The impact of strategic human rights litigation on corporate behaviour

For several decades, strategic human rights litigation (litigation) has been a key tool used by affected rightsholders, civil society organisations (CSOs) and human rights defenders to influence corporate behaviour and hold corporations accountable for human rights abuses. Such litigation seeks to bring about systemic change and encourage corporations to operate with greater respect for people and the planet.

But how effective has this strategy been? What are the potential risks of litigation and how can these risks be managed? Under what circumstances has litigation achieved positive changes in corporate behaviour? By drawing on a review of the relevant literature, analysis of selected case studies and insights gained from interviews with diverse stakeholders as well as participants of a workshop, this report seeks to answer these questions and in turn fills an important gap in current understanding about the efficacy of litigation in shaping corporate behaviour.

The report uses the concept of a corporate ecosystem to describe the network of factors and stakeholders that interact with corporations and in turn influence corporate behaviour. The report finds that litigation has direct and indirect impacts on the corporate ecosystem and proposes an original Impact Framework to assess impacts in a holistic and systemic way. These impacts are both positive and negative and are grouped into four positive impact categories and two negative impact categories. These six categories are further broken down into 16 indicators that can be used to assess impact.

Assessing impacts of litigation on corporate behaviour is difficult because impacts are often indirect, incremental and intertwined. The Impact Framework can be used both prospectively (when determining whether litigation is a viable option in a specific case) and retrospectively (when assessing whether a given case produced the intended impacts) by all parties to the litigation as well as other stakeholders.

The report finds that litigation has been used successfully to promote human rights and shape corporate behaviour. The systemic impact on corporate behaviour has, however, been slow and patchy. The report highlights that litigation is generally more impactful when consciously used in conjunction with other complementary strategies – such as civil society advocacy, media campaigns, complaints to regulatory bodies and broader engagement with stakeholders (e.g. investors and consumers) – that can influence the corporation.

The report references seminal business and human rights (BHR) cases to illustrate the application of the Impact Framework.

Positive examples of impact include:
• Raising awareness by enabling CSO advocacy, engaging with the media, triggering consumer or investor action and/or educating key stakeholders, e.g. the enduring shareholder responses to litigation against the construction of a pipeline in Myanmar continued to resonate more than 20 years after the lawsuit was filed.
• Changing corporate culture by triggering changes in BHR approaches, impacting corporate reputation and/or facilitating broader sectoral changes, e.g. the lawsuits filed against Casino Groupe in France, alleging a lack of human rights due diligence, resulted in the corporation revising its risk management practices.
• Remedying harm by encouraging meaningful engagement with rightsholders and/or providing remedy, e.g. the Nkala class action lawsuit in South Africa resulted in a USD $353 million settlement, and the Milieudefensie case against Shell led to €15 million in compensation for the 7 affected communities and was the first time a Dutch multinational was held responsible for the actions of an overseas subsidiary.
• Shaping laws and policies by developing responsible business standards and/or clarifying legal standards to drive corporate accountability, e.g. the decision of a US court in the Ratha lawsuit led to legislative reform to clarify the intent behind the Trafficking Victims Protection Reauthorization Act; the decision in the Vedanta case in the UK led to solidification of the direct duty of care principle to hold parent companies accountable; and the Nevsun case clarified the applicability of customary international law to corporations as well as influenced broader BHR policy reform in Canada.

Negative examples of impact include:
• Inadvertently leading to the establishment of regressive precedent or laws, e.g. the early optimism that attached to litigation brought pursuant to the Alien Tort Statute in the US has waned as decisions in subsequent cases have narrowed its potential application.
• Creating unintended adverse impacts on transparency by influencing corporations to take a cautious approach to the release of non-financial information, e.g. effect of the Vedanta decision on corporate attitudes to disclosure.
• Disrupting relations between corporations and communities, e.g. when initiating litigation causes a worsening of relationships between the corporation and the communities involved in the litigation.
• Adverse effects on the initiators of litigation by increasing security risks or strategic litigation against public participation (SLAPP) and/or imposing costs in terms of time and resources and creating conflict within communities, e.g. SLAPP cases filed against CSOs have a chilling effect on human rights advocacy and can impact the limited resources CSOs have to file cases.

The report also identifies six key strategies and variables to maximise the impact of litigation on corporate behaviour:
1. Selecting the ‘right case’ – taking into account variables including the public profile and culture of the corporation, suitability of the forum and access to credible evidence.
2. Evaluating and managing negative risks of litigation.
3. Collaborating with reliable local partners.
4. Managing expectations and competing goals.
5. Employing complementary redress mechanisms.
6. Securing sustainable funding.

The report concludes with some practical recommendations for the four key stakeholders to litigation: initiators of litigation, corporations, funders, and states:
• The initiators of litigation should take care in the selection of cases, keep paramount the interest of affected rightsholders and adopt the ‘do no harm’ principle. They should also build trusted collaboration with local partners and explore diverse options to secure sustainable funding.
• Corporations should view litigation as an opportunity to engage key stakeholders, rather than ignore or retaliate against them. By doing so, corporations will be able to align their approach with international BHR standards.
• Funders of litigation should be conscious of litigation uncertainties, build in flexibility in funding models and make provision for preparatory funding.
• States should introduce law and policy reforms (such as liberalising locus standi requirements, enacting anti-SLAPP laws and expanding legal aid) to create an environment conducive to strategic human rights litigation.