This short article lays out why business lawyers need to understand the Guiding Principles and consider human rights as part of due diligence they perform for clients and companies.
February 2014 | John F. Sherman III, Shift; Juriste International | Pages: 2
This summary is excerpted from page 49 of the resource. This article was published in Juriste International, the publication of the International Association of Lawyers, and is available here for download with their permission.
Although the growth of global business in recent decades has played a major role in reducing poverty and increasing welfare, it has also had adverse impacts on human rights. One example among many is the Conga mine in northern Peru, a US$4.8 billion open pit gold and copper mine suspended during construction since 2011, as a result of community protests regarding pollution of farms and watershed from cyanide used to leach gold and copper out of raw ore. Ten thousand campesinos clashed with riot police, barricaded roads, and shut down the local airport. The President of Peru called in the army to break the protest. About a dozen protesters were killed in the confrontation.
In addition to the costs to people and communities, the costs of such community conflict to companies are quite high. In the mining industry, the costs of a shutdown of a US$3-5 billion mining project is roughly US$20 million per week in delayed production, mostly due to lost sales. Yet even greater costs result from lost opportunities linked to future projects that are foregone, expansion plans that are cancelled, or sales that did not go ahead.
As the gatekeepers for major business transactions and projects, business lawyers can help their clients prevent and mitigate human rights risks. To do so effectively, they must understand and apply the UN Guiding Principles on Business and Human Rights. In June 2011, following six years of multistakeholder consultations and research, the UN Human Rights Council unanimously endorsed the Guiding Principles, authored by Harvard Kennedy School Professor John Ruggie, the former Special Representative of the UN Secretary-General for Business and Human Rights.
So how do the Guiding Principles apply to business lawyers? Business lawyers have a prominent place at the outset of major transactions that can affect human rights. They draft and negotiate the core transactional documents that structure and implement the deal. They help to write detailed due diligence checklists. Traditionally, the goal of transactional due diligence is to ensure that the company leaves nothing on the table; i.e., it takes steps to understand all of the risks of the transaction – from the perspective of the company. But human rights due diligence under the Guiding Principles adds something new. It requires companies to demonstrate that they have identified their human rights risks and have addressed them – from the perspective of the affected stakeholder.