The draft binding treaty on business and human rights: an analysis

5 Jun 2019

By Sebastian Smart

In a previous post, we weighed the arguments for and against a binding treaty on business and human rights, and set out some initial conditions and thoughts.

But the treaty we were considering there was an abstract, theoretical document. What about the actual binding treaty which is currently in development (at the time of writing as a “Zero Draft”)? How does it stack up from a human rights perspective?

We previously outlined three conditions that a binding treaty would have to meet to warrant the support of human rights defenders, which we’ll be using as our framework for assessment here:

  1. Strengthen the implementation of the UN Guiding Principles on Business and human rights (UNGPs);
  2. Set clear participatory mechanisms for all stakeholders, including victims; and
  3. Strengthen existing remedy mechanisms for victims.

Let’s look at each in turn.

*

Does the Zero Draft…

1. STRENGTHEN THE IMPLEMENTATION OF THE UNGPs?

Yes and no. On some issues, such as mandatory due diligence, the Zero Draft can be seen to strengthen the implementation of the UNGPs. In others—such as the scope of the document—it represents a regression from the UNGPs.

Mandatory due diligence

The Zero Draft calls for states to ensure that transnational businesses within their jurisdiction undertake human rights due diligence measures, including monitoring their actual and potential human rights impacts, identifying and assessing any actual or potential human rights violations that may occur, and preventing human rights violations within the context of a company’s business activities. This is done through a variety of processes: like engagement with affected communities, human rights policy development, and the disclosure and reporting of violations. In particular, Article 9 of the Zero Draft directs businesses to conduct due diligence that would identify and prevent human rights abuses arising from their activities, or those of their subsidiaries and of entities under their direct or indirect control.

The recognition of mandatory due diligence in the binding treaty comes on the back of a wave of regulation that has been discussed (and passed) at the national and regional level. The EU has recently passed regulation which introduces due diligence requirements to take into account risks to people and planet (the so-called environmental, social and governance risks) in investment decisions. Under French regulation, companies have to publish Vigilance Plans describing their systems to identify and mitigate risks in their supply chain and customer interaction— Switzerland, The Netherlands, Austria, Italy, Germany and Luxembourg are at varying stages of discussing similar legislative initiatives; while the Shadow EU Action Plan currently working under discussion would also enshrine mandatory due diligence at the supranational level.  

Scope of the Treaty

As it stands the treaty only applies to “business activities of a transnational character” (Art. 3(1)). The rationale behind this decision is that each nation should regulate its own domestic companies. But this limited scope is concerning because it leaves out domestic companies, holding them to a different standard than transnational companies. In doing so, the binding treaty would actually  lower standards when compared to the UNGPs which applies to “all enterprises regardless of their size, sector, operational context, ownership and structure” [Principle 14]. Moreover, Article 4(2) of the Zero Draft defines business activities of a transnational character as “any for-profit economic activity…”, a definition which leaves out state-owned companies (which are usually non-for-profit companies).

The treaty also gives states the option to exempt small and medium-sized enterprises (SMEs) in order to spare them “undue additional administrative burdens” (Art. 9(5)). This is a mistake: the structure or nature of a company is irrelevant to victims of human rights abuses, who should be entitled to access to remedy regardless of the kind of company committing the abuse. This is especially true in the tech sector, where companies such as Cambridge Analytica and NSO Group tend to work in tandem with the government, and could—in some cases— be classed as SMEs. Despite their small size, these companies have brought about significant impacts on both individual privacy and democratic systems. Moreover, many transnational corporations own or have relationships with strictly domestic companies, making it difficult to differentiate between transnational and national companies in practice. This is especially the case of tech companies which operate both at a global and national scale.

*

2. SET CLEAR PARTICIPATORY MECHANISMS FOR ALL STAKEHOLDERS, INCLUDING VICTIMS?

Not really. The Open-Ended Intergovernmental Working Group (OEIWG), which is leading the development of the binding treaty, has tried several different mechanisms to include the voice of different stakeholders. Yet geopolitical divisions, coupled with the UN’s formal rules of engagement, and a lack of resources, have put up barriers to multistakeholder participation.

Geopolitical divisions and lack of government engagement

There is a clear lack of certain government’s participation in the binding treaty discussions.  While a majority of global South governments support the treaty and have participated in the discussions, many governments in the global North—where numerous multinationals are headquartered—are more reluctant. Ecuador and South Africa, who championed the resolution to establish the OEIWG, continue to be leading forces in driving the treaty process forward (supported by countries such as Bolivia, Cuba and the BRICs). On the other end of the spectrum, Australia, Canada and the United States have been reluctant to even engage in the treaty process. The European Union, while insisting that they are not yet ready to engage formally in negotiations, did participate (though not without hesitation) in the last OEIWG session.

Large presence of CSOs and companies but limited rules of engagement

As John Ruggie puts it, “when states are this divided and ambivalent, NGO leadership is badly needed”. Yet while many civil society organisations have been closely involved in and supportive of the treaty process, their participation has been limited by the UN Human Rights system rules of engagement, which puts strict conditions on formal consultations, allowing only organisations with ECOSOC status (which is difficult to obtain) to have any say in the formal discussions.

It’s important to note that the OEIWG has made some efforts to include informal consultations with academia, NGOs, and businesses. But as Linda Kromjong, Secretary General of the International Organisation of Employers (IOE) argues, because many business associations do not have consultative status in ECOSOC, they have not been able to join the discussions. And while credit should be given to Ecuador for including business representatives on the different panels, business representation is still vastly outweighed by civil society representation in these discussions, creating an imbalance.

*

3. STRENGTHEN EXISTING REMEDY MECHANISMS FOR VICTIMS?

Again, yes and no. The Zero Draft addresses a range of issues relating to remedial processes, including extraterritorial jurisdiction, the potential creation of international remedial mechanisms and the criminal liability of corporate representatives. All these aspects of the document raise concerns from a human rights perspective.

Extraterritorial jurisdiction

As we have seen in the previous blog, the use of extraterritorial jurisdiction by home states is crucial to ensuring that companies cannot avoid accountability. This is especially urgent in the tech sector, where data can be collected, stored and used in different jurisdictions.

On this question, the Zero Draft is somewhat unclear. Article 8 (2) of the Zero Draft could be read as authorising extraterritorial jurisdiction, especially when it argues that “States Parties shall guarantee the right of victims, individually or as a group, to present claims to their Courts”; and there is further language on jurisdictional issues in Article 5. But during the discussions of the fourth session of the OEIWG, it became clear that neither Article 8 nor Article 5 can be read as making any explicit commitment towards extraterritorial jurisdiction.

International remedial mechanisms

As it stands, the closest the treaty comes to addressing an actual path to remedy is the section on implementation on the national level, which directs states to “take all necessary legislative, administrative or other action…to ensure effective implementation of this Convention” (Art. 15(1)). The Zero Draft recognises that corporate impunity for human rights abuses are globally widespread—why then is there no provision for an international mechanism for remedy? While it’s important to have state-level remedies, a combination of state-level mechanisms and global governance mechanisms in the treaty would be far more effective in achieving corporate accountability, and allowing victims to access remedies.

Criminal liability of companies

Article 10 (1) recognises that: “State Parties shall ensure through their domestic law that natural and legal persons may be held criminally, civil or administratively liable for violations of human rights undertaken in the context of business activities of transnational character. Such liability shall be subject to effective, proportionate, and dissuasive criminal and non-criminal sanctions, including monetary sanctions. Liability of legal persons shall be without prejudice to the liability of natural persons.”

There are a series of issues with this Article. First, what happens with those jurisdictions that do not recognise criminal liability of legal entities? Moreover, it could be argued that the binding instrument should create direct obligations for companies and include provisions establishing criminal liability of companies and individuals. As it stands today, the Zero Draft only establishes direct obligations for states.

*

Conclusions

As we’ve seen above, the current Zero Draft is a mixed bag when assessed against the criteria we’d initially set out. Three ways it could be improved:

  1. More clarity and precision in the language. Given its legal nature, the articles covering the scope, definitions, jurisdiction, applicable law, rights of victims, legal liability and international cooperation require more precision if we want the treaty to set clear standards for companies and governments.
  2. Clearer reference to the protection of human rights defenders and other at-risk populations—for example, by integrating considerations of gender at a structural level.  
  3. Specific reference to the UNGPs. While imperfect, the UNGPs have served to advance the responsibility of businesses to respect human rights. If the treaty is to have a real, positive impact on the digital environment, it must clearly recognise both the progress made by the UNGPs and the universal, indivisible, interdependent and interrelated nature of human rights.

It’s important to emphasise that the treaty is not locked down. It can still be improved, and its deficiencies addressed. But the only way this will happen is if human rights organisations take part in these debates.

There are a few ways you can do this. The OEIWG has been receiving recommendations on the Zero Draft from all stakeholders through successive open consultations (see for example GPD and Access Now’s recent joint submission). The last consultation period closed in February, but a new one is likely to start soon. You can monitor developments on the OEIWG website here.

Another opportunity to take part in these debates is the 5th session of the OEIWG that will be held in October 2019 (specific date TBC) where states, companies and civil society organisations will have a chance to discuss issues such as remedies, scope and definitions of the treaty.