The Human Rights and Alliance of Civilizations Room of the Palace of Nations, Geneva is the meeting room of the United Nations Human Rights Council. Wikicommons/ Ludovic Courtès. Some rights reserved.
Earlier this autumn, Professor John Ruggie, author of the UN Guiding Principles on TNCs and
Human Rights (UNGP), shared his comments on the Zero Draft treaty on transnational
corporations and human rights on the Business and Human Rights Resource Centre blog
(1). His core concerns are that the zero draft has not adequately dealt with
‘scale’ and ‘liability’. I think Ruggie’s arguments in opposition to the
binding treaty are misdirected and that they fail to recognize the historic
opportunity offered by the Human Rights Council to create a human rights remedy
system for corporate abuse across national boundaries.
The issues Ruggie raised in opposition to a binding treaty seemed to have influenced the delegations from Europe. On the final day of the fourth session (19 Oct 2018), the EC announced that they and their member countries were leaving the chamber as they could not agree with the Chairperson’s recommendations to continue negotiating a new international instrument on TNCs and human rights. But before I address Ruggie's two major concerns with a binding agreement,
I’d like to make three preliminary observations.
A well drafted remedy system in a
binding treaty
First,
the third UNGP pillar is the need for ‘access to remedy’. No major democratic
country deals with domestic civil or criminal matters related to human rights
based fundamentally on a voluntary system. Given this legal history alone, it makes
good sense to have a clear set of binding rules and procedures for a more
complex cross-border remedy system. It is also clear from the facts on the
ground that there is not now a working global remedy system for those whose
human rights have been violated by business with a transnational
character. It is also clear from the political
decision of the Human Rights Council to create the working group that a
significant number of Governments share this view.
This
should not be surprising. If a business can use jurisdictional boundaries to
avoid providing documents that may provide evidence of corporate human rights
violations, then that business will certainly do so. If a witness can avoid
providing evidence that the international partner instructed the local firm to
take an action that resulted in a human right violation, then that witness may
be quite happy to stay out of a court case. If a court ruled against an
international business in either a civil or criminal case, would that
international business voluntarily pay a fine of millions of dollars or accept
that its executives are financially or criminally sanctioned?
A
voluntary-based remedy system cannot reasonably result in a meaningful remedy
system, particularly if the issues are contested between the parties and the
potential financial costs are significant. Consequently a well drafted remedy
system in a binding treaty could well be the only way the third pillar of the
UNGP could be meaningfully implemented.
The
second preliminary observation relates to the legal rationale for a new legally
binding agreement. I agree with Ruggie that “no international economic system
like this has ever existed” and that the zero draft approach for a convention
cannot be done ‘without standing international law on its head’. I also agree
that certain legal elements like extraterritorial obligations (ETO’s) and
universal jurisdiction are ‘unlikely to be met with uniform acclaim ‘. However,
unlike Ruggie, I don’t see these as arguments for not proceeding. Rather I see
these candid assessments as a good reason to proceed. Getting any meaningful
remedy system for human right violations involving business activities with a
transnational character will require new legal concepts. Many of the old guard
and supporters of the current lack of cross border legal accountability will
object. It is a challenge that must be faced. It would be surprising if
proponents of the current non-remedy system did not use legalisms against a
potential new regime. It is also not surprising that a host of traditional
rules of law will be raised against any proposal that might result in a legally
clear statement on corporate responsibility, obligations, and liabilities.
Providing information and ensuring
implementation
The
third preliminary observation is, as Ruggie argues, that (a) prevention and (b)
the provision of mutual assistance and cooperation between States are crucial.
I share with Ruggie that all sources of prior work need to be drawn on to
provide clarity on what is to be done to prevent human rights abuses by
businesses with a transnational character. The zero draft however misses a
major opportunity in its specifications for how a relevant business entity can
organize its operation to prevent human rights abuses. The draft wisely
elevates human rights due diligence; but it should also establish the ground
rules for mandatory public comments on the due diligence report from those most
likely to be affected; and a judicially based
process to reconcile the corporate-drafted due diligence statement and
the views of the affected public.
An internally prepared due diligence study is
only one-third of the process for an effective prevention system. As with the
prevention requirements, the zero draft and its associated draft protocol
misses the opportunity to provide a far higher degree of clarity about potential
mechanics of mutual assistance and cooperation. The draft provision are also
only one-third of the story. The zero draft and the protocol establish an
institutional structure to ask for information from authorities in other
countries but omits the requirement that the receiving country act within the
terms of its legal structure to provide the requested information and then to ensure
the implementation of any final court judgement. No doubt there is a lot of good
legal work necessary to define the appropriate way for one legal system to
‘talk’ effectively with another legal system. The treaty can lay the basis for
this work.
The scope of the binding treaty
Ruggie’s
concerns with the scope of the zero draft involve (a) the coverage of national
enterprises and state-owned enterprises (SOEs), (b) the scope of human rights
covered, and (c) the introduction of the concept of ‘business activities of a
transnational character’.
With
regard to (a), Governments already have the domestic legal capacity to deal
with businesses that violate human rights within their jurisdictions. The need
for a treaty therefore involves only those business activities that in a
significant fashion cross jurisdictions and result in adverse human rights
violations.
When
SOE’s business activities involve significant transboundary activities, whether
as the international partner or the domestic partner of a transnational
corporation, they could be treated in the binding convention as ‘other
enterprise’.
With
regard to (b) I share with Ruggie that the zero draft is very vague about the scope
of human rights covered. The draft both says that it is intended to include all
human rights but operationally it presumes that the relevant human rights are
those enforced in individual countries. Having 193 different sets of applicable
human right standards affecting businesses with a transnational character is
confusing and difficult to operationalize, even for a firm that aspires to act
in a manner consistent with international human rights standards.
This
is a problem for both the UNGP and the zero draft. The best way to address the
multiplicity of human rights standards is for the binding treaty to explicitly
define those human rights standards that apply to businesses with a
transnational character. A first listing of direct obligations in a treaty
would clarify that these enterprises do, say, have expected standards for
treating their workers but do not have expected human right standards to
provide, say, health care or a sound education.
With
regard to the core definition in (c), the text should have
a clear definition of ‘businesses with a transnational character and executives
of these businesses’. Elements of this definition are in footnote 2.
Scale of the
binding treaty
Ruggie’s
concerns with scale involve that (a)
the zero draft does not grapple with ‘the magnitude of the task at hand seeking
to regulate transnational business enterprises or ‘activities’; (b) the lack of
legal precedent for a remedy system; (c) ‘entrenched national law doctrines
that limit the piercing the corporate veil’, (d) the ‘inextricable relationship
between due diligence and the attribution of liability’ and (e) the inadequacy
of the proposed institutional machinery.
With
regard to the size of the challenge in (a), Ruggie’s argument is fundamentally
a defeatist statement. If he believes that the potential number of TNCs which
engage in cross border human rights is so large, he seems to want that the
world should just accept that the problem is incurable and not worth the effort
to fix. With regard to the existing view
about difficulties of ascribing liabilities to parent enterprises (c), the world’s investor community and stock exchange have figured out how to
ascribe income and assets from affiliated businesses to the parent firm and the
tax authorities in a number of OECD countries have likewise developed
acceptable way to sum up income and assets from a diverse range of financially
and contractually associated entities.
If the parent firm and its investors and shareholders were
not trying to hide assets from victims of human right abuses, it should be
possible to use a similar approach to aggregate legal liabilities based on the practices in use for assets and income. I share with Ruggie that (c), (d),
and (e) are problems in the text. The solution for (c) and (d), as suggested
above, is to establish clear statements of direct global corporate
transboundary human rights standards in the body of the text and a process to
elaborate over time additional standards in annexes using the authority of the
COP. With regard to the advisory role of experts as the core machinery to
oversee the agreement (d), it would be far better to have a more traditional
conference of parties, relevant expert advisory bodies and secretariat support
structure. Details for such an approach
are footnote 3.
To
be clear, my underlying difference with Ruggie and other supporters of the UNGP
who disparage the complementary nature of a binding treaty is that times have
changed. When human rights gained recognition the dominant power was that of
the state relative to the individual and citizen. Over time the approach has shifted
to include that the state should have a positive obligation to use it power to
protect the human right of individuals, citizens, and communities. What has now
changed is that businesses with a transnational character have vastly greater
power than states and individuals. And therefore it is wise to combine the
power and authority of states, individuals, and community associations to
establish clear and effective standards, rules and procedures to counterbalance
those which have disproportionate power today.
Notes
(1) He subsequently conveyed similar views to all Geneva
missions working on the draft binding treaty.
(2) Elements of this definition include (a) there are significant
international commercial linkages between relevant businesses (and therefore
the agreement does not need to address fundamentally domestic enterprises), and
(b) the nature of explicit or implicit actions/instructions/requirements by the
international business firm and its executives to other firms that create a
causal chain of liability. Relevant executives are those that issued or
implemented the action/instruction/requirement that caused a violation of human
rights.
(3) The arrangement should at a minimum empower the Conference of
Parties (COP) (a) to continue to evolve the human right legal commitments for
businesses with a transnational character, (b) to address issues raised by
repeat corporate violators or repeat business practices in a sector, (c) to be
able to sanction non-conforming countries, (d) to have supervisory oversight of
the Fund to support victims and incentivize countries, and (e) to manage the
secretariat staff . An expert committee can advise the COP on any of these
issues and prepare potential decisions for the COP. The secretariat can be
asked (a) to identify issues that should be considered by the COP to advance
the goals of the Convention, (b) to maintain a public registry of national
implementation actions, a public registry of cases that are using the mutual
cooperation provisions, and a public registry of reports from CSOs, the media,
and other sources about unresolved human rights cases involving businesses with
a transnational character; and (c) to assist signatory countrie in their
implementation of the treaty.
