1. Introduction and Overview of the Legislative Developments

The question to be discussed in this article is whether soft law instruments—such as the UN Guiding Principles on Business and Human Rights (UNGP) and OECDʼs Guidelines for Multinational Enterprises (OECD Guidelines)—have a role to play in the application of Norwegian law. Since we are discussing issues related to the broad term ‘corporate social responsibilityʼ—or ‘responsible business conductʼ, which is a more precise term—an analysis of the impact of soft law on hard company-related law is especially timely.

Traditionally, a companyʼs more general duties to act responsibly have been expressed in non-binding guidelines and recommendations. Legal civil or criminal responsibility have been harder to establish, both due to stricter requirements and procedural obstacles related to jurisdictional limitations, rules of evidence, costs etc. For decades, there has been little connection between the two systems—that is, the global systems of non-binding guidelines and recommendations to companies on how to act responsibly, on the one side, and the legal obligations to avoid causing or contributing to negative impacts that companies may have on people and environment, on the other. This is now changing.

The Norwegian Transparency Act (‘åpenhetslovenʼ) which entered into force in July 2022, is but one example of a current trend of establishing legally binding duties for companies to act in accordance with international standards for responsible business conduct. Both in Norway and internationally, legislation which is based on, and refers directly to, international soft law instruments on responsible business conduct, is being prepared and adopted. The UNGP and OECD Guidelines regularly play a prominent role in such new legislation, as they are normally regarded as the most well-established and respected instruments in this field.

A key principle in the UNGP and OECD Guidelines is that business enterprises should respect human rights. This responsibility requires that businesses avoid causing or contributing to adverse human rights impacts through their own activities, and address such impacts when they occur. Moreover, the duty to respect human rights requires that businesses seek to prevent or mitigate adverse human rights impacts that are directly linked to their operations, products or services by their business relationships, even if they have not contributed to those impacts. Businesses should operationalise these duties by carrying out human rights due diligence (HRDD) in order to identify, prevent, mitigate and account for how they address their adverse human rights impacts. The HRDD shall apply a risk-based approach and prioritise the most salient risks. The HRDD is not, however, limited to risks and impacts caused by the businessesʼ own activities, but must also cover actual and potential human rights impacts that the business is directly linked to through its business relationships, including in its supply chains.

In addition to the Transparency Act, the Accounting Act § 3-3 litra c incorporates the EU Directive on non-financial reporting (Directive 2014/95/EU) into Norwegian law and requires that ‘large companiesʼ shall prepare a statement on social responsibility. The statement shall, among other things, cover human rights. Key elements in the statement are a description of the companyʼs policies for its handling of human rights issues, the salient human rights risks, as well as expected negative impacts on human rights by business partners, products or services—and how the company is addressing these risks. This seems to echo expectations under the UNGP and OECD Guidelines. Moreover, both the EU Regulation on sustainability-related disclosures (Regulation (EU) 2019/2088) and the EU Taxonomy Regulation (Regulation (EU) 2020/852) are made Norwegian law. Significantly, the Taxonomy Regulation establishes that an economic activity must be carried out in compliance with minimum safeguards in order to qualify as environmentally sustainable (Article 3 litra c of the Regulation). It follows from Article 18 that these minimum safeguards shall be procedures implemented by an undertaking that is carrying out an economic activity to ensure the alignment with the OECD Guidelines and the UNGP, as well as the ILO Declaration on Fundamental Principles and Rights at Work.

As a consequence of these standards being transposed into hard law, the companies and their boards must fulfill new legal duties. In other words, through acts of the legislature new, legally binding standards for the companiesʼ business conduct are introduced.

The legal developments described above show that soft law plays a significant role in the application of the law within the scope of the relevant acts. As regards the Transparency Act, the impact of soft law is especially powerful. The preparatory works explain that the OECD Due Diligence Guidance for Responsible Business Conduct—an extensive document of close to 100 pages explaining in detail the due diligence procedure—in addition to the several sector guidances adopted within the OECD, are the authoritative guidelines for the interpretation of the Act. Furthermore, the preparatory works make clear that the companies must adapt to any future changes and revisions of the OECD Guidelines and the guidances prepared within OECD.

2. Impact of Soft Law in Some Other Fields of Company-related Law

What then, if we look beyond the scope of the legislation mentioned above? May soft law instruments like the UNGP and OECD Guidelines also play a role in the application of the law in other fields of company-related law? As a backdrop for this analysis, it should be noted that boards of Norwegian companies, especially larger ones, have ample room to weigh in public interests, including issues of sustainability, in their management of their companies. Furthermore, it is worth noting that our experience at the National Contact Point for Norway is that many leading Norwegian companies do not really distinguish between non-binding and strictly legal requirements in their compliance and responsible business operations. Thus, soft law standards are taken seriously, and many leading companies seek to implement them in their business operations in parallel with the companyʼs legal obligations. Accordingly, in the companiesʼ own practice, soft law instruments like the UNGP and OECD Guidelines often have an important role to play regardless of whether they are transposed into hard law or not.

For a closer legal analysis, my working hypothesis has been that some impact of soft law instruments like the UNGP and OECD Guidelines might be expected to be seen in fields such as:

  1. in traditional company law, the question of liability of a parent company for acts committed by its subsidiaries (in Norwegian: ‘ansvarsgjennombruddʼ);

  2. in the law of torts, the question of a companyʼs liability for harmful acts against third parties, especially an employerʼs liability for acts of employees (in Norwegian ‘arbeidsgiveransvarʼ) and a companyʼsʼ liability for acts of its governing bodies and leading decision makers (in Norwegian: ‘organansvarʼ); and

  3. in criminal law, whether a companyʼs faithful implementation of the UNGP and OECD Guidelines could be a defense against corporate criminal liability – ie, criminal penalties for enterprises – for human rights abuses committed by personnel acting on behalf of the company.

However—and not too surprisingly—a closer look at the traditional Norwegian legal sources, including the relevant case law, regarding the said issues reveals that there is not much to find and study on these matters. On the current state of developments, it must be concluded that there are few signs of impact from the UNGP and OECD Guidelines when it comes to the application of the law within the above fields.

Nonetheless, Norwegian law is not in principle opposed to including soft law instruments among relevant legal arguments in a concrete case. The situation may just be that we are not there yet. Therefore, we need to take a step back and start our legal analysis on a more general level.

As indicated above, there is no doubt that soft law may be relevant in legal reasoning in Norway. One example is the Healthcare Personnel Act § 4, which states that healthcare personnel shall exercise their work in a ‘professionally proper mannerʼ. This norm will be interpreted and applied, among other things, on the basis of relevant professional guidelines and ethical guidelines for health care personnel, ie, soft law instruments. This is a typical interaction between a provision in an act setting out a general standard of conduct and soft law guidelines or recommendations addressing, perhaps in more detail, the same issue or role.

Another example is found in a plenary judgement of the Norwegian Supreme Court from 2018 concerning indigenous peoples rights (the ‘Nesseby-judgmentʼ). In this case, the Supreme Court held in paragraph 97 that the UN Declaration on Indigenous Peoples Rights—which is a non-binding declaration—was a central document within the law of indigenous peoples. The Supreme Court pointed out that the Declaration reflected international law principles and had wide support among states. The UNGP and OECD Guidelines can be said to have much of the same qualities. The UNGP was unanimously endorsed by the UN Human Rights Council in 2011, and the OECD Guidelines are recommendations to companies that are agreed between all OECD states and several adhering states. Furthermore, both instruments reflect in many respects international law principles, ie, those found in international human rights conventions. Even more important in the present context, the Transparency Act establishes new legal duties for companies based on the said soft law instruments.

The conclusion so far is that, in Norwegian law, non-binding, soft law guidelines, recommendations etc may be capable of having a role to play in the application of the law. However, the actual impact that soft law will have in a particular area of law, and in the actual case, is notoriously uncertain.

With this in mind, let us turn to the three areas of possible impact listed above. What is the current situation and possible developments in those areas?

2.1 Parent Company Liability for Harmful Acts Committed by its Subsidiary (‘ansvarsgjennombruddʼ)

A typical question in the field of business and human rights is whether it is possible for victims of human rights abuse to pierce the company veil and sue the parent company in the group—often headquartered in a well-functioning western state—for damage directly caused by a subsidiary in a foreign jurisdiction. This is a controversial issue, but at the same time often the legal crux in human rights and environmental litigation. Company law limitations may in many cases be a main obstacle for victims seeking remedy for human rights abuses in situations where pursuing legal claims against the subsidiary in local courts of the jurisdiction where the subsidiary is operating, is regarded futile.

The situation in Norwegian law at present is that we have no Supreme Court cases exploring in any detail the possibility for victims of human rights violations by a subsidiary to sue a parent company for damages. There is one case—Hempel—which contains helpful language for plaintiffs, and the Supreme Court seems to have confirmed that parent company liability (‘ansvarsgjennombruddʼ) is a possibility. The Supreme Court has not yet, however, decided any cases on this basis. The latest Supreme Court judgment addressing the issue, the case of Nettforsk, was handed down in June 2022. In this case, the Supreme Court held that two types of arguments were relevant if parent company liability should be established: first, that it appeared inappropriate vis-à-vis the creditor to maintain the limitation of liability; and second, that the companies were intermingled in way so that the formal company structure no longer deserved protection. The Court stated that an overall assessment must be undertaken of these points.

Obviously, the outcome in cases like this depends a lot on the facts of each case. As regards claims for compensation against a parent company for human rights abuses committed by a subsidiary, an interesting, and not unpractical, situation could be as follows:

In a group of companies, there is established responsible business policies applicable for the whole group, and the parent company/the head of the group has assumed the responsibility for the whole groupʼs efforts regarding compliance, human rights and environment. If the policies and the parent companyʼs services to the groupʼs companies are substandard, and the duties under the Transparency Act to carry out HRDD in accordance with the UNGP and OECD Guidelines have not been observed, there may—depending on the concrete circumstances—be a basis for arguing that it would be inappropriate vis-à-vis the victim of the subsidiaryʼs violations to maintain the limitation of liability. Whether also the companies are intermingled in a way such that the formal company structure no longer deserves protection, will depend on the circumstances of each case, eg whether the company structure is designed to avoid liability.

2.2 Law of Torts: Employerʼs Liability and a Companyʼs Liability for Acts of its Governing Bodies or Leading Decision Makers (‘organansvarʼ)

According to § 2-1 of the Damages Act (skadeserstatningsloven), an employer is liable for damage or injury caused intentionally or negligently during an employeeʼs performance of work or functions for the employer. The employer (eg a company) may be held responsible also in situations when the actual wrongdoer is unknown and for wrongdoings that are the cumulative result of multiple acts (in Norwegian: ‘anonyme og kumulative feilʼ).

A basis for liability requires establishing that a culpable act or omission has been committed. The wording of the Damages Act provides some guidance in this respect, as it underscores that account shall be taken of ‘whether the requirements which the aggrieved person can reasonably make to the business or service, have been neglectedʼ. It is clear that whether rules of conduct applicable to the activity or business have been observed, is a key part in the assessment of culpability. As such, the Transparency Act introduces new rules of conduct that may be relevant when the applicable standard of conduct shall be established.

A pertinent question is whether the companyʼs relationship with, for instance, its suppliers, may create a connection or a duty of care that is legally relevant for the assessment of the employerʼs liability for damages of injury caused to third parties. Obviously, this will depend on the circumstances of each case and further requirements must be fulfilled for a compensation claim to be successful, but the expectation that businesses shall respect human rights and the duties established by the Transparency Act will necessarily add a new element to the legal assessment of such relationships and thus the employerʼs liability. As a consequence of the Transparency Act, soft law (ie the OECD Guidelines and UNGP) must be expected to impact such assessments.

A companyʼs liability for acts of its governing bodies or leading decision makers (‘organansvarʼ) is a separate basis for the companyʼs liability when damage is caused by wrongdoing or neglect by the these bodies or decision makers, and it may go beyond the employerʼs liability for acts of employees described above. If leading decision makers, for example, fail to implement and observe duties to protect workers from accidents, the company may be held liable for damage caused when an accident happens.

The UNGP and OECD Guidelines require that the companyʼs responsibility to respect human right is embedded into the companyʼs policies and management systems, and that the policy is approved at the most senior level of the business enterprise. Thus, the responsibility to secure the proper implementation of the responsibility to respect human rights lies with the top management and the board of the company. A typical failure or neglect would be that adequate measures are not implemented in order to prevent risks of human rights violations that are identified in the HRDD. The Transparency Act has, as mentioned above, transposed this into a legal obligation for the top management and the board of the company. It follows from this that damage caused by failure or neglect in this regard may—depending on the concrete facts of the case—entail liability (‘organansvarʼ) for the company.

2.3 Corporate Criminal Liability

According to the Norwegian Penal Code, companies may be penalised for criminal acts committed by someone acting on their behalf. Criminal liability for companies depends, however, on a set of considerations. According to § 28 of the Penal Code, it must, among other things, be considered whether the company had done all it could to prevent the criminal act, especially whether it had in place proper guidelines, instruction, training, checks or other measures to prevent the offence committed by the person acting on behalf of the company. It follows from this, that a central part of the defense of a company accused of responsibility for criminal acts committed by someone acting on its behalf, will be that the criminal act happened despite the fact that proper guidelines and checks actually were in place.

Soft law recommendations and guidelines established by, for instance, an industry sector, may clearly be relevant in the assessment of whether proper risk-preventing systems were in place. This is already a well-known defense in corruption cases. And, since handling of risks is exactly what the UNGP and OECD Guidelines are concerned with, it is reasonable that they are relevant as well. It should be recalled that many human rights are also protected by the penal code—eg, the right to life, prohibition of torture, the right to protection of home and privacy, as well as basic rules for security at the workplace, prohibition of human trafficking, child labor and forced labor. Thus, it would be a good advice to companies to implement faithfully the UNGP and OECD Guidelines, and to carry out HRDD as required by these standards. To be able to document well-embedded policies, thorough risk-assessments and a proper and ongoing HRDD may be a central part of the defense of the company in a criminal case, should someone acting on behalf of the company nevertheless commit a crime.

3. Final remarks

The aim of this brief article has been to discuss the role of soft law in the application of Norwegian law, and to briefly sketch out some possible developments. These need to be discussed and analysed further, and the impact of soft law instruments like the UNGP and OECD Guidelines must ultimately be decided by the courts on a case-by-case basis. Clearly, there are challenges in the application of these soft law instruments in concrete cases. The principles and guidelines in these instruments are—as well as many of the human rights that must be respected—couched in broad and vague terms, and they are not initially written with a view to be applied as legal rules. Accordingly, it can be hard to define exactly the limits of the duties they spell out, and decisionmakers will face legal uncertainty. There will be situations where the company clearly has adhered to the principles and guidelines and situations where the company clearly has not. In between, there will be grey areas. This is not, however, unknown in the application of legal standards or in relation to legislation where the legislator has left it to the courts to develop the law within broad language applied in the act itself. It may be argued that certain parts of the UNGP and OECD Guidelines leave open an especially wide range of matters, eg the general rule that the human rights due diligence ‘will vary in complexity with the size of the business enterprise, the risk of severe human rights impacts, and the nature and context of its operationsʼ. This may lead to some reluctance in the application of the principles in a legal context. It must be expected, however, that the transposition of the UNGP and OECD Guidelines into hard law through the Transparency Act, and the ensuing legal obligations for larger Norwegian companies and their boards, have increased notably the potential impact of these soft law instruments on the hard law in Norway. When the cases are raised, the issues must be solved, and uncertainty will be reduced through practice. Decision-makers will, in the case of the UNGP and OECD Guidelines, also benefit from a substantial body of guidance, recommendations and other sources that have been developed with a view to explaining in more detail the obligations flowing from the two instruments.

  • 1
    OECD Guidelines for Responsible Business Conduct 2023 available at <https://doi.org/10.1787/81f92357-en> accessed 2 December 2023.
  • 2
    The Act applies to larger Norwegian companies offering products or services in or outside Norway, and larger foreign companies offering products or services in Norway, provided that they are taxable in Norway. The companies must exceed two of the three following thresholds for the Act to apply to them: a sales revenue of 70 million Norwegian kroner, a balance sheet total of 35 million Norwegian kroner, or an average of 50 employees during the year.
  • 3
    UNGP Principle 11; OECD Guidelines Part I Chapter IV No 1. Note that the Transparency Act covers human rights and decent working conditions. Often also environment and climate are included in this kind of legislation. Moreover, the concept of responsible business conduct covers several other issues, like openness and disclosure, anticorruption, consumer interests, science and technology, competition and taxation. The OECD Guidelines cover all these issues. In this article, human rights are used as an important example within the field of responsible business conduct.
  • 4
    UNGP Principle 13 litra a; OECD Guidelines Part I Chapter IV No 2.
  • 5
    UNGP Principle 13 litra b; OECD Guidelines Part I Chapter IV No 3.
  • 6
    UNGP Principle 17; OECD Guidelines Part I Chapter IV No 5.
  • 7
    The steps to be undertaken through the due diligence are explained in UNGP Principle 17 through 21 with commentaries, the OECD Guidelines Part I Chapter IV paragraph 50, and, in detail, in the OECD Due Diligence Guidance for Responsible Business Conduct of 2018 (see further n 12). In the Transparency Act, the duty to carry out due diligence in accordance with the OECD Guidelines is enacted in § 4.
  • 8
    Directive 2014/95/EU as regards disclosure of non-financial and diversity information by certain large undertakings and groups [2014] OJ L 330/1.
  • 9
    Regulation (EU) 2019/2088 on sustainability-related disclosures in the financial services sector [2019] OJ L 317/1.
  • 10
    Regulation (EU) 2020/852 on the establishment of a framework to facilitate sustainable investment [2020], OJ L 198/13.
  • 11
    See LOV-2021-12-22-161 om offentliggjøring av bærekraftsinformasjon i finanssektoren og et rammeverk for bærekraftige investeringer; in force 1 January 2023.
  • 12
  • 13
    See Tore Bråthen and Stine Winger Minde ‘Styrets arbeid med bærekraft etter norsk rettʼ (2022) 4 Nordisk Tidsskrift for Selskabsret 50, 56-57.
  • 14
  • 15
  • 16
  • 17
    Lov-1969-06-13-26 om skadeserstatning.
  • 18
    It is true that due diligence responsibilities do not shift responsibilities from enterprises causing or contributing to adverse impacts, to enterprises that are directly linked to adverse impacts through their business relationships. Nonetheless, enterprises contributing to adverse impacts are expected to provide for or cooperate in remediation. Thus, the nature of the relationship with, eg a supplier, as well as the companyʼs concrete involvement in the developments leading to the negative impact, must be assessed, and, in principle, these elements should be included in a broader assessment of culpability and causation according to Norwegian law.
  • 19
    Typically for claims for non-financial injury according to the Damages Act § 3-5.
  • 20
    See eg RG-1995-1231.
  • 21
    UNGP Principle 16; OECD Guidelines Part I Chapter IV No 4.
  • 22
    UNGP Principle 17 b; OECD Guidelines Part I Chapter IV No 5, which is also echoed in § 4 second paragraph of the Transparency Act.
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