Last week, the United Nations Human Rights Council considered the second report of the intergovernmental working group on transnational corporations (TNCs) and other business enterprises (IGWG).
In June 2014, the Human Rights Council adopted Resolution 26/9 and established the IGWG to elaborate an international legally binding instrument to regulate, in international human rights law, the activities of transnational corporations and other business enterprises.
The global labour movement, which has long sought the international regulation of international business, has been actively engaged in the process of developing a meaningful treaty on business and human rights.
So what kind of binding treaty do we want? There are numerous possibilities for its form and content. Some proponents have called for a so-called ‘soft touch’ option covering non-financial reporting by TNCs, while others have advocated for a wide-ranging treaty providing for civil and criminal remedies in national and international courts.
The unions favour a strong binding treaty that can effectively realign the normative asymmetry between the legally enforceable rules that protect corporate interests through Investor-State Dispute Settlement (ISDS) provisions and arbitration tribunals, and the soft law approaches to TNCs obligations to respect human rights.
However, it is important that any such treaty build upon the United Nations Framework for Business and Human Rights adopted in 2008 and on the UN Guiding Principles for Business and Human Rights (UNGPs) adopted in 2010. Any process to develop a binding treaty must not become an excuse for governments or business enterprises to fail to implement the UNGPs.
Inclusion of international labour standards
The current model of trade – with the majority of it tied to global supply chains, in highly competitive low cost markets – means that jobs created by TNCs often fall short of decent working standards. It is clear that global supply chains cannot and will not be sustainable unless they are based on the principles of decent work. A binding treaty should therefore include all internationally recognised human rights, including fundamental workers’ and trade union rights, as defined by relevant international labour standards.
In this regard, the global labour movement has also been engaged in a parallel process at the International Labour Organization (ILO) with the aim of achieving an international standard on decent work in global supply chains. If such a standard is achieved, there may be significant areas of overlap with a binding treaty. However, these parallel and intrinsically linked processes can be complementary and mutually reinforcing.
The ILO has in its own right called on the IGWG to clearly ensure that its work builds on and does not prejudice existing international standards on human rights in business operations, including international labour standards.
Another important element is that a binding treaty should apply to TNCs and all other business enterprises. Although Resolution 26/9 covers TNCs and other business enterprises, a preambular footnote qualifies “other business enterprises” as those with “a transnational character”. While the importance given to the responsibilities of TNCs is welcome, it should not mean that corporations – including state-owned enterprises and local businesses, which can equally have an impact on human rights – should be excluded.
A binding treaty should be applicable to all business enterprises regardless of size, sector, operational context, ownership and structure in order to avoid accountability gaps. This would also be consistent with the UNGPs and other international instruments including the OECD Guidelines for Multinational Enterprises.
Human rights due diligence in global supply chains
The international labour movement also wants to see a binding treaty which obliges states to adopt regulatory measures that require business to adopt and apply human rights due diligence policies and procedures.
While there has been a recent trend towards human rights due diligence reporting by corporations, a binding treaty should go further and elaborate the steps that corporations need to take in order to fulfill due diligence requirements and establish that a breach of these requirements gives rise to civil, criminal or administrative liability.
It is also the case that international law is not well equipped to address cross-border corporate human rights violations. This is primarily because the international legal order has traditionally been based on the principle of sovereign states holding human rights abusers to account within their own borders.
Further, the separate entity doctrine has effectively converted TNCs into de facto networks of national level entities, each protected by the corporate veil.
Local companies are often under-capitalised, making them essentially judgment-proof. There is usually no effective remedy at home against the local firm, or abroad against the lead firm which may have contributed to the violation. TNCs are also usually immune from legal accountability when the violation is caused by a supplier.
A binding treaty should therefore reflect the complexity and inter-related nature of today’s global economy, including the structures of TNCs and their supply chains in order to address the existing accountability gaps with respect to human rights obligations. This would require the recognition of the need for the extraterritorial application of any binding treaty.
At present, international law only allows states to engage in moderate exercises of jurisdiction over the conduct of their corporations in other states. A binding treaty should explicitly require states to exercise extraterritorial jurisdiction.
In fact, the duty of the state to provide access to remedies in the home state court of TNCs for human rights violations occurring in a host state has already been recognised in the UNGPs and backed up by numerous recommendations of the UN Treaty Bodies.
Strong enforcement mechanisms
Finally, a binding treaty must include access to a complementary international mechanism to oversee compliance. This public mechanism will need to be more ambitious than an optional protocol to a binding treaty with the usual individual and collective complaints machinery.
What is required is an international tribunal that can adjudicate cases where corporations violate human rights across international borders. This tribunal would develop specific case law in this area without replacing the role of national courts.
In addition to guaranteeing access to an independent judicial forum for affected people to obtain justice for human rights violations, it will help balance the system of private justice for corporations created via the likes of the Permanent Court of Arbitration.
In addition to the essential elements that need to form the basis of a binding treaty, there are a number of other issues that the IGWG will need to consider. Chief amongst these is whether a binding treaty should place direct obligations on corporations. While academics and legal practitioners disagree on whether corporations can be subjects of international law, it is widely accepted that human rights are not rooted to any particular agent, including the state. These corporate obligations will have to be in addition to and not in lieu of state obligations.
Needless to say, there is still a long way to go in the process of developing a binding treaty. While the first meetings of the IGWG were dedicated to exploring the possible content, scope and general character of the proposed instrument, the third session to be held from 23 to 27 October 2017, will focus on the key elements and/or a draft text.
The international labour movement will remain at the disposal of the IGWG and states in particular when it comes to workers’ rights. Governments and the business community will also need to effectively participate in next year’s meeting and make meaningful and constructive contributions in order to allow the IGWG to develop a binding treaty.
A version of this article was printed in the journal International Union Rights Volume 23 Issue 4