Thursday, December 06, 2018

9-Flora Sapio on the Zero Draft of a Legally Binding Instrument to regulate the activities of transnational corporations and other business enterprise (Article 3 Scope)

(Pix © Larry Catá Backer 2018; Musée Ariana, porcelain figures Meissen 1725-1730 )

Flora Sapio (Comments on the "Zero-Draft"), and I (Making Sausages?: Preliminary Thoughts on the "Zero-Draft") have been considering the challenges posed by the Zero Draft.  But we wanted to dig deeper.  To that end we wanted to avoid the altogether too easy exercise of textual exegesis to suggest the challenges that this draft might construct for itself.

Rather than consider text, or text in light of the various mandates and principles purportedly manifested in the language used to build the Zero Draft, we thought it might be useful to consider text within the context of the initial commentary it might generate among Zero Draft stakeholders motivated enough to make them. These, then, might usefully inform the reading of text, and sharpen analysis of its structure and consequences. 

To that end, and in this and subsequent posts, Flora Sapio  presents summaries of discussions on each article of the Zero Draft, based on the written submissions available on the website of the OEIGWG.  These, then, will be woven together first to develop both a critique of the Zero Draft, and thereafter to suggest the value of an alternative, framework, model for such a project.

These Commentaries form part of a larger Coalition for Peace and Ethics Project on the Effort to Elaborate an International Instrument on Business and Human Rights. Go to CPE Treaty Project Page: HERE.

This Part 9 focuses on Article 3 of the Zero Draft (Scope). 

Summaries of discussions on each article of the Zero Draft, based on the written submissions available on the website of the OEIGWG
Article 3 (Scope) 
Flora Sapio 

On 14 July 2014, the Human Rights Council created an Open-Ended Intergovernmental Working Group (OEIGWG) on Transnational Corporations and Other Business Enterprises with respect to human rights (OEIGWG). According to Resolution 26/9, the Working Group has the mandate to: “elaborate an international legally binding instrument to regulate, in international human rights law, the activities of transnational corporations and other business enterprises.”

By “Other business enterprises” the Human Rights Council referred to all business enterprises having a transnational character in their operational activities. This designation does not apply to local businesses.

In establishing the OEIGWG, the Human Rights Council also decided that the first two sessions of the OEIGWG would be dedicated to conducting constructive deliberations on the content, scope, nature, and form of the future Treaty. Following deliberations, the Chairperson would prepare elements for the draft Treaty. Substantive negotiations on the Treaty would be held during the third session of the Working Group, based on the discussions held during the first two sessions.

The OEIGWG held its first session from 6 to 10 July 2015. A second session took place from 24 to 28 October 2016. Based on discussions held during the first two sessions, a third session was convened from 23 to 27 October 2017. During this session, the elements for the draft Treaty were discussed. Also, the OEIGWG requested the Chair-Rapporteur to complement the ongoing bilateral consultations with states and non-state stakeholders with informal consultations.

Following the third session, a Zero Draft of a Legally Binding Instrument (LBI) on Transnational Corporations (TNCs) and Other Business Enterprises (OBEs) was prepared by Ecuador. In July 2018 the Ministry of Corporate Affairs of India released the draft for public comments.

The Zero Draft of the Legally Binding Instrument (and a zero draft of an optional protocol to the binding instrument) formed the basis for a first round of substantive negotiations, held in Geneva from 15 to 19 October 2018. According to the program of work adopted by the OEIGWG, substantive negotiations saw experts, representatives of national states, transnational organizations, and NGOs comment on the Zero Draft.

In this and in following posts, I will be presenting summaries of discussions on each article of the Zero Draft, based on the written submissions available on the website of the OEIGWG.

Article 1 – summary of discussions - Thursday 18 October 2018
Article 2 – summary of discussions - Monday 15 October 2018
Article 3 – summary of discussions - Wednesday 17 October 2018
Article 4 – summary of discussions - Wednesday 17 October 2018
Article 5 – summary of discussions - Thursday 18 October 2018
Article 6 – summary of discussions - Tuesday 16 October 2018
Article 7 – summary of discussions - Tuesday 16 October 2018
Article 8 – summary of discussions - Monday 15 October 2018
Article 9 – summary of discussions - Tuesday 16 October 2018
Article 10 – summary of discussions - Wednesday 17 October 2018
Article 11 – summary of discussions - Wednesday 17 October 2018
Article 12 – summary of discussions - Wednesday 17 October 2018
Article 13 – summary of discussions - Tuesday 16 October 2018
Article 14 – summary of discussions - Thursday 18 October 2018
Article 15 – summary of discussions - Thursday 18 October 2018

Article 3

1. This Convention shall apply to human rights violations in the context of any business activities of a transnational character.

2. This Convention shall cover all international human rights and those rights recognized under domestic law.

Article 3 of the Legally Binding Instrument on Transnational Corporations and Other Business Enterprises  was scheduled for discussion on 17 October 2018, from 15 to 18 PM, together with article 4 (Definitions).

Written comments specific to Article 3 were submitted by:

  • 2 experts
  • 1 group of five states (Brazil, Honduras, Mexico, Peru, Chile)
  • 7 states (Chile, China, India, Mexico, Peru, South Africa, Switzerland)
  • 1 international organization
  • 5 NGOs

Comments by Experts

David Bilchitz, University of Johannesburg:

First, a common starting point should be that all states are concerned to ensure that the human rights of individuals are given effect to. It has little bearing on an individual whether someone who violates his/her rights is a massive transnational corporation or a smaller business. This consideration would support the recognition of a general obligation upon business not to violate human rights.

Secondly, we can recognize that there are many contexts in which businesses are not held to account for violations of fundamental rights. State are already under a duty in international law to protect individuals from harm by businesses and so a new treaty is not necessary to make this point in relation to domestic companies. But, realities are that, even in domestic systems alone, there is an enforcement gap often in relation to business. This consideration would support going beyond the state to develop regional or international accountability mechanisms to do so.

Thirdly, the fact that business crosses borders and is structured through complex global supply chains creates particular challenges for the enforcement of fundamental rights. Since no one state can address these problems, this consideration motivates for an international law resolution.

Article 3(1) states that the Convention should apply to human rights violations in the context of any business activity of a transnational character. One major worry about this definition is that business will attempt to exploit the focus on ‘transnational character’ to find loopholes to avoid liability in terms of the treaty.  The nature of business today is such that the global transnational corporations engage intimately with a range of small businesses which are largely locally based.

Olivier De Schutter, Professor, University of Louvain: the scope of application of the instrument is defined by the nature of the activity concerned, rather than by an attempt to distinguish transnational corporations from other business enteprises. It would be problematic to seek to establish a distinction between transnational corporations (TNCs) and other business enterprises (OBEs), or between enterprises which have activities of a transnational character and enterprises which do not have such activities (and whose activities thus are limited to a single jurisdiction). TNCs are simple networks of distinct companies (each of which is domiciled in a national jurisdiction), more or less tightly connected to one another by investment or contractual links, and that follow a global strategy under a more or less integrated leadership structure.

It is appropriate to base the scope of application of the future instrument on the transnational nature of the activity than on the nature of the corporation itself: in other terms, it is to the extent that the corporation deploys its economic activities across different national jurisdictions (by investing in a outside jurisdiction, by buying shares in companies domiciled in other countries, by licensing of franchisee agreements, or by contracting with suppliers or sub-contractors located in other jurisdictions) that the future instrument shall be of relevance to those activities.

The scope of application clause could be reworded as follows:

This treaty applies to the activities of all corporations, irrespective of their size, mode of creation or control or ownership. Its scope of application is limited to business activities that have a transnational character.

Written comments by Sandra Ratjen, Franscicans International are not available on the OHCHR website.

Written comments by Kinda Mohamadieh, South Centre, are not available on the OHCHR website.

Comments by States

Brazil, Honduras, Mexico, Peru, Chile: the scope of this Instrument impacts its consistency and its effectiveness. Given this is a human rights instrument we are concerned because its scope is determined according to the type of activities, rather than by the gravity of their impact. The scope of this instrument should be broadened to all kinds of buiness activities. Limiting this instrument to a specific kind of business activities sets this Treaty apart from the UNGPs, and leaves room for interpretation regarding the transnational nature of business activities, as there are no clear, stable and uniform criteria for its determination. To be able to confer victims of effective remedy mechanisms and provided with legal certainty, there must be a precise regulatory framework that includes all companies.

Chile: we believe this instrument should include the activities of all enterprises. The present wording is inadequate. Any company that sporadically carries out transactions with an international impact, or that involve persons or assets located in two or more states could be included in the scope of application of the Treaty, according to the interpretation that is granted. Given the Treaty has not created a body competent to determine whether an enterprise is included within the scope of application, states can use different criteria to reach such a determination. The absence of clear, stable and uniform criteria to determine which enterprises are included in the Treaty creates legal uncertainty. The scope of the Treaty should be revised, to include all enterprises without distinctions.

China: this article should be examined according to the principle of legality
We support the content of Article 3.2 but a precise determination is needed on how to achieve its goal. First, international human rights are not clearly defined. This overly general expression does not conform to the principle of legality. There is a risk to impose on states international obligations they do not undertake or accept. We suggest that, as a legal basis for obligations and responsibilities, the international human rights here referred to be those that emanate from treaties to which the state is a party, and the customary international law accepted by the concerned state. This is the approach taken by the first operative paragraph of the 2005  Basic principles and Guidelines on the Right to a Remedy and Reparation for Victims of Gross violation of International Human Rights Law and Serious Violation of International Humanitarian Law.

Second, this article refers to human rights recognized under domestic law. Human rights recognized by each state are common, but they are also different. Some human rights have different legal meanings in different legal contexts. Unlike non-legally binding documents, and documents that can be autonomously executed by states, we are negotiating a binding instrument. Therefore, this wording will result in different standards for judging human rights violations in different countries. The criteria to determine legal liability are inconsistent, they lack predictability, and do not conform to the principle of legality.

India: on Article 3, India reiterates its position that this instrument should focus only on business activities of a transnational nature and not to national enterprises as we already have domestic laws to regulate them. India also believes that point 2 of Article 3 should be revised so as to ensure that there is no conflict between a state’s domestic laws and its international obligations.

Mexico: limiting the scope of the instrument to transnational enterprises allows to create consensus on the Treaty. But, we do not think it appropriate to limit the scope of application to transnational enterprises only, because not all legal or physical persons that can violate human rights have a transnational character. As Professor de Schutter said, state enterprises, or private enterprises with transnational operations have a significant economic power, and they are a majority of enterprises, therefore they can cause a greater number of human rights violations.

The application of the Treaty can be different in states where domestic legislation is not robust enough, and where mechanisms of regulation and prevention are not sufficiently solid. To avoid jurisdiction shopping we suggest to extent the scope of application to all business activities, regardless of their domestic or transnational character.

The term “violation” should only be used with reference to states, while “abuses” or “adverse impacts” should be used with reference to violations caused by business activities.

Peru: the concept of human rights includes a broad range of rights and the Treaty should define the rights it applies to. We reiterate our comments on the need not to make any distinction between different kinds of enterprises, according to the UNGPs.  It is necessary to create a process or a modality allowing to overcome the limitations created by the footnote to Resolution 26/9, and include domestic enterprises in the Treaty. Alternatively, a new Human Rights Council Resolution is needed.

South Africa: my delegation wishes to reiterate that this Intergovernmental Working Group as created by Resolution 26/9 was mandated to create a legally binding instrument for Transnational Corporations and Other Business Enterprises. In this regard the scope should clearly reflect this. No business enterprise may violate human rights but at the same time the focus is on TNCs and OBEs (as mentioned by some delegations). The text in the Zero Draft should therefore use the language as agreed by replacing “business activities of a transnational character” with Transnational Corporations and Other Business Enterprises to read
This Convention shall apply to human rights violations occurring as a result of the operational activities of Transnational Corporations and Other Business Enterprises

In addition, the text should include fundamental freedoms  to read:

This Convention shall cover all internationally recognised human rights and fundamental freedoms and those further recognised under domestic law.

Furthermore, international humanitarian law including situations of occupation and armed conflict must be included.

Switzerland: Switzerland presented two requests for clarification:

Comments by International Organizations

South Center: proposed a textual exegesis of Article 3 that would allow inclusion of domestic enterprises in the scope of the Draft Treaty, concluding that “the zero draft seems to seek asserting the general principle that all business enterprises shall respect human rights, which basically makes the Guiding Principles’ language an integral part of a binding treaty, thus taking them a step forward. While doing that, the zero draft keeps the focus on the specific concerns emerging from transnational business conduct which requires international cooperation or will otherwise not be effectively addressed.”

Negotiating parties seeking further clarity and certainty in the negotiation outcome could seek clarifying language or footnotes, such as assertions that domestic laws to be developed in implementation of this Treaty would be done in a manner that does not discriminate among domestic entities or between domestic and foreign entities, although this should already be guaranteed as a result of obligations that States have, either deriving from constitutional law, or stemming from the principle of non-discrimination under international law.

Comments by NGOs

Corporate Accountability International: there is a legal vacuum in regards to corporate accountability in cases of human rights violations committed by transnational entities, due to a State centered paradigm established in the 1940s, when the international system of human rights became to take shape.  One of the great benefits that will be brought by the future treaty will be to expand the existing venues for victims to seek redress for human rights violations caused by transnational corporations. That can only by accomplished with the focus on business activities of transnational character, as well as by establishing direct obligations to them.

FIAN: we believe the mandate of this working group refers to the activities of transnational business enterprises but, we are concerned that the Treaty may create different rights for those affected by the activities of TNCs. Therefore, we suggest the inclusion of a non-discrimination clause when the obligations of the Treaty are applicable to national business activities or, alternatively, the explicit inclusion of a clause according to which the obligations deriving from Articles 9, 10.8 and 8 also apply to activities of a national nature when this is possible.

FIDH: individuals and groups on the ground are confronted to a variety of companies, and it isn't their structure or transnational character that determines if they violate human rights.  We propose that the text embody a hybrid approach :
  • the responsibility of all companies to respect human rights, which is well established under international law and recognized by the UNGPs should be set in the operational part of the text rather than in its preamble;
  • the definition of the activities that fall under the scope of the treaty should be flexible, and have the capacity to adapt and evolve following the changing nature and structure of business. It should be clarified that the criteria used for defining "activities of transnational character" are alternative and not cumulative;
  • State-owned enterprises should be included in the scope of the Treaty;
  • considering companies often operate through partnerships, joint ventures and other contractual forms associating several legal persons, it is important for the treaty to refer to "natural or legal persons" in plural and not in the singular form and to establish a joint liability for these types of associations.

Friends of the Earth International: we think respecting the mandate of Resolution 26/9 – a focus on TNCs – is essential. The rights referred to in Article 3.2 should include those enshrined in the main international convention on human rights, and in particular the right to the self-determination of peoples, environmental rights, and all collective rights of indigenous peoples and communities. It is essential to acknowledge environmental rights as human rights.

International Organization of Employers: it is not clear that direct international human rights obligations would apply only to State Parties, and not business. The use of the term "violations"  could imply that companies have a direct legal international human rights obligation under this Treaty.

Limiting the scope to "business activities of a transnational character" (which has no accepted definition) excludes domestic companies, and ignores the impact of SOEs. The Treaty will not serve most victims, and there is incentive for States to lead by example.

It would be extremely difficult, if not impossible, to assess the vast array of activities that have a "transnational character" and reasonably determine liability for a harm that involves a cross-border transaction. Given the failure to understand the three distinct ways that a business can be involved in a harm, if companies were to be held liable for a violation of all human rights in the context of an "activity of a transnational character" they would need the corresponding capabilities to meet such a huge responsibility.

The terms "all human rights" and "all international human rights" have no legal basis and it is not clear what human rights would be covered by the Treaty or which standards would be used to define a human rights violation.


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