10-Flora Sapio on the Zero Draft of a Legally Binding Instrument to regulate the activities of transnational corporations and other business enterprise (Article 4 Definitions)

(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 10 focuses on Article 4 of the Zero Draft (Definitions) (with China, India, and Mexico's comments quite interesting). 

Summaries of discussions on each article of the Zero Draft, based on the written submissions available on the website of the OEIGWG
Article 4 (Definitions)
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 4 (Definitions)

1. “Victims” shall mean persons who individually or collectively alleged to have suffered harm, including physical or mental injury, emotional suffering, economic loss or substantial impairment of their human rights, including environmental rights, through acts or omissions in the context of business activities of a transnational character. Where appropriate, and in accordance with domestic law, the term “victim” also includes the immediate family or dependents of the direct victim and persons who have suffered harm in intervening to assist victims in distress or to prevent victimization.

2. “Business activities of a transnational character” shall mean any for-profit economic activity, including but not limited to productive or commercial activity, undertaken by a natural or legal person, including activities undertaken by electronic means, that take place or involve actions, persons or impact in two or more national jurisdictions.

This is article affirms concepts, principles and rights contained, among others, in the following international instruments:

• Basic Principles and Guidelines on the Right to a Remedy and Reparation for Victims of Gross Violations of International Human Rights Law and Serious Violations of International Humanitarian Law

Article 4 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 3 (Scope).

Written comments specific to Article 4 were submitted by:

• 2 experts
• 6 States (Argentina, China, India, Mexico, Peru, South Africa)
• 1 international organization
• 4 NGOs

Comments by Experts

David Bilchitz, University of Johannesburg: states 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. 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. I would therefore suggest amending the definition to include two further sentences:

‘Business activity of a transnational character’ should, include economic activity which is undertaken not solely for local purposes but for contributing supply to markets that cross international boundaries’, and economic activity that takes place as part of a network of relationships that cross international boundaries’.

It is suggested that there be a new provision added titled  General Principles of international law at the beginning of the treaty. It should include two important sections: first, it should bring the statement in the Preamble concerning corporate obligations into the operational provisions of the treaty itself and state the following:  ‘All business enterprises, regardless of their size, sector, operational context, ownership or structure shall respect and contribute towards the realization of human rights’; secondly, it should recognize the state duty to ensure business enterprises meet their obligations. Laying down these provisions, would attempt to address the first two issues I mentioned. The scope provision could then say, that ‘without affecting the general principles outlined in this treaty, the scope of this Convention will focus on human rights violations in the context of business activities of a transnational character’.

Olivier De Schutter, Professor, University of Louvain: the definition of "business activities of a transnational character" in Article 4(2) may create confusion, and could be improved. Restricting the definition to "for-profit economic activity" alone stems from a sound intention but, it may be interpreted as excluding from the scope of application of the instrument all state-owned enterprises (SOEs). This would be a mistake, both because SOEs ought to be even more exemplary in their conduct, since States, as shareholders, can influence more easily their day-to-day operations, and because SOEs have gained major positions of influence in many world regions.  Secondly, defining activities "of a transnational character" as activities that "take place or involve actions, persons or impact in two or more national jurisdictions", may be excessively vague. As such, this formulation may be at the same time too broad and too narrow. The latter consequence  based on a restrictive (but literal) reading of the current definition of "business activities of a transnational character" contained in Article 4(2), would be especially problematic, since it would be inconsistent with the important provisions on human rights due diligence (Article 9. Prevention)

The  scope of application clause could therefore 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. and the definition of "business activities of a transnational character" could be reworded as: Business activities of a transnational character are activities that a corporation conducts in another juridiction than the jurisdiction where it is domiciled:

(i) directly;

(ii) through branches, subsidiaries, or affiliates; or

(iii) through business partners with which the corporation has a continuous business relationship,

thus affecting human rights of individuals or groups located outside the jurisdiction where the corporation is domiciled.

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

Argentina: the definition of victims is characterized by a lack of precision, that makes it difficult to know the limits necessary to apply this project. Under this definition, an undefined number of persons may be considered victims, opening up the way to extend the active legitimation to initiate actions that entail the risk of distorting the objectives of the system.

China: we have noticed how the definition of “victims” is based on the 2005 Principles and Guidelines. It can be the basis of negotiation. But considering we are negotiating a legal document, requests about clarity and precision of meaning are higher than those of the Basic Principles and Guidelines. Discussion of a specific wording in the future should not preclude necessary modifications.

Concerning paragraph 2, according to the mandate, the document we are negotiating is mostly for TNCs. The “business activities of a transnational character” mentioned in paragraph 2 are only a complement. Therefore, it may be considered to augment the definition of TNCs. The definition of “business activities of a transnational character” is broad, including the word impact, and needs further review.

India: as far as Article 4 on ‘Definitions’ is concerned, the text requires to be revisited to bring in more clarity and flexibility. Phrases like ‘mental injury’ or ‘emotional suffering’ are difficult to define objectively in the legal sense. Hence it leaves room for their misuse. The reference to ‘environmental rights’ also needs to be revisited.

On the definition of ‘business activities of a transnational nature’, India believes that the definition requires to be fine-tuned as a number of elements in the definition raise concerns. Use of words and phrases like ‘impact’ and ‘including activities undertaken by electronic means’  have the potential to conflict with the growth of e-commerce activities. This impinges on the development of economic activities of states. Hence, further clarity is required on these points.

Mexico: the definition of “victim” may be problematic because it may differ based on domestic law. We consider it problematic that the quality of victim is acquired by the mere fact of claiming to have suffered damage, without establishing a direct causal relation between business activities and their effect. This may cause confusion between victims and petitioners.

The standard to follow in order to acknowledge the quality of victim of a person or a community must be the existence of a direct causal relation by the competent judicial or administrative authority, coherent with regulation of each state. A basis could be the admissibility requirements that are foreseen for petitions in the regional human rights protection systems.

Peru: concerning Article 4.1, that refers to “environemntal right”, a definition acknowledged by international law is necessary.

South Africa: the word victim should encapsulate the following:

• Peoples or groups of peoples/ communities whose quality of life is affected/ has been affected by the activities of these entities resulting in HR violations.
• Peoples or groups of peoples/ communities who are suffering/ formerly suffered harm at the hand of these entities as a result of the operational activities.
• Furthermore, the definition must include individuals/ groups/organs of society who also suffer at the hands of TNCs and OBEs in line with the Declaration on the subject

In line with Resolution 26/9, the definition under Article 4.2 must be specific  and reworded to “Transnational Corporations and Other Business Enterprises”. As formulated the term “business activities of a transnational character” covers one part of the mandate. In addition to the above, the scope should include the methods in which the entity can be involved. The definition for a transnational corporation should include: an entity whether fully or partially state-owned or privately owned which own or controls production, distribution, services that operates across more than two jurisdictions including a partnership, association, joint venture or proprietorship.

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

FIAN: Article 4.2 must include explicit references to State-owned corporations, as well as to international financial institutions, and philantropic institutions funded by transnational business enterprises.

We suggest to include in the definition of victims two central groups: human rights defenders and traditional peoples and communities (pueblos y comunidades tradicionales).

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: given the complexity of the structure of transnational enterprises, and their ability to create new legal forms to escape the law, a definition of “transnational enterprises” may be complicated. Definitions of the control relationship may be included. We propose: “the control of the home enterprises over the value chain may be direct, indirect, financial, economic or of other kind” (el control de la empresa matriz sobre su cadena de valor puede ser directo, indirecto, financiero, económico o de otro tipo). It is also important to include a definition of supply chain, to determine the scope of responsibility of TNCs for human rights violations.

Finally, it is necessary to include the definition of other words, as “official international economic and financial institutions” and “impacted communities” (comunidades afectadas).

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.

• 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.

• Focusing obligations on "natural or legal persons" is far reaching and it creates tremendous legal uncertainty and risk.

• It is not clear how the inclusion of "environmental rights" would apply to the Treaty; what the term "omissions" means; and the definitions of the terms "victims" and "harm" are unclear, too broad and they do not reflect common civil law traditions.

South Center:

 - The South Centre is an inter-governmental organization of 54 developing countries. My intervention is part of the reflections by the South Centre’s secretariat on the zero draft of an International Legally Binding Instrument on Transnational Corporations and other Business Enterprises with respect to human, and does not necessarily reflect the views of members of the South Centre.

- My intervention concerns Article 3.1 on ‘scope’ together with Article 4.2 on ‘definitions’, which read as follows:

o Article 3.1: This Convention shall apply to human rights violations in the context of any business activities of a transnational character.

o Article 4.2: “Business activities of a transnational character” shall mean any for-profit economic activity, including but not limited to productive or commercial activity, undertaken by a natural or legal person, including activities undertaken by electronic means, that take place or involve actions, persons or impact in two or more national jurisdictions.

- My general reflections engage particularly the suggestion that the approach proposed under the zero draft would exclude domestic enterprises from coverage under the legally binding instrument.

- The approach proposed under the zero draft does not differentiate entities based on the mere fact of whether they are domestic or not.

- Taking this approach in conjunction with the assertion in the Preamble, which incorporate the Guiding Principles language that all business enterprises shall…respect human rights”, affirms that the proposed Instrument recognizes that it is indeed irrelevant whether an act of violation was committed by a national or transnational entity, and that all enterprises are susceptible of committing human rights violations.

- Yet, this approach shifts our attention from the legal nature of the entity and its nationality to the nature of its business conduct. So all entities are expected to be covered as long as their for-profit activities demonstrate one of three links expressed in Article 4.2, which are whether the activity took place or involves “actions, persons or impact in two or more national jurisdictions”.

 - So actions or omissions by businesses acting only within national jurisdiction/ domestically will not be omitted. For example, an enterprise acting in one jurisdiction at a scale that leads to transboundary impact will be covered. Similarly, a domestic company with no international subsidiaries but which operates with a sufficiently large scale to require sourcing intermediate material from another country or hiring from another jurisdiction would be covered under the treaty.

- In effect, this approach would cover all domestic or national enterprises of significant size allowing them to potentially affect human rights.

- This approach means that the Instrument will eventually cover all kinds of business entities involved in human rights violations, whether they are parent companies, branches, subsidiaries, affiliates, contractors, or business partners, as long as their conduct takes place or involves actions, persons, or impact in two or more national jurisdictions, which would thus require mechanisms of international cooperation to be utilized to achieve effective redress and remedy.

- It is worth noting that the zero draft does not include specific reference to TNCs or other kinds of business enterprises, besides the reference made in the title. It indeed focuses on “any business activity of transnational character”. Avoiding the use of terminology linked to specific legal form of the business entity would potentially be helpful in avoiding the effects of maneuvering such legal forms through restructuring the business entity.

- Other areas of the text include clear indications that no business enterprise is excluded due to the mere fact of operating within domestic jurisdiction only. One example is under Article 9 dealing with prevention and due diligence, where States are provided the possibility to “elect to exempt certain small and medium-sized undertakings from the purview of selected obligations under [the article on prevention] …”. This indicates that generally small and medium-sized enterprises are intended to be covered under the scope of this provision and the treaty, and are not excluded by virtue of the fact that they are domestic enterprises. If small and medium domestic enterprises are already excluded from the scope of the text by virtue of the approach adopted under scope and definitions, then such a provision would not be needed from the start.

- So 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.

- This approach seems legitimate given the reality of economic and business practices in the world today and seems well suited for a multilateral Instrument that will primarily serve as a preventive and remedial instrument focusing on victims’ access to remedy and justice. Indeed, as articulated by the Chair and multiple participants in this discussion, this would be an Instrument primarily concerned with enforcement of rights in particular situations where there are jurisdictional obstacles to hold business enterprises liable for their misconducts.

- It is worth recalling that the Accountability and Remedy Project of OHCHR recognizes the particular challenges posed by ‘cross-border’ cases1, and defines those cases as ones “where the relevant facts have taken place in, the relevant actors are located in or the evidence needed to prove a case is located in more than one State”.

- 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.

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