Source: https://www.ejiltalk.org/bending-the-knee-or-extending-the-hand-to-industrial-nations-a-comment-on-the-new-draft-treaty-on-business-and-human-rights/
Timestamp: 2020-01-28 03:39:42
Document Index: 159187593

Matched Legal Cases: ['Art. 1', 'Art. 3', 'Art. 15', 'Art. 14', 'Art. 8', 'Art. 5', 'Art. 5', 'Art. 10', 'Art. 6', 'Art. 6', 'Art. 6', 'Art. 6', 'Art. 10', 'Art. 6', 'Art.1', 'Art. 10', 'Art. 6', 'Art. 6', 'Art. 6']

EJIL: Talk! – Bending the Knee or Extending the Hand to Industrial Nations? A Comment on the New Draft Treaty on Business and Human Rights
Home EJIL Analysis Bending the Knee or Extending the Hand to Industrial Nations? A Comment on the New Draft Treaty on Business and Human Rights
Bending the Knee or Extending the Hand to Industrial Nations? A Comment on the New Draft Treaty on Business and Human Rights
Published on August 23, 2019 Author: Pierre Thielborger and Timeela Manandhar
On 16th of July, 2019, the Open-Ended Intergovernmental Working Group (OEIWG) on transnational corporations and other business enterprises with respect to human rights published a revised draft(RD) for a treaty on business and human rights. It is the second substantial draft of such treaty after the zero draft(ZD) released exactly one year earlier. The new draft contains some big concessions to States and businesses opposing the treaty.
The OEIWG was established in 2014 by the UN Human Rights Council (through resolution 26/9) to develop a legally binding instrument to regulate, “in international human rights law, the activities of transnational corporations and other business enterprises” (Art. 1 Res. 26/9). The OEIWG held its latest session in October 2018. The RD itself was prepared by the Chairman of the OEIWG over the last months. A first point of procedural criticism is thus that despite the inputs in the previous OEIWG’s sessions, there was no transparent process in the stage of drafting. The text was created by the chairman and his team alone. A drafting team consisting of legal experts representing different areas of expertise and different geographical regions would have given the draft more procedural legitimacy. The “power of the pen” should not be underestimated.
On substance, much could be said about the draft. We will focus on three particularly pertinent points: the new scope of the draft treaty; the comprehensive inclusion of human rights abuses in conflict areas; and the issue of corporate liability.
Scope of the draft treaty
The scope of the draft treaty lies at the core of the question of who bares liability within the complex structure of transnational corporations and within global supply chains. The supporters of the treaty had initially limited its mandate to businesses with a “transnational character in their operational activities”, leaving out all “local businesses”. Parent companies and buyer companies at the top of the supply chain were seen to be able to elude regulation and profit from exploitation of people and the environment – through their de facto power, corporate structure (corporate veil) spreading across borders and economic leverage vis à vis national regulations. They were thus chosen as the focal point of the treaty.
Different from the ZD, Art. 3(1) RD significantly broadens the scope. The treaty would apply “except as stated otherwise, to all business activities, including particularly, but not limited to those of a transnational character”. This is an immense concession towards industrialized countries. Especially the EU had strongly advocated for all companiesto be included in the scope; without it, the Union would not engage with the treaty process. The main arguments were that a limitation of the scope would not fit the globalized world, that it would create an uneven playing field and potentially serve as a loophole for state-owned businesses.
In truth, there might be a good argument to focus on transnational corporations. In the (quite typical) cases where subsidiaries serve the sole purpose for the parent company of operating overseas, while all profits are transferred to the mother company which also retains decision-making powers, any attempt to hold the subsidiary accountable is usually rather pointless. Furthermore, the treaty in essence tries to solve legal challenges and problems in the current international legal framework that specifically revolve around transnational corporations. Therefore, the change of scope is not mirrored in the later provisions of the treaty, leaving the extension with not much substantial value.
However, a treaty must be an abstract regulatory instrument that should aim to regulate coherently, in a fair and anti-discriminatory manner. In this way, the decision to include all businesses was necessary. Firstly, while indeed the power often formally lies with mother companies or heads of supply chains, the reality is often more complex. Nationally operating companies can have severe impacts on workers, people living near the operation facilities and the environment. From the victims’ perspective, the (trans)nationalism of the perpetrator doesn’t make a difference for their suffering. Secondly, any limitation based on transnational activities creates a blurred line between businesses that the treaty applies to and those that it leaves out. This creates unnecessary debates within States trying to implement the treaty. Drawing a line between national and transnational businesses is often simply impossible (and the focus of operation can also change rather swiftly).
Lastly, the broadened scope leaves no room for the EU to hide behind. If the Union is truthful to its own values, including to uphold human rights, it now has to issue a formal mandate and engage in the negotiation in a meaningful way – as the European Parliament has long requested. If the EU still refuses to do so, its previous arguments lose all credibility.
Human rights abuses in conflict areas
A second innovative issue in the RD is the human rights responsibility of corporations in conflict-affected areas, post-conflict settings, and occupied territories. The ZD failed to include comprehensive provisions on this issue. It merely called in Art. 15(4) ZD for “[s]pecial attention […] in the cases of business activities in conflict-affected areas”. This was especially disappointing as it fell even behind the previously agreed non-binding United Nations Guiding Principles (UNGPs), which recognized that business activities in conflict-affected areas could fuel conflict and contribute to violations of human rights and international humanitarian law (IHL). The UNGPs called on States to support businesses to respect human rights in conflict-affected areas (Principle 7(b), 7(c)) and IHL (commentary to Principle 12).
We welcome that the RD now also addresses the heightened risks in conflict-affected regions. Its preamble and Art. 14(5) explicitly mention obligations under IHL, and Art. 8(1) demands that the statute of limitations in State parties’ jurisdiction shall not apply to violations of IHL. Furthermore, it includes requirements for corporate human rights due diligence in such settings, including consultations with “protected populations under occupation or conflict areas” (Art. 5(3b)) as well as “enhanced human rights due diligence measures” (Art. 5(3e)).
These changes, while an important first step, are still insufficient. The concrete obligations of States and responsibilities of corporations on this matter must be much better defined. For instance, the responsibility of corporations to prevent contributing to conflict-related human rights abuses must be carved out. This encompasses more details on the “heightened due diligence measures” in conflict-settings. Specific human rights due diligence measures before entering conflict zones must be discussed (including a possible responsibility not to invest/engage), as well as provisions to regulate corporate obligations if a conflict arises in a region where business activities already exist (including, as ultima ratio, a duty to leave the region while simultaneously safeguarding local employees).
On the third point, legal liability has several important facets, in particular civil and criminal liability. Previously laid down in Art. 10 ZD, the issue of legal liability was now moved to Art. 6 RD. As in other parts of the new draft treaty, victims have moved into the focus, as many NGOs had vigorously demanded. Art. 6(4) RD states that “State Parties shall ensure (..) effective, proportionate and dissuasive sanctions and reparations to thebenefit of victims”. In order to make their claims financially more viable, States may require “natural or legal persons engaged in business activities to establish and maintain financial security, (…) to cover potential claims of compensation” (Art. 6(5) RD). This innovation might allow liability to become more than symbolic for victims.
A worrying change, however, is contained in Art. 6(6) RD. The former equivalent, Art. 10(5) ZD, had used broad language to establish liability vis-à-vis supply chains and subsidiaries. It had proclaimed liability throughout a business’s entire operations process, e.g. if a business exercises control over the operations of other entities (lit. a) (liability based on control), if it holds a close relationship to the subsidiary or entity in the supply chain and if there is a strong link between conduct and harm (lit. b) (liability based on close relationship), or if the risk was foreseeable for the business (lit. c) (liability based on risk).
This wording in the ZD was much contested and had created “many calls for clarity and increased precision” (Report of the OEIWG, A/HRC/40/48, para. 68). Two positions are juxtaposed to each other: the fear that the extension of liability would subject companies to an unreasonable risk and the desire to close loopholes. Art. 6(6) RD upholds two of the three options, namely liability based on control (“sufficiently controls or supervises”) and liability based on risk (“should foresee or should have foreseen risks”). The liability based on relationship was more or less dropped.
This is problematic given that a close relationship between natural or legal persons within supply chains or other business operations is easier to prove for victims than to show whether control was exercised or risk was (not) assessed. This becomes all the more problematic given that a business’s liability is now limited to the conduct of other entities with which it has “a contractual relationship.” This is open for interpretation (even though a first attempt of a broad definition is offered in Art.1(4) RD – the acceptance of which by businesses is, however, highly doubtful). In a more restrictive interpretation, this new wording might exclude liability of a business enterprise for the conduct of other entities several steps down the supply chain with which no direct contractual relationship exists. As supply chains usually consist of numerous tiers, holding the buyer at the top liable would not be possible under a narrow interpretation of this clause. Even more, in the case of parent companies and subsidiaries, it is equity (not contractual) relationships that must also be covered (if either liability based on control or liability based on risk is given). ‘Contractual relationship’ appears thus not a suitable choice of words. Altogether, the new proposal can thus potentially be understood much more restrictive for cases of supply chains and subsidiaries.
On the issue of criminal liability, the ZD had called upon States in Art. 10(8) ZD to provide measures under domestic law to establish corporate criminal liability for human rights abuses amounting to criminal offence. States in which the imposition of criminal liability on legal entities is not part of their legal system had heavily protested this provision. As a compromise, States Parties are now only asked “subject to their domestic law” to ensure criminal liability (Art. 6(7) RD).
In the last OEIWG meeting, many delegations had also demanded a clarification for which crimes legal liability was intended. The RD lists eleven particularly grave offenses, including the three core crimes under the Rome Statute (Art. 6(7a) RD). This new inclusion is to be welcomed because it establishes a link between corporate responsibility and international criminal law as recently also recognized by the International Law Commission (see Art. 6(8) ILC Draft Convention on Crimes Against Humanity). Liability for core crimes (or at least complicity in it) must indeed not be understood as limited to the acts and omissions of natural persons, given that many armed conflicts (in the context of which the very most perpetrations of core crimes occur) are often driven by corporate interests.
Overall, the draft is a big concession to businesses and industrialized nations. The supporters know that a treaty without their support has little prospect for success. As always in international law, new norms have to find their slim path of success on the rocky road between ‘apology’ and ‘utopia’, in a Koskenniemian sense. While the ZD draft was accused of being too utopian, the changes now speak a more apologetic (maybe a too apologetic) language. The hope is that with these significant adjustments, the treaty process is now on a better, more realistic course for success. It is now high time for businesses and industrialized nations to also set a new course – towards compromise.
Filed under: EJIL Analysis, Human Rights, International Economic Law
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Andreas Chorakis
August 23, 2019 at 11:32
It is a very interesting and informative piece on a significant Development in the field of human rights and bussiness. Truly, the new Draft adresses and provides solutions on several contensting points. However, what I think that this inniative lacks is the context of direct responsibility. By adopting the wording and the format of transnational crime treaties, the Draft mitigates the matter of responsibility and liability to states legislative power rather imposes direct obligations of respecting the Human Rights and Humanitarian Law to corporations. Such an approach does not correspond to the practice of the courts in national and International level that not only accept the direct liability for grave human rights Abuses but it holds accountable corporations for complicity to atrocity crimes. Thus, I cosnider that the Draft should move to a model close to the one incorporated in the Malabo Protocol rather to limit itself to a traditional way of thinking that Judicial practice has already changed.
Pierre Thielborger
Prof. Dr. Pierre Thielbörger, M.PP. (Harvard), is Professor of German Public Law and Public International Law and Executive Director of the Institute for the International Law of Peace and Armed Conflict (IFHV) at Ruhr University Bochum. He is also Adjunct Professor of International Law at the Hertie School of Governance and Co-Chair of the European Society of International Law (ESIL) Working Group on Human Rights. His main area of expertise include public international Law, (business and) human rights, international humanitarian law, the law and governance of climate change as well as German constitutional law. Read Full
Timeela Manandhar
Timeela Manandhar is a doctoral candidate at the Institute of Peace and Armed Conflict (IFHV) and the Faculty of Law at the Ruhr-University Bochum (Germany). She is specialised in public (international) law, (business and) human rights, international economic law and international humanitarian law. In her previous work, she analysed the necessity of a binding legal instrument on BHR and assessed the content of the Zero Draft. Furthermore, she works as a research associate at the Institute of Development Research and Development Policies (IEE), where she works on labour rights in the supply chain of the apparel industry. Read Full
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