Arms Exporters’ Corporate Liability for Due Diligence Failures
The intensification of the armed conflict between Israel and Hamas is reported to have led to another surge in international arms sales. In fact, lately, new weapon systems have been in increasing demand from various countries. The Stockholm International Peace Research Institute (SIPRI) estimates that in 2021, the combined (domestic and international) arms sales of the world’s top 100 arms-producing and military services companies was $592 billion. According to SIPRI, such sales have been on an upward trajectory since at least 2015.
When it comes to the actual use of exported weapons, it is primarily incumbent on the recipients of the weapons to observe the applicable obligations under international human rights law (IHRL) and international humanitarian law (IHL). Yet arms exporters are part of the “value chain of actors” in the complex life cycle of weapon systems. The question thus arises, to what extent can they be held liable if their exported weapons and related components are used in ways that violate IHRL and IHL?
In this post and the report published by the Flemish Peace Institute, we argue that even if arms exports are subject to governmental licensing regimes, arms exporters are expected to conduct their own autonomous due diligence to identify and mitigate risk to human rights and IHL. We also argue that failure to properly conduct due diligence may potentially lead to civil or criminal liability.
State-Industry Nexus
The obligations and liability of arms exporters have not been extensively discussed in international legal scholarship or the field of business and human rights, at least compared to the level of attention given in the scholarship to the role of governmental authorities in connection to arms trade. Under international law, legal frameworks have developed under the Arms Trade Treaty, common Article 1 to the Geneva Conventions, and the concept of complicity in order to regulate States’ conduct and hold them responsible for their arms exporting decisions. The arms trade with Saudi Arabia for use in the armed conflict in Yemen has generated debates on States’ obligations in identifying and responding to the patterns of serious violations of IHL (e.g., see UN Doc. A/HRC/45/6 of 28 September 2020, para. 102). Yet relatively limited attention has been given to companies active in the defense sector.
The relative lack of attention paid to the autonomous role and associated legal liability of arms-exporting companies can partly be explained by the State-industry nexus which characterizes the defense sector. Regardless of the level of privatization of the defense sector in a specific country, governments remain responsible for assessing and deciding upon export licenses for military items, pursuant to national laws (which may be substantively based on regional and international export control standards). Defense companies may refer to a governmental licensing check as a key safeguard for mitigating the normatively problematic consequences of arms exports.
For example, Lockheed Martin’s Human Rights Report of 2022, which refers extensively to human rights due diligence, relies upon the existence of the U.S. governmental review with regard to international product sales and their uses. The Report notes that the governmental review already includes “consideration of whether any arms transfer contributes to the risk of human rights abuses and whether they are being used in potential conflict-affected regions” (p. 13). While it remains crucial that governmental licensing processes integrate proper risk assessments, we argue that governmental review is not a replacement for the assessment and mitigation of risks conducted by defense companies themselves. After all, on the basis of their prior contacts with a client, arms-exporting companies have original insights into end-users and end-use of the defense items which they export.
Human Rights and IHL Due Diligence for Businesses
What obligations are then incumbent on companies exporting arms to conflict zones where the risk of IHRL and IHL violations is high? As already indicated above, international law traditionally regulates the conduct of States, not that of corporations. No specific treaty on business and human rights/IHL has been adopted, although intergovernmental negotiations are underway to draft such a treaty. For the time being, however, business enterprises are governed primarily through formally non-binding international instruments, such as the UN Guiding Principles on Business and Human Rights (UNGPs). The UNGPs consider due diligence (understood as the processes of risk identification and mitigation) to be integral to the fulfilment of businesses’ responsibility to respect human rights. Importantly, on top of anticipating business enterprises’ respect for human rights, the UNGPs note that enterprises should respect the standards of IHL in situations of armed conflict (commentary to Principle 12).
While the UNGPs expect corporations to respect human rights and IHL, a thorny question pertains to the levels of risks (of authorized or unauthorized end-users acting in violation of these bodies of law) that arms exporters should identify and mitigate. According to Ruggie and Sherman, the UNGPs envisage due diligence to deal with three levels of impacts: (i) where a business “causes or may cause” an adverse impact; (ii) where a business “contributes or may contribute to” the adverse impact; (iii) where a business has not contributed to the adverse impact but such an impact is still “directly linked to its operations, products or services by its business relationship with another entity.”
A wide range of situations can fall under these three scenarios. For example, the third scenario—involving adverse impacts “directly linked” to an entity’s “business relationship with another entity”—covers not only the impact caused by direct sales of weapons to governments or non-State armed groups. The scenario may also cover the exportation of parts, components, machines, and software that can be used to produce weapons, or the involvement of corporations in the extraction or processing of raw materials used to produce weapons. The third scenario also appears to cover arms exporters’ due diligence regarding brokers or civilian front companies for the military.
Civil and Criminal Liability as a Result of Due Diligence Failures
The defense sector’s failure to conduct adequate due diligence and to identify potential adverse IHL and human rights impacts of their exports may potentially lead to a finding of legal liability, both under civil (tort) and criminal law.
Arms exporters and their officers could be held (civilly) liable in tort for failing to properly discharge their duty of care vis-à-vis victims of violations of IHL and human rights law. Such civil liability can be based on specific due diligence laws, but can also be based on general tort law, in particular a duty of care incumbent on arms exporters. For an exporter to be held liable, however, a sufficiently close connection should exist between the company and the victim, so that the risk of harm is reasonably foreseeable. It may be challenging to prove such a connection. There are additional legal hurdles, such as the evidentiary issues which plaintiffs are likely to face, the fact that civilian harm may result from multiple causes, and the opacity of corporate structures.
Arms exporters could also be held criminally liable for complicity in violations of IHL and human rights law that rise to the level of international crimes. In particular, they may incur accomplice liability if they sell arms to regimes that engage in international crimes, insofar as they were aware or could not have been unaware of these crimes, provided that the degree of assistance provided by the trader significantly enhances the risk that these crimes will (continue to) be committed. Again, hurdles may appear on the horizon, related to the burden of proof, causal uncertainty, and prosecutorial reluctance to go after powerful corporations.
What matters for the sake of this post is that both in tort and in criminal law, due diligence may inform the interpretation of relevant legal norms, for example, the standard of negligence in the context of breaching a duty of care. Accordingly, if only to avert legal liability and its possibly drastic consequences (such as injunctions, compensation, fines, or imprisonment) arms exporters are well advised to develop adequate due diligence procedures with respect to their clients.
Conclusion
In the last two decades, the international community has designed authoritative frameworks for business and human rights, in particular the UNGPs. In this debate over business and human rights, however, comparatively little attention has been paid to the adverse impacts of arms exports on the enjoyment of human rights and IHL, even if UNGPs refer to businesses’ respect for the standards of IHL. We argue that, in fact, arms exporters are expected to conduct heightened due diligence in light of the high risk of military items being used in ways that violate human rights and IHL. Going forward, more research may need to be conducted on the extent to which corporations are bound by IHL, and the extent to which due diligence failures may lead to a finding of liability.
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Machiko Kanetake is Associate Professor of Public International Law at Utrecht University and the director of the Master’s Programme in Public International Law.
Cedric Ryngaert is Professor of Public International Law at Utrecht University.
Photo credit: IDF
