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12 Jul 2015

Doug Cassel, Notre Dame Law School

Treaty Process Gets Underway: Whoever Said It Would Be Easy?

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This blog is part of the debate blog series on the proposed treaty and its complementarity with the UN Guiding Principles. We believe that an inclusive and open debate is crucial to make sure these initiatives deliver for everyone, and that the business & human rights movement continues its 'unity in diversity'.

The first session of the UN Intergovernmental Working Group to draft an “international legally binding instrument” on business and human rights convened in Geneva July 6-10.  Toward the end of the debate, Anne van Schaik of Friends of the Earth was moved to exult from the floor, “I and many of my colleagues feel inspired by this week’s discussion.” As she reminded us, this was the first time that “binding rules for businesses have been discussed, with experts, NGOs, and countries at the UN.”

There was indeed much to celebrate.  Under the leadership of Ecuador’s Ambassador to the UN in Geneva, María Fernanda Espinosa, the “intergovernmental” process was by no means limited to governments.  The first session included ample opportunities for civil society participation, including by business organizations, both in writing and in person, and was webcast live on webtv.un.org. 

Organized thematically by topics ranging from general principles to remedial mechanisms, each topic began with presentations by experts, followed by interventions by States, then by civil society, and finally responses by the experts.  The quality of the experts and their interventions was high.  As commented by one expert panelist, Professor Chip Pitts of Stanford Law School, this was the best seminar on the subject he had ever attended. 

Ecuador arranged for a diversity of backgrounds and views among panelists.  Some came from UN entities and experts: UNCTAD; ILO; a treaty body; the thematic rapporteur on indigenous rights who served as keynoter; and the Office of the High Commissioner for Human Rights (including High Commissioner Zeid Ra’ad Al Hussein by video).  Others were academic experts from Argentina, Hong Kong, South Africa, the UK and the US.  There was a leading human rights litigator from the UK.  Others came from activist NGOs, national human rights institutions, and the inter-governmental South Centre. 

Business viewpoints were represented as well.  Ecuador invited the International Organization of Employers (IOE), and three IOE panelists spoke: a senior executive of a major transnational corporation (TNC, in this case Sodexo); a lawyer who represents employers in labor matters; and IOE’s Deputy Secretary-General.  (IOE also organized a well-attended side event and made interventions from the floor.)

NGO written submissions and interventions from the floor were informative and well thought out.  They had clearly done their homework, and their views enriched and energized the debates.

Also encouraging were Ecuador’s and Chair Espinosa’s efforts to be flexible and open to reasonable diplomatic compromises in hopes of attracting States to participate in the Working Group process.  It is evident that Ecuador is treating the process, not as a point-scoring exercise, but as a serious effort to negotiate a meaningful treaty.

Unfortunately, there were also major downsides.  First was a lack of State participation.  By my rough count, only about 60 States attended the first day; by the fourth day, that number was down to about 35, some represented only by student summer interns.  Throughout the week, again by my rough count, fewer than 30 States intervened from the floor, and about two thirds of those interventions were made by only eight States: the Latin American “Bolivarian” States of Bolivia, Cuba, Ecuador and Venezuela; plus China, Pakistan, Russia and South Africa.  And one of those States – Russia – surprised most observers by openly announcing its opposition to a treaty (at least for now).

Second was the absence of key home States of TNCs whose participation will be critical if TNCs are to be effectively regulated by a global treaty.  As far as I could tell, Australia, Canada and the US did not attend at all.  Japan and South Korea showed up to listen, but (unless I missed it) said nothing.  Brazil participated, but was expressly neutral on the need for a treaty.  The European Union (EU), as discussed below, walked out on the second day.

Third was the rigidity, not of Ecuador, but of several other countries in its core group of supporters (as discussed below in connection with the EU).

And fourth was the lack of human rights credibility among some countries in that core group.

In this context, not surprisingly, Ms. van Schaik tempered her remarks by adding, “We are aware of the challenges ahead of us, and will continue to mobilize support for this treaty, engage with our governments around the world and let our movement grow.”

The EU’s Exit

The EU’s temporary participation, followed by its exit on the second day, illustrates the diplomatic minefield confronted by Ecuador.

When the Human Rights Council in June 2014 adopted resolution 26/9 establishing the Working Group process (by a weak vote of 20 in favor, 14 opposed and 13 abstentions), all EU member States on the Council voted against the resolution.  They supported instead a continuation of the existing expert working group on implementation of the UN Guiding Principles on Business and Human Rights, which the Council then approved by consensus.

At the UN Forum on business and human rights in Geneva last December, the EU stated that it could consider participating in the treaty Working Group, taking into account four criteria: the naming of an independent chair; an open and transparent process; a reaffirmation that the treaty process is complementary to ongoing implementation of the UN Guiding Principles; and the application of any treaty to all businesses, and not merely to TNCs.

By the time the first session of the treaty Working Group opened on July 6, two of these criteria had been resolved.  Ecuador would chair the Working Group, as was formally confirmed by a vote the first morning.  In light of Chair Espinosa’s adroit conduct of the meeting, one may doubt whether a better Chair could have been found.  Her leadership skills likely benefited from her prior experience as Ecuador’s Foreign Minister and as its UN Ambassador in New York (among other posts).  The EU did not press this issue further.

Second, as noted earlier, Ecuador ensured an open and inclusive process.  While improvements can be made (the plan of work was made public only days before the meeting), overall the first session was transparent and participatory.  The EU did not press this issue further.

The EU did pursue its third concern.  In the debate on approval of the program of work on the first day of the Working Group session, the EU proposed that a panel be added on the continuing importance of the Guiding Principles.  This was initially opposed by some in Ecuador’s core group.  However, Chair Espinosa called a recess and managed to work out a mutually acceptable compromise: the floor was given to the Chair of the expert Working Group on the Guiding Principles, Professor Michael Addo of Ghana and the University of Exeter in England, to make the first expert presentation of the session. 

While it would have been better to include this helpful signal in the original program of work (Professor Addo’s Group had offered to collaborate), the opening-day fix sent a message both of compromise and of reassuring adherence to the Guiding Principles.  Chair Espinosa remained mindful of the message in her closing remarks.  Noting the multiple invocations of the Guiding Principles during the week’s presentations, she stressed their importance as an important source of applicable norms.

The Key Divisive Issue: What Companies Will a Treaty Regulate?

That left the EU’s fourth issue: its call for the program of work to include debate on the EU position that any treaty should cover all business enterprises, and not be limited to TNCs. 

The issue arose from the June 2014 resolution establishing the treaty Working Group.  Like earlier UN Human Rights Council resolutions on the subject, it referred to “transnational corporations and other business enterprises.”  Similarly, the UN Guiding Principles expressly apply to all business enterprises.  Further, in response to a question at last year’s UN Forum, then Ambassador-designate Espinosa agreed that a treaty should cover all business enterprises.  This view was echoed in last week’s session by most NGO’s, several expert panelists, and IOE business representatives. 

However, in order to attract votes from some States for the June 2014 resolution, Ecuador had found it necessary to accept a footnote to the preamble of the resolution, defining “other business enterprises” to include only those with a “transnational character in their operational activities.”  The footnote excluded “local businesses registered in terms of relevant domestic law.”

Citing that footnote, several States in Ecuador’s core group – including lead co-sponsor South Africa -- opposed the EU proposal to include the issue in the program of work.  They not only argued against the merits of a treaty covering companies beyond TNCs, they also rigidly insisted on the legalistic position that the preambular footnote precluded any discussion of treaty coverage beyond TNCs.  Therefore the issue could not be contemplated in the program of work.

As observed by several speakers, victims do not care whether their human rights are violated by TNCs or by national companies.  In addition, given the complex interrelationships between TNCs and local companies, it can be hard to disentangle their respective legal responsibilities.  For example, as noted by Professor John Ruggie, author of the UN Guiding Principles on Business and Human Rights, a treaty limited to TNCs would have covered the North American and European companies purchasing garments from the Rana Plaza factory building in Bangladesh, which collapsed in 2013, killing over 1,100 workers -- but not the local factory owners. 

Even defining “TNC” is a tricky exercise.  Is transnational character based on locations and percentages of sales, purchases, marketing, financing, or business locations, or on the nationality of shareholders? What if a company uses the internet (as almost all do)?  And no matter how TNCs might be defined, lawyers for international business are adept at restructuring transactions to evade regulatory categories.  

Finally, as the International Commission of Jurists has rightly argued, a footnote to the preamble need not constrain the Working Group deliberations, which are governed, strictly speaking, only by the operative paragraphs of the resolution.

For all these reasons, even if the extent of due diligence requirements may be less for smaller companies, it makes sense for a treaty in principle to cover all business enterprises.

On the other hand, Pakistan and other States opposing the EU position argued that local companies can be regulated by national governments, without the need for intrusion into their domestic sovereignty by international regulation.  Also, they argued, it would be more efficient to focus a treaty on what they see as the main problem – the unique ability of TNCs to evade or escape national regulation by a host State.

Pakistan’s points are not without substance.  But they pay insufficient attention to a key problem: the lack of will or capacity of many States effectively to regulate, not only TNCs, but even their own companies, especially the largest and most influential local companies.  If only TNCs are covered by a treaty, then in practice many victims will be left without remedies for violations of their human rights committed by local companies. 

Pakistan and others call for technical assistance to support the judicial systems in developing countries.  However, even if that assistance were in fact provided, experience shows that strengthening weak judicial systems is often a matter of generational change.  Victims ought not to have to wait decades for relief.

Aside from the merits, the geo-economic and diplomatic stakes are sensitive. Europe understandably does not want a treaty that would regulate its large companies -- nearly all of which are TNCs -- while giving a free pass to other nation’s local companies (which may compete with European TNCs in their national markets).  Nor does Europe want to give Pakistan (and others) a green light to impose strict treaty regulations on European companies, free of any worry about the regulatory impact on Pakistani companies.

In the debate on the program of work, Ecuador’s core supporters refused to budge.  Even after negotiations during the recess, the Chair was left with no choice but to announce that too few States supported the EU proposal.  Stiffed on one of its key concerns – and being told that the issue even exceeded the mandate of permissible negotiation – the EU saw little reason to remain in the process.  It walked out on day two, and did not return.

If the treaty process is to be credible, a compromise – and willingness to compromise – is needed.  Fortunately, reasonable middle grounds can be proposed.  For example, potential treaty requirements that companies publicly report on their human rights performance, and engage in extensive human rights due diligence, could be applied only to companies above a certain size (as in the case of recent EU regulations and pending French legislation).  A treaty taking that approach would in effect cover only TNCs, since any company above a certain size is likely to do business across national borders.  But it would not in principle exclude local companies. 

And smaller, local businesses need not be ignored.  They could be covered, for example, by requiring States to adopt National Action Plans to implement the UN Guiding Principles.  Each State could then determine how best to regulate its smaller companies. Domestic sovereignty over most local companies would be preserved.

Neither side would be entirely satisfied by this potential compromise (or others that might be devised).  But that is inevitable in international rule-making.  If either side insists on an all-or-nothing position, there will no meaningful treaty on business and human rights.  In that scenario, the primary losers will be the victims of human rights violations.


Even if a compromise is reached on whether to regulate only TNCs, other difficult issues will likely arise.  What is needed is flexibility in order to build consensus.  In the first session, Ecuador and Chair Espinosa demonstrated that spirit.  Some others did not.  If a treaty on business and human rights is to have a chance to gain wide support, no issue can be ruled off the table before the negotiations even begin.

The session closed with the adoption of a report (ad referendum, so that corrections can be submitted during a two-week period) in which the Chair committed to informal consultations with stakeholders before next year’s second session of the Working Group.  To judge by her performance in the first session, she will look for ways to bridge the gap between the EU and some of her core group supporters.

The goal warrants the effort.  In Ecuador’s closing remarks, Foreign Ministry official Pablo Roldán acknowledged the “complexity, sensitivity and challenges of this intergovernmental process, [and] that [it] will take time.” But, he added, it “merits the attention and joint efforts of the international community.” 

So it does.  If the treaty drafting process is to be credible, diplomatic and NGO efforts in the coming year, beginning without delay, are vital.  Meanwhile, especially given the risks of the treaty process, every effort should be made to press for wider and more effective implementation of the UN Guiding Principles on Business and Human Rights.  Yes, they have significant weaknesses.  But they also have an important but elusive element -- widespread global support by the governments and businesses which will need to carry them out.


Doug Cassel is a professor of law at Notre Dame Law School in the USA.  He and Professor Anita Ramasastry co-authored, for the American Bar Association Center for Human Rights, and the Law Society of England and Wales, a White Paper on options for a treaty on business and human rights. This blog reflects solely his personal views.