We are Taking a Short Break

Christmas is just around the corner. With all the hustle and bustle of the academic life, we all need a little time off to refresh, recover and reflect. So as of next week (23 December 2019), we’ll be on a short hiatus.

We hope that you can look back on a generally positive year with us. In 2019, we published 27 posts which attracted more than 3,200 views from 94 countries around the world.

The Essex Law Research blog will be back in early January with more research news from our School. However you celebrate at this time of the year, we hope you enjoy a wonderful holiday season!

With best wishes

The Research Visibility Team

Reporting as a Means to Protect and Promote Human Rights? The EU Non- Financial Reporting Directive

Dr Johanna Hoekstra, Lecturer in Law at the University of Essex, published an article with Professor Olga Martin-Ortega, Director of the Business, Human Rights and Environment Research Group at the University of Greenwich, entitled Reporting as a Means to Protect and Promote Human Rights? The EU Non- Financial Reporting Directive. The article was published in November 2019 in Vol 44 of the European Law Review.

The paper analyses the adoption and content of the EU Non-Financial Reporting Directive 2014/95 (NFR Directive) in the context of current developments to protect and respect human rights through corporate human rights due diligence and transparency legislation and considers the potential role of the reporting obligations of the Directive in the wider debate regarding human rights reporting. The analysis presented in this article makes clear that the NFR Directive is not designed to protect and promote human rights.

The NFR-Directive entered into force in 2014 and was transposed by all Member States in December 2016. Non-financial reporting builds on corporate financial reporting and requires corporations that meet certain criteria with regards to income and size to publish a statement on policies and procedures regarding environmental protection, social responsibility and employee protection, anti-corruption and bribery, diversity on boards, and human rights protection. The Directive leaves it to the company to decide on the format of the report, the extent of the information that is disclosed, and the specific issues that are included in the report. The flexible criteria on what should be reported will make it more difficult to understand the company’s impact on society in an objective manner.

The Directive includes the possibility for Member States to require integrated reporting (the financial information is published alongside non-financial information) which creates a more holistic understanding of corporate activities and for Member States to require the information in the report to be independently verified by a designed institution. Most Member States choose not to transpose this second option because of worry that the additional costs would damage the competitiveness of their companies. The NFR Directive can be placed in the developing mandatory legal framework on corporate human rights responsibilities which include reporting laws such as the UK Modern Slavery Act and human rights due diligence laws such as the French Duty of Vigilance Law.

While reporting is advocated as a measure to further corporate accountability with regards to human rights, the NFR-Directive is primarily framed as an accounting measure that is intended to stimulate economic investment through furthering transparency. The requirements in the NFR-Directive are framed in a way that they reduce the potential effectiveness of the reporting because of the flexible and general criteria and the lack of verification by an overseeing body in most Member States. This is aggravated by the divergence between the requirements of the NFR-Directive and the UN Guiding Principles of Business and Human Rights (UNGP). The 2011 UNGP are the main reference in the definition of corporate responsibilities regarding human rights and propose a three-pillar framework to address the actual and potential impact of companies on human rights: (1) the state’s duty to protect; (2) the corporate responsibility to respect; and (3) the victims’ access to remedies. As the NFR Directive was published later than the UNGP it is regrettable it did not take the reporting requirements of the UNGP as a starting point to further develop the law.

The NFR Directive differentiates between who should report and who should not report, based on the type of company and the number of employees whilst the UNGP acknowledge that all companies have a reporting obligation, although this obligation can differ depending on the sector in which the company operates. It adds that this process should draw on human rights expertise and involve meaningful consultation with stakeholders which is not part of the NFR Directive. The NFR Directive contains specific requirements as to environmental and social factors that the company should report on but uses the word “could” in relation to human rights reporting and only suggests this could include: “information on the prevention of human rights abuses.” The limited requirements mean that it is up to the company to decide on how they approach the issue. There is therefore a risk that reporting will be a mere box ticking exercise that does not involve any meaningful reporting, which to have a significant effect needs to be closely linked to due diligence.

Reporting cannot be equated with a meaningful due diligence process that identifies, prevents, mitigates and accounts for corporate impact on human rights. Reporting as the main legislative tool leaves in the hands of civil society organisations, shareholders, and consumers the task of monitoring the veracity of the information. This does not sit well with the substantive, far reaching and right holder centred concept of due diligence proposed in the UNGPs. The Directive does not recognise the consolidated approach to human rights responsibilities of businesses and there is a concern that it may limit existing social expectations expressed in soft law, including the UNGPs. This has led to a call for European legislation on corporate human rights due diligence.

Visiting the Shanghai Stock Exchange to discuss Capital Market Issues between China and the UK

Dr Flora Huang, Senior Lecturer in Law at the University of Essex, visited the Shanghai Stock Exchange (SSE) in China between 21-25 October 2019.

This research visit, which is funded by the British Academy Mid-Career Fellowship, aims to promote research on the development of Chinese capital markets and simultaneously engage with the regulatory authorities to facilitate knowledge exchange.

The SSE, established in November 1990 in China, is the fourth largest Exchange in the world by market capitalisation at USD 4.77 trillion as of October 2019, following the New York Stock Exchange, Nasdaq and Tokyo Stock Exchange.

The Shanghai-London Stock Connect, namely an exchange tie-up, which was launched in June 2019, has drawn wide attention for giving mutual market access to the two stock exchanges for the first time.

During her visit, Dr Huang met the staff and experts from SSE’s Investor Service Department, Listed Company Supervision Department, Global Business Development Department and Capital Market Institute.

Visiting the SSE’s Investor Service Department 

They discussed issues regarding the stock connect, the Chinese and UK capital markets, supervision of listed companies, regulatory cooperation and cross-border enforcement.

This visit has laid down a strong foundation for further research collaboration and engagement between academia and market regulators in the two countries.

The Responsibility of Corporations under International Law: Essex Academic Presents at the Urban Morgan Institute for Human Rights

Dr. Tara Van Ho, Lecturer in Law at the University of Essex, spoke on the responsibility of corporations under international law at the 40th anniversary celebrations of the Urban Morgan Institute for Human Rights at the University of Cincinnati School of Law in the US.

Dr. Van Ho, a co-President of the Global Business and Human Rights Scholars Association, was asked to discuss the international legal standards relevant to addressing business impacts on human rights.

After outlining the expectations in the UN Guiding Principles on Business and Human Rights, currently the most authoritative statement on the issue, Dr. Van Ho focused on the difficulty victims face in securing remedies. These include, but are not exclusive to, states that are unwilling and unable to ensure victims can hold corporations accountable and complex corporate structures that limit the ability of victims to pursue people abroad.

When states like the US take administrative action to sanction businesses, the fines paid rarely go to support the victims but instead benefit the treasury of the enforcing state. There is room for hope, however. As Dr. Van Ho explained, businesses can embed respect by human rights by ensuring they speak about human rights responsibilities, empower employees and others to raise concerns through independent grievance and complaint mechanisms, and ensuring their incentive structures encourage managers and employees to take human rights seriously. This has been done successfully by some businesses. 

The Urban Morgan Institute is the oldest endowed human rights centre at a law school in the world. There is a rich history of collaboration between Essex and Cincinnati.

The Urban Morgan Institute houses the Human Rights Quarterly, the world’s leading interdisciplinary journal on human rights, which has provided a venue for research works from several Essex faculty members.

The Essex Human Rights Centre‘s first director, Kevin Boyle, and the Urban Morgan Institute’s Director for its full 40-year history, Bert Lockwood, were long-term friends and colleagues. Professor Lockwood served as a visiting lecturer at Essex for a year when Professor Boyle was asked to serve at the UN.

A few years later, the late Sir Nigel Rodley, the long-term Chair of the Essex Centre, visiting Cincinnati to receive the Butler prize for his work on human rights and to deliver a speech on the prohibition of torture.

Dr. Van Ho is a graduate of the educational programmes at both centres.