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Focus on Regulation

A binding treaty on business and human rights? Still a way to go.

Last week (23-27 October 2017), the third round of negotiations on a binding international treaty on business and human rights concluded.  In this post we consider what (if any) progress has been made and what the sticking points are.

By way of background, the UN Guiding Principles on Business and Human Rights (the “UNGPs“) currently form the framework for action by States and companies in connection with business-related human rights impacts. However, the UNGPs are non-binding and do not create new legal obligations for either States or companies. A treaty would impose legally binding obligations on the States that sign it, and may also seek to bind corporations directly.

The current treaty process commenced in 2014, when the UN Human Rights Council mandated an intergovernmental working group to “elaborate an international legally binding instrument to regulate, in international human rights law, the activities of transnational corporations and other business enterprises” (Resolution 26/9).  Although the UN Human Rights Council had endorsed the UNGPs in 2011, many – including NGOs and several States – felt that their non-binding nature limited meaningful progress on corporate responsibility and accountability for human rights violations.

Talk of a binding treaty on business and human rights is nothing new.  The UN tried for twenty years to broker a Code of Conduct for Transnational Corporations before giving up in 1993.  The Draft Norms on the Responsibilities of Transnational Corporations (2003) fared little better, failing to achieve broad consensus, in part because of the ambiguous nature of the proposed obligations.

In accordance with its mandate, the intergovernmental working group conducted two initial sessions in July 2015 and October 2016, dedicated to constructive deliberations on the content, scope, nature and form of the future international instrument.  The third session was intended to allow substantive negotiations on the basis of “Elements” to be prepared by the chair of the working group taking into consideration the input received from stakeholders in the framework of the first two sessions.

Which companies should the treaty apply to?

The EU’s position is that a treaty should apply to all companies, both domestic and transnational, to avoid disadvantaging European companies operating abroad. This is consistent with the wide scope of the UNGPs and desirable in creating a level playing field.  However, the Human Rights Council, under pressure from Southern States including South Africa, limited the scope of the envisaged treaty to companies that “have a transnational character in their operational activities” (thus carving out companies with purely domestic activities).  The policy reasons for such a distinction are murky.  It is not clear why a domestic extractive company, for example, should not be required to comply with the same human rights standards as an international extractive company operating in the same environment.

Rather than answer this question, the Elements contain a diplomatic fudge, proposing that the treaty apply to transnational “activities” rather than companies. Unfortunately, the Elements do not suggest how to define such activities and no such definition has emerged from the negotiations.  Nor did the negotiations diffuse the tension between the EU and its southern interlocutors, all of whom restated their positions during last week’s sessions.

Direct application to companies

The Elements propose that the treaty applies directly to businesses but do not suggest how this will be achieved as a matter of law.  While it is a common feature of international treaties that states are required to take steps to prohibit certain conduct by natural or legal persons under their domestic law, the extent to which a treaty can be directly effective on non-state actors is, at best, uncertain. Would corporations be expected to sign the treaty? Or would the treaty (somehow) automatically bind corporations falling within its scope?  Either option would be legally unprecedented and highly controversial, yet last week’s negotiations didn’t really address this question.

Nature of corporate liability

The nature and extent of the corporate obligations proposed in the Elements did not receive much attention either, in part due to time-constraints.  Again, when the negotiators do get this far, there is likely to be controversy.  The obligations are vague and potentially onerous, stretching far beyond the UNGPs and existing domestic law in this area.  For example:

  • The UNGPs carefully calibrate the nature and extent of a business’ responsibilities with respect to its suppliers. They require that a business seeks to prevent or mitigate adverse human rights impacts in its value chain by adopting measures such as risk sensitive due diligence and, to the extent possible, exercising leverage over suppliers.  In contrast, the Elements bluntly propose that a business should “respect human rights throughout its supply chain”.  This is potentially very broad and leaves various questions unanswered.  Does it, for example, require a business to remediate a human rights impact which it neither causes nor contributes to?
  • The Elements propose that businesses “shall prevent” human rights impacts of their activities. This could suggest a form of strict liability for failing to prevent – an innovation which would go far beyond anything in the UNGPs and, absent some form of adequate procedures defence, obligations in domestic legislation such as the UK Bribery Act.
  • The Elements suggest that businesses “shall” use their influence in order to help promote and ensure respect for human rights. The UNGPs on the other hand carefully distinguish between a business’ responsibility to respect and voluntary efforts it may undertake to pro-actively promote human rights.  The Elements blur this boundary.  Furthermore, it is unclear how such a provision could be either drafted or enforced.  What is the point at which a business has legally done enough to promote human rights?

The invitation for States to adopt corporate criminal liability (for legal entities as well as natural persons responsible for decision-making in a business) proved a contentious topic on Day 3. This was not unexpected given the variety of approaches to this question in domestic legal systems around the world and a lack of consensus as to the existence of corporate liability for crimes under international law – proposals to extend the jurisdiction of the ICC to legal persons were considered and rejected at the Rome Conference and there has been little to change this position since.

The Elements give prominence to the “recognition of the primacy of human rights obligations over trade and investment agreements“.  Several states questioned the legal foundation and implications of this provision but no consensus was reached on this issue. It remains to be seen how this would operate in practice. Could, for example, it be argued that the right to health could be invoked to invalidate protection offered to pharmaceutical companies under investment agreements?

Extraterritorial obligations of States

There are well established rules under international law concerning the limits of a state’s jurisdiction.  Failure to adhere to these causes legal and diplomatic strife.  The Elements declare that “State Parties’ obligations regarding the protection of human rights do not stop at their territorial borders” without suggesting how such extra-territorial jurisdiction would be granted to states under the treaty or how this would interact with existing rules on jurisdiction.  It was unsurprising, therefore, to see this question cause division on Day 4 – unfortunately with no substantive resolution.

Where do we stand?

While some hoped that the widely drafted Elements would allow room for negotiations, the reality is that last week’s talks lacked focus, with sessions overrunning and arguments from previous rounds frequently being revisited.  It is also unfortunate that the discussions appear to have been dominated by questions and objections, rather than concrete proposals to take the negotiations forward, although participants did note greater engagement as the week progressed.  In the end, a time-pressured schedule left little room for a consensus to emerge or issues to be narrowed down.

But last week was not all doom and gloom:

  • One cause for celebration was the widening of the discussion to include active participation from the EU and some business organisations (such as the International Chamber of Commerce and the International Organisation of Employers), compared to the first two sessions which had been dominated by States from the “Global South” and NGOs. This gives hope that the treaty will be drafted in a way that is fair to businesses, and not simply designed to punish them.
  • There was also visible consensus on some significant issues, including for example the importance of prevention and the role of mandatory due diligence mechanisms (several references were made to France’s “duty of vigilance law”) and the need to remove current barriers to access to justice and achieve effective remedies for victims through judicial and non-judicial mechanisms (a current area of focus for the international business and human rights community).

In principle, a treaty has the potential to promote human rights and level the playing field for businesses, ensuring that businesses who respect human rights are not disadvantaged by doing so. However, any treaty should reflect the fact that businesses and their personnel have rights too.  A treaty must contain provisions which are sufficiently clear to allow businesses to regulate their conduct.  Last week suggests that this remains a long way off.

What next?

International treaties are not concluded overnight. The UN Convention on the Law of the Sea took nine years to negotiate and a further eight years to come into force.  Nevertheless, Ecuador (as chair of the working group) is expected to present a concrete proposal for a draft treaty ahead of the fourth round of discussions next year.

Meanwhile, many businesses and other actors remain committed to implementing the “Protect, Respect and Remedy” framework of the UNGPs, which benefits from widespread support. And let us not forget the treaty process is not the only game in town: recent years have seen a proliferation of domestic and international initiatives to drive forward the implementation and enforcement of the principles enshrined in the UNGPs.  We look forward to seeing these debated and developed at the upcoming UN Business and Human Rights Forum at the end of November.