In recent years it has become increasingly important for companies to be cognizant of human rights issues, particularly when operating abroad. Companies that fail to do business ethically in accordance with human rights norms and legislation may face not only regulatory exposure but also civil exposure and significant reputational and business risk. Most recently, Canada has released its new model Foreign Investment Promotion and Protection Agreement (the 2021 Model FIPA) which includes significant additional obligations pertaining to human rights.
On May 13, 2021, Global Affairs Canada released the 2021 Model FIPA, a model agreement which will serve as the basis for future foreign investment negotiations. The updated model – which was informed by public consultations – incorporates recent developments in free trade agreements, investment treaty law and investor-state dispute resolution, and reflects the Government of Canada’s policy objective of ensuring the benefits of trade and investment are more widely shared.
Notably, the 2021 Model FIPA significantly expands on previous provisions regarding responsible business conduct (formerly called corporate social responsibility), and includes the promotion of internationally recognized standards that investors are encouraged to incorporate. In particular, parties who adopt the model:
- reaffirm that investors and their investments must comply with domestic laws and regulations of the host state, including human rights, the rights of Indigenous peoples, gender equality, environmental protection and labour
- reaffirm the importance of internationally recognized standards of responsible business conduct, including the OECD Guidelines for Multinational Enterprises and the United Nations Guiding Principles on Business and Human Rights
- must encourage investors to voluntarily incorporate such standards into business practices and internal policies
- should encourage investors to undertake engagement and dialogue with Indigenous peoples and local communities; and
- must cooperate on and facilitate joint initiatives to promote responsible business conduct.
Human rights and Canadian businesses
This expansion is consistent with domestic and global trends in support of internationally responsible conduct on the part of businesses. Canadian entities are subject to human rights obligations through both federal and provincial legislation as well as customary international law such as the United Nations (UN) Universal Declaration of Human Rights (the UDHR). In addition to the Canadian Charter of Rights and Freedoms (the Charter) – which principally governs government institutions but may apply to entities under routine or regular control, including e.g. hospitals, universities or transit authorities – all provinces and territories have human rights laws applicable to private actors, such as the Ontario Human Rights Code (the Code). When operating a business or subsidiary abroad, companies also must consider the potentially applicable human rights laws of the host jurisdiction. The government has also proposed modern slavery legislation, currently before the Senate, that would impose an obligation on certain entities to report on the measures taken to prevent and reduce the risk of forced or child labour.
While it has not yet been adopted, on October 29, 2020, Bill S-216, (the Bill) was introduced in the Senate. The Bill has now received two readings. In its current form, this Bill would mean businesses captured by its criteria will be subject to its reporting requirements.
In addition, international and domestic best practices have been published including by the U.N. and the government of Canada. For instance, under the Ten Principles of the United Nations Global Compact businesses should support and respect the protection of internationally proclaimed human rights and ensure that they…