20 Jul 2024 - by A4ID

Developments in the regulation of the extractive industries for human rights harm committed abroad

2011 saw a number of significant developments in the field of business and human rights. Perhaps the best known developments were the adoption by the United Nations Human Rights Council in June 2011 of the United Nations Guiding Principles on Business and Human Rights and the subsequent revision of the Organisation for Economic Co-operation and Development’s Guidelines on Multinational Enterprises which featured, for the first time, a stand-alone human rights chapter.

These developments have attracted a lot of attention from human rights groups, governments and also from business. However, there are other, lesser-known, developments particularly affecting the extractive industries that also merit consideration.

The financial crash of 2008 was the impetus for a shift towards greater regulation of companies and a firmer emphasis on company sustainability and shareholder value. One area of regulation that has come under particular scrutiny has been the non-financial disclosure obligations of companies, specifically the extractive industries.

The Dodd Frank Wall Street Reform Act 2010 (the DFWSR Act) is an excellent example of how changes to the non-financial disclosure obligations of companies can increase standards of human rights due diligence and accountability amongst extractive companies. There are two provisions in the DFWSR Act that are particularly relevant.

Firstly, the DFWSR Act requires all extractive industry companies (oil, gas and mining) registered with the Securities and Exchange Commission to publicly report payments to foreign governments. In addition, companies trading in ‘conflict minerals’ (as defined within the DFWSR Act) are required to include a description in their company report of all measures taken to exercise due diligence on the source and supply chain of such minerals.

The implementation of these provisions has been heavily criticised, but they demonstrate one way in which extractive industries may increasingly be expected to take account of their human rights impacts, especially when they operate abroad and in areas of weak governance.

The USA is not alone in making changes to company law in this respect. As far back as 2007 the Swedish Government required that all state-owned companies issue a sustainability report (in line with guidelines issued by the Global Reporting Initiative) which must include a human rights chapter.

In November 2010 the European Commission launched an online public consultation to gather views on the disclosure of non-financial information by companies. This was followed by a similar initiative by the UK’s Department of Business and Skills in September 2011 that expressly addressed the inclusion of human rights impacts in company reports. And more recently in October 2011, the European Commission announced a package of measures designed to encourage responsible business and transparency.

These developments suggest a shift towards an increased awareness of corporate conduct and accountability, particularly in relation to human rights impacts, and particularly for the extractive industries, which have been singled out in both the DFWSR Act and in the European Commission’s proposals of October 2011.

However, these developments should be approached with caution. There are many problems with the enforcement of narrative reporting requirements. These are set out in Client Earth’s excellent The Future of Narrative Reporting and also Adrian Henriques’sThe reporting of non-financial information in annual reports by the FTSE100.

Human rights lobbyists and claimants should not expect changes to existing reporting requirements to provide them with a ‘golden ticket.’ Indeed, when viewed against a background of continued allegations against extractive companies and cuts to the funding of cases brought against companies for human rights harm committed abroad, it is clear that simply raising awareness through company law reporting requirements, whilst a step in the right direction, is not sufficient on its own.

Katherine Tyler is a barrister at 9-12 Bell Yard where she specialises in criminal law, public international law and human rights.