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June 3, 2008 12:01 PM

Analysis: The Millstein-Lipton Debate on U.N. Human Rights

Posted by Michael D. Goldhaber

Will today's United Nations report on business human rights surrender the boardroom to a band of predatory human rights plaintiffs' lawyers? Or is it merely a benign export of U.S. best practices? That depends on which titan of the New York bar you believe: Martin Lipton of Wachtell, Lipton, Rosen & Katz, or Ira Millstein of Weil, Gotshal & Manges. It also depends on your global attitude toward regulation.

Millstein and other luminaries at Weil Gotshal argue that the best U.S. companies already monitor human rights due to the pressures exerted by fiduciary duties, SEC disclosure requirements, the consideration of corporate culture in criminal sentencing, and the bogeyman of alien tort liability. By analogy to the history of anticorruption, they conclude that corporate America should push strong worldwide norms.

Weil's big-picture view of the U.S. regulatory landscape is insightful, and it has taken a laudable stand in the U.N. debate, but the analogy to anticorruption is imperfect. There is no hard human rights law, akin to the Foreign Corrupt Practices Act, which places American corporations at a disadvantage. The human rights norms that inform U.S. company directors are mushy, and there are arguably nations with tougher laws. The U.S. norm that is foremost in directors' minds is the Alien Tort Claims Act. And while gatekeeper doctrines may bar many extraterritorial claims, the plaintiffs' lawyers aim to apply ATCA equally to non-U.S. corporations. In the human rights game, the playing field may already be level.

On the flip side of the debate, Lipton fears that U.N. compliance guidelines would define human rights with reference to broad conventions, and require companies to prioritize their challenges, which would invite litigation. He argues that non-binding U.N. guidelines could inform binding common law. Or a non-binding U.N. report could inspire binding statutory law, which is after all one of the report's goals.

It's hard to poke holes in Lipton's logic. The problem with Lipton's memo is its reflexive resistance to regulation. The Wachtell memo does not so much misapprehend the provisional nature of the U.N. report, as to imagine its most radical possible implications in an effort to stem a healthy and moderate debate. Millstein is right in stressing that a corporate lawyer (or superlawyer) should promote social responsibility as a matter of both principle and practicality. Millstein looked around and concluded that, given the evolving social consensus, responsible directors of U.S. companies already monitor and control human rights risks. To the extent that the U.N. report helps to universalize this instinct, it is all to the good. Lipton's fears of over-regulation counsel engagement with the U.N. process rather than resistance.

In any event, the U.N. is not exactly famous for its effectiveness. On this point the history of corruption policy may indeed be instructive. U.S. lobbying led to one corruption treaty sponsored by the U.N., and another by the Organisation for Economic Co-operation and Development. While the U.N. treaty has had limited impact, the OECD convention has gone far in globalizing the fight against corruption, by nurturing the growth of new bribery laws in Europe. Yet even the OECD convention is largely ignored in Asia.

The lesson for Wachtell Lipton is that, like it or not, an evolving social consensus drives global regulation. The lesson for Weil Gotshal is that regulation can not be pushed beyond the bounds of that consensus.

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