International Arbitration of Business and Human Rights Disputes - Answers to Key Questions
1 September 2017
International arbitration uses private arbitrators to resolve disputes of many kinds that arise between parties from different countries. The parties must consent to its use and they participate in the selection of the arbitrators. Could it be used to resolve human rights disputes involving business?
Three years ago, a group of human rights lawyers floated the idea and formed a working group to explore it further. Since then, the proposal has been refined, based on feedback from arbitration and human rights experts and institutions all over the world. The Working Group on International Arbitration of Business and Human Rights has now published a Questions and Answers paper that covers the key issues raised during the consultation process.
The paper addresses how to overcome deficiencies in existing legal systems, such as political influence, difficulties in enforcing awards, corruption, and unfamiliarity with international human rights law.
The Working Group paper addresses the nature of international arbitration and how it could overcome some of the major deficiencies in existing legal systems, such as political influence, difficulties in enforcing awards, corruption, and unfamiliarity with international human rights law, that pose obstacles to justice for businesses and victims alike. It describes the advantages that arbitration offers over civil lawsuits, such as its nearly universal availability, its flexibility, and the enforceability of arbitral awards. The paper also points out how international arbitration could help to implement all three Pillars of the UN Guiding Principles on Business and Human Rights by offering states and businesses a means to protect and respect human rights and to provide access to justice for victims.
The paper shows how international human rights commitments can be incorporated by multinational enterprises into contracts throughout their supply chains as well as in development projects. Contracts could require all participants to observe human rights standards and agree to arbitrate any disputes that arise. The approach set out by the Working Group shows how victims can be empowered to participate in, or even initiate, arbitration proceedings and seek damages and other forms of redress. Issues arising out of the “inequality of arms” between victims and well-financed businesses are also addressed and sources of support for victims in their quest for justice are highlighted, such as pro bono lawyers, trade unions and international human rights NGOs.
The paper describes advantages that arbitration offers over civil lawsuits, such as its nearly universal availability, its flexibility, and the enforceability of arbitral awards.
In response to concerns that international arbitration might conflict with existing avenues for redress of human rights abuse, the paper points out that there is little likelihood that the work of regional human rights courts, which focus on the actions of states, not business enterprises, would be affected. The OECD’s National Contact Points could use arbitration as an additional option for parties to resolve their disputes. The effort to negotiate a new international business and human rights treaty could be also be aided by the availability of arbitration as a means of access to justice.
Would human rights arbitration resemble investor-state dispute settlement (ISDS), which is viewed by some as inimical to human rights interests? The paper points out the principle distinctions between its proposal and ISDS that should allay such concern. These distinctions include the call for complete transparency, the focus on the protection of human rights, and the potential participation of victims.
The paper does not call for the creation of any new arbitration institutions. It seeks to ensure that parties could ask existing international arbitration institutions located throughout the world, such as the Permanent Court of Arbitration, the London Court of International Arbitration and the Singapore International Arbitration Centre, to use the new specially designed rules in lieu of the rules that they might otherwise apply to commercial and other disputes. The new rules could also be used in arbitration proceedings for which the parties manage themselves on an ad hoc basis.
The paper proposes the establishment of a high-level drafting committee to review existing international arbitration rules, beginning with those of the UN Commission on International Trade Law (UNCITRAL), to assess the need for revisions to adapt those rules to human rights disputes. Among the issues that the drafting committee would address are: the need for transparency of proceedings and awards, the need to accommodate the participation of victims, and the need for arbitrators to have the expertise and impartiality to obtain the confidence of potential parties.
The rules should be drafted in consultation with the international institutions that would be expected to administer them.
The Working Group’s paper also proposes that stakeholder subgroups be appointed to assist the drafting process. This would allow experts on international arbitration, labour, human rights, mediation, business practices, governmental policies, and other topics to have input into the final rules. The Working Group suggests that the rules should be drafted in consultation with the international institutions that would be expected to administer them.
The paper points out that mediation and other forms of informal dispute resolution should be used by disputants, before resorting to formal arbitration. It calls for input from the international mediation community on the question of whether revisions to conciliation rules might be appropriate.
The rulings in arbitration cases would become a significant source of guidance for businesses in managing human rights risks and would contribute to the emergence of global standards of business conduct.
Once the new rules have been finalised, they could be presented to international arbitration institutions for consideration. It is anticipated that as the use of international arbitration expands, this new proposal would receive support from governments, lenders, investors, and other stakeholders involved in protecting human rights. It is also anticipated that the rulings in arbitration cases would become a significant source of guidance for businesses in managing human rights risks and would contribute to the emergence of global standards of business conduct.
