The Role of Soft Law in the Application of the Law: The Norwegian Perspective

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)¹—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 companies² 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.³ 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.⁴ 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.⁵ 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.⁶ 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.⁷

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)⁸ 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)⁹ and the EU Taxonomy Regulation (Regulation (EU) 2020/852)¹⁰ are made Norwegian law.¹¹ 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 Conduct¹²—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.¹³ 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:

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).¹⁴ 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?

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.²² 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.