TWN Info Service
on Trade and UN Sustainable Development
17 June 2019
Third World Network
www.twn.my
UN: Revised business and human rights draft treaty
text expected end June
Published in SUNS #8925 dated 14 June 2019
Geneva, 13 Jun
(Kinda Mohamadieh) – A revised draft text of a legally binding instrument
to regulate, in international human rights law, the activities of
transnational corporations and other business enterprises is to be released
by the end of June.
This was announced
by Ambassador Emilio Rafael Izquierdo Mino of Ecuador to the United Nations
in Geneva, in his capacity as Chair-Rapporteur of the treaty proposal
process.
An informal
consultation was held on 6 June in a room full of diplomats and civil
society representatives, the first in a series of three planned for June.
The mandate for
this work is rooted in the UN Human Rights Council Resolution 26/9 titled
“Elaboration of an international legally binding instrument on
transnational corporations and other business enterprises with respect to
human rights”.
This Resolution
established an open-ended intergovernmental working group (OEIGW) with an
open-ended mandate to elaborate such a legally binding instrument
(hereafter referred to as the “Treaty”).
The OEIGW convenes
annually for one week, and its next meeting is scheduled for 14-18 October
2019.
The consultation
dealt with the proposed articles on scope of the Treaty and related
definitions as well as jurisdiction (Articles 3, 4 and 5) as they appear
under the “zero” draft treaty text released by the Chair- Rapporteur in
2018.
The second
informal consultation will deal with issues pertaining to rights of victims
and prevention, while the third will deal with issues pertaining to legal liability
and mutual legal assistance and international cooperation.
On the subjective
scope of the Treaty (Article 3.1), or whose conduct would be subject to the
Treaty rules, the zero draft provides that the “Convention shall apply to
human rights violations in the context of any business activities of a
transnational character” that “take place or involve actions, persons or
impact in two or more national jurisdictions” (Article 4.2 on definitions).
This approach
focuses on the nature of the activities rather than the legal form or
structure of the enterprise.
During the
consultation, the Chair-Rapporteur noted that the legal nature of the
entity is less relevant to victims in comparison to the nature of its
activities. Yet, there have been suggestions to expand the scope of the
Treaty to “all business enterprises”.
This point was
reiterated by Brazil, Mexico and Peru during the consultation. Another
opinion, expressed by Bolivia, points out that while all businesses must
comply with human rights, the objective of the proposed Treaty is to
address the ability of multinational corporations to evade liability and
accountability through maneuvering jurisdictional limitations and gaps
under international and domestic laws.
The
Chair-Rapporteur told the meeting that serious attempts are undertaken to
overcome the differences in views in this regard.
Adding to this
discussion, the representative of the International Commission of Jurists
noted that the decision on scope ought to be guided by the original
intention and purpose behind this initiative, namely to deal with the
phenomena of cross-border abuses by business enterprises.
He added that,
despite the focus on the cross-border cases, any substantive obligations to
be established under the Treaty, including on rights of victims,
prevention, due diligence and legal liability should be applied across the
board and not only to those affected by cross-border operations of
corporations.
Other
scope-related issues raised during the consultation pertain to whether state-owned
enterprises ought to be explicitly addressed by the Treaty text, the need
for greater precision on what is meant by “transnational activities”, the
importance of clarifying the responsibilities of the home states of parent
companies as well as strengthening how the proposed Treaty would address
abuses and adverse impacts by corporations in conflict and post-conflict
situations.
On the scope of
human rights to be covered, the zero draft treaty text proposes a wide
approach. Article 3.2 provides that the “Convention shall cover all human
rights and those rights recognized under domestic law”.
The
Chair-Rapporteur noted that, in revising the text, he will seek to bring
more clarity to the reference to “all international human rights”.
For example, one of
the clarifications that the representative of the Philippines sought was
whether Article 3.2 would require future State Parties to the Treaty to
ratify all human rights instruments and protocols.
On jurisdiction,
the Chair-Rapporteur noted that the relevant Article 5 forms a cornerstone
in the proposed Treaty and is essential for its effective operation,
including in ensuring access of victims to a forum.
As crafted under
the zero draft, this article deals specifically with adjudicative
jurisdiction, thus seeking to clarify which domestic courts would be vested
with the ability to admit and hear claims brought by victims covered under
the Treaty.
The
Chair-Rapporteur explained that a broad approach has been proposed under
the zero draft, which vests jurisdiction with the courts of the States
where “the acts or omissions occurred”, as well as where the legal person
or association of natural or legal persons responsible for the violations
have a statutory seat, central administration, substantial business interest
or subsidiary, agency, instrumentality, branch, representative office or
the like.
This approach was
inspired by the 2012 European Regulation No. 1215/2012 of the European
Parliament and the Council on jurisdiction and the recognition and
enforcement of judgments in civil and commercial matters, as well as
General Comment 24 of the UN Committee on Economic, Social and Cultural
Rights and General Comment 16 of the Committee on the Rights of the Child.
According to the
Chair-Rapporteur, multiple issues are considered in the process of revising
this part of the draft text, including clarifying the term “substantial
business interest”, building in the text safeguards pertaining to the
possible abuse of the “forum non conveniens” doctrine, and considering the
insertion of a “forum necessitatis” doctrine in order to avoid situations
where victims would be denied justice.
The “forum non
conveniens” doctrine allows a court, whose jurisdiction is established
under the applicable rules, the discretion to decline to hear a case if it
finds that it is an inappropriate forum or that another forum would be more
appropriate.
Following a 2005
ruling by the European Court of Justice, “forum non conveniens” has been
considered as no longer available in cases involving European Union
defendants, including in the United Kingdom.
“Forum
necessitatis” is the doctrine upon which a court hears a case although
ordinarily it would lack jurisdiction due to the fact that no other
competent forum is available to the claimant, or the court that otherwise
would have jurisdiction refuses to permit the action, will provide an
unjust judgment, or is unable to adjudicate the claim.
It was pointed out
in two interventions by civil society groups participating in the
consultation that Article 5 as currently drafted focuses on adjudicatory
jurisdiction in civil liability cases and requires further clarification
regarding jurisdiction in criminal liability cases, which is covered under
Article 10 pertaining to legal liability.
Another point
raised is the potential risk of parallel proceedings and conflict of
jurisdictions.
Overall, the zero
draft of the treaty provides a viable basis for negotiations and a valuable
addition to the historical record of discussions on corporate obligations
and business and human rights at the United Nations.
A multilateral
instrument that focuses on jurisdictional and procedural challenges that
victims of corporate human rights abuses face would advance access to
remedy and justice.
However, the
proposed Treaty will not provide all the answers. National and multilateral
processes ought to reinforce each other.
Indeed, a
multilateral instrument feeds from the advancement in national practices,
such as those pertaining to due diligence obligations of business
enterprises, but also addresses issues and gaps that cannot be achieved
through unilateral action, but requires international cooperation.
There have been
incremental developments in the jurisprudence of multiple courts pertaining
to the imposition of “duty of care” upon a parent company for the acts of
its subsidiaries.
These developments
could facilitate the discussion on aspects of the sought multilateral
treaty. At the same time, these cases shed additional light on the added
value that a multilateral instrument would provide.
For example, in
April 2019, a decision on jurisdictional issues by the UK Supreme Court in
a case pertaining to the mining operations of the UK’s Vedanta Resource PLC
and its subsidiary in Zambia has provided clarifications regarding the
application of the “duty of care” standard to a parent company regarding
communities impacted by the subsidiary’s operations.
The Court
confirmed that a “duty of care” can exist between a parent company and
those affected by the operations of its subsidiaries.
The Court provided
that there is no separate category of negligence in tort law when it comes to
parent- subsidiary and impacted communities’ relationships.
The Court focused
on whether the parent company “exercised a sufficiently high level of
supervision and control of activities at the Mines, with sufficient
knowledge of the propensity of those activities to cause toxic escapes into
surrounding watercourses, as to incur duty of care to the claimants”.
For the purposes
of the Treaty discussions, it is noticeable how the UK Court approached the
relations within the corporate group, recognizing their changing and
dynamic nature.
The Court provided
that “there is no limit to the models of management and control which may
be put in place within a multinational group of companies”.
The Court’s
reasoning pointed out that “duty of care” arises from the level of control
that the enterprise exerts on the specific activities under scrutiny, and
not from the legal form or the extent of shareholding by the parent in the
subsidiary.
The Court provided
that “[d]irect or indirect ownership by one company of all or a majority of
the shares of another company … may enable the parent to take control of
the management of the operations of the business or of land owned by the
subsidiary, but it does not impose any duty upon the parent to do so,
whether owed to the subsidiary or, a fortiori, to anyone else. Everything
depends on the extent to which, and the way in which, the parent availed
itself of the opportunity to take over, intervene in, control, supervise or
advise the management of the relevant operations (including land use) of
the subsidiary…”.
With such an
approach, the Court appears to be leaning towards emphasizing the economic
reality of transnational corporations, beyond focusing only on legal
separateness of entities within a corporate group.
This pragmatic approach
recognizes that the relationship in a supply chain may in certain
circumstances be as tight as that in parent-subsidiary relation.
Yet, this case is
also a reminder of the importance of addressing the jurisdictional hurdles
that victims might face in such cases.
For example, the
Court’s reasoning resulted in finding that England is not the proper place
in which to bring the claim, but that the English courts should take
jurisdiction over the claim due to very specific reasons, particularly due
to the risk of lack of access to substantial justice in Zambia given the
impossibility of funding the claim and the absence of suitably experienced
and resourced legal teams.
That led some
experts to raise questions pertaining to potential resurgence of the doctrine
of “forum non conveniens” in regard to foreign defendants within the UK
courts.
These
jurisdictional complexities that victims in a case of transnational
character may face underline the importance of addressing these issues and
seeking more clarity on these matters under the proposed Treaty.
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