April 22, 2021

ABA Business Law Section Working Group Has Developed Model Contract Clauses to Protect Workers in International Supply Chains

Version 2.0 provides a practical, shared responsibility, framework for upholding human rights

A Working Group formed under the auspices of the American Bar Association (ABA) Business Law Section has published a set of model contract clauses (MCCs 2.0) and a responsible purchasing code of conduct (the Buyer Code) to improve the protection of human rights in international supply chains. The MCCs 2.0 and the Buyer Code serve as practical tools to help buyers and suppliers improve the human rights performance of their supply contracts. They update the clauses published two years ago to give counsel a model to follow in operationalizing companies’ human rights policies. They are the first model contract clauses to systematically seek to integrate the “human rights due diligence” principles contained in the UN Guiding Principles on Business and Human Rights (UNGPs) and the Organisation for Economic Co-operation and Development (OECD) Due Diligence Guidance into international supply contracts. They translate these principles into contractual obligations requiring buyer and supplier to cooperate in and take responsibility for ensuring the contract’s human rights performance—recognizing that the buyer firms’ purchasing practices can have a major impact on that performance.

Governments and regulators worldwide are increasingly paying attention to the issue of human rights abuses in global supply chains, and COVID-19 has put supply chains under additional public scrutiny. 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. The MCCs provide missing operational guidance on contracting against this evolving backdrop. In addition, the MCCs can be used to advance broader environmental, social, and governance (ESG) goals.

“Contracts are how businesses implement their policies. The MCCs allow companies to make human rights policies into operational commitments,” said David V. Snyder, Professor of Law at American University in Washington, DC, and Chair of the Working Group.

“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,” said Sarah Dadush, Professor of Law at Rutgers Law School, and Lead of the Working Group’s Principled Purchasing Project.

Vijaya Palaniswamy, a partner at Linklaters, which provided pro bono support to the Working Group, added, “Linklaters is proud to be involved in this important work. 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.”

The Working Group is led by David Snyder, Susan Maslow, and Sarah Dadush in close collaboration with Olivia Windham Stewart and John Sherman. The Principled Purchasing Project is housed at the Rutgers Center for Corporate Law and Governance and supported by a grant from the Laudes Foundation.

The MCCs 2.0 toolkit can be accessed by clicking here.