Thursday, December 13, 2018

11-Flora Sapio on the Zero Draft of a Legally Binding Instrument to regulate the activities of transnational corporations and other business enterprise (Article 5 Jurisdiction)

(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 11 focuses on Article 5 of the Zero Draft (Jurisdiction). 

Summaries of discussions on each article of the Zero Draft, based on the written submissions available on the website of the OEIGWG
Article 5 (Jurisdiction)
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 5 (Jurisdiction) 

1. Jurisdiction, with respect to actions brought by an individual or group of individuals, independently of their nationality or place of domicile, arising from acts or omissions that result in violations of human rights covered under this Convention, shall vest in the court of the State where:
a. such acts or omissions occurred or;
b. the Court of the State where the natural or legal person or association of natural or legal persons alleged to have committed the acts or omissions are domiciled.

2. A legal person or association of natural or legal persons is considered domiciled at the place where it has its:
a. statutory seat, or
b. central administration, or
c. substantial business interest, or
d. subsidiary, agency, instrumentality, branch, representative office or the like.
3. Where a claim is submitted on behalf of an individual or group of individuals, this shall be with their consent unless the claimant can justify acting on their behalf without consent.

Article 5 of the Legally Binding Instrument on Transnational Corporations and Other Business Enterprises  was scheduled for discussion on 18 October 2018, from 10 to 13 AM.

Written comments specific to Article 5 were submitted by:

  • 1 expert
  • 8 States (Azerbaijan, Chile, China, India, Iran, Mexico, Namibia, South Africa)
  • 7 NGOs

Comments by Experts:

Olivier De Schutter, Professor, University of Louvain: it may create confusion to include provisions relating to natural persons' liability in this new instrument, not least since this would require a delicate assessment of how the future instrument would relate to the duties of States under the Rome Statute establishing the International Criminal Court. Nor is it clear whether a reference to an "association of natural or legal persons" is fully justified.

Transnational corporations have no legal personality of their own; the expression refers, rather, to networks of separate legal entities, and the challenge is precisely to ensure that the separation between such legal entities does not result in creating obstacles to victims' ability to seek reparation for the harms they have been inflicted.

The provisions concerning prevention and civil liability, however, render redundant the reference to "associations of natural or legal persons" in the other parts of the Zero Treaty, and the coexistence of these two logics -- both of which seek to respond to the same challenge, but through different legal techniques -- can only be a source of confusion.

The principle according to which a State may allow its courts to adjudicate claims filed against its nationals for human rights abuses committed abroad is uncontroversial. To the extent that States impose duties on corporations domiciled under their jurisdiction, it could be argued that there is no extraterritorial jurisdiction involved at all, although such duties may also relate to situations located outside the State's national territory. The kind of "extraterritorial jurisdiction" which the Zero Draft envisages to codify is "ajudicative", rather than "prescriptive" or "executive". Adjudicative extraterritorial jurisdiction would be exercised here in order to contribute to the protection of internationally recognized human rights. To the extent that it affirms the duty of States to ensure that their courts shall be empowered to receive claims filed against companies domiciled under their jurisdiction where such companies have allegedly committed human rights abuses, article 5 should not be seen as derogating from already well-established grounds of jurisdiction under international law.

Because article 5 of the Zero Draft is ambitious, as it seeks to ensure that victims of human rights
abuses shall not be left without a remedy, it does create a risk of positive conflicts of jurisdiction: the same corporation could be sued in different fora for the same alleged violations. It would be desirable to avoid such conflicts. Article 11 of the Zero Draft goes a long way towards minimizing that risk. However, in the absence of provisions in the Zero Draft of provisions allocating jurisdiction (the various grounds of jurisdiction are not hierarchized in article 5), the conclusion of supplementary conventions might be considered desirable.

Article 5 could provide for a more restrictive reading of the duty to accept jurisdiction, where the only link between the defending company and the forum State is that the company has a "substantial business interest" in that State; finally, the future instrument could (in line with what other human rights instruments provide) include a provision encouraging States to conclude conventions reducing the risk of positive conflicts of jurisdiction in cases that have their source in human rights abuses committed in transnational situations.

Written comments by Richard Meeran, Leigh Day are not available on the OHCHR website.

Written comments by Lavanga Mijekoon, Littler, are not available on the OHCHR website.

Comments by States

Azerbaijan: We must make sure that this legally binding document will not be used to create provocations and legalize puppet regimes on the occupied territories of states. In line with the proposals made by our delegation earlier and as suggested and supported by some experts and Member States’ delegations yesterday, we suggest to make a reference to the humanitarian law in the draft legally binding document, as well as to introduce a separate article covering special cases in conflict and in post-conflict situations.

Chile: the possible conflict between different legislations applicable to the same facts, the expansive extraterritorial effects of domestic legislation and the lack of adequate exceptions to requests for reciprocal assistance and the recognition of foreign decisions are issues that need to be redefined in a new elaboration of the treaty. An interesting alternative would be requesting technical assitane from the Hague Conference on Private International Law.

China: Article 5 suggests two juridisctions: “the State where such acts or omissions occurred”. This belongs to territorial jurisdiction. The second kind is jurisdiction of the state where the legal person or association are domiciled. When the place where the violation occurred and the above places differ, in reality jurisdiction becomes a type of extraterritorial jurisdiction. But according to international law, there are reasonable limitations to extraterritorial jurisdiction. Therefore, the wording of Article 5.1 needs to be clarified or adjusted.

First is the criterion used in Article 5.2 to determine where a legal person has its domicile. Subparagraph C mentions “substantial business interest”. This idea is confused. Subparagraph D mentions “subsidiary, agency, instrumentality, branch, representative office”, this method is not an international practice and should be deleted.

Article 5 mentions associations of a natural or legal persons. This concept is unclear, and may result in the allocation or distribution of legal liabilitites among concerned associations and their constituents. The relationship with Article 10.6 is unclear. This article needs to be amended.

Article 5.3, about class actions and collective claims may be inconsistent with domestic legislation. We suggest to delete it.

The extent of extraterritorial jurisdiction must be limited to the extent permitted by current international law, in accordance with the preinciple of reasonableness and only as an exception. Universal jurisdiction has no basis under current international law and should not be adopted.

India: India believes that the text requires significant revision and clarification:

  • The right to bring an action under the instrument should be conferred to the victim. Permitting anyone to bring an action without the victim’s consent has the potential for abuse.
  • The article also needs to provide a mechanism to recognize the main proceeding in situations where there are multiple proceedings in place.
  • Point 2 of Article 5 should be harmonious with the domestic corporate law so as to avoid any ambiguity or misuse. Point 2(d) of the same article has enough ambiguity and leaves scope for misuse and hence should be removed.

Iraq: we think it is better  to facilitate the right of differentiation to the victim's nationality court and the victim's court, whichever is easier. Territorial jurisdiction is the original jurisdiction, and there is no need to have an exception to the original rule in order to provide broader guarantees for the victims and enable access to justice. We repeat yesterday’s observations about the wording of the Zero Draft. Article 5 needs to be reviewed and redrafted. It is necessary to define the terms, such as those referring to domicile, the central administration, subsidiary, agency, instrumentality, branch, representative office.

Mexico: the Mexican delegation asked a question to the panelists. A significant number of states adopt the rule on forum necessitatis. Even though the Draft Treaty does not contemplate it, Mexico would like to request the opinion of the panliests on whether it would be appropriate to include a provision where, subject to domestic civil procedure, States could provide a forum to avoid a denial of justice, when there is no other competent or appropriate forum.

Namibia: it is known that jurisdiction is traditionally based on territorial considerations aimed at establishing the existence of some link between the preferred or chosen forum and the dispute. There should thus be a real and substantial link between the two. This link usually relate to the subject matter of the litigation or to the parties.

Other jurisdictional requirements might also be established in addition to the above and this differs according to the jurisdictions. Given the mixture of different legal norms within which TNCs operate, the aim of this treaty should be to provide a uniform application.

Conflict of jurisdictions is a risk as the violations and abuses can occur in more than one State or territory, under the hand of one business. In that regard, we will have to consider the consequences on the ground. We also welcome the inclusion of Article 5 (3), but we are weary of a façade of consent in the absence of real consultations, especially in the case of illiterate victims and also in the case of indigenous or marginalized people.

South Africa: the question that we have to ask is whether this Article on jurisdiction will cover the huge remedial gap that exists.  Will it ensure that a victim can be guaranteed access to justice both where the violation occurred and faced with situations whereby TNCs settle out of court as a way to circumvent being held accountable?  On the other side, will it ensure that the home states litigate effectively? This Article must make specific provision for preventing home state courts from declining jurisdiction on the basis of the forum non conveniens in order to ensure that the victims can access justice. The draft treaty should also take into account the possibility of accessing justice in a third state where the victims may be domiciled after the violation has taken place. Regional approaches in accessing justice must also be included. Information regarding the jurisdictional activities of the transnational corporation must also be made available to local authorities within the jurisdiction to ensure transparency and accountability.  Article 5.2 should include:

    • Parent companies interest in the subsidiary as mentioned by Mr Meeran
    • The issue of subcontractors and suppliers;
    • Partnerships with whom they have an established commercial relationship;

The Article must further include reference to breaches of the duty of care by parent companies in ensuring that their subsidiaries do not cause harm to the communities in which they operate in.

Comments by NGOs

Amnesty International: firstly, the article deals only with civil jurisdiction. It is currently unclear who is the state that should act whenever the treaty discusses criminal action and criminal liability. This article should clarify the basis for exercising jurisdiction in relation to cross-border activities that constitute or result in crimes. 

Secondly, this article, or alternatively Article 8 on the rights of victims, should also expressly deal with the issue of forum non conveniens. Ensuring that courts have jurisdiction to hear claims is essential, but in some states it is only part of the solution. In some states, although courts may have jurisdiction, they may still choose not to exercise it on the basis of the doctrine of forum non conveniens. To address this challenge, the treaty could take inspiration from the Council of Europe Recommendation on HR and Business of 2016 (The “doctrine of forum non conveniens should not be applied” in civil claims concerning business-related human rights abuses against business enterprises domiciled within the jurisdiction)  or from GC24 of the CESCR.

CETIM: we have some proposals in order to strengthen the article and ensure its effectiveness. It is essential to provide provisions to inhibit the use of the argument of forum non conveniens, one of the main component of corporate impunity.

Paragraph d) does not adequately cover the concept of supply chain. This means that there will be no provisions on responsibility for violations committed by subsidiaries, suppliers, subcontractors and licensees, nor on how to link parent companies to these entities. In addition, it is necessary to add clarifications on the liability links between parent companies and their supply chains, in order to be able to jointly attack the parent company and the entity in question before the same jurisdiction, as co-authors of the damage or violation. 
It is necessary that the article considers that in cases where national complaint mechanisms fail, affected communities must be able to bring their complaint before an international mechanism, and link this provision to article 14.

We propose the creation of an international court that would guarantee the implementation of the obligations established in the Convention. It would also be important to consider the opportunity to include a forum necessitatis that could be used as an option in circumstances of denial of justice.

Friends of the Earth International: to achieve the purposes of Article 5.2, it must be better articulated with Articles 7 and 10.6: the Treaty must lift the corporate veil to enable the Courts ascertain the liability of parent and outsourcing companies over the activities of their subsidiaries and the entire value and supply chain, as the French law on duty of vigilance.

The Treaty must allow affected people to sue the guilty transnational corporations in the courts of their home country, and in the countries where they concentrate their assets. To reach this objective, it is indispensable to bring in more clarity and add several provisions to Article 5.

First, a provision must be added recognizing the joint responsibility of corporations as co-authors of a violation, thus enabling action against the parent, subsidiary, outsourcing or other entities in the supply chain before the same jurisdiction, including financiers. In this regard, we propose that the Convention borrows from the wordings of Article 2.2 on connected claims of the Sofia Guidelines of the International Law Association

A provision should be added to exclude the possibility for parent companies to carry out declaratory actions disclaiming their responsibility. Courts should rely on the principles of precaution, prevention, polluter pays, and absolute liability.

Article 5 includes a provision on forum necessitatis, and it must prohibit the use of the argument of forum non conveniens.

International Association of Democratic Lawyers: international law does not pose any obstacles to the use of extraterritorial jurisdiction as a meant to allow respect of human rights by TNCs. The Committee on the Rights of the Child has emphasized how states have the obligation to respect and guarantee rights within their jurisdiction, and that jurisdiction is not limited to territory. This includes finding means to regulate the behavior of non-state actors, as TNCs.

Besides international instruments, we can reflect on other possible solutions but it is necessary to take into consideration the concept of supply chain, because otherwise there will be no responsibility for violations committed by subsidiaries, suppliers, sub-contractors, etc.

Article 5.2 defines “domicile” according to four criteria, but this is a closed list, and a blanket clause should be added, allowing to address “other elements of relationship allowing an adequate reparation to rights that have been violated” (otro elemento de conexión que permitiera la reparación adecuada de los derechos vulnerados).

It is necessary to limit the use of the doctrine of forum non conveniens.

Indigenous Peoples’ International Centre for Policy Research and Education: in relation to Article 5, we recommend that an additional provision be included that will acknowledge the jurisdiction on customary justice systems in the settlement of disputes. As an example of a provision respecting indigenous peoples customary laws jurisdiction, we refer to the American Declaration on the Rights of Indigenous Peoples, Article XXII on Indigenous Law and Jurisdiction. This Declaration provides that:
“1. Indigenous peoples have the right to promote, develop and maintain their institutional structures and their distinctive customs, spirituality, traditions, procedures, practices and, in the cases where they exist, juridical systems or customs, in accordance with international human rights standards.
2. The indigenous law and legal systems shall be recognized and respected by the national, regional and international legal systems.”

International Organization of Employers: giving so much attention to extraterritorial jurisdiction does not respect national sovereignty, the principle of territorial integrity and non-intervention in the domestic affairs of other States. Overall, the draft text fails to define the conditions under which the sovereignty and obligations of Host States would not be infringed.

Many of the Zero Draft Treaty's provisions are equally unclear and unrealistic. For example, the language concerning the "domicile" of a person (or association of natural or legal persons) who could face prosecution is imprecise and overreaching. There is no clear legal definition of "substantial business interest." Similarly, the terms "agency, instrumentality, branch, representative office or the like" are far too broad and unclear. They could apply to everything from telecommuting to contracting and they undermine applicable national corporate laws and other important considerations, such as national tax structures. The practical and procedural shortcomings of ETJ are also ignored in the Zero Draft Treaty.

Tides Center: regarding article 5, we would like to welcome the establishment of a broad concept of jurisdiction, ensuring affected communities the possibility to bring cases to the national courts of the business perpetrator’s home countries.  We would like to note a few aspects that will help to improve the protection afforded by article 5:

  • the criteria for the definition of domicile is too vague. Article 5 would benefit from a review on its text, in order to make it more precise, for instance by explicitly including mention to parent companies.
  • Draft article 5 did not explicitly contemplate human rights violations committed by companies exercising a degree of control in a global value chain without the formalized or exact relationships enumerated in 5.2. To ensure harmony between articles 10 and 5, we recommend that article 5 make explicit reference to inclusion of jurisdiction over such instances.
  • It would be quite important to have a provision prohibiting States and transnational corporations from making use of the forum non convenience doctrine, because this is one of the most used arguments to block affected communities from accessing the courts of home States.

No comments: