3-Flora Sapio on the Zero Draft of a Legally Binding Instrument to regulate the activities of transnational corporations and other business enterprise (Article 7 Applicable Law)

(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 3 focuses on Article 7 of the Zero Draft (Applicable Law). 

Summaries of discussions on each article of the Zero Draft, based on the written submissions available on the website of the OEIGWG

Article 7 (Applicable Law)
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 7. Applicable law

1. Subject to the following paragraph, all matters of substance or procedure regarding claims before the competent court which are not specifically regulated in the Convention shall be governed by the law of that court, including any rules of such law relating to conflict of laws.

2. At the request of victims, all matters of substance regarding human rights law relevant to claims before the competent court may be governed by the law of another Party where the involved person with business activities of a transnational character is domiciled. The competent court may request for mutual legal assistance as referred to under Article 11 of this Convention.

3. The Convention does not prejudge the recognition and protection of any rights of victims that may be provided under applicable domestic law.

Article 7 of the Legally Binding Instrument on Transnational Corporations and Other Business Enterprises was scheduled for discussion on Tuesday October 2018, from 10  AM to 13 PM, together with articles 6 (Statute of Limitations) and 13 (Consistency with International Law).

After an introduction by the Chair, Luis Gallego Chiriboga, permanent representative of Ecuador at the UN in Geneva, comments on Article 7 were submitted by 4 experts. Written comments specific to Article 7 were submitted by:

    • 8 states (Chile, China, India, Mexico, Namibia, Peru, the Russian Federation, South Africa)

    •  4 NGOs.

Comments by Experts

Lilián Galán, Member of the Parliament of Uruguay: it is necessary to eliminate the word  “relevant”, referring to “human rights law”, because all human rights law are relevant, and this provision only expands the margins for companies and states to discuss what rights are important or not for those affected.

It is essential to have a guiding principle which provides, in case of conflicts of law, that the law most beneficial to those affected should apply. We recommend this notion is explicitly incorporated in the second paragraph of this article.

The text of this article should include provisions facilitating victims in their choice of applicable law. Victims are in a disadvantaged situation from multiple aspects, compared to companies involved. It is important to allow victims to assert their rights and make this treaty prevail over international treaties of a commercial nature.

Written comments by Nicolas Guerrero, Senior Legal Officer, WHO FCTC Secretariat are not available on the OHCHR website.

Written comments by Sam Zia-Zarifi, Secretary General, International Commission of Jurists  are not available on the OHCHR website.

Makbule Sahan, International Trade Union Confederation: I would like to express that we consider article 7 on applicable law generally as helpful. We have some comments regarding the clarity of the language used, which you can find in the joint position of the trade unions.

Comments by States

Written comments on Article 7  were submitted by 8 states: Chile, China, India, Mexico, Namibia, Peru, the Russian Federation, South Africa

Chile: more precision is needed in the drafting of this article, given it relates to substantive and procedural aspects and in our opinion is written in an “open” form, which may cause divergent interpretations.

It should be debated whether the inclusion of paragraph 2 in the Draft Treaty is relevant. This article involves a complex procedure, that could lend itself to a series of abuses and divergent interpretations. One of the interpretations possible under this paragraph is that claims of human rights violations may be known by the court of a country other than the one where the fact occurred. The court may be able to apply their own national law to evaluate the conduct of the company, if national legislation on conflict of law allows. This would indirectly imply an evaluation of the conduct of the State where the fact occurred.

China: the concept of choice of law reflected in the article applies only to civil proceedings and does not apply to criminal cases.

Unlike contract cases, the applicability of law is a mandatory norm of national legal systems, which should not be altered “at the request of victims”, in line with general principles of law. Paragraph 1 of Article 7 should refer to generally applicable rule in domestic legislation, included the law relating to conflict of laws. If good reasons and a legal basis exist, provisions on conflict of law in the state of the competent court can point to laws in the state where the TNC is located. Paragraph 2 can therefore be deleted.

India: this article needs more clarity, particularly with respect to paragraph 2. The term “involved persons” need to be well defined to avoid any ambiguity. Providing a “choice of law” option needs adequate safeguards to avoid forum shopping. The Draft Treaty should provide guidace to establish a genuine relation between the violation and the chosen law.

Mexico: Mexico expressed its concerns over the following:

• paragraph 2 allows victims to invoke the legislation of the host state of TNCs. This may provoke reservations and objections, given the national regulation of the applicable law and jurisdiction, restrictions justified by public order, or by other reasons that limit the applicability of foreign law;
• the Draft Treaty should incorporate a language allowing Parties to produce reciprocal obligations to modify domestic legislation, to allow for actions initiated by citizens of another State party. Actions are to include those cases when, according to the domestic criteria for jurisdiction, jurisdiction can be exerted or acknowledged by more than one state.

Namibia: the purpose of MLA is to provide States the opportunity and ability to solve many complex legal issues even where a conflict of laws exists. Thus, it can be employed also with regards to this treaty.

Peru: this article is redacted in a very general form, and allows no limits to applicable legislation. In some respects it reminds of a most-favorite-nation clause. This clause originates from other fields of international law, and furthermore has ceased to be used. In this respect we echo the commentary of the Russian Federation.

We consider that this article should be sent to the International Law Commission for comments.

Russian Federation: we can not comment on paragraph 2 of Article 7. It provides for the right of the victim of a violation to require that the substantive issues be considered by the court under the law of the other Party. In general, the choice of applicable law is a category of civil law. This, as a rule, is about the right of two parties to a commercial transaction with a foreign element to agree that it will be governed by the law of any one state. In criminal proceedings, this principle, to our knowledge, does not apply. The national court examines the criminal case and passes judgment on the laws of its state, if necessary, taking into account the law of the place of the crime.

It is hard to imagine, Mr. President, that, for example, a judge in Ecuador will pass judgment on someone on the basis of the Criminal Code of the Russian Federation. Namely, this possibility is now mentioned in paragraph 2 of Article 7 - it is not limited to civil claims. But even if this is so, it is unclear how this logic relates to the principle of equality of the parties to a dispute before the law and the court.

South Africa: providing victims with the choice of the most favorable applicable law, between theat of the State where the harm occurred (home state) or where the TNC is domiciled (host state) is paramount. There are circumstances when a victim is not able to utilize the courts of the home or the host state, but those of a third state, and this needs to be taken into account.

The applicable law should make reference to competent regional courts as an avenue of remedy.

Comments by NGOs

FIAN International: we fully support Article 6. On the one hand, it corresponds to the definition of jurisdiction in a broad manner, and on the other hand, it strengthens the protection of victims as they can choose the law which is more favourable to them.

FoEI: Article 7 should be better coordinated with Article 5. It should make explicit that any dispute between States, or between a State and a TNC that may affect human rights should always primarily be subject to international human rights law, or to the legislation most favorable to persons affected.

For more details we refer to the commentary to Proyect Cero, presented by CETIM, IPS y FoEI in name of the Campaign, and to the Treaty of People we presented during the 3rd Session.

International Indian Treaty Council: none of the rights elaborated in the UN Declaration on the Rights of Indigenous Peoples are mentioned in the zero draft. Since the first session of the UN Forum on Business and Human Rights, there has been consensus that Indigenous peoples worldwide suffer the greatest human rights abuses by transnational corporations and business enterprises. We recommend that this Declaration be added to the List of Documents consulted for the preparation of this treaty.  We recommend that CERD General Recommendation No. 23 on the Rights of Indigenous peoples be added to the list of documents consulted.

Article 7 fails to recognize Indigenous laws and customs. Article 11 of the UNDRIP  addresses situations of redress developed with Indigenous peoples where property was taken in violation of their laws, traditions and customs. 

International Organization of Employers: the text on "Applicable Law" would result in the extraterritorial application of one State's domestic law in another jurisdiction. There are many problems with this:

• The focus placed on expanding extraterritorial jurisdiction does not respect national sovereignty and the principle of non-intervention in the domestic affairs of other States.
• The provisions take the focus off the need for States to improve victims' access to effective remedy at the domestic and local level.
• They ignore the practical and procedural shortcomings of extraterritorial jurisdiction
• Furthermore, this text contradicts the internationally recognized principle of the Rome II Regulation – under which the law in the jurisdiction where the tort occurred applies in general.