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7 Sep 2020

Justine Nolan, Opinio Juris

Commentary: Scholar analyses how Second Revised Draft of the Binding Treaty addresses global supply chains

"BHR Symposium: Global Supply Chains–Where Art Thou in the BHR Treaty?", 7 September 2020

Global supply chains affect every aspect of our lives. It is hard to overstate the impact of supply chains on the economy and people’s lives. Trade, production, investment, employment relations and labour itself have drastically changed with the growth of supply chains...

The International Trade Union Confederation estimates that 60% of global trade in the real economy depends on the supply chains of 50 corporations, which employ only 6% of workers directly but rely on a hidden workforce of 116 million people. Crucially, companies that source through supply chains do not generally have legal responsibilities towards workers at suppliers and subcontractors in the same way as they do towards their own employees.

But there is not a single mention of global supply chains in the second revised draft business and human rights treaty issued in August 2020...So how does the latest version of the draft treaty deal with this?

...while there is no mention of supply chains, the draft treaty refers to ‘business relationships’. Article 1.5 notes that this includes ‘any relationship between natural or legal persons to conduct business activities, including those activities conducted through affiliates, subsidiaries, agents, suppliers, partnerships, joint venture, beneficial proprietorship, or any other structure or contractual relationship as provided under the domestic law of the State, including activities undertaken by electronic means.’

This is broader than the 2019 revised draft treaty which had used a similar definition but referred to it as relevant to defining a business’ contractual relationship (Art 1.4 2019 revised draft treaty). This is a key issue. The substitution of ‘business’ for ‘contractual’ is important in defining the relationship between entities in supply chains, because such relationships are not always marked by direct legal connections between suppliers and the supply chain ‘captain’. In using this terminology, the draft treaty is acknowledging this broader relationship and also partially dismissing the formal limitations posed by the corporate form and the challenges that poses in tracing liability up and down a supply chain...

The drafters of the 2020 version are continuing to build on the improved coherence and consistency that was evident in the 2019 revised draft and are providing a glimpse into the future of a global framework that addresses the structural realities of global supply chains and recognizes that HRDD and corporate liability must be part of that model.