A new draft Business and Human Rights treaty and a promising direction of travel
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.
On 16 July 2019 the Open-ended intergovernmental working group on transnational corporations and other business enterprises with respect to human rights published a revised draft treaty on business and human rights. This is the second draft published by the intergovernmental working group and already a significant improvement over the first one, published in 2018.
Some of the positives
A key improvement in the current draft treaty on business and human rights is the greater recognition given, and protection afforded, to human rights defenders. This is reflected in the preamble and a few operative provisions. Provisions on the right to remedy and rights of victims as well as corporate civil and criminal liability continue to be prominent, and rightly so. They are core to this treaty.
The elimination of “for profit” from the definition of “business activities” in Article 1.3 is another significant improvement. This means that a broader range of economic activity is now subject to regulation under the treaty, most importantly that of certain state-owned enterprises whose activities are typically not characterised as profit-seeking.
Particularly significant is the articulation in Article 5.1 of an express duty of the State to regulate and, more specifically, to impose on business actors a legal duty to respect human rights and prevent human rights abuses. This is important because, unlike the 2018 draft, all subsequent due diligence provisions are now clearly premised on the underlying duty, and goal, of preventing harm.
The focus on prevention is reinforced in Article 5.2b by the articulation of a corporate duty to “take appropriate actions to prevent”. The articulation of a liability standard based on a “failure to prevent” harm by certain third parties is consistent with this approach and another very positive development.
The new scope: substantively and politically wise
The proposed new scope of the treaty on both transnational and domestic business activities will prove controversial. States who had so far opposed the treaty because of its narrow focus on transnational corporations or activities should now be satisfied and come to the table. However, those who advocated for a narrower scope will be dissatisfied. Regardless of where one stands on this issue, the drafting process revealed – if anything - that operationalising the narrower approach through provisions that looked at all workable and fair was a massive challenge.
The proposed new scope does two things. On the one hand, it reaffirms existing duties of states in relation to domestic companies or activities within their territories. In this sense, it does nothing more than confirm existing duties in relation to the activities of non-state actors. It does, however, give some specificity and actual content to those duties.
On the other hand, it does what many advocating for a treaty always sought to achieve: it creates new obligations to regulate the activities of transnational corporations and ensure cross-border accountability and remedy. This is a tremendous added value of the treaty of which civil society should not lose sight. These are the provisions that will fill the gaps in the international normative framework, and advance international law.
From a purely pragmatic and political perspective, this broad approach should help bring many reluctant states to the table, or at least no longer provide them with an excuse not to engage.
The balance between prevention and remediation: a work in progress
There continues to be an imbalance in the current draft between measures to prevent versus measures to redress harm. The current Article 5 on prevention is almost entirely dedicated to corporate due diligence, but due diligence is not the only means of ensuring prevention, and there is plenty more a state can and must do to prevent harm in the context of business activity.
A new article, or new provisions within current Article 5, should address critical procedural rights that enable individuals and communities to defend their rights in the context of business activity - such as participation in decision making, meaningful consultation and the Free, Prior and Informed Consent of Indigenous Peoples.
While the need for consultation has been given some attention, it has been left entirely within the realm of corporate due diligence. Indigenous Peoples’ rights have now also been mentioned, but the text refers to Consultation instead of Consent, watering down international standards.
The treaty should also include, or significantly strengthen, provisions concerning access to information and the availability of injunctive and other precautionary measures, all of which are essential to preventing harm.
The risk of entrenching an absent state
The current draft does not articulate clear obligations of the state to respect and protect human rights in the context of business activity, many of which would also be conducive to preventing harm.
As expressed above, the current draft places significant attention on remediation, and rightly so, but the state cannot rely purely on a liability regime that places the burden on victims. It must take a proactive role in enforcement and prevention in all those areas where the state directly facilitates, encourages or shapes business activity.
The opportunity for the state to properly control and prevent abuses in these spheres is enormous. Take, for example, the role of the state in approving environmental and social impact assessments and allowing certain activities, such as mining, to go ahead; in financing high-risk projects abroad through its export credit and insurance agencies; in licensing products, such as arms or surveillance technology, for export; in procuring products or services. Future iterations of the draft treaty should articulate the duties of the state to respect and prevent human rights violations in these contexts.
Scope of corporate responsibilities and liability: Inexplicably limited
Principle 17(a) of the UN Guiding Principles on Business and Human Rights (UNGPs) extends a company’s due diligence responsibilities beyond the adverse impacts of its own activities to also include those “which may be directly linked to its operations, product or services by its business relationships”. Here, the “directly linked” element is critical, the nature of the business relationship less so.
Inexplicably, the draft treaty limits the scope of a company’s due diligence to activities “under their contractual relationships”. This is overly restrictive, and would leave important relationships, such as suppliers (or buyers) two or more tiers removed from the company, outside the scope of its due diligence duties.
Depending on how “contractual” is to be interpreted under the treaty, this could also leave subsidiaries out of the scope of a parent company’s due diligence duties - an outcome I doubt the drafters intended. While I would advocate for departures from existing soft law standards that push the boundaries of protection further, the current draft deviates from the UNGPs in a way that lessens, rather than augment, protections.
The current draft also overly restricts the scope of a company’s liability for the harms caused or contributed to by others, by requiring the existence of a contractual relationship between the two. Again, depending on how “contractual” is interpreted, it is not clear whether a parent company would be liable for the human rights harms caused or contributed to by a subsidiary. It is clear, however, that relationships of factual control or dominance not underpinned by contract would be left out.
All of that said, the current draft is a considerable improvement from the first, and the direction of travel is clearly positive. One can begin to envisage the strong and effective instrument that this can one day be. With the broadening of the scope to all business activities and a clearer, tidier draft to work from, the forthcoming negotiations should see a much larger number of states participate and be the most substantive yet.
Gabriela Quijano is Legal Adviser for Business and Human Rights at Amnesty International.