A Long and Winding Road to Corporate Accountability: the Wider Ramifications of Jesner v Arab Bank

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This post is the fourth in the Jesner v Arab Bank special series on this blog. Previous posts are here, here and here.

It is a pleasure to welcome Marisa McVey (@MarisaMcV) on Rights as Usual. Marisa is a PhD student at the University of St Andrews. She is focusing on analysing corporate accountability in the reporting and assurance practices of the UN Guiding Principles on Business and Human Rights. More information can be found here. This post is hers.

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Against the backdrop of the outcry over Cambridge Analytica and Facebook, and other recent business and human rights scandals, there have been increasing calls for greater corporate accountability for human rights, yet binding accountability still seems to be a rarity. Transnational tort litigation has been used to fill this void, but the recent US Supreme Court decision Jesner v Arab Bank more than complicates matters. While the intricacies of Jesner are far better summarised elsewhere, this post wishes to explore the wider implications of closing this particular avenue of corporate accountability. Essentially, does the judgment handed down by the US Supreme Court mean we must look outside the courtroom for corporate accountability?

Fast fashion 

On 24th April 2013, the Rana Plaza factory complex in Bangladesh collapsed, killing over 1,000 people. It gave the general public a glimpse not only of the true cost of ‘fast fashion’, but also the urgent underlying need to hold corporations to account for their conduct. The implications of this disaster echoed around the world, culminating in the Accord on Fire and Building Safety in Bangladesh and the Alliance for Bangladesh Workers Safety, signed by the likes of H&M, GAP and Nordstrom. Audit procedures and corrective action plans within these initiatives sought to prevent any further health and safety hazards. The Accord also provided remediation options, such as international arbitration as an attempt to ensure the brands were accountable to their obligations under the agreement. A fund was also set up to try to compensate victims and their families. The success of these attempts at corporate accountability has been mixed. Brands offer financial help with better safety equipment, yet still apply downward pressure on garment prices; moreover, the compensation fund took two years to reach its $30 million target. Rana Plaza ultimately highlighted two of the most prominent difficulties in the business and human rights endeavour: how do we hold corporations accountable for human rights violations, and how do we provide redress for the harm committed?

Slow justice

Across the globe, and coincidentally on the fifth anniversary of the Rana Plaza disaster, the US Supreme Court handed down its judgment on Jesner. The facts of this case are very different to those of Rana Plaza, but the plaintiffs’ argument exposed the same need to hold corporations to account for their human rights conduct. However, the judgement effectively applies a blanket ban on the ability to hold corporations accountable via foreign direct liability under the Alien Tort Statute (ATS). This antique statute was absolutely not a perfect mechanism for redress for victims of human rights violations by corporations. One could argue that it represented more of a novel legal avenue for scholars of business and human rights, rather than an efficient mechanism for redress for the victims whose lives and livelihoods were destroyed by corporations. In fact, at the time of writing, no plaintiff under the ATS has ever won in the Supreme Court (and with Jesner, it is now unlikely that they ever will).

Yet the ATS became a trendsetter, providing a foundation for the gradual global diffusion of transnational tort cases. One such example was Okpabi v Shell, heard in the UK earlier this year and discussed on this blog here. In the business and human rights field, where voluntary soft-law principles still reign supreme, the ATS and its subsequent case law had offered some (albeit dwindling) hope for legally binding corporate accountability. Corporations are becoming increasingly aware that human rights cannot simply be part of a shiny report on corporate social responsibility (see the Cambridge Analytica/Facebook scandal above). This awareness, however, does not directly translate into action. With foreign direct liability in troubled waters in the UK, and now in the US, there is a need to ensure that corporations are consistently reminded that their human rights responsibilities reach beyond fundraising or building schools in the Global South.

Soft law?  

It’s unlikely that transnational tort cases for human rights will disappear. But, unlike when the ATS first came to the attention of those using creative judicial means to hold corporations to account, there now exists a plethora of non-statutory corporate accountability mechanisms eager to come to the fore. Some, like the Alliance for Bangladesh Workers Safety, are galvanised by (and specific to) a particular industry or human rights issue. Others, like the UN Guiding Principles on Business and Human Rights aim to be preventative, encouraging human rights reporting practices to become central to providing corporate accountability. The OECD Guidelines, with their National Contact Points and specific instance procedure, to an extent provide a stronger form of corporate accountability. However, interpretation of these Guidelines differs from country to country, leaving a highly fragmented body of cases.

These multi-layered, multi-disciplined approaches all have their advantages, yet they are dispersed and incongruent. In some ways, through tort law, foreign direct liability provided an international normative basis for accountability. My guess (and hope) is that Jesner will provide an excellent incentive to ramp up the campaign for a binding international treaty on business and human rights. This would attempt to provide a cohesive basis for corporate accountability, though progress has to date been slow and its exact contents up for debate. Nevertheless, on the fifth anniversary of Rana Plaza, the outcome of Jesner reminds us of the need to provide legal avenues for human rights violations, regardless of who commits them.