Comments on the “Zero Draft” Treaty on Business & Human Rights
Professor John G. Ruggie, Harvard University
This blog is part of the Reflections on the Zero Draft blog series on the proposed binding treaty on business and human rights. We present this series as part of our work to highlight key developments and opportunities for change, with the aim of empowering advocates in civil society, governments and businesses with the evidence and guidance to help define their position and engagement in the treaty process. We believe this initiative is complementary to the implementation of the UN Guiding Principles, and that an inclusive and open debate is crucial to ensure these initiatives deliver for everyone, and that the business & human rights movement continues its 'unity in diversity'.
Consultations on the ‘zero draft’ business and human rights treaty will be getting under way soon, with formal negotiations due to start in Geneva at the October session of the Intergovernmental Working Group.
The zero draft proposed by Ecuador is a considerable improvement over the “draft elements” it released last fall. The new document not only has the look but also the feel of a serious text, addressing the issues of prevention and remedy without standing international law on its head. “Not that the new text is ready for signing tomorrow,” Doug Cassel states in his commentary. “Issues of both concept and language remain. If not satisfactorily resolved, they could derail the treaty process.”[i] Carlos Lopez in his blogs adds several reasons why that’s the case.[ii] I largely agree with their reservations but will avoid unnecessary repetition, or at least take a somewhat different tack.
I first note some sources of strength in the draft, and then address critical issues related to scope, scale, and liability.
Any business and human rights treaty should begin with prevention, and this draft does. Some of its provisions on prevention are broadly consistent with the UN Guiding Principles on Business and Human Rights (UNGPs). But the draft embellishes on them in ways that are likely to prove unhelpful. As Lopez puts it, “both businesses and governments will find it hard to comply or monitor compliance respectively with such far reaching and imperfectly defined obligations of due diligence.”
Whether intentionally or otherwise, the draft posits human rights due diligence as a standard of results: it requires business “to prevent” harm. This is an extremely tall order for any due diligence requirement, which typically is expressed as “seek to prevent,” suggesting a standard of conduct. Moreover, “mitigating” the risk of harm generally is also called for, but is omitted from this text. It may be worth considering sticking with the endorsed language of the UNGPs.
On remedy the zero draft echoes some of the recommendations of the Accountability and Remedy project carried out under the auspices of the UN Office of the High Commissioner for Human Rights, particularly the provisions on mutual assistance and cooperation among states. These address real gaps. Here too it would prove useful to draw on some of the particulars of that initiative, which have been extensively vetted by experts and received multiple mandates from the Human Rights Council.
From the outset of this process four years ago, the universal criticism has been the exclusion of national enterprises from the scope of the proposed treaty, irrespective of their size or impact on human rights. This was baked into the resolution establishing the Working Group, which was adopted by a mere plurality in the Human Rights Council, not a majority. The zero draft seems to make a modest move to address this restriction by defining the treaty’s scope as “business activities of a transnational character,” whether conducted by natural or legal persons (more on that below). But at the same time the new formulation further limits the proposed treaty’s scope to “for profit” economic activities.
As a result, it could well exclude state-owned enterprises (SOEs) engaged in transnational business activity whose mission is not strictly profit-driven. As we know from practice, SOEs can serve as ATM machines for governments or as instruments to advance governments’ geopolitical interests abroad, for which the SOEs may be subsidized and thus not be “for profit” at all. In either situation the SOEs may be in a joint venture relationship with private sector transnational enterprises, in which case under the terms of the treaty only the private enterprise might be held responsible for harm. SOEs constitute a non-trivial – and growing – fraction of global business, so the “for profit” stipulation adds another limitation to the treaty’s scope.
Lopez correctly points out that the zero draft also “pays scant attention” to states as economic actors, the subject of Pillar I of the UN Guiding Principles. Moreover, whereas a decade ago “corporate complicity” in human rights abuses committed by the state was a major focus of attention, including in the resolution establishing my mandate as Special Representative of the UN Secretary-General for Business and Human Rights, neither the term nor the underlying conduct appear in the zero draft (legal liability seems to be limited to “persons with business activities of a transnational character”).
In fact, it is not entirely clear which human rights the proposed treaty would cover. The stated intent is to include “all international human rights” and “those rights recognized under domestic law.” The former category has no legal pedigree; perhaps it was meant to say “all internationally recognized human rights.” Yet even that would need clearer definition. The second phrase, regarding human rights recognized under domestic law, requires elucidation of how possible tensions and contradictions between international and national standards are to be addressed, as they are in the UNGPs.
Finally, a truly foundational challenge for the proposed treaty is how to define and operationalize “business activities of a transnational character.” To my knowledge, this phraseology is nowhere defined in the law or the social sciences, so it would have to be constructed de novo—difficult in the best of circumstances, let alone in this highly contested treaty negotiation. But whatever the definition, even more daunting is operationalizing it for the purposes of monitoring and attributing legal liability, given the expanse and complexity of global supply chains (more on that below).
In short, the zero draft further narrows the scope of the proposed treaty in the direction of a specific subset of actors: all we know for certain is that it would cover transnational private enterprises (or ‘activities’). But even there the meaning of the terms is unclear. The same is true regarding human rights violations for which private sector actors involved could be held liable. These are highly problematic bases for a treaty. The framing is reminiscent of the bias and fuzziness that doomed negotiations on the UN Code of Conduct on Transnational Corporations, which dragged on from 1976 to 1982 and in the end did not yield so much as an agreed set of voluntary measures.
From the outset of this initiative, treaty proponents and their supporters have discounted or ignored altogether the issue of scale: the magnitude of the task at hand in seeking to regulate transnational business enterprises or ‘activities’.
The reason the scale of transnational business activity is of critical importance is that it significantly affects—and perhaps even determines—the feasibility of actually implementing any particular international regulatory instrument. This is not an argument against treaties. It is an argument for effectiveness in treaty design, with implementation uppermost in mind.
Consider just a few indicators of scale. There are somewhere between 70,000 and 80,000 transnational corporations (precise numbers keep changing because of mergers and acquisitions, among other factors). According to the ILO, one out of seven jobs worldwide is global supply chain-related, not counting “informal” and “non-standard” work. According to UNCTAD, 80 percent of global trade (in terms of gross exports) is linked to the international production networks of transnational corporations. World trade in intermediate goods (‘transnational business activities’) is greater than all other non-oil traded goods combined.
Or take a couple of concrete examples. The components of my iPhone 6 (I am a technology laggard) were produced by 785 suppliers in 31 countries, several of which were transnational corporations in their own right. None of the entities involved were Apple subsidiaries. For its part, the consumer products company Unilever has reported having 50,000* first-tier suppliers, and that its ultimate supply chain includes 1.5 million small holder farmers.
No international economic system like this has ever existed. Therefore one would wish to ensure that the instrumentalities for monitoring and provisions for attributing legal liability are up to the magnitude of the task. The zero draft assigns international monitoring (in the treaty body sense, but lacking their already limited authority) to a body of 12 experts, based on reports submitted by states and other stakeholders. Thus, virtually by definition meaningful international monitoring is set to be severely constrained. Other commentators have noted significant issues with the zero draft’s provisions for attributing legal liability, both civil and criminal.[iii] I address only the most basic: who should be held liable, and how that is to be determined.
Article 10.6 of the draft, on civil liability, is poorly worded. Two points here. First, Cassel seems to assume that it has parent companies in mind. He warns that the language needs “to make clear that the actionable act [sic] or omission must be that of the company itself…if the treaty is to avoid clashing with the entrenched national law doctrines that limit piercing the corporate veil.” The blog by a Hogan Lovells team reflects the same assumption. But if their reading is correct then 10.6 would effectively leave out so-called “lead” companies like Apple, which do not hold equity in their business partners, as well as Unilever’s many contractors. This is unlikely to have been the intent of the proposed treaty. But if expert lawyers are possibly misreading this key Article, then clearly the text needs further work before it can be set loose on the world.
Second, there is an inextricable relationship between due diligence and the attribution of liability, which the draft seems not to recognize. Under Article 9.7 States Parties shall ensure that “all persons” engaged in transnational economic activity within their jurisdiction have the specified due diligence obligations; and that these obligations should be included in “all contractual relationships.” As noted earlier, the text stipulates due diligence as a standard of results. But that inevitably would hold parent and lead companies liable for any harm anywhere in their supply chains because the contractual relationships ultimately begin with them. On the other hand, if due diligence is a standard of conduct, as it should be, and a parent or lead company has ensured that the appropriate language is included in all contractual relationships, and if the parent or lead company has made good faith efforts to monitor its business relationships and is not itself involved in the wrongful act or omission, then whichever business partner was responsible for the wrong should be held liable. Due diligence and liability must be more closely aligned than they are in this draft.
Carlos Lopez has noted several critical issues with the draft treaty’s provisions on criminal liability, to which I have nothing to add.
Lastly, the provisions for extraterritorial jurisdiction (Article 5.1) and universal jurisdiction (Article 10.11) are unlikely to be met with uniform acclaim.
When all is said and done, my frank assessment is that debating the details of legal liability at this point is premature. The Working Group has had no serious discussion of the issues of scope and scale, and whether they require a strategic mix of different regulatory interventions rather than a single treaty instrument. Now that an actual draft exists perhaps the need for such a discussion will become clearer, and perhaps the Working Group’s new Chair might consider having it.
John G. Ruggie is the Berthold Beitz Professor in Human Rights and International Affairs, Harvard Kennedy School, and Affiliated Professor in International Legal Studies, Harvard Law. From 1997-2001 he served as UN Assistant Secretary-General for Strategic Planning in the cabinet of Kofi Annan, and from 2005-2011 as Special Representative of the UN Secretary-General for Business and Human Rights. A Fellow of the American Academy of Arts & Sciences, he has won numerous awards from professional societies for his contributions to social science and international law.
[i] Doug Cassel, “At Last: A Draft UN Treaty on Business and Human Rights,” Letters Blogatory, posted August 2, 2018
[iii] See Cassel and Lopez, above; and Alison Berthet, Peter Hood and Julianne Hughes-Jennett, “UN treaty on business and human rights: Working Group publishes draft instrument,” Hogan Lovells Focus on Regulation, posted July 26, 2018
* This has been updated from the original published figure.