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Focus on Regulation

UN treaty on business and human rights: Working Group publishes draft instrument

On 19 July, the UN working group tasked with elaborating an international, legally binding instrument on business and human rights published the text of a draft treaty (see the draft here and the accompanying statement by the Chair of the Working Group, here). In this blog, we look at its key terms and what it might mean in practice for transnational businesses.

Drafting history

In October 2017, following the last round of deliberations, we wrote that a number of fundamental issues remained unresolved, including:

  1. Would the treaty apply to all businesses or just those of a “transnational” character?
  2. How would an international treaty bind businesses?
  3. What would be the nature and extent of the obligations on businesses and would this give rise to corporate criminal liability?

Fundamentally, we expressed concern that the initial “Elements” of the treaty were, in several respects, inconsistent with the UN Guiding Principles and threatened to undermine the growing consensus on the business responsibility to respect human rights. The draft instrument goes some way to resolving these issues although in doing so gives rise to various new rule of law concerns – we consider each one in turn.

Would the treaty apply to all businesses or just those of a “transnational” character?

During consultations, a major source of contention was whether the treaty should, like the UNGPs, apply to all businesses or, as per the Working group’s mandate from the Human Rights Council, be restricted to businesses of a “transnational” character.

The draft treaty adopts the more restrictive approach, limiting the scope of its application to “business activities of a transnational character” (Article 3) which are defined as “any for-profit economic activity, including but not limited to productive or commercial activity, undertaken by a natural or legal person, including activities undertaken by electronic means, that take place or involve actions, persons or impact in two or more national jurisdictions“.

This restrictive approach risks creating an uneven playing field for domestic and transnational enterprises, particularly those operating in states where the protection of human rights under domestic law is weak. It may also deprive victims of a means to access a remedy against a domestic enterprise.  It is in the interests of both victims and business, not to mention fundamental to the rule of law, that the law should apply equally to all.

How would the treaty bind companies?

Although the draft Preamble underlines, as per the UN Guiding Principles, that “all business enterprises… shall respect all human rights“, the treaty is intended to be signed by States and envisages that the provisions regulating business activity will be enforced by the State Parties.  Specifically, the draft requires State Parties to:

  1. guarantee the right of victims to present claims to their Courts, and ensure their domestic judicial and other competent authorities have the necessary jurisdiction to hear such claims and allow victims to access remedies – Article 8(2)
  2. investigate human rights violations and, where appropriate, take action against those allegedly responsible “in accordance with domestic and international law” – Article 8(3)
  3. ensure that persons falling within the scope of the treaty that are within their jurisdiction (or control) undertake “due diligence” throughout their transnational business activities – Article 9(1)

Contrary to suggestions made during the earlier consultations, private persons (natural or legal) would not be directly bound by the provisions of the treaty. However, they would be subject to civil and criminal liability under the jurisdiction of the State Parties, as defined in the treaty (see below). This provides some clarity and brings the treaty in line with well-established principles of public international law.

What is the nature and extent of corporate liability?

The nature of corporate liability was another controversial issue during the Working Group’s third session in October 2017. This was not surprising given the variety of approaches to this question in domestic legal systems around the world and the lack of consensus on whether corporate liability exists for crimes under international law at all.

The draft instrument requires State Parties to provide (through their domestic law) for criminal, civil and administrative liability for violations of human rights in the context of transnational business activities and for effective criminal and non-criminal sanctions, including monetary sanctions.

In contrast to the limited attention previously given to this crucial question, draft Article 10 goes into some detail on the proposed civil and criminal liability regimes:

  1. Civil liability shall arise for harm caused by violations of human rights arising in the context of business activities that include: operations over which control is exercised; activities of subsidiaries or other entities in the supply chain that are “sufficiently closely” related and where there is a “strong and direct” connection between the alleged conduct and the wrong suffered; and where risk has been, or should have been, foreseen of human rights violations within the chain of economic activity. This proposed definition, which cuts against the established doctrine of separate legal personality, is likely to prove controversial.
  2. Criminal liability shall arise for persons that intentionally, whether directly or through intermediaries, commit human rights violations that amount to a criminal offence under international law or domestic law. The draft specifically extends criminal liability to principals, accomplices and accessories, as defined by domestic law. Given that the nature and extent of secondary liability varies extensively from one state to another, this gives rise to rule of law problems – the same conduct may constitute an offence in one state and not in another. Article 25 of the Rome Statute of the ICC already provides a regime for secondary liability under international criminal law and various national courts have deferred to this in domestic cases involving participation in international crimes (see for example the Supreme Court of Canada in Ezokola v Canada). From the perspective of legal certainty, it is regrettable that the draft instrument does not do the same.

Due diligence requirements

As mentioned above, the draft specifically requires State Parties to ensure that due diligence of business activities of a transnational character is undertaken.

Broadly consistent with the UN Guiding Principles, draft Article 9 defines due diligence as including monitoring, identifying, assessing, preventing and reporting on the human rights impacts of business activities, including those of subsidiaries and other entities under one’s direct or indirect control or directly linked to one’s operations, products or services. The draft instrument requires states to ensure that businesses incorporate these due diligence requirements in “all contractual relationships which involve business activities of transnational character“.  This is a significant ‘hardening’ of the ‘soft law’ regime under the UNGPs and would create a web of legally binding requirements to carry out due diligence.  The consequences of this over time would likely be a proliferation of disputes and a body of case law on the adequacy of due diligence.

Where can claims be brought?

Consistent with well-established principles of international law, the draft instrument vests jurisdiction in the courts of the State where either (1) the alleged acts or omissions occurred or (2) the natural or legal person(s) alleged to have committed the acts or omissions are domiciled (Article 5). It also requires states to incorporate or otherwise implement in their domestic law appropriate provisions for universal jurisdiction over human rights violations which amount to crimes (Article 10).

Interestingly, the draft treaty also includes provisions requiring State Parties to mutually recognise and enforce domestic judgments made in another State Party pursuant to the treaty, unless limited exceptions (e.g. procedural unfairness, public policy) apply. This would give victims of a human rights abuse in State A the right to enforce against assets held by the defendant in State B, even if there was otherwise no basis to do so.  If adopted, this would amount to a self-standing regime of reciprocal recognition and enforcement of human rights judgments.

In conclusion

The publication of the draft instrument represents a major milestone in the elaboration of a potential treaty, and marks significant progress on key issues left outstanding in October 2017.

The draft will provide the basis for meaningful discussions during the Working Group’s fourth session on 15-19 October 2018. Businesses and their advisors should continue to engage in the process to lobby for a treaty which is consistent with rule of law principles on legal certainty and equality before the law.

In the meantime, businesses that want to get ahead of the curve and anticipate any future changes in legislation prompted by any treaty should take steps to implement the operational principles set out in the UNGPs.

Watch this space for details of further developments on the treaty negotiations.


Julianne Hughes-Jennett, Partner, Peter Hood, Consultant, and Alison Berthet, Associate, are all members of Hogan Lovells’ Business and Human Rights Group.