Editor’s Note: This is the third of three articles we will be publishing on the progress that has been made in holding corporations accountable to international human rights laws. The first article can be found here and the second article can be found here.
Treaty Background and Main Features
Back in June 2014, the Human Rights Council adopted Resolution 29/9 to establish an open-ended intergovernmental working group (IGWG) with the mandate to develop a binding instrument to regulate business activities with respect to human rights.
Four years and three sessions later, in July 2018, the IGWG released what is considered ”one of the most important international human rights treaties of recent years”. The treaty is the so-called “zero draft legally binding instrument to regulate, in international human rights law, the activities of transnational corporations and other business enterprises” (thereafter “Zero Draft”). This is a rare case of international negotiations tackling non-state actors’ obligations. It is the first time that corporate actors are explicitly mentioned as having obligations under a human rights treaty.
Nevertheless, none of the treaty’s clauses will result in businesses having direct human rights obligations, apart from the preamble. Their obligations will still be conditional upon certain legislative measures and other steps that must be taken by participating states. The three main requirements from states are:
- The most important requirement relates to mandatory human rights due diligence. States must ensure that “business activities of transnational character within such State Parties’ territory or otherwise under their jurisdiction or control” undertake human rights due diligence to exclude/mitigate human rights violations throughout their value chain (article 9);
- The second essential requirement covers “fair, effective and prompt access to justice and remedies” that states must guarantee to all victims, regardless of their nationality or place of domicile (article 8). It also provides guidelines on how to establish the link between the company, the abuses perpetrated and the court’s judicial competences. The competent court will be the one belonging to the state in which the abuse occurred or in which the alleged abuser has its “statutory seat, or central administration, or substantial business interest, or subsidiary, agency, instrumentality, branch, representative office or the like” (article 5);
- The third precondition focuses on cooperation between states in dealing with transnational human rights cases. It implicitly recognizes that the principle of non-interference in sovereign states’ affairs without mechanisms to facilitate judicial cooperation may undermine the third pillar of the United Nations Guiding Principles on Business and Human Rights (UNGPs), which is Access to Remedy.
Despite its promising approach, the draft was not exempted from criticism.
The state’s role in securing corporate compliance with the treaty may be deficient, especially in weak or non-functioning legal systems. Furthermore, it is quite common for governments to be directly implicated in business operations (e.g. extractive activities) and many of the abuses that are usually reported involve private business and state complicity. Neither governments’ inability nor their unwillingness is addressed in the current draft.
Some experts also regret the restrictive scope of the draft, which only applies to “business activities of transnational character”, contrary to UNGPs’ wording. Accordingly, victims of abuses committed by national companies are at risk of being excluded from remedy.
Most importantly, it was argued that – with no binding international enforcement mechanism or any other complaint mechanism – the draft may not effectively address the existing asymmetry between the rights and obligations of businesses, which is exacerbated by international investment agreements (IIAs).
Linking Human Rights to Investments
The majority of IIAs contains, in fact, the so-called Investor-State Dispute Settlement (ISDS) Clause. The IGWG could have conceived a similar clause in the Zero Draft, but it did not: victims will be unable to directly claim that the treaty commitments have not been honoured. Meanwhile, investors can sue a state alleging the breach of one of the rights contained in the IIA when state’s regulatory decisions negatively impact their investments.
For the sake of completeness, the Zero Draft does address its relationship with investment treaties: even though the draft is “without prejudice” to states’ obligations under existing treaties (article 13.3), investment treaties shall be interpreted in a way that is least restrictive of the rights contained in the draft (article 13.7). Regarding future investment treaties, article 13.6 recalls that they “shall not contain any provisions that conflict with the implementation of this Convention”.
However, if it is true that these clauses are “reasonable compromises” to balance investors’ privileged position, the draft fails to specify which rights shall be covered under the treaty. As Carlos Lopez, Senior Legal Advisor at the International Commission of Jurists, suggested, “all international human rights” might have been delimited by reference to treaties or custom, or by reference to whether they are binding on the State Parties. In absence of such delimitation, it might be extremely difficult for arbitrators to rule in favor of governments when public interest and fundamental rights are at stake. In other words, arbitral awards will still depend on their personal sensitivity. Moreover, under many IIAs, investors do not have to exhaust local remedies (domestic courts) as a condition to go for an arbitration; they can simply choose the most favorable way (Fork-in-the-Road clause).
Against this background, it is possible that the Zero Draft will open the door to a new generation of IIAs, where the obligation to exhaust local remedies before going to arbitration is a prerequisite for negotiating ISDS provisions. This may be a natural development of the investment regime to ensure its consistency with the draft and restrain investors’ privileges. Other possible scenarios – suggested at the fourth session of the IGWG in October 2018 – are introducing “an explicit reference to the primacy of human rights over trade and investment agreements” or “a new provision requiring human rights language to be placed in trade and investment agreements” into the draft.
Clearly, numerous issues still need to be tackled before getting the treaty’s final version; only time will tell how many drafts later the final version will be. However, this draft represents the “ground zero” of corporate accountability, the beginning of a silent revolution that will radically change the existing panorama of international law.
Image courtesy of Flickr. Originally published by S&S on November 8, 2018.