7.7 Dilemmas

In the previous section it has been argued that performing an HRIA can be fitted into the existing corporate due diligence practice in a relatively easy way. It will all depend on the corporate decision to embark upon this path. Having said this, there are certainly unanswered questions. One of these is the question in which way the Ruggie framework works out for victims of corporate-related human rights abuses. Does it improve their position? The third pillar of the framework, i.e. 'Remedy' aims to address this question, but that pillar was not the subject of this chapter. Related thereto, the question has been raised whether a third party - for instance an NGO concerned with human rights issues, or a victim of a corporate-related human rights abuse - should have access to corporate due diligence reports.

As regards an NGO request, the following could be considered. If the company concerned already cooperates with NGOs in performing the due diligence assessment, providing access to the due diligence report could be seen as part of an effective stakeholder dialogue. It could help to define further recommendations to improve company policies. However, if a company only commissions a due diligence report with a view to silencing critics, the answer will probably be different. NGOs and campaigning organisations will sense the ' cosmetic approach by the company management, and will critically review the due diligence report if handed to them.

Regarding a victim of a concrete abuse who wants access to a due diligence report, the situation is as follows. Certain jurisdictions, such as the UK and the US, recognise the concept of 'pre-trial discovery' or 'document disclosure'. In the US, this doctrine forms part of civil procedural law.1 This concept does not exist under Dutch law.2 There is only one provision in Dutch Civil Procedure law that deals with a party s right to request documents (i.e. article 843a). In practice, it appears difficult and sometimes impossible to obtain documents that are in the possession of opponents who are unwilling to submit them. The requesting party must (i) have a legitimate interest, which will only be the case where an evidential interest exists; (ii) specify the desired documents in sufficient detail so that it is possible to determine which documents are meant and why the requesting party has a legitimate interest in them (this condition is designed to prevent so-called 'fishing expeditions'); and (iii) the documents must 'relate' to a legal relationship (based on contract or tort) to which it is a party. As regards due diligence reports, there are examples of cases in which the claimant was allowed to receive a copy. In BVR/Ho-Cla, a report prepared by a financial adviser for the buyer of a company was concerned. The court considered this document to 'relate to the legal relationship between the buyer and the seller as laid down in their Share Purchase Agreement (i.e. the third condition mentioned above had been fulfilled).3

A lesson to be learned from this is that under certain jurisdictions, a documents disclosure request can also pertain to a due diligence report. Hence, there is a risk that such a report will end up in the public domain. Consequently, it will be important for companies based in such a jurisdiction to carefully document any internal decisions that relate to the report. When a due diligence report shows a considerable risk of becoming engaged in human rights abuses in a certain area, management need to have good arguments if they nevertheless decide to invest. Good corporate governance supposes a rational and good business-informed decision.4

Another pressing question for companies is where to draw the line? How deep into the international supply chain and how broad should the due diligence investigation extend? Responding to a question about supply chain management, Ruggie indicated that all links in any supply chain represent companies owing a duty to respect human rights. In other words, a chain consisting of many links does not constitute an excuse for the companies involved to not act diligently.5 In the opinion of the author the answer will depend on: (i) the available possibilities; (ii) the type of human rights issues; (iii) best practices in the industry; and (iv) the availability of certified operations in the particular industry (FSC, SA 8000, round tables). But it will remain difficult to demarcate the exact scope of a due diligence. This needs to be determined on a case-by-case basis. As commercial due diligence has expanded and formalised over time, it can be anticipated that societal expectations of corporate human rights due diligence will also increase over time.

Another dilemma frequently posed is what to do when human rights abuses are likely to occur in a certain type of industry or region. Some companies assert that their activities help to diminish such abuses. For instance, because they hired black employees in a country where black people did not enjoy the same civil rights as white people. Shell asserted that it did so in South Africa during the Apartheid regime.6 Other companies claim that they improved labour-related human rights in China because they created employee-representative bodies.7 These companies point to the likelihood that, if they leave, other parties will come in that probably care less about human rights. The argument of these companies is valid, their predictions usually materialise. However, following the Ruggie line: if due diligence research shows that there is a risk that a company s activities contribute to human right abuses, directly or indirectly, it is better to leave. However, the outcome will vary from case to case.