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Corporate responsibility and private (international) law
Written by Giesela Rühl, University of Jena/Humboldt-University of Berlin
Note: This blogpost is part of a series on „Corporate social responsibility and international law“ that presents the main findings of all contributions published in August Reinisch, Stephan Hobe, Eva-Maria Kieninger & Anne Peters (eds), Unternehmensverantwortung und Internationales Recht, C.F. Müller, 2020.
1. Corporate social responsibility has been the subject of lively debates in private international law for many years. These debates revolve around the question of whether companies domiciled in countries of the Global North can be held liable for human rights violations committed by foreign subsidiaries or suppliers in countries of the Global South (so-called supply chain liability).
2. According to the majority view in the public international law literature, companies are not, at least not directly bound by human rights. Although numerous international law instruments, including the UN’s 2011 Guidelines for Business and Human Rights (Ruggie Principles), also address companies, liability for human rights violations is, therefore, a matter of domestic law.
3. The domestic law applicable to liability for human rights violations must be determined in accordance with the provisions of (European) private international law. Direct recourse to the lex fori, in contrast, is not possible. The legal situation in Europe is, therefore, different from the United States where actions which are brought on the basis of the Alien Tort Claims Act (ATCA) are governed by US-American federal (common) law.
4. Claims for human rights violations committed abroad will usually be claims in tort. Under (European) private international law it is, therefore, the law of the place where the damage occurs (Article 4(1) Rome II Regulation) and, hence, foreign law which governs these claims. Exceptions apply only within narrow limits, in particular if domestic laws can be classified as overriding mandatory provisions (Article 16 Rome II Regulation) or if application of foreign law violates the ordre public (Article 26 Rome II Regulation).
5. In addition to tort law, claims for human rights violations may also be based on company law, namely when directors are directly held liable for torts committed by a foreign subsidiary. According to the relevant private international law provisions of the Member States these claims are governed by the law of the (administrative or statutory) seat of the foreign subsidiary. As a consequence, claims in company law are also subject to foreign law.
6. The fact that (European) private international law submits liability for human rights violations to foreign law is very often criticized in the private international law literature. Claiming that foreign law does not sufficiently protect the victims of human rights violations, a number of scholars, therefore, attempt to subject liability claims de lege lata to the domestic law of the (European) parent or buyer company.
7. These attempts, however, raise a number of concerns: first, under traditional (European) private international law, substantive law considerations do not inform the determination of the applicable law. Second, the wish to apply the domestic law of a European country is mostly driven by the wish to avoid poorly functioning court systems and lower regulatory standards in countries of the Global South. Neither of these aspects, however, has anything to do with the applicable tort or company law. Regulatory standards, for example, are part of public law and, therefore, excluded from the reach of private international law. Finally, the assumption that the domestic law of the (European) parent or buyer company provides more or better protection to the victims of human rights violations does not hold true de lege lata. Since parent and buyer companies are legally independent from their foreign subsidiaries and suppliers, parent and buyer companies are only in exceptional cases liable to the victims of human rights violations committed abroad by their foreign subsidiaries or suppliers (legal entity principle or principle of entity liability).
8. The difficulties to hold (European) parent and buyer companies de lege lata liable for human rights violations committed by their foreign subsidiaries or suppliers raises the question of whether domestic laws should be reformed and their application ensured via the rules of private international law? Should domestic legislatures, for example, introduce an internationally mandatory human rights due diligence obligation and hold companies liable for violations? Proposals to this end are currently discussed in Germany and in Switzerland. In France, in contrast, they are already a reality. Here, the Law on the monitoring obligations of parent and buyer companies (Loi de vigilance) of 2017 imposes human rights due diligence obligations on bigger French companies and allows victims to sue for damages under the French Civil Code. The situation is similar in England. According to a Supreme Court decision of 2019 English parent companies may, under certain conditions, be held accountable for human rights violations committed by their foreign subsidiaries.
9. The introduction of an internationally mandatory human rights due diligence obligation at the level of national law certainly holds a number of advantages. In particular, it may encourage companies to take measures to prevent human rights violations through their foreign subsidiaries and suppliers. However, it is all but clear whether, under the conditions of globalization, any such obligation will actually contribute to improving the human rights situation in the countries of the Global South. This is because it will induce at least some companies to take strategic measures to avoid the costs associated with compliance. In addition, it will give a competitive advantage to companies which are domiciled in countries that do not impose comparable obligations on their companies.
10. Any human rights due diligence obligations should, therefore, not (only) be established at the national level, but also at the European or – even better – at the international level. In addition, accompanying measures should ensure that the same rules of play apply to all companies operating in the same market. And, finally, it should be clearly communicated that all these measures will increase prices for many products sold in Europe. In an open debate it will then have to be determined how much the Global North is willing to invest in better protection of human rights in the Global South.
Full (German) version: Giesela Rühl, Unternehmensverantwortung und (Internationales) Privatrecht, in: August Reinisch, Stephan Hobe, Eva-Maria Kieninger & Anne Peters (eds), Unternehmensverantwortung und Internationales Recht, C.F. Müller, 2020, pp. 89 et seq.
Jurisdiction unbound: extraterritorial measures to ensure corporate responsibility
Written by Nico Krisch, Graduate Institute for International and Development Studies, Geneva
Note: This blogpost is part of a series on „Corporate social responsibility and international law“ that presents the main findings of all contributions published in August Reinisch, Stephan Hobe, Eva-Maria Kieninger & Anne Peters (eds), Unternehmensverantwortung und Internationales Recht, C.F. Müller, 2020.
1. The conceptual framework of jurisdictional boundaries in international law continues to be dominated by the principle of territoriality and its exceptions, even if calls for a reorientation have grown in recent years.
2. The principle of territoriality leads today to far wider jurisdictional claims than in the past, and its limits are being redefined through ‘territorial extensions’ in a number of areas.
3. These extensions are rarely questioned by states, and clear and consistent jurisdictional boundaries remain hard to define. Contestation arises primarily when states seek to use extraterritorial measures to counteract important policy choices of other states.
4. The result is a far-reaching overlap of different jurisdictional spheres which, if seen in conjunction with the multiple forms of transnational regulation existing today, leads to a multi-layered ‘jurisdictional assemblage’.
5. So far, there are no accepted rules governing the relationship of competing jurisdictional spheres in this assemblage. The effective exercise of jurisdiction depends, in large part, on the political and economic power of a country in a given issue area and market.
6. The wider options for action that result from this territorial extension allow for more effective responses to existing societal challenges, especially with a view to the provision of (national and global) public goods, albeit in a limited way.
7. The new jurisdictional regime accentuates hierarchies between countries, interferes with the autonomy of weaker states, and subverts the principle of sovereign equality. Yet under certain circumstances, it also allows actors in weaker states to compensate for their otherwise limited ability to hold multinational companies to account.
8. Existing procedural and substantive proposals only have limited promise for alleviating the tensions resulting from the power imbalance in the exercise of jurisdiction.
9. The territorial principle in the law of jurisdiction has always been sufficiently limited not to overly impede powerful states’ pursuit of their interests.
10. Territoriality today appears less as a principle of effective limitations than as the basis of different strategies and tactics through which states seek to hold mobile actors to account and through which they pursue their political aims in a global context.
Full (German) version: Nico Krisch, Entgrenzte Jurisdiktion: Die extraterritoriale Durchsetzung von Unternehmensverantwortung, in: August Reinisch, Stephan Hobe, Eva-Maria Kieninger & Anne Peters (eds), Unternehmensverantwortung und Internationales Recht, C.F. Müller, 2020, pp. 11 et seq.
Jurisdiction for claims against transnational companies for human rights violations
Written by Anatol Dutta, University of Munich
Note: This blogpost is part of a series on „Corporate social responsibility and international law“ that presents the main findings of the contributions published in August Reinisch, Stephan Hobe, Eva-Maria Kieninger & Anne Peters (eds), Unternehmensverantwortung und Internationales Recht, C.F. Müller, 2020.
1. The question of the reach of courts’ jurisdiction is highly significant for claims against transnational enterprises based on human rights violations or environmental damages abroad. It does not only determine the applicable law but also the access to a particular justice system.
2. Universal jurisdiction of national courts for human rights and environmental damages claims against enterprises cannot be established, neither on the basis of existing law nor from a legal policy perspective. Rather, such claims have to be handled under the traditional jurisdictional mechanisms.
3. From a global perspective, a remarkable shift regarding jurisdiction can be noted: Whereas the courts in the United States are increasingly limiting access to their justice system in cases with foreign elements, jurisdictional limits are no significant hurdle for human rights and environmental damages claims in the European Union.
4. Domestic enterprises can be sued at their seat. Yet, the forum non conveniens doctrine allows US courts – and perhaps soon English courts as well – to decline jurisdiction, also for human rights and environmental damages claims.
5. Yet, human rights and environmental damages claims against foreign enterprises can also only be brought under certain circumstances in the EU.
6. Claims against foreign enterprises for human rights violations and environmental damages abroad can only rarely be brought before domestic courts based on special jurisdiction related to specific subject matters, for example the jurisdiction for tort claims at the place where the harmful event occurred.
7. If human rights and environmental damages claims are simultaneously directed against a domestic enterprise, for example a mother company or a buyer company in the EU, at least partially, foreign subsidiaries and suppliers can be sued on the basis of special jurisdiction over multiple defendants which can be used strategically.
a) If foreign enterprises have their seat in a third State outside the European Union, the jurisdiction of the domestic courts over the foreign co-defendant is governed by the national law of the forum Member State.
b) However, the current trend to establish a separate liability of domestic enterprises, for example, by extending human rights and environment-related duties of care for the supply chain, could endanger this special jurisdiction over multiple defendants, which, on the other hand, could lose significance.
8. Extending the general jurisdiction at the domicile of the defendant by relying on a personal criterion different to the seat of the defendant enterprise is not a viable solution.
a) Today US courts refuse to exercise jurisdiction based solely on the foreign enterprise ‘doing business’ within the territory. In some EU Member States, for claims against foreign enterprises at least with a seat in a third State, exorbitant jurisdiction can be established, for example, based on assets of the foreign defendant enterprise within the territory.
b) At the most from a policy perspective, for claims against foreign subsidiaries of a domestic enterprise the introduction of an enterprise jurisdiction could be considered.
9. For claims against foreign enterprises jurisdiction of the domestic courts can often only be based on a forum necessitatis if proceedings cannot reasonably and effectively be brought or conducted abroad; the hurdles for such an exceptional jurisdiction are, however, high.
10. To hear human rights and environmental damages claims against enterprises lies within the powers of the domestic courts.
a) Foreign enterprises do not enjoy State immunity even if they violate human rights or damage the environment abroad in collaboration with foreign States.
b) The power to adjudicate is also not limited by the fact that a decision of the court on human rights and environmental damages claims potentially has implications on the foreign policy relations of the forum State.
c) The domestic courts are often even not barred from deciding on human rights and environmental damages claims of foreign States against enterprises.
Full (German) version: Anatol Dutta, Internationale Zuständigkeit für privatrechtliche Klagen gegen transnational tätige Unternehmen wegen der Verletzung von Menschenrechten und von Normen zum Schutz der natürlichen Lebensgrundlagen im Ausland, in: August Reinisch, Stephan Hobe, Eva-Maria Kieninger & Anne Peters (eds), Unternehmensverantwortung und Internationales Recht, C.F. Müller, 2020, pp. 39 et seq.
News
Academic Position Paper on the Reform of the Brussels Ibis Regulation available on SSRN
Burkhard Hess and his team at the University of Vienna recently finalised an Academic Position Paper on the Reform on the Brussels Ibis Regulation, which is now available on SSRN. They have kindly shared the following summary with us.
The Brussels Ibis Reform project leading up the Academic Position Paper commenced with the formation of a Working Group within the European Association for Private International Law (EAPIL) in 2021, spearheaded by Burkhard Hess and Geert Van Calster. This Working Group consisted of 42 academics from 22 EU Member States plus Iceland, Norway, Switzerland and the UK. The Members of the Working Group provided information on the application of the Brussels Ibis Regulation in their respective jurisdictions by means of a questionnaire, after which a Members Consultative Committee of the EAPIL produced a report. Based on this input, the former MPI Luxembourg and the KU Leuven organised a conference in Luxembourg on 9 September 2022.
After the Luxembourg conference, Burkhard Hess and a team of researchers of the former MPI Luxembourg prepared a Working Paper with 32 reform proposals. The Members of the EAPIL Working Group and the academic public were invited to express their opinion on these proposals through online surveys. The results of these surveys were processed by Burkhard Hess and his team , which led to amendments to the original proposals. These amended proposals were presented discussed at a conference in Vienna on 12 April 2024. The findings of this conference were integrated into the Academic Position Paper that, after consulting the Members of the EAPIL Working Group, received a final update before being uploaded on SSRN
The five different parts of the Academic Position Paper cover the role and scope of the Brussels Ibis Regulation, collective redress, third-state relations, jurisdiction and pendency, as well as recognition and enforcement. Each part covers distinct issues identified at the 2022 Luxembourg conference and formulates specific proposals to resolve them. The background of each proposal is briefly explained and the charts indicating the responses to the surveys are presented, before discussing the feedback received through the surveys and during the 2024 Vienna Conference.
Burkhard Hess and his team would like to thank everyone that has taken the time to answer the surveys and/or attend the conferences. Your input was invaluable, and we have sought to take your views into account as much as possible. We believe that the proposals in the Academic Position Paper provide a solid set of recommendations to consider in recasting the Brussels Ibis Regulation, which will be presented to the European Commission as a meaningful contribution of academia in the upcoming law-making process.
Nygh Essay Prize in Private International Law
The Australian Branch of the International Law Association is now calling for submissions for the 2024 Nygh Essay Prize in Private International Law.
Issue 1 of Journal of Private International Law for 2024
The latest issue of the Journal of Private International Law was published yesterday It contains the following articles.
Alex Mills, Sustainability and jurisdiction in the international civil litigation market
The sustainability of the global economy, particularly in response to the concerns of climate change, is an issue which impacts many different aspects of life and work around the world. It raises particular questions concerning globalised industries or markets which depend on long distance transportation for their function. This article takes as its focus international civil litigation – the judicial resolution of cross-border disputes – as a particular example of a globalised market in which sustainability considerations are presently neglected, and examines how this omission ought to be addressed. It proposes a modification to English law which aims to ensure that jurisdictional decisions by the English courts take into account their environmental impact – that is to say, the environmental impact of the selection of a particular forum. The article also considers the implications of adopting this change on the position of the English courts in the global litigation marketplace, arguing that the effects are likely to be limited, and it could have an incidental benefit in promoting the development and adoption of communications technologies in judicial dispute resolution.
Saloni Khanderia, The law applicable to documentary letters of credit in India: A riddle wrapped in an enigma?
Despite significantly fostering international trade in India, letters of credit and the determination of applicable law in cross-border disputes arising from the same have received negligible attention from lawmakers. The Indian Supreme Court, too, has failed to use its power to mould the law despite regularly being confronted with disputes on this subject. This paper demystifies India’s conflict of law rules on the law governing disputes on letters of credit by examining relevant judicial trends. It highlights rampant references to the lex fori – and explores reasons why it is considered the “proper law” by being the country possessing the closest and most real contractual connection. It anticipates a “ripple effect” prompting parties to evade Indian courts through choice-of-court agreements preferring a foreign forum or to avoid business with Indian traders insisting on such payment mechanisms. Accordingly, it identifies the need for coherent rules and suggests some solutions that Indian lawmakers should consider.
Frederick Rieländer, The EU private international law framework for civil disputes concerning credit ratings: Exploring the status quo and prospects of reform
This article addresses the EU private international law framework for cross-border disputes concerning credit ratings. It argues that investors harmed by faulty ratings face considerable challenges when enforcing claims against credit rating agencies. These challenges arise not only due to the high standard of proof for damages claims and additional barriers rooted in substantive law but also from the limited territorial reach of the common EU civil liability regime of Article 35a of the amended Regulation (EC) No 1060/2009. Additionally, uncertainties concerning the determination of the concurrently applicable national law and the lack of unified European cross-border collective redress mechanisms in the area of capital markets law compound the problem. Against this background, this article discusses the options for reforming the existing private international law regime to enhance investors’ access to justice in disputes with CRAs.
Tony Ward & Ann Plenderleith Ferguson, Proof of foreign law: a reduced role for expert evidence?
This article considers the position as to proof of foreign law in the English courts in light of the case of FS Nile Plaza v Brownlie [2021] UKSC 45 and the 11th edition of the Commercial Court Guide. We discuss the “old notion” of proof by expert witnesses, the extent to which recent developments displace the traditional role of the expert and enhance that of the advocate, and the dicta in Brownlie concerning the presumptions of similarity and continuity and judicial notice. While welcoming the greater flexibility in the way foreign law can be put before the English court, we argue that the use of oral expert evidence and cross-examination will remain important in at least two types of case: those where the issue of foreign law is complex or novel, and those where the English court does not just need to ascertain the “correct” interpretation of foreign law, but rather predict whether a foreign court would in reality provide appropriate relief in relation to the matter before the court.
Olivera Boskovic, Extraterritoriality and the proposed directive on corporate sustainability due diligence, a recap
Tortious actions brought against companies for the violation of human rights and/or environmental damage have raised important issues of jurisdiction and choice of law. Damage caused abroad by subsidiaries of European companies or the possibility of bringing actions against non-European companies for damage caused outside of the European union have been referred to in terms of extraterritoriality. This paper examines these issues in relation to the proposed directive on corporate sustainability due diligence.
The Brussels IIb Regulation, dealing with proceedings in matrimonial matters, those of parental responsibility and international child abduction cases, is the newest instrument of the European Union in international family law. The article critically evaluates its most significant changes compared to its predecessor, the Brussels IIa Regulation, in the fields of jurisdiction and of recognition and enforcement. In addition, it analyses how the Brussels IIb Regulation optimises the provisions of the 1980 Hague Convention on International Child Abduction between the member states of the European Union. The article argues that the regulation is overall a helpful and welcome addition to international family law because it strengthens the welfare of the child and enhances the practical functionality and normative structure of its predecessor. Nevertheless, scope for further improvements in another recast regulation is identified.
Olga Bobrzy?ska & Mateusz Pilich, Cases of cross-border child abduction in times of populism: a Polish perspective
This article analyses the case law in Poland on matters of the return of children wrongfully removed or retained within the framework of the Hague Convention of 25 October 1980 on the Civil Aspects of International Child Abduction during the period of the “populist” government (2020–2022). It takes account of the legislative and judicial developments in the EU and the European Court of Human Rights and of the aims of the Hague Convention. It seeks to ascertain whether the influence of populist reforms and politicisation of the courts has become apparent in the case law of the Polish Supreme Court on international child abduction cases.
Ye Shanshan & Du Tao, The Jurisdiction of China International Commercial Court: substance, drawbacks, and refinement
The wave of setting up international commercial courts has emerged internationally. Following the trend, China established the China International Commercial Court (CICC) in 2018. The CICC exercises consensual jurisdiction and non-consensual jurisdiction over international commercial disputes, and has jurisdiction to support international commercial arbitration. This article analyses the CICC’s criteria for determining international commercial disputes and the specific requirements for each type of jurisdiction based on the relevant provisions and judicial practice of the CICC. In addition, this article identifies the drawbacks of the CICC’s current jurisdiction system, and provides several suggestions for refinement, including the modification and clarification of the criteria for determining the internationality and commerciality of disputes, the removal of restrictions on jurisdiction agreements, the clarification of substantive standards for case transfer, and the expansion of its jurisdiction to support international commercial arbitration.
Gülüm Bayraktaroglu-Özçelik, When migration meets private international law: issues of private international law in divorce actions of Syrian migrants under temporary protection before the Turkish courts
The extended stay of Syrian nationals under temporary protection in Türkiye for more than a decade has caused an increase in their involvement in private law actions before the Turkish courts. Even though their substantive rights have mostly been regulated following their arrival, the private international law legislation has not yet been reviewed. This research, focusing on the most recent judgments of Turkish courts in divorce actions of Syrian migrants identifies important issues of private international law. These include questions on determination of international jurisdiction of Turkish courts, their access to legal aid and the obligation to provide security, questions of applicable law concerning marriage (including the recognition of the marriages validly celebrated in Syria), determination of the law applicable to divorce and the content of Syrian law. The study demonstrates that some of these questions arise because of the ongoing unfamiliarity of Turkish courts with “temporary protection status” as a relatively new concept in Turkish law, whereas others are related to application of general provisions to temporary protection beneficiaries and highlights the urgent need to review the Turkish private international law legislation considering the status of these persons to provide uniformity in court decisions and to ensure predictability.