In October 2022, the Intergovernmental Working Group on transnational corporations and other business enterprises with respect to human rights (IGWG) conducted an eighth round of negotiations in Geneva on a new United Nations (UN) treaty.
Eight years after talks began, political and legal challenges continue to stymie efforts to draft a legally binding instrument to regulate, in international human rights law, the activities of transnational corporations and other business enterprises. The proposed treaty raises some thorny issues for both states and businesses.
Background and political context
The IGWG was established by the UN Human Rights Council in June 2014 with twenty states voting in favour of its creation, fourteen against and thirteen abstentions (www.ohchr.org/en/hr-bodies/hrc/wg-trans-corp/igwg-on-tnc). The home countries of many of the world’s largest transnational corporations were opposed, while countries that tend to host those corporations and their activities were divided. The treaty process has inevitably suffered from this weak political mandate. However, the latest round suggests a narrowing of the gap between its supporters and detractors.
This is the latest in a line of attempts to regulate the conduct of multinationals at the international level dating back to the 1970s. It stems from the conviction by activists, which has periodically been espoused by some developing countries, that the human rights protections in relation to corporate activity currently available under regional and national instruments are not sufficient. A legally binding instrument is needed to establish obligations for business and facilitate access to justice for victims of violations, according to proponents. They hope that such an instrument would prompt more multinational businesses to act with due diligence regarding the impacts of their activities on human rights around the world.
From polarization…
Those that are opposed to the treaty often point out that international human rights law already imposes obligations on states that are relevant to the regulation of corporate activity and that the 2011 UN Guiding Principles on Business and Human Rights (UNGPs) reminds states of that fact (www.ohchr.org/sites/default/files/documents/publications/guidingprin ciplesbusinesshren.pdf). They note that various attempts to regulate business conduct through international human rights law have failed in the past, and that a treaty approach is politically and legally challenging because human rights involve complex issues, approaches and interests. A treaty approach also is unnecessary, they argue, as governments already have the legal power to control businesses under their respective domestic laws.
Those who support the treaty argue that transnational corporations wield formidable economic power and are often effectively immune to state control. They argue that clarifying obligations and imposing them directly on transnational corporations is necessary, as human rights abuses can involve non-state actors in a globalised economy.
Initially, proponents of the treaty sought not only to impose human rights obligations directly on businesses by treaty, but also to create an international architecture to enforce these obligations and recommend remedies for their violation. This would follow the example of the core UN human rights treaties, the implementation of which is monitored by committees of independent experts – with the notable difference being that, while the committee that monitors the implementation of the most widely ratified human rights treaty, the UN Convention on the Rights of the Child (UNCRC), must track the performance of 196 sovereign states, a committee to monitor the implementation of a business and human rights treaty would need to track the performance of more than 60,000 multinational corporations, more than 500,000 subsidiaries of those corporations and, if they were in scope, millions of single nationality corporations. Not surprisingly, the current draft of the treaty – which is the Third Revised Draft (the Third Draft) – abandons this approach and instead obliges states to take certain steps domestically to ensure that businesses respect human rights and provide remedies for their violation.
This new approach helped several of the treaty’s former opponents that had not participated in negotiations, namely, the US, UK and the EU, to participate in the more recent rounds of talks. During the latest talks, the US said that it understood the motivations of those who wanted a treaty. The US pointed in particular to an increase in attacks against human rights defenders and growing pressure to protect human rights from the impact of climate change. However, the US also expressed concerns that the Third Draft still fails to account for the diversity of legal systems and is too prescriptive. Both Australia and the UK also argued that the Third Draft strayed too far from the approach of the UNGPs.
Ecuador, as Chair of the IGWG, released a set of less prescriptive proposed amendments to key provisions before the eighth session (the Chair’s Proposals). While this was viewed as an encouraging step by certain states, including the US, other states criticised the Chair’s Proposals as deviating inappropriately from the text of the Third Draft. Ecuador then clarified that their formal basis for the negotiations remained the Third Draft and agreed to consult further with a grouping of states on how to consolidate the various proposals.
State obligation to regulate business activities
One point of contention during the latest round of negotiations was the proposed obligations on states to prevent, and ensure the remediation of, business-related human rights impacts. Under Article 6 of the Third Draft, states would be required to “regulate effectively the activities of all business enterprises within their territory, jurisdiction or otherwise under their control” (Article 6.1). This would apply with respect to all internationally recognised human rights (Article 6.2).
The Third Draft provides that states must require business enterprises to undertake human rights due diligence through prescribed steps (Article 6.3). Those steps include requiring impact assessments to address human rights, labour rights, the environment and climate change (Article 6.4.a). It also calls on states to mandate non-financial reporting in respect of group structures, suppliers, and impacts on human rights, labour rights, health, environmental and climate change (Article 6.4.e).
Article 6 of the Third Draft has much in common with the mandatory human rights reporting and due diligence legislation already adopted or contemplated by several states, including the EU’s proposed Corporate Sustainability Due Diligence Directive (CSDD) and Corporate Sustainability Reporting Directive (CSRD) and the US Uyghur Forced Labour Prevention Act (UFLPA) and its implementation guidelines (see News brief “Corporate sustainability due diligence duty: gathering momentum”, www.practicallaw.com/w-034-8795). Nevertheless, the US proposed that Article 6 should not prescribe steps or features of human rights due diligence, arguing that states should merely be required to “take steps to encourage” proportionate human rights due diligence in order to ensure and promote business respect for human rights.
While they would require states to introduce mandatory due diligence and reporting, the Chair’s Proposals do not prescribe which businesses the requirements should apply to, nor the processes involved. They merely call on states to ensure that corporate due diligence meets certain criteria: that is, it should:
- Take into account the experience of women and girls and the needs of the most marginalised.
- Involve meaningful stakeholder consultation.
- Ensure the safety of those at risk of retaliation.
- If it involves engagement with indigenous peoples, adhere to the principle of free, prior and informed consent.
The vagueness of these provisions – which would establish procedural obligations of conduct, while avoiding precise obligations of result – would arguably diminish their legal status as well as the treaty’s overall ability to ensure that corporate due diligence obligations are as rigorous around the world as they are becoming in Europe and under the UFLPA in the US.
State obligation to provide access to remedy
Another contentious issue was the proposed obligations on states to provide access to remedies for business-related human rights impacts. The Third Draft would require states to provide their courts and non-judicial mechanisms with the necessary competence in accordance with the treaty to enable victims access to justice and to adequate, timely and effective remedy (Article 7.1).
One controversial proposal would require states, to remove the doctrine of forum non conveniens from their legal systems to ease access to remedies (Article 7.3.d). Although this doctrine has already been removed in the EU and the UK, it is a mainstay of US transnational tort litigation. Another clause would require states to allow judges reverse the burden of proof.
Instead of addressing matters in detail, the home states of many large multinationals raised general concerns. For example, Japan referred to the Third Draft’s access to remedy provisions as an area containing “fundamental flaws” and referred to the US statement on the topic. The US statement says the Third Draft contained “overly broad jurisdictional provisions”.
However, the Chair’s Proposals would merely require states to implement effective policies to “promote” access to justice, “progressively reduce” obstacles to effective remedies, and ensure that state agencies “can either deliver, or contribute to the delivery of” effective remedies. Furthermore, states would only be required to take steps that are consistent with their domestic legal and administrative systems.
State obligation to provide for legal liability
The content of the proposed obligation to provide for legal liability is also a contentious issue. Under the Third Draft, states would need to, “ensure that their domestic law provides for a comprehensive and adequate system of legal liability for human rights abuses by business, including in transnational activities, or arising from their business relationships” (Article 8.1).
States will be particularly sensitive to the specific provision that would require them to impose liability on businesses for their failure to prevent another legal or natural person with whom they have a business relationship, from causing or contributing to human rights abuses, where the former controls, manages or supervises that person or the relevant activity, or should have foreseen, but failed to take adequate measures to prevent, the abuse (Article 8.6). They are also likely to object to the provision that would require domestic legal systems to provide for the criminal liability of legal persons for human rights abuses that amount to criminal offences under international human rights law binding on the states or customary international law, or their domestic law (Article 8.8).
The US remarked that Article 8 was concerning because of its “unclear liability provisions, and potential criminalisation of an ill-defined range of human rights abuses”.
Again, Ecuador sought to reduce the impact of these provisions. As chair, it proposed that the requirement to introduce legal liability should be subject to domestic legal requirements. Likewise, liability for human rights abuses arising out of business relationships should be in accordance with existing domestic legal principles on liability for conspiracy to commit and “aiding, abetting, facilitating and counselling” that type of abuse.
A long road
These latest negotiations suggest that, while opposition to the idea of a business and human rights treaty may be subsiding, states remain divided over its form and content. The Chair’s Proposals may have been intended to bridge that divide, but they have not succeeded, as yet.
During the latest session, a number of states that are home to major transnational corporations expressed interest in the US proposal that the treaty should take a less prescriptive approach, more akin to a framework agreement, that builds on the UNGPs with more prescriptive elements addressed through optional protocols. However, other states continued to add more detail to the proposed treaty.
With Ecuador looking to publish an updated draft by the end of July 2023, the long road towards a business and human rights treaty will wind on for some years to come.
