21 April 2021

Recognising Nuances

Mandatory Human Rights Due Diligence in Mexico and Colombia

This week, the German Parliament is beginning its debate on the cabinet draft for a national Due Diligence Act (Sorgfaltspflichtengesetz). Critics of Germany’s initiative often claim that it would run counter to the development interests of the Global South. This, however, not only ignores strong development policy arguments in favour of human rights due diligence (HRDD) regulation but also the fact that several countries in the Global South are calling for similar obligations or have already created them. In particular, Germany may learn valuable lessons from the Colombian Constitutional Court’s recent case law which has created meaningful HRDD obligations for companies as well as from a draft for a Mexican Due Diligence Act.

Accountable businesses

Germany is in the process of debating and ratifying new human rights laws. ILO Convention 169, which calls for participation rights of indigenous groups in projects that affect their interest, has just been ratified. And the cabinet draft for a national Due Diligence Act is about to be debated in Parliament. Essentially, this Act would oblige enterprises to implement HRDD, a risk management process to identify, prevent, mitigate and account for ways in which enterprises impact human rights and to remedy any adverse impacts, according with the UN-Guiding Principles on Business and Human Rights (UNGP). Insights from Latin America might enrich these debates.

The UN Binding Treaty Process – an initiative by Ecuador and South Africa for an international treaty on businesses’ human rights obligations, which in the past has been rather ignored or blocked than supported by great parts of the Global North – is receiving most public attention. In the following, we will analyse the developments in Colombia and Mexico and show that the topic of corporate human rights obligations is already being confidently shaped by actors of the Global South. The legal debate in the Global North might also learn something from this.

Mexico: Differentiated obligations

In September 2020, senator Martínez Cázares from Mexico’s ruling party Morena presented a draft for a “Corporate Accountability and Due Diligence Act” to the Mexican Senate (upper house of Mexico’s bicameral Congress). The draft is based on the UNGP. The Act would obligate all enterprises and educational institutions operating in Mexico to prevent and mitigate the adverse impacts of their business activities, considering also environmental and corruption aspects.

Several aspects of the draft are problematic: A similar obligation for enterprises to implement a CSR project (arts. 11 et seq.) is criticised in India because of misleading incentives, arts. 72 et seq. seem to be designed to make companies direct actors of state policy and art. 24 contains several diffuse or unrelated obligations as part of the HRDD obligations.

But there are also parts that might inspire constructive debate. The draft proposes a way to implement a mandatory human rights and environmental due diligence by proportioning the obligations according to the size of the enterprise and the inherent risk of certain sectors. Small and medium enterprises (“SMEs” – in the manufacturing industry: enterprises with up to 250 employees; in the commercial and service sector: enterprises with up to 100 employees – art. 22) only must meet lower requirements: According to art. 23 of the draft, they are only obliged to keep the ledger and corporate books up-to-date and to include in the enterprise’s articles of association the obligation to fulfil their responsibility to respect human rights. The full obligations are to be met by (i) large enterprises and (ii) SMEs in high-risk sectors (defined as textile, mining and energy, tourism and agriculture art. 4 para. 2). While art. 23 does not specifically mention full obligations for SMEs in high-risk sectors, a systematic interpretation, considering art. 4 para. 2 would include them. This provision stipulates that high-risk sectors – regardless of the enterprises’ size – are bounded to the “highest standard of fulfilment” of this Act.

In the same spirit, art. 2 No. 2 and 3 of the resolution of the European Parliament from 10th of March 2021 recommend to the EU Commission that SMEs in high-risk sectors shall be subject to HRDD. This goes beyond the focus on big enterprises by the French Loi de vigilance (for enterprises with at least 5.000 employees) and the German draft of a Sorgfaltspflichtengesetz (for enterprises with at least 3.000 employees until 2023 and at least 1.000 employees from 2024). The Mexican and the European proposals recognise that high-risk SMEs can have considerable impacts on human rights and that their capacity for HRDD must be reflected by the proportionality of graduated due diligence requirements or specific measures for support (art. 15 European resolution). This approach – adapted application to SMEs, instead of no application to SMEs – can achieve effective protection of human rights while not overregulating SMEs.

Enforcement

The Mexican draft does not explicitly call for “civil liability”. According to art. 6 there will be “liability” for companies involved in adverse human rights impacts. Following systematic interpretation, this could be read as “civil liability”: Arts. 3 and 64 make clear that a civil proceeding or a trial can be initiated independently of an administrative proceeding against an enterprise. The draft also provides alternative mechanisms for dispute resolution for the compensation claims for damages (arts. 77 et seq.).

Additionally, the draft includes sanctions for the violation of human rights, e.g. an official public warning, a financial penalty, the exclusion from public procurement, the suspension of the enterprise’s activities or even the dissolution of the enterprise (art. 50). A register shall function as a blacklist of companies abusing human rights (art. 44 et seq.). Unlike the current German Lieferkettenregistergesetz proposal, this blacklist is not designed as an alternative to other sanctions and obligations, but as an additional tool to help companies select suppliers that respect human rights.

It is still open if the Mexican draft will actually be adopted. Senator Martínez Cázares faces headwinds from the private sector and from parts of civil society because of the lack of public participation. Furthermore, after unrelated public controversies with the Mexican president, it is not clear, if the senator has the political capital to make his draft succeed.

Colombia: Giving effect to human rights

The Colombian National Action Plan for Human Rights (NAP) calls on businesses to voluntarily conduct HRDD. It is rightly criticized for its lack of concrete verifiable objectives. The Constitutional Court (the Court), however, has created meaningful legal obligations. It has mentioned HRDD and the UNGP in several decisions. Decision SU-123-18 stands out as it defines clear parameters and consequences for companies that do not comply with HRDD. This holds lessons for other countries where the constitution makes reference to international human rights standards. In these, the UNGP might become “soft law with teeth” – as has already happened in South Africa.

In the province of Putumayo, Colombia, a business group extracted oil with a license. 400m away lived the indigenous Awá community “La Cabaña”. Counter to ILO 169, which Colombia has ratified, the Awá were not consulted before the start of the project. Their representative thus filed a “tutela”, the constitutional rights protection action. The tutela was explicitly filed against the business group and was rejected in the first and second instance.

The Court stated that the human right to prior consultation and consent directly creates obligations for private actors. It based this claim on two arguments: First, it is recognized that constitutional individual rights in the Colombian Constitution are indirectly binding for private actors (13.1 of the decision). Additionally, the Court relied on art. 93 para. 1 of the Colombian Constitution which states that international human rights based on international treaties that Colombia has ratified, are treated as individual rights in Colombia (13.6). This also applies to the rights of prior consultation and consent derived from ILO 169, ratified by Colombia. Second, the Court held that the UNGP “confirm” the “well-established” international principle that human rights are binding for businesses, a claim it reinforces by making reference to General comment 24 of the UN-Committee on Economic, Social and Cultural Rights (13.2 and 13.3). According to the Court, these pronunciations of international organs need to be considered when interpretating Colombian constitutional law (13.6).

The Court then developed a specific ILO 169 HRDD standard to be met by enterprises (13.5): They are required to apply due diligence to recognize indigenous groups, to analyse the impact of a project on indigenous’ land, territory and natural resources and to consult the indigenous people.

The Court ruled that the business group had violated its obligation to conduct HRDD and to recognize the rights of the Awá people (23.3). It argued that companies are obligated to consult with indigenous people when these people are directly affected by a project (7.1 et seq.). It explicitly dismissed the criterion applied by the lower Courts which held that companies are only obligated to consult with indigenous people insofar as they directly use their territory for a project (7.4). The Court found that due to considerable environmental impacts on flora and fauna, the quality of water and hence a substantial negative impact on the people’s cultural life, it was clear that they were directly affected and prior consultation was needed (20.19, 21.12). It based its weighting on an analysis of the concrete ethnological structure and cultural norms of the Awá, an exemplary exercise of context and cultural sensitivity that other parties to ILO 169 should strive for (19.3 et seq.).

Legal consequences of human rights violations by businesses

The violation of the Awá’s right to prior consultation does not automatically imply the obligation to stop the project. Instead, the deciding judge of the tutela is required to weigh all affected constitutional rights and obligations, including the efforts made to conduct HRDD, the interests of the Awá, and legal certainty (given that the project had all official permits) as well as the rights of the workers of the business group and the state’s financial interests (25.5 et seq.). The Court denied the business group a good faith defence which it could only have relied on if it had conducted HRDD (26.6). It argued that the circumstances indicated that the project had to be suspended, considering that the affection was evident (21.17), and that the Awá are a community in danger of extinction (25.5).

As the local leader of the Awá had communicated that his people do not want a halt of the project but only a proper and meaningful consultation process, the Court concluded that not a suspension, but a close monitoring to ensure a consultation process was required, as the will of the affected indigenous people must prevail (25.6).

Lessons for other states

Any legal system implementing mandatory HRDD and ILO 169 can learn several lessons from these two Latin American examples. Instead of exempting SMEs from any obliation, a tailored approach to HRDD is possible. Furthermore, to establish whether a business has violated human rights and which consequences must follow from the violation, all relevant constitutional and human rights aspects must be considered in each case. In cases of terminating business relations – even because of human rights violations –, the negative human rights impact of the ending should be considered, for example, on the labour rights of the supplier’s workers. Where violations of the right to prior consultation under ILO 169 in relation to businesses’ projects occur, establishing if companies conducted meaningful HRDD can be a criterion to determine if a company has acted in good faith. The Colombian Constitutional Court’s definition of ILO 169’s right to prior consultation and consent in 7.6 and the consequences of noncompliance in 11.5 provide useful guidance for any legal system looking to implement ILO 169.


SUGGESTED CITATION  Sanabria, Diana; Schönfelder, Daniel: Recognising Nuances: Mandatory Human Rights Due Diligence in Mexico and Colombia, VerfBlog, 2021/4/21, https://verfassungsblog.de/recognising-nuances/, DOI: 10.17176/20210421-101319-0.

2 Comments

  1. Humberto Cantú Rivera Mi 21 Apr 2021 at 22:56 - Reply

    Thanks for the post. So many other things are wrong with the Mexican bill, including the failure to recognize the actual regulatory capacity of the government as a result of austerity measures (how do they put into motion the suggested registry, for example?); the lack of capacity (and in many cases evident disregard) in terms of compliance with its own international obligations; a conceptual confusion between CSR & BHR; the idea of moving this into the direction of a consumer affairs ombudsperson; the logic of granting „certificates“; and a few more relevant items. That, of course, without referring to the outspoken opposition not just from the private sector, but also from civil society organizations that demand HRDD, and without discussing the evident conflict of interest in the drafting of the bill… In my view, such a detailed proposal will most likely run counterproductive to the purpose of enhancing human rights protection within business activities, and will face legality challenges instantly.

    Also, you note that civil liability is not expressly addressed in the bill (and in my view, there is no relation between the „liability“ mentioned there, and civil liability; it is framed in terms of administrative oversight and sanctions), but let’s be honest: why do we need to include that in mHRDD legislation, if at the end of the day, civil law countries already have clearly established laws on extracontractual civil liability (and other kinds, including corporate criminal liability), and sufficient case law on this (including on cases that could be considered as human rights violations)? If you take into account conventionality control and the pro persona principle, there is so much than can already be done without having to move into the same direction as Europe.

    The SMEs part is, however, an interesting aspect. The main issue is that more than 90% of the economy runs on SMEs, and thus, ensuring oversight and compliance doesn’t look like a realistically enforceable alternative.

    Kind regards,
    Humberto Cantú Rivera

    • Daniel Schönfelder Mo 24 Mai 2021 at 15:15 - Reply

      Thanks for your comment! I do think that there are worrying parts of the Mexican bill that both we and you mention. The Indian experience with CSR spending obligations should urgently be taken into account, for instance, and Artt. 72 – 74 seem like a authoritarian power grab to me.

      The law in itself, the idea of a country of the global South adopting an mHRDD law, to me seems to be a great chance: With France, Germany, the EU and other parts of the Global North moving towards mHRDD, their companies will be looking for business partners and regions that have a strong record on human rights in business. Breaking the dilema of the race to the bottom, where deregulation can be an advantage in cooperating with global firms, mHRDD in the Global North can create a setting in which strong regulation in Global South countries is not only creating an environment that respects workers, communities and nature, but that has advantages in cooperation with firms from mHRDD contexts looking for reliable partners.

      As to civil liability – not all global firms operating in Mexico or other countries come from context where this is clear cut. In the Netherlands and the UK parent liablity seems to be on the rise in BHR cases, but neither are the US, China, Germany or Spain visibly following this path, nor are there many cases of supply chain liability recognized by courts. With the exit from Lugano looming in UK, parent liability for foreign subsidiaries might get even harder. So there are many gaps in civil liability that a mexican mHRDD law could fill.

      Finally, the SMEs part is something to inspire European debates, mostly focused on a include them completely vs. exclude them completely.

      Best regards from Germany to Mexico!

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