The Impacts of Strategic Corporate Human Rights Litigation

Our key takeaway: The rise of strategic human rights litigation against companies has been a significant lever in recent years, forcing the targets of litigation to engage with rightsholders and disrupting the “business as usual” approach. Litigation can also create “systemic change” that encourages proactive action on the part of other companies, levels the playing field for impacted people, and opens new possibilities by setting legal precedents for similar litigation in the same or new jurisdictions. However, a new analysis of the impacts of strategic litigation cautions that the effects of litigation are often unclear “because impacts are often indirect, incremental and intertwined.” They can also backfire. Significant positive outcomes (like increasing awareness among influential stakeholders, shifting corporate culture and spurring new legislation) can be countered by unintended adverse consequences (like disincentivising corporate transparency, disrupting direct company-community engagement and relationship-building, setting regressive legal precedents, and harming the initiators via costly countersuits that chill activities of human rights defenders and civil society organisations. What does this mean for companies? Proactive, meaningful engagement with affected stakeholders and their advocates needs to rise to the top of the corporate toolkit to both respond to litigation and prevent and address the negative human rights impacts that could prompt lawsuits. In parallel, companies should aim for more corporate transparency rather than less.

The Freedom Fund commissioned The Impact of Strategic Human Rights Litigation on Corporate Behaviour (November 2023), a report authored by Ebony Birchall, Surya Deva and Justine Nolan:

• Positive potential impacts of strategic litigation: The report highlights the potential for positive outcomes from strategic litigation to influence corporate behaviour on human rights and related issues, like climate change and the environment. Strategic human rights litigation can increase awareness of issues “by enabling CSO advocacy, engaging with the media, triggering consumer or investor action and/or educating key stakeholders,” citing as one example decades-long investor engagement with a lawsuit over a pipeline in Myanmar. Strategic litigation can also help to prompt a change towards a human rights-respecting corporate culture “by triggering changes in BHR approaches, impacting corporate reputation and/or facilitating broader sectoral changes.” For example, the high business risks of litigation and reputational risk can create a shift in the “tone from the top” on the importance of implementing meaningful human rights commitments and human rights due diligence. This can also have ripple effects for others in the sector, who are incentivised to examine their own practices and to collaborate with others to address challenging human rights issues. Strategic litigation may also prompt remedy that is based in “meaningful engagement with rightsholders”; this can happen at both the end-point of litigation, which “receives the most media attention,” as well as throughout the process by “forc[ing] businesses to share information with the local community. … [T]he involvement of the courts can encourage transparency surrounding corporate activity.” Finally, strategic litigation can “shap[e] laws and policies by developing responsible business standards and/or clarifying legal standards to drive corporate accountability.”
  

• Negative potential impacts of strategic litigation: The report cautions that there are also potential drawbacks of strategic litigation that may in fact impede the forward progress of corporate respect for human rights. For example, litigation may “inadvertently [lead] to the establishment of regressive precedent or laws,” citing the precedent set by the Alien Tort Statute in the U.S., the applicability of which has been narrowed over time by court decisions. In addition, strategic litigation may unintentionally drive companies to keep non-financial information confidential out of fear of attracting legal action, reducing prospects for transparency more broadly. Strategic litigation may also strain company-community relationships by creating an adversarial environment: "One business interviewee suggested that litigation can often be counterproductive to resolving the human rights issue at the centre of the case, warning that if a business wants to engage in good faith and negotiate with the rightsholders to come to a solution, commencing litigation can act as a barrier. … Similarly, a civil society interviewee explained that communities who are negotiating with local managers of the business might have a good chance of coming to practical solutions but as soon as the prospect of litigation is mentioned, the local managers hand the issue over to the business headquarters and legal department, and the community’s ability to engage and negotiate is impacted by confidentiality rules and the formal legal processes involved with litigation.” Finally, strategic litigation may harm the initiators “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.” These outcomes can also “have a chilling effect on human rights advocacy and can impact the limited resources CSOs have to file cases.”
  

• Six key strategies and practical recommendations for companies: The report identifies six key strategies for those considering strategic litigation against companies: (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 also offers practical recommendations for stakeholders involved in strategic litigation, including companies. The authors emphasise that “[c]orporations 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.”