Towards an International Convention on Business and Human Rights
[Carlos Lopez is a Senior Legal Advisor at the International Commission of Jurists.]
The first draft of one of the most important international human rights treaties of recent years, and instrument addressing on business and human rights has just been released in Geneva by Ecuador’s Ambassador acting as Chair of the process. The “zero draft” strongly focuses on the key issue of access to justice and remedy for those who allege harm by a business enterprise and it is likely to please many and displease others, but it will surely contribute to a change of tone and character of deliberations so far focussed primarily on political and procedural considerations. In this blog (in two parts) we carry out a preliminary broad analysis of the salient elements of the draft treaty.
The draft is published in the context of the establishment by the United Nations Human Rights Council in Geneva through resolution 26/9, in 2014 of an Intergovernmental Working Group created to elaborate a “legally binding instrument to regulate, in international human rights law, the activities of transnational corporations and other business enterprises” (a draft treaty on business and human rights). The Working Group has held three sessions, with its next session scheduled for October 2018.
At first glance the draft treaty adopts reasonable choices in some of its overarching aspects and its overall structure. The chosen model is a treaty focussed on access to remedy and justice by victims of corporate abuse and legal accountability of transnational corporations. Other options that had been proposed included a framework treaty that would basically provide for general principles, procedures and perhaps some institutional arrangements, or a treaty that would focus on creating or recognizing under international law direct human rights obligations for businesses. At the moment –in this project elaborated by the Ecuadorian Ambassador- business human rights obligations are only recognized as such in the preamble:
Underlining that all business enterprises, regardless of their size, sector, operational context, ownership and structure shall respect all human rights, including by avoiding causing or contributing to adverse human rights impacts through their own activities and addressing such impacts when they occur.
The Role of the State
Although the proposed treaty would create obligations only for States to take legislative and other measures to make business legally accountable and for victims to have access to remedy, the State role and the need of legal accountability and remedies also in the context of State commercial activity is generally overlooked. Very often, States enter into joint ventures with private investors (such as in Nigeria with Shell), or otherwise facilitate and support business operations in mining, oil and gas sectors, or provide security to the operational sites, and many of the abuses that are usually reported involve private business and State complicity. Regrettably the draft treaty pays scant attention to the role of the State and the need for accountability and remedy in that context. Further, some provisions seem to go in the opposite direction. For instance, Article 13 on consistency with international law presents astonishing wide-ranging and somewhat imprecise clauses that leave untouched existing obligations for States.
The focus on remedies and accountability for business enterprises’ abuses is commendable and reflects the desire of many of those advocating for a treaty to tackle what they consider the most pressing issues in the field of business and human rights: those that relate to the ability of society at large, and most concretely individuals and groups that are impacted by business operations, to hold businesses legally accountable for abuses that may be committed in their operations, and to provide effective access to justice and reparation to those who allege a harm. The structure, including the headings tackles head on some of those issues, among others: legal liability of corporations, victims’ rights, jurisdiction, and mutual legal assistance. However, the way the draft treaty deals with those issues is uneven, imprecise and at times obscure. In any case, having a full draft in front of our eyes undoubtedly helps in the debates and the eventual improvement of the draft.
In respect of the ratione materiae, the draft fails to provide clarity on what rights are to be covered under the treaty. The formulation in draft article 3.2 that the Convention is to apply to “all international human rights and those rights recognized under domestic law”, flies in the face of the principle of legality. “All international human rights” might have been delimited by reference to treaties or custom, or by reference on whether they are binding on the State Parties It is extremely difficult to see how a State could even go about implementing a treaty with as open ended an prescription as article 3.2.
Regarding scope of personal jurisdiction, pursuant to 3.1. the zero draft addresses only the conduct of transnational corporations and other business enterprises that have “transnational activities”. Actions or omissions by businesses acting only within domestic jurisdictions are omitted. The zero draft treaty defines “business activities of transnational character”, those for- profit activities that “take place or involve actions, persons or impact in two or more national jurisdictions”. In such way it implements a footnote that was inserted into resolution 26/9 of 2014 which limited the scope to transnational business operations to the detriment of a broader scope including all business enterprises advocated by some States and NGOs and reflected in the UN Guiding Principles on Business and Human Rights.
The limited scope adopted in the process and in the published draft has been a matter of contention since the start of the process. The scope obviously impacts on the reach and consistency of several sections and articles of a draft treaty whose focus is on the definition of grounds of legal liability for businesses (mainly civil and criminal) and access to remedy and reparation by the alleged victims of company abuse. Its disruptive effects can be seen for instance in the definition of corporate criminal offences that States Party are required to enact domestically. Under the current scope and definitions only criminal conduct (no matter its seriousness) that occurs in more than jurisdiction may be punishable, which may lead to the absurd outcome that egregious criminal conduct (for instance crimes against humanity) may not be punishable if committed by businesses acting only within one jurisdiction.
The draft could, for example, have inserted some mitigating clauses such as the one included in the UN Convention on Transnational Organized Crime (Article 34.2) with the intention to mitigate similar problems in the context of that treaty. An adapted provision would read:
The offences established in accordance with article 10.8 of this Convention shall be established in the domestic law of each State Party independently of the transnational nature of the business activity, except to the extent that the nature of the crime would require the transnational element.
The clause above may also be broadened to refer not only to corporate criminal liability but to other measures that are required from companies such as human rights due diligence (Article 9)
One thing is clear, the draft treaty, while clearly deficient here, will reassure those concerned that the operations of transnational corporations may not be properly addressed if they were to be embedded within broad and vague norms that would address “all business enterprises” without distinctively addressing the specific problems that arise in the context of transnational operations.
The draft treaty takes a somewhat sweeping approach to the issue of preventative measures to be required by States from business enterprises (article 9). What States are asked to require from businesses is framed as a sort of (human rights) due diligence that significantly departs from what is generally known as such. As it is, those requirements maybe better seen as “responsible business” measures than only human rights due diligence.
As formulated in the United Nations Guiding Principles on Business and Human Rights, human rights due diligence is a four-step process whereby business enterprises should identify, prevent, mitigate and account for how they address their adverse human rights impacts. The draft treaty splits some of those steps into two steps and adds “meaningful consultation” with affected groups, the requirement of financial security to cover potential compensation claims, and the incorporation of some measures into businesses’ transnational contracts. Failure to comply with such due diligence measures would entail legal liability under domestic law for the concerned company. The draft makes a positive point by providing for “effective national procedures” to “enforce compliance” – something that is always week everywhere- although both businesses and governments will find hard to comply or monitor compliance respectively with such far reaching and imperfectly defined obligations of due diligence.
Given that preventative measures are usually regarded by States as important and preferable to the need to provide remedies after the fact, and that substantial sectors of organized civil society are advocating for mandatory business human rights due diligence, it is foreseeable that this section of the draft treaty will attract special attention and support. For those reasons, this section is likely to remain in a final draft, though likely in a revised form.
Legal liability and access to remedy
The core of the draft treaty is perhaps its provisions on legal liability for transnational corporations and the rights of victims to remedy and reparation. Although it is not strictly needed, draft Article 8 starts with a restatement of the rights of victims to access to justice and remedies. However, how the various forms of reparation (restitution, compensation, rehabilitation, satisfaction and guarantees of non-repetition) -originally from the law of State responsibility- relate to companies, to States or to both may need to be explained somehow and somewhere. In addition, references to “environmental remediation” and “ecological restoration” are also in need of clarification if they are different from other generally accepted forms of reparation.
Among some of the rights of victims spelled out in the draft convention, the sweeping provision that “in no case shall victims be required to reimburse any legal expenses of the other party to the claim” stands out as potentially controversial since it may be seen as an incentive to frivolous litigation. The draft treaty also makes provision for the establishment of a Fund for Victims but leaves its details for a later definition.
Rights of victims to justice and reparation are assorted with provisions for the legal liability of business enterprises and that is what Article 10 of the draft treaty does, focussing on civil and criminal liability. The provision requires the enactment of civil, criminal or administrative legal liability for abuses committed in the context of transnational business activity, and that liability applies to both legal and natural persons.
A key issue in the discussion of civil liability is the parent-subsidiary company relationship and the corresponding legal responsibilities in the event that harm is caused or contributed to in the context of business operations. Draft Article 10.6 makes an attempt to tackle this complex and contested issue by mandating certain parameters whereby a “person with business activities of transnational character” (presumably a business corporation) will be liable for harm caused in the context of those operations, “including” when it controls “the” operations or it has “close relation” with its subsidiary or entity in its supply chain and its own conduct is closely connected to the wrong produced, or the risk have been foreseen or should have been foreseen. The various grounds under which the liability of parent companies may be established in relation to wrongs by their subsidiaries are remarkable for their flexible definition and their alternative application, which suggests an effort to cover all possible ways in which a company may be involved in the harm caused by others. But there is a need for careful analysis to ascertain to what extent these clauses will be effective in clarifying the link between parent and subsidiary or, on the contrary, will provide an incentive for parent companies’ hands-off strategies to avoid “strong” or clear connections with other companies.
The provision is likely to be the subject of heated debates during negotiations. Many corporations remain keenly attached to the doctrine of separation of legal entities (the corporate veil) as laid down in Salomon v Salomon and Co., by the United Kingdom House of Lords in 1897 and many States and legal practitioners are reluctant to accept loosely defined theories that would do away with they perceive as a sacrosanct doctrine of separation of legal entities. It is to be hoped that the emergence of doctrines of enterprise risk liability and enterprise liability in certain developed countries would be the basis to overcome the likely stalemate on this point. In any case, this is going to be one of the treaty sections that will attract heightened attention from legal experts but also by groups and communities from around the world who often complaint that subsidiaries of large companies in the extractive sector cause damage to their livelihoods, environments and health, among others.
The provisions on criminal legal liability are similarly formulated in loose fashion. It should be said for starters that a special provision on corporate criminal liability is a step forward and should be maintained until the end, but the language needs serious work to address difficulties in precision and feasibility of objectives. The draft treaty not only calls for criminal liability for all human rights violations amounting to criminal offences under international law and “domestic law” (leaving open a large window for divergent and potentially arbitrary approaches) but also continues to limit the definition and sanction of those offences only when committed by “persons with business activities of a transnational character”. I addressed this major flaw in the first part of this blog, it suffices here to reaffirm the need to correct the definition of the scope of the treaty to avoid major disruptions to fundamental rule of law principles.
International institutional arrangements
It may be the subject of a separate blog, but here it may also be helpful to briefly address the institutional arrangements proposed in the draft treaty. The draft treaty would create a committee of experts to monitor and promote the implementation of the treaty and a conference of State Parties, but regrettably confines their functions to the traditional functions performed by existing similar bodies. The limitations in terms of effectiveness of the current international system of monitoring and supervision based on expert committees are well known. This system is already insufficient in examining State compliance with classic human rights treaties and may be even less effective in relation to business enterprises practices and policies. There is still a chance that the new treaty on business and human rights will innovate the practices, strengthen functions and enhance the effectiveness of the international system of treaty monitoring and supervision.
All things considered, it may be said that the draft treaty is a step forward. Many doubted the process would advance to the stage of having a full draft for negotiations that can only be improved. The process is in its fourth year and moving forward despite the many challenges. But treaty drafting needs considerable work to measure up to the high expectations and needs expressed by the international community and especially those people in need of justice and reparation.