CSR 2019/2020 Exam Model Answer PDF

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Model answer/Point distribution – CSR Regular sit0. Preliminaries: Point distribution & grade calculationCalculation of overall grade : Both the essay task and the exam task are graded on a scale from 0- 10 (unrounded). The final grade is calculated by weighting the grade obtained in the ess...

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Model answer/Point distribution – CSR Regular sit 0. Preliminaries: Point distribution & grade calculation Calculation of overall grade: Both the essay task and the exam task are graded on a scale from 0-10 (unrounded). The final grade is calculated by weighting the grade obtained in the essay task with 40% and the exam task with 60%. Hence, the following calculation was made: Grade obtained in essay task x 0,4 + Grade obtained in exam task x 0,6. The calculated grade is rounded up or down to the nearest full grade. Calculation of the grade for essay task (40%): The essay task is separately graded on a scale from 010 according to the point distribution below. The point distribution includes the points for formalities and language that were part of the grading criteria. Calculation of grade for exam task (60%): In the exam task, each of the two parts was given the same weight. A maximum of 10 Points could be obtained for each Part. The results of both parts were summed up and then divided by 2. This grade then formed the grade for the exam task. Exams exceeding the word limit: Please note that exams that exceeded the word limit received a deduction of 0.5 to 1 Point (depending on the extent). The deduction was made on the grade of the essay task. Given that the guidelines were clear in allowing up to 6.000 words, we deemed it a matter of fairness towards everyone who adhered to the rule to not leave this unnoticed. Note in this context that we have applied a grading standard that made it possible to receive full points without exceeding the word limit (i.e. all relevant information could be included in less than 6.000 words).

A. Essay task: 10 Points (weighted with 40%) For the essay task, 7 Points were awarded for content and 3 Points for structure, language and formalities. The point distribution was made as follows. 1 Point was awarded for explaining the global governance gap in relation to multinational corporations. For this purpose, it was necessary to explain (a) what global governance is (governance being the rules, norms and processes by which collectives govern their affairs and global governance being this amalgam of rules, norms and processes on an international level that exist in the absence of a global government) and (b) what the gap is that exists in relation to the governance of multinational corporations (namely that they are acting globally, but are neither governed by a coherent global norm order, such as international law, nor coherently by any national governance order that applies extraterritorially). 1 Point was awarded for discussing the causes of this global governance gap. For this purpose, several causes could be mentioned: 1) economic globalization that led to a liberalization of trade, but also to a loss of steering capacity of the nation state without any simultaneous compensatory global state (that was more in line with what Scherer/Palazzo argued), 2) the new evolving organizational structure of multinational corporations that operate as one economic unit, but are legally separated due to the principle of limited liability and separate legal personality (that is what Ruggie argued in the article on the corporate form), 3) the offering of states of their legal modules to corporations as a means to structure their organizations globally and avoid regulation (Pistor’s argument of the coding of capital), 4) the active facilitation of corporate mobility by states and supranational organizations as the EU with simultaneous restriction of regulatory laws to territory (in particular the decisions in Centros, the Delaware effect in the US).

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3 Points were awarded for discussing the governance models that suggest on how to fil the gap. In this regard, the main models discussed in the course (and thus the ones that were expected to be included here) are - Private governance, which includes the private regulatory initiatives by corporations (codes of conduct, CSR self-regulation), industries and civil society organizations. This framework was mostly advocated by Andreas Scherer & Guido Palazzo (but also David Vogel could be mentioned here). Private governance relies only on private actors as governance actors. - Polycentric governance, which is the model underlying the UN Guiding Principles and which is most prominently associated with the work of John Ruggie. This form of governance relies on the interaction of three actors and their governance systems, namely states (public law and governance), corporations (corporate governance) and civil society (civil governance). It assumes that change can only be brought when all of these systems are invoked for the benefit of CSR/human rights, i.e. when all types of leverage are included. The main example for this model is the UN Guiding Principles and its implementation into national law systems (through reporting and due diligence laws). - International legalization, which is a model that focuses on international law as a main model for governing corporations. The main advocate of this model is David Bilchitz, but also Surya Deva could be mentioned here as a more moderate position in this direction. This model assumes that an international treaty needs to be adopted that imposes direct obligations on companies, thus integrates them as subjects of international law. The main example of this approach has been the UN Draft Norms from 2003 that were, however, never adopted. It was also possible provide examples by linking this debate on international legalization to the article by Yulia Levashova who discusses the international legalization development in relation to bilateral investment treaties. - State governance, which is a model that focuses on states as the primary duty bearers which are obliged to regulate their corporations to prevent negative impact on human rights/society. The main advocates of this model as discussed in the course are the position of FIAN (in relation to human rights) and Joel Bakan (in relation to CSR more in general). Katharina Pistor could be mentioned here as well, although she is taking a much more pessimistic view on whether such re-gaining of state authority is possible. It was also possible to integrate here the view of Jean-Philippe Robé and Lynn Stout, in particular because Bakan also indicated the possibility of transcending the existing (shareholder-dominated) corporate law and governance mode. The most important example for this governance model is the latest Zero Draft of the Legally Binding Instrument from 2019 that focuses on the obligations of states to ensure that corporations do not violate human rights. Please note that it was not sufficient to simply summarize different articles/positions that were discussed in the course. It was necessary that the positions were integrated into a coherent analysis of the governance models. 2 Points were awarded for the reasoning which governance model is most convincing. As stated in the course book and grading criteria, no preference was given to reason a particular position. Instead, points were awarded for coherence, reference to the literature and the persuasiveness of the presented position. In particular, it was looked for whether a coherent argument was developed (for instance that not two incompatible positions were advocated for), whether the course literature was productively used (and given the variety of the course literature, there was a broad argumentative basis for each position) and whether, if combinations of models were suggested, this was specified on how this could work. For instance, if the position was the suggestion to combine polycentric governance and international legalization, it was necessary to discuss how these two could be combined (through a small tailormade treaty as Ruggie suggested or a treaty that integrates human rights due diligence or international legalization through a Treaty that builds on the UNGP and contains specific obligations for corporations).

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1 Point was awarded for the structure of the essay. For this part, the following aspects played a role: The essay as such needed to follow a clear and coherent structure - The essay is structured to answer the essay questions and not merely a conglomerate of information that was discussed in the course or the literature - The arguments made are understandable - Sections are delineated and the content dealt within a specific section belongs there - There is no information that is irrelevant for answering the essay question. 1 Point was awarded for style and language. For this point, three criteria played a role: (a) use of a professional writing style, (b) correct use of the terminology as used in the course and the referenced literature, (c) correct use of the English language (note that we did not deduct points for small grammar mistakes or typos; this grading criterion only played a role when the essay was written carelessly with frequent mistakes). 1 Point was awarded for formalities. For this aspect, the following played a role: (a) use of a consistent referencing style in footnoting and bibliography, (b) compliance with the formalities as specified in the course book. Note that we graded quite lenient given that we know in what stressful situation you wrote the exam. Points were deducted only if there were obvious mistakes or the formalities showed a high degree of carelessness in writing the essay. Deduction due to exceeding the word limit: If you exceeded the word limit in the take-home exam, up to 1 point was deducted from this result of the essay task. For these exam, the detailed point distribution for the essay task will show a higher result (namely the grade you have obtained) than what is indicated as the grade for the essay task (grade obtained minus the point deduction for word limit excession).

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Exam Task Part 1 (Corporate liability) (50% of the exam task, awarded 10 points) 3 Points were awarded on the component of jurisdiction 1 Point was awarded for analysing the jurisdiction against Sielips and that it can be grounded in Art. 4, 63 Brussels (recast) Regulation as the Netherlands is the place of incorporation and main place of business. For receiving full points, all criteria needed to be mentioned and applied to the case. 2 Points were awarded for analysing jurisdiction against SDZA. For this purpose, it needed to be highlighted that jurisdiction needs to be grounded in the Dutch rules on civil procedure. Brussels (recast) is not applicable due to SDZA being a non-EU defendant (this has been dealt with in the lecture in week 3). Based on the assumptions, it was known that the Dutch rules on civil procedure allow establishing jurisdiction against a defendant by linking it to another claim. This requires, however, that the anchor claim (i.e. the claim against Sielips) is not obviously bound to fail. In this context, it was asked to make a cursory assessment on whether a duty of care would exist against Sielips. Referring to Vedanta is enough here to argue that a possibility of a duty of care exists. However, it was also possible to structure the memorandum differently by engaging in the deeper analysis on the substantive chances of success for a claim related to a duty of care within the context of the jurisdictional analysis for SDZA and later on refer to this in the context of the substantive analysis.

1 Point was awarded on the component of the applicable law Analysing the applicable law is a pretty straight forward aspect and did not require a deep analysis. It was important to identify Art. 4 Rome II Regulation that determines the law applicable on the basis of lex loci damni. In our case, this is Zimberian law, which – as the assumptions state (p. 3) – is based entirely on English common law. Whenever the article was not identified, the grade would not exceed 0.5. If the fact that Zimberian law was not identified as based on English common law, the grade would not exceed 0.75. However, if such mention was made elsewhere, namely while explaining the substantive liability in tort with duty of care, such 0.25 points would be awarded any way.

5 Points were awarded for the substantive liability in tort with duty of care considering the selfregulatory policies 1 Point was awarded for the legal rules on negligence and duty of care. The substantive liability claim will need to be based on the tort of negligence, which under English law is specified with the conditions spelled out in Caparo v Dickman. The tort of negligence requires that the tortfeasor (here, Sielips) has breached a duty of care that leads to damage. There is damage on the side of the local community, and it has been caused by the mine (the case facts indicate that causality is not an issue here). 4 Points were awarded for the analysis of the duty of care 2 Points were awarded for explaning the case law on duty of care in parent – subsidiary constellations: The central problem is whether Sielips and SDZA breached a duty of care through omission (because they were informed about the problems and did not do anything). This depends on whether there is a duty of care between Sielips and claimants, which needs to be determined by deciding whether there is proximity between defendant and claimant. As to the proximity between Sielips and the local community, you were expected to discuss whether there is proximity between the two. Reference should be made to the case law on proximity in parent – subsidiary constellations (Chandler v Cape, Akpan v Shell, Lungowe v Vedanta, Okpabi v Shell); it should be stated where the case law stands today, namely that Vedanta indicates a duty of care based

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on corporate policies that are implemented and published and Okpabi (and also Akpan in the District court ruling) do take the opposite position. 2 points were awarded for applying the rules to the case at hand: This reasoning needed to be applied to the current case: Is – based on the conditions in Vedanta or Okpabi (depending on what position you follow) – the Sielips policy, code of conduct and implementation tool enough to establish proximity? It was easier to argue that the policies do establish control (because they require all corporate group members to adhere to the common HSE&SP framework, there are onsite audits and helplines etc), but it was also possible to take the opposite position by arguing that Sielips and SDZA are in different businesses (health technology development vs mining) or that the policies are too vague because they allow all companies to develop the management framework for HSE&SP themselves. Please note that full points on the analysis of the duty of care were only awarded if the explanations of the rules and case law were correct and they have been applied to the case. As far as the substantive liability claim against SDZA is concerned, this is based on the same cause of action (i.e. tort of negligence, requirement of a duty of care). If it has been reasoned above that proximity between Sielips and the claimants exists, then it can be inferred that a duty of care also exists between SDZA and claimants (because they are closer). Otherwise, it was possible to argue that for SDZA and claimants the proximity can be inferred from the constellation of direct neighbourhood of the subsidiary and the local community. Given that we did not discuss extensively duty of care of subsidiaries (other than stating in the lectures that they are likely to be successful), this aspect was not linked to any required point. If the exam did, however, have a good reasoning, then up to an extrapoint could be obtained. Please note that no points were awarded for the description of the remaining possibilities of holding the parent company liable, namely, piercing the corporate veil, the agency theory of liability and enterprise liability, as the case facts do not provide evidence that one of them would have chances of success. Please further note that no points were awarded for discussing possible claims of the workers in the mines as this was not part of the question.

1 Point: Structure & coherence For this point, it was taken into account how the memorandum was structured. Aspects that were considered are: - Is the memo understandable? - Is the reasoning coherent and consistent? - Is the purpose of this memo understood (i.e. an internal memorandum)? - Is the memo presented well?

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Part 2 (due diligence legislation): 50% of the exam task (10 points awarded) 3 Points were awarded for applying the law to the case and spelling out the requirements for companies: It was important to understand that the law applies to the company (bc of incorporation in Netherlands and the fact that the law is applicable to all companies). It was further important to emphasise that it extends to all mine operations in Zimberia, which includes corporate group and the private security services. It was important in this respect to refer and analyse the relevant Principles of the UN Guiding Principles as a reference point for the law that also requires due diligence to extend to the corporate group and the supply-chain. 3 Points: Assessment of existing policies: There are several problems with suggesting to simply use the policy to comply with the law that the answer should focus on a) The existing policy only covers the corporate group and not the supply-chain, therefore it does not extend to all entities that the law covers, b) It is a rather vague policy, there is no real impact assessment indicated and it does not mention human rights specifically; this is linked to the problem that many companies decide to simply use their existing policies and not really conduct an impact assessment or consider consciously human rights as part of their CSR policies; given that the due diligence obligation is modelled against the UNGP’s concept, such a policy can never be enough. c) The implementation and enforcement that Sielips outlines are not sufficient, in particular there is no compliance officer to monitor compliance with the law and it is debatable to what extent a hotline is an effective complaints mechanism for those affected. Finally, there is no clarity over the consultation process with stakeholders and the reporting requirement is only partially met. The full three points were only awarded if the analysis contained all three problems and explained them well; if fewer problems were discussed or the problems were only mentioned, but not analysed in detail, then fewer points were awarded. 3 Points: link between due diligence law + civil liability The Due diligence law will not create civil liability, as the Dutch government has indicated. This means that for civil liability Dutch tort law would apply. Given the conditions that are indicated in the assumptions (p. 3), it would mean that there needs to be an interpretation that due diligence = duty of care , that lack of due diligence = breach of duty of care and that lack of due diligence as a breach of the duty of care causes damages. To answer the question properly, it was important to show convincingly that in order to prove liability the claimants will have to prove the damage suffered both by the communities and the workers of the private security company, the breach of an obligation in the form of non-conducting due diligence as a duty of care and the causal link between damage and breach of said obligation. Integration of the relevant case law (specifically on the duty of care) to sustain the arguments has been considered a plus. 1 Point: Structure and coherence For this point, it was taken into account how the memorandum was structured. Aspects that were considered are: - Is the memo understandable? - Is the reasoning coherent and consistent? - Is the purpose of this memo understood (i.e. an advice to a company from the perspective of a civil society organization)?

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