Human Rights Due Diligence for Prospective Joint Venture Partners

Your company is considering entering into a joint venture with a new foreign partner to pursue a specific business objective in the partner’s home country.  Joint ventures with local partners in new geographic markets have always been an attractive and efficient way to gain access to resources, relationships and customers that would be too expensive for a company to acquire through internal development efforts, and your company is probably already familiar with the due diligence that should be performed in order to gain comfort that the foreign partner will be able to perform its business-related commitments (e.g., legal rights to use intellectual property relating to the project; adequate financial capital; sufficiently trained human resources; and legally binding commitments with third parties for inputs required to fulfill the objectives of the joint venture).  However, traditional due diligence is no longer sufficient and the inquiry needs to be extended to cover human rights-related risks associated with the foreign partner’s operations.  For example, your company should consider commissioning a human rights impact assessment of labor and other practices at the foreign partner’s facilities and should arrange for interviews and surveys in the surrounding communities to gauge local opinions on the impact of the partner’s decisions and actions on the rights of those who are most closely connected to the partner.  The foreign partner’s relationships and dealings with governmental officials should also be explored to ensure that they have been free of corruption and that the partner has obtained necessary licenses and permits only after full and transparent consultations with local community groups.  Finally, the contract terms for the joint venture should include specific commitments from both parties regarding respect for human rights accompanied by processes for monitoring and reporting and requirements for remediation which, if breached, would allow for termination of the joint venture.  Milestones and production schedules and targets in the contract should be based on assumptions that do not create unnecessary risks that the foreign partner will need to engage in practices that compromise human rights, such as excessive overtime or reduced attention to workplace safety.