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18 Aug 2021

International Organisation of Employers (IOE)

Just released: Third Revised Draft Binding Treaty on Business and Human Rights

...The third revised draft treaty will be officially discussed at the seventh session of the open-ended intergovernmental working group on transnational corporations and other business enterprises with respect to human rights, which will take place from 25 to 29 October 2021.  IOE will again represent the global business community in this session.

Despite strong reservations expressed by business and many states on the second draft, the third revised draft treaty continues to create divergence with the UN Guiding Principles on Business and Human Rights. This concerns the following points in particular:

  • The third revised draft treaty continues to focus on the rights of the plaintiffs, but ignores the rights of the defendants, such as due process and confidentiality rights.
  • The new draft continues to define a business relationship as “any relationship between natural or legal persons to conduct business activities, (…) including activities undertaken by electronic means”. Defining business relationships as “any relationship” expands the potential scope of diligence duties and liability imposed on companies to an impractical extent. This formulation will encompass entities in global supply chains with whom companies have no contractual relationship and over which and into whose operations the companies have no control or visibility...
  • In a significant departure from the UN Guiding Principles, the new text continues to transform due diligence from a process-based standard to an outcome-based standard, which may, in some instances, be impossible for businesses to satisfy.
  • The new text continues to extend liability not only to legal, but also natural persons.
  • The new text continues to explicitly reject any “safe harbour” for companies that conduct due diligence, but still result in human rights abuses.
  • The proposed scope of adjudicative jurisdiction continues to reflect a concept of extraterritorial jurisdiction so vast that businesses are faced with grave uncertainties as to where they may be taken into court and to which laws they may be subject. The new draft allows for concurrent jurisdiction in the country where the human rights abuse occurred, an act or omission contributing to the human rights abuse occurred; the legal or natural persons alleged to have committed an act or omission causing or contributing to such human rights abuse are domiciled; or the victim is a national of or is domiciled...The new draft again also explicitly rejects the doctrine of forum non conveniens.
  • The new draft continues to grant the victim wide discretion to select the applicable law. Not only does this create uncertainties as to which laws will apply, it also creates issues of competence in that jurists in one country may not be equipped to interpret the laws of another.
  • The new text continues to foresee the possibility of collective redress/class actions. However, the introduction of group lawsuits against companies is not a concept that is recognised in many legal systems.
  • The new text continuous to require financial guarantees of companies to cover potential claims of compensations...