Ruggie's Recommendations

In the world of corporate social responsibility, there are two primary schools of thought on how to approach corporate compliance with human rights standards.  One approach is to push for legislation meant to enforce these standards; a second approach is to use market-based incentives as a means of encouraging corporate compliance with these standards.  On April 7, 2008, John Ruggie, the Special Representative to the UN on business and human rights, issued his draft report on how to conceive of business and government roles in upholding accepted human rights standards going forward.  The framework for his recommendation is rooted in a well-established international law concept: protect, respect, fulfill (or remedy, in Ruggie’s terms).

1. The State has a duty to PROTECT against human rights abuses by third parties, including business – this is a legal stipulation;
2. There is a corporate responsibility to RESPECT human rights – this is a societal expectation;
3. There is a need for more effective access to remedies – this need to FULFILL is a functional necessity.

Ruggie states that “there is no single silver bullet solution” to bridge the gap between law and practice, asserting that everyone involved “must learn to do things differently.”  He takes pains to distinguish his approach from that of the failed UN Norms, whose demise he attributes to a delineation of rights to be upheld rather than, as he proposes, the assignment of roles in upholding all rights. 

An Argentinian group (CEDHA, Center for Human Rights and Environment) issued a commentary on Ruggie’s latest piece and stated, “Ruggie again (as in previous reports) clearly steers the UN away from pressing for binding legislation, which was once conceived under the … UN Norms…” And Ruggie does use different language for States (who have a DUTY) and businesses (who have a RESPONSIBILITY).  He also states that corporations should not have the same duties as states and encourages states to “support and strengthen market pressures on companies to respect rights.”

Clearly, Ruggie supports market incentives for actors to uphold human rights, but does his framework preclude binding legislation, or does it allow for such legislation conceived of in a format different from the UN Norms?  At the national level, he refers to reporting requirements, redefining fiduciary duties and socially responsible investment as incentives.  Is he being politically astute in not mentioning alternative binding frameworks, or does he genuinely believe there are no such options?  An interview with Ruggie in Ethical Corporation Magazine reveals that he thinks the time is not right for a binding international treaty as there is not sufficient buy-in from stakeholders.  However, I felt he could have provided more ideas on state level legally-binding solutions to drive this process forward.

A recent development regarding the Central American Free Trade Agreement (CAFTA) demonstrates the delicate interplay between a standard-setting approach and an incentive-based approach to enforcement.  The law firm of Sandler Travis has reported that the AFL-CIO has filed the first ever labor rights complaint under CAFTA, in part to protest the U.S.-Colombia Free Trade Agreement.  The complaint cites fives cases in Guatemala where local labor laws were not upheld and the U.S. government failed to implement CAFTA labor provisions to remedy the situation.  The AFL-CIO’s chief international economist cites the incentive structures of free trade agreements as problematic stating that “once the U.S. approves a free trade agreement the partner country no longer has any incentive to make labor rights improvements.”  The U.S. government evidently responded by claiming that at least free trade agreements allow the U.S. to investigate the labor violation allegations.

This situation highlights the “governance gaps caused by globalization” that Ruggie refers to and shows why an incentive-based structure is so important to facilitate compliance with labor standards.  But an incentive-based structure, while important, is not sufficient.  At present, Ruggie points to a disincentive to uphold labor standards through bilateral investment treaties because “… treaties … permit… investors to take host States to binding international arbitration, including for alleged damages resulting from implementation of legislation to improve domestic social and environmental standards…”  So clearly, the national level legislative component is important and must not be negated by the incentives created.

The AFL-CIO complaint also highlights the third prong of Ruggie’s framework, the need for effective remedies.  Clearly, the right to investigate referred to above does not equate with fixing the problem.  The NAFTA labor rights component has faced similar criticisms of inefficacy.  Unless there are remedial mechanisms, judicial and non-judicial, as Ruggie alludes to, it seems unlikely that these provisions will be enforced at all in any trade agreement. 

The way forward will not be easy – Ruggie’s framework seems to be based largely on the good faith of the relevant actors to subject themselves to measures that would enforce their respective duties and responsibilities, if only through market mechanisms.  Relying on the good faith of these actors hasn’t worked so far, and there’s no indication it will work going forward.

If you have questions and comments about this blog, please contact Lara Blecher at lblecher@intlcompliance.com