Strengthening Due Diligence: Side event at the 58th Session of the Human Rights Council

On February 28, the Institute for Human Rights held a side event titled “The role of due diligence in transnational corporations and human rights protection”, during the Human Rights Council 58th Session in United Nations Office in Geneva.

This event brought together notable speakers, including Emin Huseynov (Director of Institute for Human Rights), lawyer and strategic legal advisor Sam Noshadha, and Stephen M. Kohn (Chairman of the National Whistleblower Center). Moderated by human rights advocate Diana Nazarets, the discussion shed light on how, if not properly managed, cross-border investment can contribute to corruption, human rights violations, and instability. 

Sam Noshadha highlighted the empowering ethnical investment practices for international stability and explained that due diligence is the systematic process investors undertake to assess risks and compliance before engaging in foreign investment. 

“If cross-border investments are not regulated, there is an increase in the risk of corruptions-bribery, money laundering, etc.-, and of human rights violations, that include: labor rights abuses, land rights conflicts, and environmental degradation”. 

Mr. Noshadha illustrated key strategies to strengthen due diligence, which should be implemented in all phases of investment: “Comprehensive risk assessments and engagement with the local communities and stakeholders are essential in the pre-investment phase. During the investment phase, the focus is on implementing corporate accountability mechanisms. Lastly, transparency in financial reporting and periodic evaluation are required in post-investment”. 

He also mentioned the role of technology, such as AI (Artificial Intelligence), in ensuring transparency and ethical investment, which is not only a legal obligation but also a moral imperative. 

Stephen M. Kohn brought the example of the U.S. and specifically on the Foreign Corrupt Practices Act (FCPA). The FCPA, that was recently suspended for 180 days, is a federal law, which prohibits payments, gifts, or even offers of “anything of value” to a “foreign official” for the purpose of influencing the official or otherwise “securing any improper advantage” in obtaining, retaining or directing business.

“Foreign bribery is done for profit. The profit hurts the people who need those resources and those economic opportunities the most”, highlights Kohn.

 In his speech, Mr. Kohn emphasized the urgent need to combat transnational corruption within large global businesses, stressing that corruption directly undermines human rights. He called on governments to use their domestic anti-corruption regulations to hold companies accountable for their actions, as businesses have a responsibility to operate ethically and respect human rights. 

"If a company pays a bribe and profits 300 million dollars from it, they must pay it back, in addition to facing all other fines and penalties," Kohn stated. He proposed a straightforward three-step approach to tackle corruption: "detection, enforcement, and heavy sanctions," urging both businesses and governments to act responsibly.

Lastly, Emin Huseynov emphasized the critical role of civil society in monitoring and holding businesses accountable for their corporate responsibility, particularly in the context of human rights. He reflected on the most recent Omnibus package, adopted by the European Commission, on February 26, 20205, that foresees some critical changes, particularly limiting due diligence obligation solely to direct business partners; reducing the frequency of due diligence monitoring and considerably narrowing the definition of the “stakeholder”. 

“If these amendments are adopted, they will generate serious problems for those affected by irresponsible business conduct”. 

 He stated that in Azerbaijan, transnational corporations make deals directly with the state, creating gaps that allow human rights violators to act with impunity. As a result, human rights groups have limited capacity-building resources, leading to the exclusion of stakeholders. This, in turn, results in accountability issues, particularly in authoritarian regimes.

He posed a crucial question: “How is it possible to conduct efficient due diligence, if key stakeholders, such as civil society and independent media are often excluded from the process” .

The panel concluded with a unanimous call for stronger due diligence practices in transnational investments to prevent corruption, human rights violations, and environmental harm.