UNPRI consultation on human rights framework

A PRI consultation on a new human rights framework has begun. A paper has been published - see here (pdf) - the purpose of which is to set out a framework for institutional investors on the implementation of respect for human rights in their investment activities.

UK: England and Wales: did the company receive a fair trial?

Judgment was handed down yesterday in Alstom Network UK Ltd, R. v (Rev 1) [2019] EWCA Crim 1318. The court was required to consider whether a company that had been found guilty of conspiracy had received a fair trial where the individual - the company's directing mind and will, in respect of whose actions the company's liability was based - had not been indicted as a co-conspirator and was not available to give evidence at the company's trial.

The court unanimously rejected the argument that the trial had been unfair, noting that although counsel for the company "was at pains to distance himself from any suggestion that a corporate conspirator could never be tried in the absence of a [directing mind and will], it is plain that, if well-founded, his principal submission would have wide and untoward ramifications .... it can only be in a very rare case that the absence of a [directing mind and will] would itself be determinative of the question whether a corporate defendant could receive a fair trial. " (paras. [53] and [58]).

USA: Supreme Court gives judgment in Kiobel

The Supreme Court gave judgment earlier this week in Kiobel v. Royal Dutch Petroleum Co. A copy of the judgment is available here (pdf). Judgment was keenly awaited because of the potential impact of the decision on the accountability and liability of multinationals. The case was brought by a group of Nigerian nationals living in the United States against certain Dutch, British, and Nigerian companies. The petitioners sued under the Alien Tort Statute 28 U. S. C. §1350, arguing that the companies had aided and abetted the Nigerian Government in committing violations of the law of nations in Nigeria. The petitioners did not succeed, the court holding that the presumption against extraterritoriality applied to claims under the Alien Tort Statute. Amongst other things, Chief Justice Roberts stated:

...all the relevant conduct took place outside the United States. And even where the claims touch and concern the territory of the United States, they must do so with sufficient force to displace the presumption against extraterritorial application. ... Corporations are often present in many countries, and it would reach too far to say that mere corporate presence suffices. If Congress were to determine otherwise, a statute more specific than the ATS would be required."

Europe: Commission publishes proposals to improve non-financial reporting by companies

The European Commission has adopted proposal for a directive to increase the disclosure provided by certain large companies in respect of environmental, social and employee matters, respect for human rights, anti-corruption and bribery. Proposals are also included in respect of the disclosure by large listed companies of their policy on board diversity.

For further information see: Press release | FAQs | Copy of proposed Directive (pdf) | Impact assessment: full text (pdf), summary (pdf) | Further background information |.

United Nations corporate law project

In 2009 the Special Representative of the UN Secretary-General on Business and Human Rights launched a Corporate Law project. The purpose was to examine company and securities laws in over 40 jurisdictions to determine the extent to which they recognised human rights. Questions were framed around around several broad themes including incorporation and listing, directors' duties, reporting and stakeholder engagement. The survey also sought background information concerning the legal and regulatory landscape in each jurisdiction.

An overview of the survey results was published last month: see here (pdf). Further background information (including completed surveys for some of the jurisdictions, e.g., UK, France, South Africa, India and Japan), is available here.

UK: rewards for failure, the court of public opinion and human rights

Yesterday's comments by the Rt. Hon. Harriet Harman QC MP concerning Sir Fred Goodwin's pension have been widely reported. Ms Harman provided this eminently quotable statement concerning the pension agreement: "...it might be enforceable in a court of law, this contract, but it is not enforceable in the court of public opinion and that is where the government steps in". 

This has been interpreted by some as an indication that the Government may legislate to reduce Sir Fred's pension entitlement. The difficulties with such an approach - which would involve rewriting contracts - were rehearsed several years ago when the Company Directors’ Performance and Compensation Bill 2002-03 was introduced in Parliament as a Private Members' Bill by Archie Norman MP. The Bill would have resulted in directors'  compensation for loss of office being subject to a test of reasonableness in the light of any failure by the director. It did not receive Government support (see here) and was killed off at Second Reading (see Hansard for the controversial way in which this was done: HC Deb 31 January 2003 vol 398 cc1147-8). Nevertheless, the Government introduced a mandatory advisory vote for the shareholders of quoted companies with regard to the company's remuneration report (see, now, Section 439 of the Companies Act (2006)).

Of relevance to the current debate was the opinion of the then Parliamentary Joint Committee on Human Rights with regard to Archie Norman's Bill. The Committee explained that the Bill:

... appears to make it possible to deny payment of money legally due to a director, interfering with the director's right to peaceful enjoyment of possessions and depriving the director of property protected by Article 1 of Protocol No. 1 to the [European Convention on Human Rights]. The Committee is concerned about the possibility that this might be incompatible with two sets of rights under that Article: first, the right of the director to money legally due to him or her; secondly, the right of the company to use its property and enter into contracts as seems best to it. Under Article 1, compensation for a deprivation of property in the public interest is required save in exceptional circumstances, and any control on the use of property must strike a fair balance between the rights of property owners and the general public interest (which may itself demand compensation in some circumstances)."

UK: Scotland: directors' disqualification and the requirement to give notice

Section 16(1) of the Company Directors Disqualification Act (1986) provides that a person applying for a disqualification order must give no less than ten days' notice of his intention to the person against whom the order is sought. In Secretary of State for Trade and Industry v Langridge; Re Cedac Ltd [1991] Ch 402, a majority in the English Court of Appeal held that the ten day requirement was not mandatory but directory. This position has been adopted in Scotland (see Secretary of State for Trade and Industry v Lovett 1996 SC 32).  More recently, in Secretary of State for Trade and Industry v Swan [2003] EWHC 1780 (Ch), Laddie J. held that "although failure to give 10 days notice does not, per se, render the disqualification proceedings a nullity, taken with other factors, including the shortness of the notice, it may do so" (para. [58]).

The operation of Section 16 was considered towards the end of 2008 in Scotland by Sheriff Principal Lockhart in Secretary of State of Business, Enterprise and Regulatory Reform v Smith and Smith (19 November 2008, conjoined cases B412/07 and B410/07). What makes this decision interesting is that it was argued that the directory status of Section 16(1) should be reconsidered given the enactment of the Human Rights Act (1998). More specifically, it was argued that the failure to regard Section 16(1) as mandatory amounted to a breach of articles 6 and 8 of schedule 1 of the 1998 Act. Sheriff Principal Lockhart rejected this argument stating that he was bound by Lovett. What was also significant was the fact that the directors had not been prejudiced by the failure to give no less than days' notice.  Indeed, the Sheriff Principal stated that where there was proof of the notice being sent, its receipt may be presumed unless evidence existed rebutting that presumption.