First model contract clauses to integrate human rights due diligence principles into every stage of buyer-supplier relationship
Linklaters has advised pro bono a working group formed under the auspices of the American Bar Association (ABA) Business Law Section on a set of model contract clauses (MCCs 2.0). It is designed as a practical tool to help buyers and suppliers better protect human rights in international supply chains.
The MCCs 2.0 are the first model contract clauses to integrate “human rights due diligence” principles as an integral part of the buyer-supplier relationship. They translate the principles contained in the UN Guiding Principles on Business and Human Rights (UNGPs) and the Organization for Economic Co-operation and Development (OECD) Due Diligence Guidance into contractual obligations that require buyer and supplier to cooperate in protecting human rights and make both parties responsible for the contract’s human rights performance.
The MCCs 2.0 allow companies to choose and adapt the clauses to reflect their positions, exposure to human rights risk, objectives, and their industry-specific needs. In addition to helping align contracts with human rights due diligence principles, the MCCs can also be used to advance broader environmental, social, and governance (ESG) goals.
Against an evolving backdrop of increased global scrutiny by regulators and governments on human rights abuses in global supply chains, the MCCs provide missing operational guidance on contracting. The EU has already taken major steps in the direction of mandating corporations doing business in the region to engage in human rights due diligence and reporting.
“Accountability for human rights violations within supply chains is rapidly evolving and the MCCs can provide a framework for companies to implement policies in a way that is both legally effective and operationally likely,” said Vijaya Palaniswamy, partner at Linklaters.
Sarah Dadush, Professor of Law at Rutgers Law School commented, “Better contracts and contractual practices can generate better human rights outcomes. Practical solutions like the MCCs can result in real improvements in the lives of real people, no matter how complex the supply chain.”
The Linklaters team that was led by partner Vijaya Palaniswamy alongside associate April Kent and senior associate Menaka Nayar worked closely with Professor Sarah Dadush to support the ABA working group. David Snyder, Professor of Law at American University Washington College of Law in Washington, D.C. and Susan Maslow, a partner at Antheil Maslow & MacMinn, LLP in Pennsylvania served as principal drafters of this report.
The MCCs 2.0 are an update to the clauses published two years ago to give counsel a model to follow in operationalizing their companies’ human rights policies.
