Friday, June 24, 2022

Part 5 Reflections on Völkerrechtsblog Online Symposium: "Framing Business & Human Rights?": Claire Methven O'Brien, 'Bounded Rationality, Metonymy, Humility:Further Arguments for a Framework-Style Business and Human Rights Treaty'


It is with great delight that I pass along the announcement of an exciting new Online Symposium. It is  hosted by Völkerrechtsblog and brilliantly co-organized by Justine Batura (Völkerrechtsblog), Anna Sophia Tiedeke (Völkerrechtsblog) and Michael Riegner (University of Erfurt; co-founder of the Völkerrechtsblog), who will feature as guest editor of the Symposium. The Symposium Summary nicely captures the spirit of the event:

With a view to regulating business in the field of human rights, an Open-Ended Intergovernmental Working Group (OEIGWG) has been negotiating an international binding treaty in business and human rights (BHR) since 2014. Confounding the dichotomy of hard and soft law approaches to BHR, the Biden Administration recently expressed openness to a legally binding framework agreement that would build on the UNGPs. Framework agreements are a type of treaty, that establish key objectives and a system of governance but leave details to be determined in the future by an agreed-on mechanism. Perceived by some as a distraction from existing efforts to create a binding treaty in the field, others consider the treaty design choice for a framework agreement as offering a promising and realistic route. In any event, the joining of the US delegation to the OEIGWG has (re-)fuelled long smouldering discussions about the prospects of success of the OEIGWG endeavour and the need to explore alternative avenues, such as opting for the treaty design of a framework agreement. With this symposium, we take a deep dive into exploring a framework convention as an alternative regulatory proposal and examine potentials and challenges from different angles. (Völkerrechtsblog, Symposium, Framing Human Rights? Introductory Note )

Throughout the week starting 20 June 2022, the co-editors will post written contributions on the homepage of the Symposium in the following order:

--Monday: Introduction by co-editors Justine Batura (Twitter: @JustineBatura), Anna Sophia Tiedeke & Michael Riegner (Twitter: @riegnerm)
--Monday, 1 pm: Giulia Botta
--Tuesday, 8 am: Jonathan Klaaren (Twitter: @JonathanKlaaren)
--Tuesday, 1 pm: Lucas Roorda (Twitter: @LRoordaLaw)
--Wednesday, 8 am: Claire Methven O‘Brien (Twitter: @Claire_OB1)
--Wednesday, 1 pm: Tara Van Ho (Twitter: @TaraVanHo)
--Thursday, 8 am: Nils Grohmann
--Thursday, 1 pm: Flávia do Amaral Vieira (Twitter: @eiflavia)
--Friday, 8 am: Larry Catá Backer (Twitter: @BackerLarry)
--Friday, 1 pm: Concluding Interview with Claire Methven O'Brien (Twitter: @Claire_OB1) & Surya Deva (Twitter: @ProfSuryaDeva)

 I was delighted to have been invited to participate.  I will be posting the Symposium contributions here and will also contribute some brief reflections and engagement with each of the excellent and thought provoking contributions.

For this Part 5 we consider the wonderful essay: Claire Methven O'Brien, Bounded Rationality, Metonymy, Humility: Further Arguments for a Framework-Style Business and Human Rights Treaty, Völkerrechtsblog, 22.06.2022, doi: 10.17176/20220622-153107-0; which follows along with my brief reflections. 


 Other Essays and Reflections may be accessed here:

Part I Introduction 

Part 2 Giulia Botta 

Part 3 Jonathan Klaaren

Part 4 Lucas Roorda

Part 5 Claire Methven O'Brien 

Part 6 Tara van Ho

Part 7 Nils Grohmann

Part 8 Flávia do Amaral Vieira

Part 9 Larry Catá Backer

Part 10 Interview: Surya Deva and Claire Methven O'Brien


Bounded Rationality, Metonymy, Humility
Further Arguments for a Framework-Style Business and Human Rights Treaty


History does not stop, a truth of which recent years have provided a gruesome reminder. Trajectories of globalising production and exchange that were widely perceived as uninterruptable have, since 2019, been thrown into disarray, first by the COVID-19 pandemic and then Russian military aggression, each triggering in its wake geopolitical as well as economic reconfigurations.

What significance do these events hold for the business and human rights treaty debate? Like other institutions of global governance, any UN business and human rights treaty needs to hedge uncertainty about the future. Building on earlier work, this contribution contends that a framework-style convention offers greater strengths in this regard than the draft instruments advanced by the Open-ended Working Group (OEIGWG). I consider first, evolving approaches to the legalisation of corporate human rights due diligence, and second, recent developments in the domain of ‘Environment Social and Governance’ (ESG) investment. These cases, I suggest, demonstrate that norms and techniques of business and human rights (BHR) regulation remain emergent and unstable. Correspondingly, a UN BHR treaty should be broad in scope, flexible and responsive, whereas a detailed, prescriptive international scheme risks obsolescence.

Due Diligence: Forward Momentum but Unclear Destination

The notion of corporate human rights due diligence (HRDD) has been central to the coalescence of business and human rights as a distinct legal and policy field. Inspired by ideals of reflexive law and procedural regulation, due diligence was first given explicit formulation in the UN Guiding Principles on Business and Human Rights (UNGPs). Defined loosely in the UNGPs as an iterative cycle through which companies identify, prevent, address, and remediate risks they pose to human rights, due diligence has animated a wave of norm-making endeavours since 2011.

At first, this wave yielded guidance, such as revisions to the OECD Guidelines for MNEs, the Voluntary Principles on Security and Human Rights and Equator Principles. Quickly, however, due diligence requirements started to appear in commodity-based or thematic laws, such as the EU Conflict Minerals Regulation and s1502 of the US Dodd-Frank Act and, albeit indirectly via reporting duties, in modern slavery statutes in the UK and Australia. Subsequently, harder, thematic due diligence requirements have taken form through new measures on forced labour in the United States, legislation on child labour and conflict minerals due diligence passed in Switzerland, and proposals for EU batteries and deforestation regulations.

In addition, some initiatives have sought more directly to legalise the UNGPs’ general due diligence concept via ‘horizontal’ due diligence requirements. France’s 2014 Loi de Vigilance was the first of these; with Germany and Norway following suit in 2021. A draft corporate human rights and environmental due diligence directive is currently under consideration in the EU.

Due Diligence: Unclear Destination

Such developments hold great promise. Voluntary uptake of due diligence amongst businesses was poor, even in high risk sectors. Statutory due diligence duties, if backed by adequate support for labour rights and participation, remedies for victims, penalties and administrative enforcement might deliver transformational changes to business practices in some areas (see further analysis here).

Yet the UNGPs’ loose definition was neither intended nor designed to provide a template for due diligence legislation. Consequently, due diligence laws such as those mentioned above embody significant divergences, for instance, regarding their personal and subject matter scope, the question of how far down the supply or value chain their requirements extend and regarding what roles ‘safe harbour’ provisions and civil liability should play within their legislative schemes.

Horizontal due diligence laws, furthermore, still remain largely untested. Evidence on their effectiveness in preventing or remediating business-related abuses is scant. Though various cases have been launched under France’s 2014 Loi de Vigilance, none has yet yielded a final outcome favouring victims. At the same time, a number of studies (here, here and here) suggest that conflict minerals laws have increased exposure to conflict and poverty amongst communities they aimed to support, while the efficacy of due diligence-based import bans and related measures in combating forced labour and human trafficking has been queried.

Besides, due diligence and supply chain laws have attracted more fundamental critiques. Their consistency with self-determination and rules on jurisdiction, as well as their democratic legitimacy, have been questioned by scholars from both the Global South and Europe (here, here and here). Concerns that such laws merely distract from measures that would more directly empower marginalised rights-holders, such as increasing wages, have also been expressed.

Due diligence laws are also proving politically contentious. France’s draft due diligence law was initially rebuffed by its Constitutional Court. Germany’s law contains provisions both seeming to extend and limit civil liability linked to due diligence failures as a result of differences in view between political parties that could not be bridged. Switzerland’s new statute likewise ping-ponged between Parliament and a popular mandate, while the design of the EU’s proposed due diligence directive was rejected repeatedly by its Regulatory Scrutiny Board.

None of this necessarily implies that due diligence laws should be abandoned or should not feature, and feature centrally, in any UN BHR treaty. On the contrary, given the scale and urgency of business-related human rights abuses, these issues arguably underline the need for a global forum where the legal basis, design and coordination of such laws, as well as much-needed supporting reforms to labour, trade and investment regimes, as well as development assistance, can be debated and advanced in an inclusive and comprehensive manner. On the other hand, it would also seem rash to tie States to specific legislative models when these may soon be surpassed, or depend on accompanying measures to guarantee their impact. It is also clear that a UN treaty addressed to supply chain due diligence will go beyond the mere codification of existing law, as recently claimed.

ESG: Watershed or Debacle?

ESG is a short-hand term for ‘better inclusion of environmental, social and corporate governance factors in investment decisions’. Dating from 2004, for many years it barely pricked the consciousness of global finance (see this graph). Yet, by 2021, it had become the fastest-growing segment of the asset management industry with ESG funds increasing 53 per cent year on year to a value of $2.7tn worldwide.

Governments and other policymakers have both encouraged and sought to harness this trend towards the pursuit of sustainability goals by investors. The EU Green Deal, for example, encompasses measures to extend transparency, standardisation and accountability of financial actors in relation to ‘green’ and ‘social’ investment products.

But what exactly constitutes a ‘responsible’ or an ‘ESG’ investment’? In its infancy, ESG funds screened out companies benefiting from apartheid or religious discrimination as well as ‘bads’ such as ‘alcohol, tobacco, gambling, adult entertainment, military weapons, fossil fuels and nuclear energy’.

Yet in the UNGPs’ analysis, any company, in any sector, can in principle breach human rights, rendering such ‘negative’ investment strategies inapt. Accordingly, a raft of new schemes attempt to define and standardise the measurement and communication of companies’ ‘non-financial’ performance. In the domain of human rights, this has yielded new sector-specific and cross-industry benchmarks, as well as watchdog initiatives. The EU is currently developing mandatory metrics addressing social as well as environmental criteria for around 40 different industry sectors. A grand consolidation of sustainability reporting standards, resulting in a single global reporting framework, is even foreseen.

Nevertheless, the ESG movement has in the last weeks been gripped by a sudden and potentially catastrophic loss of confidence. In one critique, among a flurry, ‘The term ESG…may already be coming to the end of its useful life’. How can this be? First, new data continues to challenge two key assumptions of ESG, namely that it can be reliably measured and that it ultimately profits investors. Second, the invasion of Ukraine has, with prominence, destabilised basic ESG conventions. ‘Easy cases’, such as the exclusion of defence, no longer appear so straightforward; and if there is an argument for ‘responsible exit’ from Russia, this readily applies elsewhere in the world. Finally, rising energy prices have triggered ESG funds to resile from fossil fuel commitments, prompting some to admit that climate risk is not material given investors’ real institutional imperatives, whatever their ethical claims, a suggestion lent credibility by a spate of high-profile greenwashing scandals.

Finally, rising energy prices have triggered ESG funds to resile from fossil fuel commitments, prompting some to admit that climate risk is not material given investors’ real institutional imperatives, whatever their ethical claims, a suggestion lent credibility by a spate of high-profilegreenwashing scandals.

Scholars have long observed the incompleteness and unreliability of corporate non-financial reports, as well as the limits of human rights indicators, which are moreover manifestly under-inclusive in the human rights domain. Even if machine learning can support human rights analysis of the vast quantities of data that new laws on corporate sustainability reporting will generate, which appears doubtful, reliance on algorithmic analysis and its supporting platforms entails its own human rights challenges. Qualified data on human rights performance is no doubt important to securing effective remediation and accountability of companies and their investors in abuses, and current rumours of the ‘death’ of ESG may be exaggerated. Nevertheless, the case of ESG shows that a UN BHR treaty must have scope to connect with but also look beyond current governance vogues.

Conclusion: Facing the Future as Well as Addressing Present Needs

Like positions taken by States in the context of the OEIGWG process (see here and here), the evolving agendas on due diligence and ESG discussed above illustrate that approaches to the legalisation of business and human rights norms are still nascent, contested and correspondingly unstable. It would be a mistake, on this basis, to enact a UN BHR treaty wedded to the contingent details of particular regimes.

Framework conventions, like human rights treaties, respond to this situation, as illustrated by their use in the areas of environment and climate as well as global plastics pollution. In such settings, framework-style treaties have not functioned as ‘empty shells’ but as flexible, inclusive problem-solving devices addressing issues of critical global concern, yet on which States are politically divided and where technical solutions alone will not suffice. When it comes to BHR abuses, we do not have all the answers today, either. Nor, as the constant identification of new risks linked to cryptocurrencies, platforms and AI show, we do not even know all the questions.

Humility, then, behoves us to recognise the limits of our current knowledge. We may not be able to escape bounded rationality, but we can design global governance regimes that are better or worse at mitigating its impacts. Alongside others, this stands as a further argument in favour of a framework approach.

Cite as 

Claire Methven O'Brien, Bounded Rationality, Metonymy, Humility: Further Arguments for a Framework-Style Business and Human Rights Treaty, Völkerrechtsblog, 22.06.2022, doi: 10.17176/20220622-153107-0.

Claire Methven O´Brien is a Baxter Fellow and Lecturer in Law at the University of Dundee. She further works as a Chief Adviser and Senior Researcher at the Danish Institute for Human Rights, and an Honorary Lecturer in the School of Management at the University of St. Andrews.


Reflections on the  Völkerrechtsblog Symposium Essay, Claire Methven O'Brien, 'Bounded Rationality, Metonymy, Humility: Further Arguments for a Framework-Style Business and Human Rights Treaty'

Larry Catá Backer

1. The core insight of the essay is as powerful, as it is tragic, for that enormous expenditure of time and good will driven by the vanguard's legions of good faith cadres all seeking a mandatory expression of duty, respect, and remedy for human rights wrongs in economic activity within an international instrument.  The insight--that one cannot legalize a moment in time--has significant ramifications for the scope and rationalizing foundation of the current treaty project.  More importantly, it suggests the value of a flexible framework instrument for the project of embedding human rights into the ordinary process of economic production. To that end the essay first suggests the contemporary and inherent instability of the field of human rights legalities by considering evolving legislative approaches and then recent developments in ESG investment. The essay then builds on that analysis to make that argument--quite logical in context-- that the techniques of treaty making ought to align with the character of the field (an argument I elaborate from a different starting point in my own contribution).  In the words of the essay, that "a UN BHR treaty should be broad in scope, flexible and responsive, whereas a detailed, prescriptive international scheme risks obsolescence." 

2. This objectives oriented approach is hardly a radical proposition--nor is it particularly alien to a generations long development of regulatory approaches within the apparatus of the European Union. For a long time, and certainly before 2010, most students of EU law were taught the lesson hard learned by its apparatus in the context of legislation for technical harmonization. In their germinal student friendly materials on EU Law, Paul Craig and Gráinne de Búrca reminded readers:

that the early approach to common market harmonization involved attempting to prescribe the desired result  through detailed regulation, and that the shortcomings of this approach  were recognized before long. These included the length of time it took to secure agreement on detail, the cumbersome nature of the legislative process, and the need for continuous updating of the detail. (P. Craig and G. de Búrca, EU Law: Text, Cases , and Materials (4th ed., 2008), 148).
Craig and de Búrca might as well have been writing about the still incomplete process leading to the Third OEIWG DraftThe solution for the EU was an effective relaunch of the internal market (Technical Harmonization and Standardisation: A New Approach, COM (1985) 19) set out by the Council in an annex 1985 resolution ([1985] OJ  C136/1; described nicely in Craig and de Búrca, supra, 149-150). The form of this new approach suggests the contours of a framework approach to a BHR Treaty aligned with the new approach to EU directives for technical harmonization--(1) limiting provisions to essential requirements; (2) technical standard setting delegated to operational bodies; (3) treating those standards as voluntary but with substantial advantages to certification of conformity. What may be required of the Treaty process is an equally profound relaunch, this time on the basis of a framework approach--a 4th OEIWG Draft might benefit from the lessons of the EU and evidence the courage to relaunch the treaty process in a manner better aligned with the realities of the regulatory context in which it must succeed. 

3. Indeed, the great shift about thirty years ago in the form and approaches to drafting EU Directives provides a hard but valuable lesson for the current crop of treaty drafters about the dangers of substantive rigidity in areas of legalization that themselves are evolving rapidly with changes in the economic, political, technical, and social environment.  In such a context, the ability of micro-substantive measures are unlikely ever to keep pace with the realities on the ground. By 2008 Craig and de Búrca were comfortable suggesting that its form of flexible non-hierarchical regulation  "has spread not only to other areas of EC regulation but also to the global regulatory context." (Craig and de Búrca, supra, 150). ) And indeed it has--polycentric, plural, and networked sometimes markets driven regulatory ecologies.  Those seeking perfection might be disappointed (and there was and is some disappointment within the EU), but those embracing perfectibility might find in this approach a more efficient way towards long terms goals.

4. But beyond that, the problem so well described in the essay suggests another element of law making from the experience of the EU that may be useful in building a framework approach--the principle of subsidiarity, one in which states, the international community, regional and local organizations and civil society could be actively involved. That is the implicit insight that can be gleaned from the quite astute analysis of national legislative trends in the context of mandatory human rights due diligence, but perhaps more importantly in that nexus between the rise of these mandatory legislative measures and the more markets driven though state nurtured ESG and the emerging trajectories of non financial reporting--at least in Europe.  And yet the stability of both have been disrupted by both pandemic and by the increasingly serious breaches of the fundamental rules of the 1945 world order respecting territorial integrity and war.  Together these suggest both the viability of contextually relevant measures and the need for an overarching rule system within which these may be developed, assessed, coordinated, and ultimately made more coherent as a matter of law and social norm.

5. Subsidiarity, margins of appreciation, and the diffusion of implementation around a unifying set of essential requirements provide both a very European, relatively well developed, and coherent system for the realization of the first stages of the constitution of a legalized framework for the embedding of human rights and sustainability within the processes of economic activity.  These, then, suggest that the critical deviation from the development of advanced law multi-level law systems, of which the EU is an exemplar, systems, is well evidenced by the forms and approaches to the Third OEIWG Draft. Europe has shown the way forward--and its pathways are well described within the cultures and sensibilities, within the methodologies, of an EU style framework arrangement.  

6. This last point bears emphasis: the Third OEIWG Draft has and will fail, even if it stubbornly pursued to finalization,  because its minders never appeared  to be open to the lessons of supra-national treaty-based regulation in general--and more specifically to the experiences of the European Union in that regard. Ideologies of regulatory solidarity matter in the construction of technically complex webs of regulation that are meant to have cultural, societal, economic, political, and legal effect.  This essay is a reminder of the consequences of that failure, and a quite conscious call to a return to an EU style approach to regulatory convergence in legal form. 

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