Ecuador’s Revised Draft Treaty: Getting Down to Business

3/9/19 - Doug Cassel, Emeritus Professor of Law, University of Notre Dame

In the first of a two-part article, Doug Cassel raises certain arguments circling around the significant improvements made in the new draft.

This commentary is part of the Reflections on the Revised Draft Treaty blog series. Our Debate the Treaty Blog highlights a diverse range of voices from across the globe on the proposed legally binding treaty on business and human rights, which we believe is complementary to the implementation of the UN Guiding Principles.

This post is co-published by the Business and Human Rights Journal Blog as part of its symposium on the revised draft of a binding treaty on business and human rights.

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The release of Ecuador’s revised draft in July marks a qualitatively new phase in the now five-years-long negotiations over a draft United Nations treaty on business and human rights.  Substantively and diplomatically, the new draft is an enormous improvement over the “zero draft” released a year earlier.

Although further refinements are needed, the new draft is both substantively serious and diplomatically plausible.  There is no longer any substantive justification for States committed to human rights to hold back from actively participating in the negotiations, which will resume in Geneva in October.

As noted in excellent commentaries elsewhere by Carlos Lopez, Nadia Bernaz, and Hogan Lovells, the new draft makes at least three major improvements over the zero draft: (1) it covers all business corporations regardless of whether they are transnational or local, (2) its preamble and certain provisions are expressly consistent with the UN Guiding Principles on Business and Human Rights (UNGPs), and (3) it is more well-drafted and structured as a legal and technical document.

Until now, the European Union and a number of national governments have sharply criticized Ecuador’s proposals for the “elements” of a treaty, as well as its zero draft, largely on the same three grounds: (1) they applied only to “transnational” companies or business activities, (2) they ignored and were in some respects inconsistent with the UNGPs, and (3) they were poorly drafted from a technical point of view.

The revised draft makes clear that Ecuador has listened.  It bespeaks a commitment to present a document that deserves to be taken seriously. Of course, there are no guarantees of ultimate success.  The field of business and human rights is sharply contested. Some powerful business interests (not all) will wish to thwart any legally binding treaty. Some States will resist, whether for reasons of State or ideology or because of business pressures.  

But we have known these realities since the beginning. What is new is that we now have a patently respectable basis for negotiation. If the negotiations eventually fail to produce a treaty, or if a treaty is adopted but then not joined by a meaningful number and range of States, that result will be for reasons other than the lack of a reasonable text for the negotiations. 

Businesses Covered: Not Only Transnational

Throughout the UN drafting process, most States, civil society organizations, and business organizations, as well as the EU, have taken the position that a treaty on business and human rights should apply to all business enterprises, and not merely to transnational corporations. 

Since the outset, however, South Africa and some other States have maintained that the treaty should cover only transnational corporations, and not enterprises operating solely within States.  In 2018 Ecuador’s zero draft attempted to bridge this gap by proposing that the treaty apply to all “business activities of a transnational character,” without regard to whether the business entity itself was transnational.  This proposed compromise satisfied neither side in the debate.

Ecuador’s revised draft is now consistent with the majority view of States and other stakeholders.  Article 3.1 provides that the instrument “shall apply, except as stated otherwise, to all business activities, including particularly but not limited to those of a transnational character.”  (Nowhere does the revised draft “state otherwise.”)

This does not mean that all businesses, regardless of size, must engage in human rights due diligence to the same extent and cost.  Unlike the zero draft (art. 9.5), which authorized States to “exempt certain small and medium-sized undertakings from the purview of selected obligations” of prevention, the revised draft (art. 5.6) proposes to facilitate rather than to exempt: States “may provide incentives and other measures to facilitate compliance … by small and medium-sized undertakings … to avoid causing undue additional burdens.”  

UN Guiding Principles on Business and Human Rights

From the outset many States and other stakeholders have expressed concern that the draft treaty should be compatible with and complementary to the UN Guiding Principles on Business and Human Rights.

The zero draft made no mention of the Guiding Principles, and in several respects its text was inconsistent with the Guiding Principles.

In contrast, the preamble of the revised draft explicitly notes the role that the Guiding Principles have played in regard to the work of the Human Rights Council in the field of business and human rights. 

In addition, the preamble parallels the Guiding Principles in distinguishing the responsibility of business enterprises to (a) “avoid causing or contributing” to adverse human rights impacts through their “own activities” and addressing such impacts where they occur, as opposed to (b) “preventing or mitigating” impacts to which they are directly linked by their “business relationships.” 

Moreover, the substantive provisions of the revised draft reflect this distinction (although some further clarification may be needed). Stakeholders will raise many points for further negotiation in the revised draft of 22 articles and numerous sub-articles. In part 2 of this blog, I will flag only five concerns, all of which can be resolved with modest revisions to the text: definition of human rights, supply chain, complicity, burden of proof, and state-owned enterprises.

You can read part 2 of this article here

Doug Cassel is Emeritus Professor of Law, University of Notre Dame, USA