The Treaty Process
In June 2014, the UN Human Rights Council mandated an Open-ended Intergovernmental Working Group (OIWG) “to elaborate an international legally binding instrument to regulate, in international human rights law, the activities of transnational corporations and other business enterprises.” The resolution creating the OIWG was co-sponsored by Ecuador, Bolivia, Cuba, South Africa and Venezuela. However, the treaty had a rather inauspicious start with only a plurality of 20 States of the Council voting in favor of the resolution. The United States, the United Kingdom, numerous European Union member States, Japan, and South Korea, all countries that serve as home states to significant numbers of prominent transnational companies, voted against the resolution. In contrast, over 600 civil society organizations indicated their support in a Joint Statement.
In explaining its negative vote, the United States, announced that it would not participate in the OIWG. The United States has expressed its opposition to the treaty process based on its view that the treaty detracts from the UN Guiding Principles (UNGPs), despite the OIWG’s statement that it believes that the treaty and the UNGPs should be “complementary and mutually reinforcing.” The United States also considers that the “international community has spoken clearly on this topic, emphasizing the need for the voluntary, multi-stakeholder, and consensus-based approach developed through the [UNGPs],” even though developments in European and other States clearly indicate the movement toward hard law in this area. And true to its word, the United States has not participated in any of the sessions held by the OIWG including the sixth one in October 2020.
Participants in the negotiation sessions are primarily State representatives and civil society organizations. Businesses cannot directly participate in these sessions. The limited role of businesses in the treaty negotiation process results from concern about the power of businesses and their potential impact on the negotiations. The concern underpinning this approach is that businesses might try slow down the negotiation process and weaken the provisions of the treaty that they perceive to be opposed to their interests. The current representation of businesses in the negotiations, through the International Organization of Employers and the International Chamber of Commerce, is a compromise position.
The first draft of the treaty, the Zero Draft, was issued by the OIWG in 2018, and has been followed by the 2019 Revised Draft, and the current 2020 Second Revised Draft. The drafts have progressively rendered the provisions increasingly consistent with the UN Guiding Principles on Business and Human Rights. While States continue to negotiate the treaty’s provisions, the current Second Revised Draft provides valuable indications of the scope of the increasing expectations on businesses related to the social aspect of ESG measures.
Scope of Application
The treaty is drafted so as to be legally binding on States, not businesses. However, the provisions extensively detail the measures States should take to ensure that: (i) businesses implement their responsibility to respect human rights; (ii) businesses are held accountable for the human rights harm they cause to persons; and (iii) persons harmed are able to obtain a remedy.
The treaty covers all business enterprises, not just those carrying out cross-border activities. Moreover, not only traditional businesses, whether manufacturers, suppliers, or retailers, but also State-owned enterprises, as well as law firms, accounting firms and consulting firms fall within the scope of “businesses” covered by the treaty. The treaty has a similarly broad remit for the “business activities” covered. They include “any for profit economic or other activity” whether undertaken by a “natural or a legal person” (art. 1.3).
The business’s actions addressed by the treaty are “human rights abuses” that is, any “harm committed by a business enterprise, through acts or omissions in the context of business activities” that impede international human rights, including environmental rights (art. 1.2). The reference to “human rights” is defined broadly to include the rights and freedoms in the Universal Declaration of Human Rights that are universally recognized, the core human rights treaties and ILO treaties to which a State is a party and customary international law (e.g., prohibition against torture, freedom from discrimination) (art. 3.3).
Prevention
The trend of States’ adoption of human rights due diligence laws, which is particularly evident in Europe, is reflected in the treaty’s provisions on prevention. States are to require businesses to undertake human rights due diligence (art. 6.2) and this due diligence includes not just an evaluation of human rights but also environmental impacts (art. 6.3), thereby reflecting the increasing recognition of the intersection of environmental harms by businesses and their impacts on persons’ human rights. The practical measures that businesses are expected to undertake in carrying out due diligence include: identifying and assessing their actual and potential human rights impacts; taking measures to address those impacts; monitoring the effectiveness of their measures; and communicating with stakeholders as to how they address their actual or potential human rights (art. 6.2). Businesses also are required to adopt a gender perspective when carrying out human rights due diligence (art. 6.3).
Businesses that fail to carry out appropriate due diligence may subject the company to "commensurate sanctions, including corrective action where applicable" (art. 6.6). These measures are in addition to those that may be imposed on businesses for their actual infringements on the rights of persons (covered in article 8, “Legal Liability,” and discussed in V. below). Additionally, a business’s performance of human rights due diligence does not automatically absolve it from the responsibility of having caused, contributed to or failed to prevent human rights abuses (art. 8.8).
A key question for businesses will certainly be the extent to which they are responsible for the conduct of businesses in their value chain and other business relationships. The current draft provides that business enterprises are to “prevent and mitigate human rights abuses throughout their operations” (art. 6.1), which is ambiguous and will need to be further clarified.
Victims and Access to Remedy
The treaty makes evident its emphasis on ensuring that those persons whose human rights have been infringed by a business have a remedy. There are numerous provisions addressing this topic: “Rights of Victims” (art. 4); “Protection of Victims” (art. 5); and “Access to Remedy” (art. 7).
The definition of a “victim” is quite broad. It covers persons who individually or collectively suffered harm and includes “immediate family members or dependents of the direct victim, and persons who have suffered harm in intervening to assist victims” (art. 1.1). Thus, the definition of a “victim” also includes all persons, advocates, lawyers, union representatives, community representatives and others, who directly provide help to victims. However, this definition is likely to undergo further refinement and modifications since there were a number of interventions in the October 2020 discussions of the treaty that criticized the lack of clarity and precision in this definition.
The harm that needs to be suffered by the victim to incur the business’s responsibility includes “physical or mental injury, emotional suffering, or economic loss or substantial impairment of their rights” (art 1.1). Also, in the most recent draft, there is the explicit introduction of being treated as a victim even if the perpetrator of the human rights abuses is not identified, apprehended, prosecuted, or convicted (art. 1.1).
The challenges faced by persons harmed by businesses have been well documented and analyzed in the Accountability and Remedy Project of the Office of the High Commissioner for Human Rights. To address the expense of such litigation, States are to provide “adequate and effective legal assistance to victims throughout the legal process” and ensure that legal costs at the end of legal proceedings do not impose an unjust and unreasonable burden on victims (art. 7.3).
Also, articles introduced into the Second Revised Draft prohibit courts from dismissing legal proceedings based on the forum non conveniens principle (arts. 7.5, 9.3) This principle normally allows the courts of a State to decline jurisdiction if they consider that it would be more appropriate for the litigation to be decided by a foreign court that also has jurisdiction. The aim is to prevent companies from using forum non conveniens to transfer cases to courts in countries where justice would be hindered or the plaintiffs deprived of the resources to pursue an effective remedy. Another provision intended to assist plaintiffs is that allowing the reversal of the burden of proof. The most recent version of the draft treaty provides that: “State Parties may, consistent with the rule of law requirements, enact or amend laws to reverse the burden of proof in appropriate cases to fulfill the victims’ right to access to remedy” (art. 7.6). While the Revised Draft provided that this principle could be utilized “where needed” and “subject to domestic law” in article 4.16 the newer formulation, with its reference to “rule of law requirements,” will require further clarification.
Liability and Jurisdiction
A business may be legally liable for its “failure to prevent another legal or natural person with whom it has a business relationship, from causing or contributing to human rights abuses” in two cases: first, when the business “legally or factually controls or supervises such person or the relevant activity that caused or contributed to the human rights abuse.” And second, where the business should have “foreseen risks of human rights abuses in the conduct of their business activities …. but failed to put adequate measures to prevent the abuse” (art. 8.7). This new approach seeks to impose liability where power is actually exercised, but even where the business does not exercise any control, it may still be liable if the human rights abuses were foreseeable and it failed to take adequate measures, presumably including conducting human rights due diligence, to address the abuse. Thus, businesses will need to take these two aspects into consideration when thinking about their supply chains and business relationships.
The most recent draft also addresses jurisdictional competence. It provides that victims can bring claims where: (i) the human rights abuse occurred; (ii) where an act or omission contributing to the abuse occurred; or (iii) the business is domiciled (art. 9.1). In addition, the principle of forum necessitatis introduced in the draft ensures that victims can file complaints in States other than those provided for in the treaty when no other jurisdiction can guarantee a fair trial (art. 9.5). Finally, there is a related exception allowing victims to sue a transnational corporation and its subsidiary or business partner in their home States, provided that the two claims against the parties are closely related (art. 9.4). According to Professor Surya Deva, member of the UN Working Group on Business and Human Rights, these revisions reduce the risk of vexatious proceedings brought with the sole purpose of harming companies, and at the same time, they facilitate corporate liability when the actions of victims are legitimate. However, given objections that have been raised, the liability and jurisdiction provisions of the treaty will certainly be subject to further discussion and revision.
Conclusion
New United Nations treaties can take years (as much as a decade) to formulate, and this will likely be the case with the draft treaty on business and human rights. However, when completed, the treaty will be the first to constitute a global standard that makes States legally responsible for ensuring companies implement their responsibility to respect human rights. In the meantime, the draft treaty can be viewed as a reflection of developments rapidly occurring in the regulatory and legislative frameworks of countries as well as the increasing expectations of investors and shareholders related to the social factor, or “S” in ESG_
This article has been adapted from an article published in the ABA International Human Rights Committee (IHRC) Newsletter, Winter 2020, Volume 5 and is reprinted with the permission of the IHRC.
