1) The present separation of powers and the dual roles of legal profession

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Abigayle Valerie Blake
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1 Business lawyers are not up to date on corporate responsibility Based on the speech by Claes Cronstedt at a seminar arranged by the International Law Association, 4 April 2012, in Stockholm. 1) The present separation of powers and the dual roles of legal profession Some years ago a CEO for a multinational company contacted me. He had problems. His company was accused for damage of environment and tort law attorneys in New York were preparing a class action suit. What should the poor fellow do? Cicero once said: He who controls the street controls the law. I thus answered the CEO: If you control the main street you ll be safe. Beware of the court of the public opinion. I strengthened my argument by quoting an American attorney: Class action is a machine, into which you are dragged as a pig, and come out of as a sausage. The dispute was settled through mediation by human rights lawyers who contributed to a respectful power balance between the parties. Corporations can accept to pay high compensations to plaintiffs, but a lost reputation would be a disaster. This story shows that a corporation s friend or enemy is the main street, the grassroots, not the government, which often is intervened with the corporate sector. But the corporations have the upper hand. Who would you say have the most influence in the global financial sector JP Morgan Chase or Bank of England? Or, whom would you contact if you wished to make an impact on the climate change discussions the Swedish Government or ExxonMobile? The big corporations also affect the legal structure. Professor Gunther Teubner, one of the great legal thinkers, rhetorically says: Is society pushing for the recognition of a global justice without the state? The corporate sector takes the initiative through self regulation and creates its own international norms to achieve predictability and a level playing field. Are we back to

His company was accused for damage of environment and tort law attorneys in New York were preparing a class action suit. What should the poor fellow do?

2 medieval Lex Mercatoria? Yes, since the globalisation gained speed we talk about New Lex Mercatoria. As always, when trade improves, politics will follow. Hence the private legal structures, the norms, will crystallize to hard laws. But how successful is the work to protect human rights? I am not impressed. It has so far resulted in a mess of overlapping conventions that, with elaborate ceremonies, many states sign in Geneva and then ignore without any consequences. Mary Robinson said 1998: Count up the results of fifty years of human rights mechanism, thirty years of multibillion dollar development programs and endless high level rhetoric and the general impact is quite underwhelming...this is a failure of implementation on a scale that shames us all. The human rights lawyers who are fighting to make the conventions work are admirable. In countries where violations of human rights are widespread these lawyers are often the only independent force that fights for democracy and the rule of law. They are heroes, but without impact on the corporations. It is the business lawyers who have access to the corporate boardrooms and can influence, but human rights are seldom or never on their agenda. 2) The fog clears around CSR thanks to initiative from the UN Professor John Ruggie, Special Representative of the United Nations Secretary- General has made an important contribution to CSR by creating the 2011 UN Guiding Principles, a framework resting on three pillars: (1) the State duty to protect against human rights abuses by third parties, including business enterprises, through appropriate policies, regulation, and adjudication, (2) the corporate responsibility to respect human rights and (3) the need for greater access by victims to effective remedy. Ruggie s work has elegantly made CSR more understandable. UN Guiding Principles, by its inclusion in the 2011 version of the OECD Guidelines for Multinationals, are made so- called soft law that is not mandatory but has a strong influence on the corporate sector and other stakeholders and on the development of the judiciary. All corporations are included, hence also law firms.

It has so far resulted in a mess of overlapping conventions that, with elaborate ceremonies, many states sign in Geneva and then ignore without any consequences.

3 EU wants to take another step. In October 2011 the EU Commission made public A renewed EU strategy for Corporate Social Responsibility. Are CSR norms to become mandatory in Europe? To what extent? It s a surprising turnaround and the business community is critical. Previously EU s official position was that the lawmakers should not interfere with the corporate actors voluntary development of CSR. This is a good example how norms and soft law can be crystallised to hard law when the time is right. 3) Business lawyers and CSR a sad story CSR has during the past five years made significant progress. But most law firms have not kept up with this development. A recent review of the 100 largest law firms in the world by Advocates for International Development (A4ID), Law Firms Implementation of the Guiding Principles on Business & Human Rights, indicates the following: - None appear to have published a high- level policy statement committing them to respect human rights in the management of their business. - A tiny handful of these firms have signed up to the UN Global Compact, whose first two principles relate specifically to human rights. - Only two of these firms have published corporate responsibility reports in accordance with the Global Reporting Initiative (GRI) Guidelines, which contains key performance indicators relating to human rights. - Only one law firm appears to have published its policy with respect to client selection and supply chains. The Council of Bars and Law Societies of the European Union in Brussels (CCBE) - an umbrella organisation for EU s approx one million lawyers - has had similar experience. On an inquiry from CCBE, almost all European Bars have answered that they are interested in CSR - but nothing happens. Some still think that CSR is about charity and pro bono work. But why this lack of interest? The answer is perhaps that CSR is difficult to understand. When, during the 1990 ies I became engaged in CSR, my colleagues at the law firm thought I was out of my mind; you can t bill such work. They were absolutely right, I couldn t! Most corporations find CSR as a voluntary

Previously EU s official position was that the lawmakers should not interfere with the corporate actors voluntary development of CSR.

4 commitment unattractive and their lawyers follow suit. Milton Friedman still casts a shadow. Some managements I have talked with do not comprehend why their strategic security should be forsaken in exchange for a volatile moral security (!). Hence they don t understand CSR. To change their perspective strong pressure is needed from e.g. NGO campaigns and/or threat of legislation or that important business partners or customers demand this or even a change of management. Main street is well informed and looks seriously upon a corporation that violates fundamental values. Unfortunately, due to lack of expertise, lawyers are not in a position to warn their clients against the legal and reputational risks that could be the consequence of failing to take social responsibility. There is a minority of corporations, which have taken on CSR seriously. They often have a management (or a general counsel) with a strong emotional quality (EQ), which creates a good corporate culture where CSR is embedded in the corporate governance. These companies show that CSR is not a cost but leads to increased profit and stability. Business lawyers with their resources and broad perspectives should have grasped this development long ago. The signals have been clear. But they are still spectators even though we must deal with complex legal boundaries. As professor Jan Eijsbouts, Maastricht University, former general counsel of Akzo Nobel, says about CSR; We have crossed many boarders: those between law and non-law, between international law and national law both public and private, between international law and transnational law, between public and private international law, between public regulation and private regulation, between law and economics, between law and sociology, between law and politics, between law and justice, between law and morals and, finally, between law and ethics, both in theory and practice. CSR covers all these territories.. This listing speaks for itself and demonstrates that there is a lot of work for business lawyers which can be billed. 4) UN Guiding Principles a headache for lawyers? Lately also business lawyers are being named and shamed. Specifically when they represent unethical clients. UN Guiding Principles may cause lawyers to be more exposed to criticisms. Advocates for International Development (A4ID) states e.g. that the UN Guiding Principles expects that firms should first understand the human rights impacts related to the services they perform for

To change their perspective strong pressure is needed from e.g. NGO campaigns and/or threat of legislation or that important business partners or customers demand this or even a change of management.

5 their clients.it is therefore necessary that a law firm conducts its own human rights investigation before committing to represent a client, or at the earliest stages of the representation the earlier this is done, the better, since it is much harder later on for the law firm to withdraw or to persuade the client not to engage in conduct that infringes human rights. This is clear speaking. If the law firm fails to carry out its own due diligence and the client subsequently gets into trouble by following the legal advise, the lawyers risk being accused for malpractice or even for complicity. The UN Guiding Principles could also have a bearing on the discussion of transparency and the attorney- client privilege, but this is another serious story. The strongest argument in support of a speaker is that he is a good man (Cicero). The lawyer assists his client and society well by strengthening the legitimacy of his profession. We must protect the ethos of our profession or we risk losing our special position in society. We are more than consultants. Claes Cronstedt Member of the Swedish Bar

done, the better, since it is much harder later on for the law firm to withdraw or to persuade the client not to engage in conduct that infringes human rights. This is clear speaking.

Extracts from Ruggie s Law: filling the human rights governance gap for multinationals in public international law 1

Extracts from Ruggie s Law: filling the human rights governance gap for multinationals in public international law 1 BY JAN EIJSBOUTS 2 1 Effectius is grateful for the friendly cooperation of Jan Eijsbouts