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17 Oct 2022

Ana María Suarez-Franco, FIAN

"It always seems impossible, until it's done": Progress and challenges in the negotiations towards a global legally binding instrument on corporate legal accountability

While multiple crises on the planet – including the pandemic – have further consolidated transnational corporate power, local communities continue to stand up to corporations violating their human rights and damaging the environment - but they face multiple barriers to access justice.

In early 2022, my participation in the G7 sustainable supply chain conference and its labour ministers' meeting made it clear that some of the most powerful states are starting to accept the ineffectiveness of voluntary standards. They have recognised the need to complement them with binding rules that create a global regulatory standard. What seemed taboo in 2013 - the mention of value or supply chains in businesses and human rights negotiations - is now unavoidable and has led to national and regional legislative processes, such as the German law on corporate due diligence in supply chains, the Brazilian framework law on business and human rights and the draft European directive on due diligence.

In this context, an international treaty based on human rights instead of economic profit must be urgently adopted. Such a treaty should guarantee the legal accountability of companies and address transnational networks which take advantage of the fragmentation and loopholes in international law to make profits by harming people and the planet. It must provide legal certainty by prioritising human rights over trade and investment regimes.

The Legally Binding Instrument (LBI) has the potential to redress regulatory asymmetries that favour transnational corporations (TNCs) with multiple rights and mechanisms that protect their interests in an unbalanced way, vis-à-vis those of communities threatened or affected by corporate abuse. The LBI should enable these communities to have their rights protected from the start or access remedy in the country where the control of powerful value chains and TNCs, and the assets necessary for communities’ redress are located.

The eighth session of the Open-ended Intergovernmental Working Group for the elaboration, negotiation and adoption of the LBI (24-28 October 2022) is an opportunity for States committed to the protection of human rights to enter or return to the room and move towards the negotiation of a robust treaty.

Recently the chair of the working group announced the third revised draft with textual input from states would be the basis for negotiation and submitted his own informal proposals for the negotiations.

Civil society expects this process to continue and to maintain, include or strengthen elements relevant to people and communities threatened or affected by corporate human rights abuses, especially in the transnational context.

Although the revised draft still has great potential for improvement, the text and States' contributions during the seventh session contain the seeds of several key elements. There is therefore a sufficient basis for negotiation.

Civil society will not be satisfied if the text reduces corporate accountability in the transnational sphere to a text on due diligence where companies define the risks they generate and the measures to avoid or mitigate them. It is not prepared to accept that judgment of these violations is limited to assessing due diligence. This would leave judges without standards which focus on the elements of control, supervision or foreseeability. Judges would also not be able to analyse damage caused by companies. Consequently, judicial determination of corporate liability throughout value chains, transnational structures or commercial relations would be impeded. The element of criminal, civil or administrative liability of controlling companies or those that hold the assets required for reparation is key for this treaty to seriously advance the protection of human rights and the environment. It is imperative that judges are able to hear cases of companies under their jurisdiction, but outside their territory that cause harm in other countries.

The LBI must provide for procedural mechanisms that correct the asymmetries of power in the judicial process, such as collective claims and class actions, the reversal of the burden of proof, a robust right to information, legal aid, the provision of forum necessitatis (a court taking jurisdiction in exceptional cases to avoid a denial of justice) or the prohibition of forum non conveniens (refusal of jurisdiction based on the fact that another forum is better suited to hear the case) among others.

A binding version of the Guiding Principles on Business and Human Rights is not enough. States hosting powerful corporations must urgently recognise their obligation to regulate them in international law by negotiating, adopting and ratifying a strong treaty oriented towards the common good. Host states must realise that such a treaty will not only be useful for fairer investment, but will strengthen their regulatory and negotiating capacity in the face of the immense power of transnational corporations.

Negotiating a treaty of this nature has never been easy. It is not clear to what extent corporate interests are trying to capture the process and intimidate host states from participating. So it is the persistence of states honestly committed to human rights and the environment, and of civil society, that will ensure this instrument has the key ingredients to curb corporate impunity.

By Ana María Suarez-Franco, FIAN

Taking stock: Reflections on the progress of the UN Binding Treaty

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