The Hague Rules on Business and Human Rights Arbitration

Businesses are increasingly being evaluated on the basis of the overall impact on the economy,  environment and society, including human rights. As scrutiny from business grows, disputes relating to the human rights impacts of business activities are likely to arise.

Background on the Hague Rules
On December 12, 2019, the Hague Rules on Business and Human Rights Arbitration (The Hague Rules) were launched at the Peace Palace in The Hague which provide for the administration of arbitration concerning disputes related to the business activities on human rights based on UNCITRAL Arbitration Rules[1]

The overlap between human rights and international arbitration has always been a contentious debate. Practice and borderlines separating human rights and international arbitration still have been blurred. Contrary to traditional wisdom, the arbitration community is growingly accepting that international arbitration and human rights are no longer distinct and unallied facets of law and practice. The advent of human rights claims in the investor-state disputes has paved the way for more discourse about relying on international arbitration to resolve human rights cases. Recently, this overlapped between international arbitration and human rights has intensified with the inception of the Hague Rules, advanced to grapple with the insufficiency of access to an effective remedy for human rights violations by businesses.

The Hague Rules have been introduced with the objective of imparting a set of rules for arbitration in relation to business and human rights disputes. In 2017, a Drafting Team was established to prepare and draft the Rules and held sessions at the Center for International Legal Cooperation (CILC). The work of drafting the Hague Rules and related activities of the project were funded by the City of The Hague and supported by the Ministry of Foreign Affairs of the Netherlands.

Objective of the Hague Rules
The Hague Rules provide a set of procedures for the arbitration of disputes related to the human rights impacts of business activities. In particular, arbitration under the rules can provide 2 main objective which are

The possibility of a remedy for those affected by the human rights impacts of business activities, as set forth in Pillar III of the United Nations Guiding Principles on Business and Human Rights (the UN Guiding Principles)[2], serving as a grievance mechanism consistent with Principle 31 of the UN Guiding Principles which is One of the fundamental principles of the international human rights system is that when a right is violated, victims must have access to an effective remedy.The Guiding Principles affirm that the State duty to protect rights includes ensuring that when human rights are violated by companies within their territory and/or jurisdiction, the State must ensure access to an effective remedy for those affected. The state duty to provide access to effective remedy includes taking appropriate steps to ensure that State-based domestic judicial mechanisms are able to effectively address business-related human rights abuses, and do not erect barriers that prevent victims from presenting their cases. States should also provide effective and appropriate non-judicial grievance mechanisms with the capacity to hear and adjudicate business-related human rights complaints as part of a comprehensive State-based system for remedy. The access to remedy principles do not only apply to States. They also stipulate that business enterprises should provide for, or participate in, effective mechanisms for fielding and addressing grievances from individuals and communities who may be adversely impacted by the company's operations.

Businesses with a mechanism for addressing adverse human rights impacts , as set forth in Principles 11 of the UN Guiding Principles which is Business enterprises should respect human rights. This means that they should avoid infringing on the human rights of others and should address adverse human rights impacts with which they are involved. and 13 which is The responsibility to respect human rights requires that business enterprises avoid causing or contributing to adverse human rights impacts through their own activities, and address such impacts when they occur and seek to prevent or mitigate adverse human rights impacts.

However, Arbitration under the Rules is not meant as a general substitute for State-based judicial or non-judicial mechanisms but encourage the settlement of disputes by collaborative settlement mechanisms, such as mediation, conciliation, negotiation and facilitation including at any stage of an arbitration proceeding and nothing in these Rules should be read as creating new international legal obligations or as limiting or undermining any legal obligations a State may have undertaken or be subject to under international law with respect to human rights.

Scope and Legal Basis of the Hague Rules

These Rules are based on the article 1, paragraph 4 of UNCITRAL Arbitration Rules with changes in order to reflect

The particular characteristics of disputes related to the human rights impacts of business activities.

The possible need for special measures to address the circumstances of those affected by the human rights impacts of business activities.

The potential imbalance of power that may arise in disputes under these Rules.

The public interest in the resolution of such disputes, which may require, among other things, a high degree of transparency of the proceedings and an opportunity for participation by interested third persons and States.

The importance of having arbitrators with expertise appropriate for such disputes and bound by high standards of conduct.

The possible need for the arbitral tribunal to create special mechanisms for the gathering of evidence and protection of witnesses.

Arbitration under the Hague Rules is premised on the consent of the parties to resolve their disputes via arbitration. The Hague Rules shall apply where parties have agreed that disputes between them in respect of a defined legal relationship, whether contractual or not, shall be referred to arbitration under these Rules.[3] The consent of the parties to submit their disputes to arbitration shall be evidenced in an arbitration agreement. Moreover, there is the rule which the arbitral tribunal shall have the power to rule on its own jurisdiction, including any objections with respect to the existence or validity of the arbitration agreement.[4]

However, there is no mechanism for the enforcement of arbitral awards is provided for in the Hague Rules. Instead, the enforcement of awards rendered under the Hague Rules is to be governed by domestic law and international treaties, notably the 1958 New York Convention on the Recognition and Enforcement of Foreign Arbitral Awards[5], article 1 which is "This Convention shall apply to the recognition and enforcement of arbitral awards made in the territory of a State." and article 1(2) of the Hague Rules which is "the parties agree that any dispute that is submitted to arbitration under these Rules shall be deemed to have arisen out of a commercial relationship or transaction for the purposes of Article I of the New York Convention."

Whilst the consent of a State to arbitration under the Hague Rules shall waive sovereign immunity from the jurisdiction of the tribunal, such consent shall not amount to a waiver of the State's immunity from execution[6]

Challenges and Future Directions

Despite its noble intentions, the Hague Rules are still nascent, their practical effectiveness shall only be evident with time. However, the focus of this post is on the problems that the Hague Rules may encounter on account of the lack of support from the host and/or enforcement states, the main reasons are , the problem between business and human rights and, the enforcement of the award on tribunal arbitration.

As a result, when businesses become increasingly focused on the human rights impacts of their business activities, an awareness of the Hague Rules arbitration as a method of dispute resolution is likely to grow. In practice, arbitration under the Hague Rules is likely to be considered alongside a repertoire of other domestic and non-judicial methods available to businesses and rights-holders for the resolution of human rights disputes.

The Thailand Arbitration Center (THAC) is an institution that provides alternative dispute resolution services, comprising of arbitration and mediation, for cross-border disputes. It is established by the Act of Arbitration Center B.E. 2550 (2007). The THAC was first founded and commenced its operation in 2015, intending to promote and strengthen the alternative dispute resolution system and services in Thailand.