Last May, the Dutch parliament adopted a that is expected to come into effect sometime in 2022. Draft proposals are before the legislators in Switzerland and Austria. Civil-society campaigns are underway in the , , , as well as countries such as , where early government commitments have fallen by the wayside.

The Way Ahead for a UN Treaty on Business and Human Rights

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To top that off, on October 23, four French NGOs and two based in Uganda brought the under the duty of vigilance law against Total as the principal operator of a giant oil project in Lake Albert and Murchison Falls, a protected natural park in Uganda. The six NGOs had formally demanded that Total revise the content and implementation of its vigilance plan for the oil project in June. Total after a three-month legal deadline, allowing the complainants to take the judicial route.

Whether or not a new vigilance plan — or even urgent preventative measures — will be necessary lies now in the hands of the court of Nanterre. The stakes are high, and not only for Total, which may soon face yet another lawsuit from a coalition of over insufficient action on climate change in its vigilance plan. The case over the Uganda oil project is also, as one of its said, “a real test to see if it [the duty of vigilance law] does indeed allow us to prevent future human and environmental catastrophes.”

Reference Points

Whatever the outcome is, the French example has provided focus and momentum. But the narrative that is spreading across Europe finds its underpinnings in the United Nations Guiding Principles on Business and Human Rights, and therein particularly in human rights due diligence. This notion is critical in that it provides the standard of conduct required of companies to discharge their duty to respect human rights. Put differently, the guiding principles flesh out the responsibility of companies in terms of the need to manage the risk of involvement in human rights abuses.

In this sense, due diligence for human rights abuse is to other processes to manage business risks. It speaks to business people because it is framed primarily as a business process. Not surprisingly, voluntary initiatives, both at company and industry level, have so far dominated the field of human rights due diligence.

The guiding principles, however, allow leeway on how to achieve the standards of business and state conduct that they incorporate. So now campaigners, banking on the poor performance of voluntary initiatives in , are pushing for states to take legislative action. They argue that imposing mandatory due diligence for companies when it comes to human rights is neither more nor less than what the complete application of the guiding principles requires.

Only a few, and quite unsuccessfully, have contested the outright appropriateness of legislative action on human rights due diligence. Most recently, the suggestions along those lines by a have drawn an unequivocal rejection from the author of the guiding principles, The episode, albeit relatively minor, tells of how coveted it is to tap into the legitimacy of the guiding principles.

Their relevance, indeed, is not only strategic but also conceptual. The guiding principles provide a relatively neat way to grapple with the complexities of global supply chains. They distinguish three scenarios — causation, contribution or direct linkages to human rights impacts — and focus on the extent of leverage by the company over the entity that is causing harm. The actions that satisfy the due diligence standard vary accordingly.

Grey Areas

Let us start from a situation of the third scenario: a supplier that uses child labor without any intended or unintended pressure from the enterprise to do so. Here, the enterprise should use its leverage over the supplier to mitigate the adverse impact, or it should try to get to that position. If no increase in influence over the supplier is possible, it should cut the business relationship. By contrast, had the enterprise caused or contributed to the adverse impact, thus falling into one of the two other scenarios, it would have had the additional duty to change its conduct and practices.

At a closer look, of course, things are messier than that. For instance, the extent to which failures to supervise or intervene in the harmful conduct of a business entity qualify as a form of contribution is pretty much a grey area in the guiding principles. More profoundly and systematically than that, the very line between contribution and direct linkage is flimsy, and particularly so in highly-integrated supply chains. Not only some extraordinary conduct, such as changing product requirements for suppliers without adjusting production deadlines and prices, but the standard purchasing practices of lead firms place a strain that will eventually lead suppliers to breach labor standards.

The extent of the measures that a lead firm should take does not depend on the correct ascription of the situation to one or the other scenario, nor is it merely a question of leverage. It is instead a choice about the function of due diligence as a policy tool for shaping business relationships and, more broadly, global supply chains.

Nonetheless, the appeal of the guiding principles remains strong. All the current legislative proposals borrow from them the idea that the greater the control over adverse impacts, the greater the company’s duty should be. The functions of human rights due diligence are also the same — namely, to detect, prevent, mitigate and account for how a company addresses its adverse human rights impacts. Yet the step forward for legislation would be to establish a clear link between corporate due diligence and corporate liability, which is at best implicit in the guiding principles.

Curbing Box-Ticking

But what does it mean to focus on the consequences of failing to carry out proper due diligence? Unlike a previous wave of due diligence laws, such as the 2015 UK’s , that only include reporting obligations, the current drafts require comprehensive human rights due diligence. Most of the bills either adopted or under discussion, however, contain little on how companies should prove that they have exercised human rights and environmental due diligence in their supply chains.

The French law requires French companies employing more than 5,000 people to establish a vigilance plan to identify risks to human rights and the environment as a result of their activities, and those of their subsidiaries and suppliers, but it leaves implementation issues to governmental decrees. The Swiss and the Dutch bills, which by now have a long pedigree in their respective parliaments, do as much and postpone even more issues for later decision-making.

The focus is instead on liability and on what form and scope are best suited to ensure that failing to carry out adequate due diligence can cost companies. Options range in nature, from civil to administrative to criminal liability, with the most popular one being civil liability. The transnational element also plays out differently. For instance, the French law ensures virtually the same scope between the coverage of due diligence and that of liability; the Swiss proposal, by contrast, restricts liability to a limited portion of the value chain over which Swiss companies shall exercise due diligence. Aside from differences in how robust accountability is intended to appear on paper, the emphasis is quite consistently on the deterrence side, on some form of sanction.

And hard law is not where it ends. The shadow of sanction permeates the narrative, particularly of lawmakers, even where there is no bill on the table yet. The cases of Germany and the UK are exemplary. In both countries, members of the government have announced that they may consider introducing laws on mandatory human rights due diligence if the voluntary measures by businesses did not yield the necessary improvements. The message sounds at the same time as a warning to the private sector and a concession to the pro-legislation campaigns. Still, legislation hovers like a threat.

The notion of sanction is far from out of place. Nor is its specific use in the current context disproportionate or unfit for curbing superficial approaches by companies. The emphasis, however, is almost exclusively on sticks, but this doesn’t need to necessarily be the case. The latest draft of the treaty on business and human rights provides useful guidance by on the role of positive incentives in prevention — for instance, financial benefits and preferential treatment in public procurement for role-model companies. A few well-devised carrots could prove beneficial in a context such as the present one, where decentralization may turn into a sounding board for polarization.

Avoiding Free-Riding on Liability

If liability raises the costs of non-compliance for companies, along with their duties, there is a reverse to this coin. Accordance with due diligence may, in turn, become a shield from liability. We would then end up back to square one, and to box-ticking being the norm. Avoiding this risk is the ultimate test for legislation, in addition to overcoming the usual barriers against transnational liability. Among these are legal doctrines that disaggregate supply chains, such as separate legal personality and material hurdles in the collection of evidence.

Overall, the solutions provided reflect the specificity of each jurisdiction. Yet the leitmotif is to focus on the overseas responsibility of the home company, which translates into variations on the theme of the parent company’s civil liability. The French and the Swiss bills provide a good glimpse into the spectrum. According to the latest draft, Swiss companies would be liable only for the conduct of their direct subsidiaries rather than for all the entities over which they have some leverage. The scope of due diligence would instead cover the entire value chain. The French law is potentially broader in scope because a French company would be liable for the failures to exercise due diligence over the companies over which it has some form of control.

Being able to sue home companies for their overseas abuses has been the holy grail for generations of human rights advocates and lawyers. This model, known as transnational tort liability, is not the only option. The Dutch Child Labor Due Diligence Law in particular stands out as an alternative by providing a mix of mild administrative fines and criminal sanctions in cases of repeated non-compliance. The law covers all companies that sell or supply goods or services to , including companies registered outside the Netherlands. The focus is on the conditions to gain access to a specific market and not on establishing a link from upstream to downstream in the supply chain of a home company.

The point is far from anodyne because it reshapes, at least in part, the allocation of carrots and sticks. Think, for instance, of the Swiss case, where a vocal lobby of companies is trying to sabotage legislation by brandishing the prospect of Swiss companies suffering a disadvantage compared to their competitors abroad. This narrative would not be available under the Dutch model because any business entity would be subject to the same obligations. After all, it is perhaps not a coincidence that the Netherlands were able to pass their law despite not having a reputation for business-bashing.

As new models of liability emerge, it may then be worth taking a look at issues outside the perimeter of transnational tort liability. Thinking along the lines of the Dutch model may revive the power of consumers, particularly in the northern countries. It could also, at least in some cases, weaken the standing of anti-legislation domestic business lobbies.

Shifts in Regulative Authority

Against this backdrop comes the return of the state as a regulator of transnational business activities. One relatively stylized way to narrate this legal development would be through the metaphor of waves. Public law is back at the forefront after decades of eclipse by soft legal regulatory frameworks, particularly the guiding principles and private codes of conduct. But the simplification here is misleading. For one thing, businesses will remain the first regulators of their supply chains, including through risk mitigation strategies.

The question for business will instead be one of adaptation. How are the current rights risk mitigation strategies going to fit an emerging but somewhat fragmented regulatory environment? At one level, this is a practical question. Most drafts do not wholesale translate the three scenarios of the guiding principles. Schemes devised along those lines may, therefore, not be enough or appropriate to satisfy the requirements of mandatory due diligence.

At the same time, the need for businesses to adapt to new public law requirements may also lead to increased activity in areas of self-regulation that so far have attracted less attention than codes of conduct and monitoring. One such area is remediation. Companies have started devising complaint mechanisms at both site, company and industry level. But the sophistication and diffusion of these practices remain relatively low. In the future, remediation may take center stage to address the consequences of their adverse impacts.

One important caveat is in place. Due to power imbalances, grievance mechanisms may provide poor remediation deals for affected individuals and communities. The gap with transnational litigation may prove severe, even when a case does not proceed to the merits. Examples range from women at the in Papua New Guinea to in Tanzania’s North Mara mine. Those who sought relief in UK courts were able to conclude out-of-court settlements far more advantageous than the remediation packages under the respective company-led compliance mechanism.

These two cases do not directly concern the issue of due diligence, but they do provide a useful lesson. Private remedy mechanisms may misrepresent the adverse impacts of a company, thus lowering its exposure to legal liability. This misrepresentation may limit the protection of rights, even where due diligence laws are in place. 

At the opposite end of the spectrum of actors, the role of civil society is also likely to change. Insofar as human rights due diligence is an ongoing process, it needs sustained scrutiny. State authorities have a role to play there. But most legislations, more or less implicitly, bestow the role of a watchdog on civil society. Just months ago, for instance, , a leading NGO in the area of business and human rights, released a detailed study on the vigilance plans adopted so far, including suggestions on necessary improvements.

Such monitoring functions may also support the development of new pressure techniques by NGOs. Again, the French law allows any concerned party to ask for changes to a given vigilance plan. If the company fails to meet obligations after three months, then the case proceeds to the litigation phase. This two-step procedure, in a way, institutionalizes the threat of judicial action as a pressure technique. As a result, not only does NGO scrutiny gain higher visibility, but transnational alliances also become more meaningful.

Having coalitions to track due diligence over time may increase the agency of NGOs in the “global south,” which all too often engage only in the litigation stage and mostly as representatives of victims of human rights abuses. 

What’s On the Horizon?

The debate across Europe is still polarized and the attitudes of business in the same country (think of the Swiss drama) divided. But as the human rights in-house counsel for Adidas, eloquently said: “it is not a question of if, but when such laws will be in place and how they will impact current business operations and practices.”

Perhaps the most balanced assessment would be that the attitudes of business are in flux, oscillating between two positions. One is to pressure against piercing the corporate veil; the other is to push for leveling the playing field. The of the latter options say it would solve the dilemma for companies of being confronted with contradictory standards and would also prevent the problem of free-riding, which they have often lamented as a drawback of national laws on human rights due diligence.

As the new European Commission has just obtained the seal of approval from the European Parliament, will likely focus on getting an EU framework. In the meantime, the stakes are higher not in the adoption of new laws but in the not-so-distant implementation challenges ahead.

The views expressed in this article are the author’s own and do not necessarily reflect 51łÔąĎ’s editorial policy.

The post The Carrots and Sticks of Due Diligence appeared first on 51łÔąĎ.

It has been just over a month since the , operated by the Brazilian minerals form Vale, collapsed, killing at least 171 people, with a further 141 still missing. In the wake of what appears to be yet another disaster heavily abetted by the , news from the Geneva headquarters of the United Nations may seem remote and out of touch. Important developments, however, are brewing there.

On February 6, a noteworthy came out — a call for comments on the international instrument that might be a game changer where, like in the Brumadinho disaster, corporations are involved in human rights abuses and affected communities and individuals seek access to effective remedies.

The call, addressed as it is to states and other relevant stakeholders, picks up on and seeks to revive the momentum and participation of the past months. October 2018 saw a whopping number of 94 states and 400 civil society organizations participate in the of the UN intergovernmental working group tasked with developing a binding treaty on business and human rights. This high participation reflects the fact that, unlike in previous sessions, a first-ever full negotiating text — a and a — was finally on the table. The draft treaty in particular had already drawn much attention as soon as it went public in July, and a very focused scholarly and policy has thrived ever since.

Good News?

If all this is good news, the question of whether the treaty initiative has moved past the mire into full maturity is still up for debate. The first reading of the draft treaty and the quick skim of the draft optional protocol brought to light all sorts of issues, from open disagreement among states to coolness toward the drafting choices of the working group. More concerning, however, at least in the immediate term, are the cracks in the support for the current form of the treaty process.

While all BRICS countries and many states from the so-called “global south” contributed, Western states — including the European Union, the US and Australia — were either absent or dissociated themselves from the conclusions of the October session. The EU in particular rubbed salt into the wound by pointing to the many open issues and the virtual boycott by major Western states as signs of dwindling faith in the leadership of the working group.

The call was thus for seeking guidance from the Human Rights Council as the authoritative body on the treaty process — and quite sensibly so, in principle, as a renewed mandate would likely help the legitimacy of the working group. At the same time, in today’s shifting political sands, particularly for the Latin American membership of the council, obtaining a new resolution would be highly volatile. The EU’s insistence on such a solution thus lends itself to two readings. It is either a tactic to remain at arm’s length from negotiations or a way to keep the legitimacy issue alight and let it fester until it blows up into an unavoidable roadblock.

The one sure thing is that the working group will need a great deal of negotiating dexterity to avoid worsening its position. For the issues to juggle are not only about transparency, inclusiveness and conflict avoidance. They are also about sorting out priorities and devising a more effective language to convey them. The October talks left no doubt indeed that the current draft treaty needs more than a tweak. Many provisions invited criticism of lack of clarity and potential incoherence, and broad phraseology had a chilling rather than a reassuring effect on states. Progress on language was therefore slow — particularly concerning non-terms of art, such as the “business activities of a transnational character” formula that should delimit the scope of the draft treaty.

To a certain extent, this is not surprising. Detailed discussions about definitions would have been unlikely at this still highly contested stage of negotiations. But as other have noted, that is not all. Some key provisions of the draft treaty eluded clarification because they are hard to operationalize for the purposes of monitoring and attributing legal liability. And this is so because the draft treaty has still too loose a grip on the complexity of global supply chains.

If it persists, this issue could derail the treaty process. It already did enough chipping away at both minimal consensus on controversial areas and deeper convergence on broadly shared objectives. Take two examples: the focus of the draft treaty and the prevention of human rights abuses by business. The first confirmed itself as the one most tangible and persistent item of disagreement between states. Once again, the division was along the lines of what types of corporations the treaty should include — a division that in turn reflects deeply entrenched development concerns.

Most Latin American states insisted on the need to focus, like the UN Guiding Principles (UNGPs), on all business enterprises. States that are home to fewer multinational companies — such as , and the — blended their support for the draft treaty with a veiled defense of the special position of national small and medium enterprises. Others still reiterated a more open support for a primary focus on transnational corporations. But very few zeroed-in on the actual language of the draft treaty that speaks of for-profit business activities of a transnational character.

Hybrid Solution

In principle, this formula neither limits the scope to transnational corporations, nor does it include all business enterprises. It rather proposes a hybrid solution based on the nature of the activity concerned. It is thus telling that, innovative as it is in its approach, the draft treaty still brought only limited perspective to the debate, and surely not enough to break the deadlock. Its language proved indeed slippery even for the experts invited by the working group.

How does one realistically define the scope of the treaty in cases where there is only an , rather than a long-term business relationship, of a transnational character, or where it only involves the selling of certain goods or services to clients in a foreign jurisdiction? How do we cope with the likely loopholes to which the focus on “transnational character” lends itself, and which business can exploit to avoid liability in terms of the treaty?

The point here is that, because business can morph easily, the transnational-local dimension is hard to translate into legal and operational meaning. Add to that the risk of domestic legislations defining inconsistently the transnational character of an activity, and one is left with serious legal uncertainty as to the scope of jurisdiction of the treaty. This is not to say that feasible solutions are out of reach. Professor , of the City University of Hong Kong, suggested that “while the main treaty could apply only to TNCs and other business enterprises with a transnational character, an optional protocol could extend its relevant provisions to all other types of business enterprises.”

Whatever the arrangement, it needs to come with enough realistic guidance from the working group. Last October, this was not the case, and states persisted in their worn-out attitudes. For similar reasons, the drafting choices of the working group fell short also on less divisive and divided issues. Prevention is a good example. Despite the general buy-in from states, progress was slow toward operationalizing human rights due diligence as a mandatory duty for business. Several states feared inconsistency between the definitions of terms contained in the draft treaty and that of the same terms in the UNGPs. But there was more than drafting sloppiness at play against consensus building.

According to the draft treaty, due diligence duties shall apply throughout a company’s business activities of a transnational character, and failure to comply with them shall entail commensurable liability and compensation. This is problematic considering our still limited understanding of the human rights impacts of businesses.

Fine Line

Regrettably, as the noted in its to the 2018 UN General Assembly, we still have scarce “comprehensive and systematic data on how the majority of the world’s business enterprises understand and manage their actual and potential adverse impacts on human rights.” There are some emerging good practices. One approach to issues relating to supply chains, notes the , is cascading — requiring or setting incentives for immediate business partners to carry out human rights due diligence, incentivizing the tier-one suppliers with their own supply chain and so on.

That said, states remain under and ill-equipped for overseeing on corporate human rights due diligence. The current dearth of good practice guidance poses a serious, and yet once again understated, challenge for a treaty requiring capacity building by governments or corporations.

All this shows that there is a gap between the business and human rights nexus in reality, and the working group’s vision for regulating it through the treaty. This gap could make the treaty process unfit to reflect both existing and future challenges. On this last point, think for instance of the very ambiguous exclusion of state-owned enterprises with a not-strictly for-profit mission. With the increasing significance of SOEs in global economy, the issue is likely to become .

Back in 2015, at the time of the adoption of the UN Sustainable Development Goals and the 2030 Agenda for Sustainable Development, lamented the continuing chasm in discourse and debate between the business development and the business human rights communities. The same chasm seems to persist in the treaty negotiation. There is a fine line between vision and practicality, particularly when reality is complex and its understanding is patchy. The working group will have to walk that fine line wisely when, at the end of this month’s window of gathering comments, it will resume its behind-the-scenes work.

The same reminder applies to civil society. The risk of shrinking space for the entire treaty process calls for civil society organizations to concentrate their advocacy in areas that may have more immediate buy-in by states. For instance, states proved very skeptical toward a body responsible for the implementation of the future treaty, which was already a very low-profile solution — albeit much needed, deeper reflection on this point is perhaps not for now. Priority should go to issues, such as due diligence and legal liability, where there are enough germs of consensus to hope that the multiple deficits of the treaty process will not sink it completely and that in the future, victims of disasters like the Brumadinho dam collapse will have better recourse to justice.

The views expressed in this article are the author’s own and do not necessarily reflect 51łÔąĎ’s editorial policy.

The post The Way Ahead for a UN Treaty on Business and Human Rights appeared first on 51łÔąĎ.

Squeezing a “zero draft” out of nearly four years of intense negotiations may seem like a meager, if not slightly ironic, achievement. Yet there was more reason to see the glass as half-full than half-empty when, on July 19, 2018, Ecuador the release of a “victim-oriented draft legally binding instrument on business activities and human rights.” Contrary to what its unflattering title suggests, this marks a key milestone in the effort to bring about a UN treaty on business and human rights.

An international treaty to regulate the activities of national and multinational corporations with respect to human rights has been on the wish list of civil society activists and state actors, particularly from the “global south,” from the 1970s. Yet the prospect of establishing international legally binding norms to address the potential harmful human rights impacts of business operations, including through direct obligations upon business enterprises, has ultimately always failed.

Domestic corporate law, for its part, has traditionally had little grip on multinational corporations and similar entities. The problem is that the regulatory power of states tends to extend no further than their political borders. What exceptions exist tend to cover only some specific aspects of business activities, such as the extraterritorial application of the Foreign Corrupt Practices Act against US companies for activities abroad. The potential adverse impacts of business activities thus fail to receive sufficient coverage from existing domestic regulations.

International efforts, particularly under the aegis of John Ruggie as the special representative of the UN secretary general, have focused toward creating a polycentric governance system based on a set of global standards that cover all business enterprises and all human rights in all UN member states. Self-regulation by business is an important component of this regulation model, which found its most accomplished expression in the 2011 UN Guiding Principles on Business and Human Rights (GPs). Interest in binding international rules in the form of an international treaty resurged only in 2014.

The path so far, however, has been rough, to say the least. In June 2014, the treaty initiative scored the of only 20 out of the 47 member states of the United Nations Human Rights Council. Then it limped along, amid boycott by the United States, rebuff by Russia and lukewarm involvement even by most of its potential supporters. Under this dark cloud, the first two sessions of the in charge of negotiations proved predictably slow in progress, yet still informational. Stalemate loomed larger in 2016, when Ecuador circulated the of a treaty. Their late release, only shortly before the third session of the working group, explains in part their cold reception.

Simmering Disagreements

A broader explanation, however, lies in over substance. The draft elements brought into the open all sorts of simmering disagreements — the types of corporations to which the treaty should apply, the allocation of legal responsibilities between states and corporations and the extent of parent company liability for supply chains, among others.

Pockets of polarization have likewise surfaced within civil society, for instance in the discourse and use of the UN GPs. For instance, in their on last year’s draft elements of a treaty, global business organizations framed the “crucial consensus achieved by the GPs” as being under threat from the possibility — albeit vague — that the treaty would impose direct obligations on business. , instead, saw the draft elements as a reaffirmation rather than a weakening of the GPs, particularly in that they made the due diligence approach legally binding.

Dropping the idea of establishing international remedy mechanisms, as envisaged in the previous draft elements, was perhaps a wise move. Yet, aside from its provisions on access to courts, the zero draft contains little novelty in the mechanisms that should inject life into the treaty.

In several aspects, the new text is likely to be more appealing than its infamous predecessor, the draft elements. Gone are many of the elements unpalatable to business and stakes alike. Gone, in particular, is the reference in the elements to international courts or mechanisms for addressing business-related harm, as well as the hint at direct international obligations for business. Mitigated, if not altogether gone, is also the ambiguity on some crucial issues, starting from the “transnational character” element that should determine the scope of the treaty.

Access to remedy and due diligence are the focus of the new draft, and rightly so. This choice zeroes in on the top priorities for victims and nudges — or at least makes a reasonable attempt to nudge — recalcitrant states to put more serious effort into negotiations. The GPs triggered some improvements, particularly in increasing the engagement of corporations in human rights due diligence.

Victims, however, are still in a position of serious weakness and power imbalance when it comes to having access to remedy for human rights abuses involving multinational companies. According to the 2018 , a collaboration led by investors and civil society organizations to benchmark corporate human rights performance, only 33% of the 98 analyzed companies can demonstrate grievance mechanisms for workers and wider stakeholders, and 33% of companies cannot demonstrate any grievance mechanism at all.

Existing Gaps

To tackle the existing gaps, despite the concerns that states appear to resent the as shackles, the working group chose to place its bet on the traditional international law pathway. Aside from reminding that business enterprises shall respect all human rights, the zero draft refrains from granting them additional legal standing under international law. Only states have legal obligations to make business legally accountable and provide victims with access to remedy.

Ironically, though, as , a senior advisor at the International Commission of Jurists, has pointed out, the role of states with respect to their own business-related operations fails to come into proper focus. This is a baffling omission, if only considering that in 2014, represented 22.8% of Fortune Global 500 companies, with $389.3 billion of profit and $28.4 trillion in assets. The zero draft is nonetheless rather ambitious in scope and content, if not always solid enough, to reach its ultimate regulatory targets — business enterprises — through the obligations it imposes upon states.

For instance, concerning the issue, the zero draft is only half a success. Language-wise, the definition of its subject matter in terms of “all international human rights” will need some tweaking, at least to clarify the conventional or customary source of such rights (Article 3.1). Concerning its regulatory target, the draft treaty text pays heed to a footnote indication in the original mandate by the Human Rights Council and opts for covering only “business activities of a transnational character.” This quality applies to all for-profit activities “including by electronic means” that “take place or involve actions, persons, or impact in two or more national jurisdictions.”

The net is thus cast less widely than the GPs, which concern all types of business, but still widely enough to capture local business with some transnational material element, and extend forward to include technology-induced developments in the very form of business operations. The caveat is that it seems at best unclear and at worst undesirable how the current definition may apply in some respects. One is that states shall ensure liability “for violations of human rights undertaken in the context of business activities of transnational character” (Article 10.1).

Does this mean that the specific activities causing harm, or rather the operations in general of a business enterprise, need to occur in two or more jurisdictions? The first option would be unwelcome, particularly in criminal liability. In a typical parent-subsidiary company or a supply-chain type of case, for instance, only the upstream business branch would potentially face liability for conduct at the downstream level. The risk of legal gaps is thus high, considering that the treaty, if ever adopted, will receive patchy ratification.

Things May Change

Likewise, the new draft text strikes a mixed balance on two of the dearest themes to the business and human rights community — due diligence and access to remedy. Here, particularly with respect to prevention, states are the immediate duty-bearers, but the actual addressee and target is business. States indeed have an obligation to enact domestic measures that would in turn oblige corporations with transnational activities to undertake effective human rights due diligence. Failure to abide by this obligation would become a source of liability under domestic law for the faulting enterprise.

To get an idea of how things may change an apt comparison is with the famous Doe v Wal-Mart case in the US. The plaintiffs in this case argued that Wal-Mart had failed to enforce its code of conduct, which required the suppliers to comply with labor and industry standards, and provided that Wal-Mart would undertake measures, such as on-site inspections, to monitor those standards. Failure to implement the standards could result in termination. The court held that although Wal-Mart had reserved the right to inspect, in doing so it had not adopted a duty to inspect, and that the workers of the suppliers did not receive protection by Wal-Mart supply contracts. This conclusion would have been harder to reach had national legislation provided for mandatory human rights due diligence, as the draft treaty text requires.

Also changed is the very content of (Article 9). This is usually understood as meaning that business should identify, prevent, mitigate and account for how it addresses its adverse human rights impacts. The draft treaty text adds “meaningful consultation” with affected groups, the requirement of financial security to cover potential compensation claims, and the incorporation of some due diligence measures into businesses’ transnational contracts.

Implementing such a sweeping agenda will obviously entail a significant legislative and monitoring burden, and indeed the draft text insists on the need for effective national procedures” to “enforce compliance.” All this may chill states’ willingness to enter into a future treaty deal. However, it may also make them feel to be in the “driver’s seat to adopt legislation of their own choosing to meet broadly stated treaty criteria,” as put it. On which side the scales will tip will soon became clear over the next round of negotiations in October. Preventative measures are indeed high on civil society’s agenda, and, as shown by the recent (due diligence law), they are becoming also on the states agendas as well.

Critical Barriers

On access to remedy, the zero draft scores important points for its mission to be a “victim-oriented” text. One point is the for human rights violations, plus a half bonus point for the attempt to chip away at the principle of separation of legal entities in the area of civil liability. Victims, indeed, face critical barriers resulting from the corporate form, particularly cases of .

To give a recent example, in May 2018 a US federal court dismissed a case brought by and its local subsidiaries over alleged attempts to unlawfully evict the claimants from their land. The reason for the dismissal was lack of jurisdiction by US courts, which the federal court upheld, notwithstanding that the plaintiffs were unable to obtain justice in Peru.

According to the new treaty draft, companies would incur liability in connection with the actions of their subsidiaries and business partners, depending on factors of control, foreseeable risk, or a “strong and direct connection” between the company’s conduct and the wrong (Article 10.6). This catch-all language will predictably stir debate, yet it still gives all parties a signal that the principle is on the negotiating table.

On remedy mechanisms more specifically, the lion’s share goes to judicial remedies. Special rights and provisions — including that “in no case shall victims be required to reimburse any legal expenses of the other party to the claim” — find their way in the draft to foster access to courts. This strong focus, albeit overall laudable, still ignores to a great extent the role of alternative forms of remedy in the area of business and human rights.

Non-judicial mechanisms have indeed gained traction in the post-GPs era. Their proliferation at all levels of governance — domestic, international and private — has raised increasing debate, civil society scrutiny and policy guidance. A series of by the Office of the UN High Commissioner for Human Rights in particular has produced substantive recommendations on how to strengthen and use the links between judicial mechanism and other forms of remedy. The working group could have drawn precious insights from this in-house research, which is now at its third and final stage on .

Poverty of Imagination

Its regrettable failure to do so reveals what is perhaps a broader weakness of the draft treaty text: its limited institutional inventiveness. Dropping the idea of establishing international remedy mechanisms, as envisaged in the previous draft elements, was perhaps a wise move. Yet, aside from its provisions on access to courts, the zero draft contains little novelty in the mechanisms that should inject life into the treaty.

This poverty of imagination or courage is also visible when it comes to monitoring and implementation. Here the choice is for a committee of experts in charge of receiving and reviewing progress reports by states, making general comments and issuing state-specific recommendations for improvements (Article 14.4). The principle is that of self-reporting and non-binding review, typical of early human rights treaties such as the International Covenants on Human Rights.

Those who wished for robust international enforcement, or who have simply grown disillusioned with the current international system of international oversight, will be disappointed, and rightly so. Their concerns have serious merit, even when weighted against the need to create incentives for a critical mass of states to join the treaty. For there is no reason why the zero draft should follow a shabby model without even trying to cherry-pick what works and capitalize on it.

There is room to think more creatively, even within the box apparently chosen by the working group. , for instance, recently offered an interesting view on the international human rights system, characterizing some parts of it as an example of transnational experimentalist governance. The premise is that broadly articulated goals at the international level may provide a solid basis for regulation when “elaborated over time through the practice of those affected by and in a position to help implement them, and routinely monitored and revised through a form of peer review.”

A key ingredient to this is a sustained, if not formal, involvement of civil society and other stakeholders in the downstream functioning of the treaty regime. For instance, the Convention on the Rights of Persons with Disabilities, which is the most recent of the UN human rights treaties, explicitly provides an . Various stakeholders, including organizations of persons with disabilities and their representatives, enjoy formal standing under the and their participation in the work of the committee of experts that comprises the treaty body. This is not to suggest that civil society is the magic bullet for the international human rights treaty systems in general, nor for a future treaty on business and human rights. The intent is rather to set the background for why the lack of avenues for institutionalizing participation by non-state actors is a major fault of the new draft treaty.

The failure here is twofold. First, it is a failure to strike a reasonable balance in dealing with the transnational quality necessarily built-into any future treaty on business and human rights. Insofar as business enterprises are the ultimate regulatory targets of the future treaty, providing for continuous contact with them and with human rights activists would have been a wise move — all the more so for counterbalancing the choice to impose direct obligations only on states.

Second, participation by non-state actors has been the hallmark of the negotiation process. For treaties affecting business activity, argues , the treaty process itself involves indirect effects “within the shadow regions of the treaty where voluntary industry regulation occurs.” Such effects include “identification of deficiencies with current self-regulatory projects, articulation of policy recommendations, increased coordination among stakeholders, and reputational shaming.” From this perspective, the zero draft misses the opportunity to create continuity between the present and the future, and to make room for penumbral effects to thrive in the monitoring and implementation process. Hopefully, the next round of negotiations will lift institutional inventiveness from the shadows, rather than of penumbra, where it currently lies.

The views expressed in this article are the author’s own and do not necessarily reflect 51łÔąĎ’s editorial policy.

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