The Proposed Binding Business and Human Rights Treaty: Introducing the Draft - By Shamistha Selvaratnam

Editor’s note: Shamistha Selvaratnam is a LLM Candidate of the Advanced Masters of European and International Human Rights Law at Leiden University in the Netherlands. Prior to commencing the LLM, she worked as a business and human rights solicitor in Australia where she specialised in promoting business respect for human rights through engagement with policy, law and practice.

By resolution, on 26 June 2014 the UN Human Rights Council adopted Ecuador’s proposal to establish an inter-governmental working group mandated ‘to elaborate an international legally binding instrument to regulate, in international human rights law, the activities of transnational corporations and other business enterprises’. The proposal was adopted by 20 to 14 votes, with 13 abstentions, and four years later, in July this year, the working group published the first draft of the treaty (from herein referred to as the ‘treaty’). Shortly after, the draft Optional Protocol to the draft treaty was released. The Optional Protocol focuses on access to remedy for victims of human rights abuses by businesses.

This first blog of a series of articles dedicated to the proposed BHR Treaty provides an overview of the main elements of the draft. It will be followed by a review of the reactions to the Draft, and a final piece outlining some recommendations for the upcoming negotiations.

Key Provisions of the Treaty

Preamble (Treaty, Article 1)

The preamble of the treaty makes it clear that it is the primary responsibility of the States to ‘promote, respect and fulfill human rights and fundamental freedoms’, including human rights abuses committed by businesses. Accordingly, the treaty seeks to indirectly impose obligations on businesses by calling on State Parties to adopt legislation that is consistent with the treaty requirements.

Purpose (Treaty, Article 2)

The purpose of the treaty is to ‘strengthen the respect, promotion, protection and fulfillment of human rights’ and to ‘ensure effective access to justice and remedy to victims of human rights violations’ in the context of business activities of transnational character, and to ‘advance international cooperation’ so that States fulfill their obligations under international human rights law.

Scope and jurisdiction (Treaty, Articles 3 to 5)

The treaty will apply to ‘human rights violations in the context of any business activities of a transnational character’. ‘Business activities of a transnational character’ is defined to mean ‘any for-profit economic activity … undertaken by a natural or legal person … that take place or involve actions, persons or impact in two or more natural jurisdictions’. Accordingly, unlike the UN Guiding Principles on Business and Human Rights, the treaty does not apply to and bind businesses that only have domestic activities.

Jurisdiction for acts or omissions arising under the treaty vests in the court of the State where the acts or omissions occurred or where the alleged perpetrator (whether a natural or legal person) is domiciled. The alleged person is considered to be domiciled at the place where it has its: ‘(a) statutory seat; (b) central administration; (c) substantial business interest; or (d) subsidiary, agency, instrumentality, branch, representative office or the like.’

Rights of victims (Treaty, Article 8)

‘Victims’ are defined to mean persons who individually or collectively alleged to have suffered harm, including physical or mental injury. The treaty recognises that victims have the right to ‘fair, effective and prompt access to justice and remedies in accordance with international law’, including restitution, compensation and environmental remediation. It also imposes a number of obligations on State Parties to the treaty, namely, State Parties must:

  • Guarantee the rights of victims to present claims to their court.
  • Investigate all human rights violations effectively, promptly, thoroughly and impartially and take action against alleged perpetrators.
  • Ensure their laws do not unduly limit the right of victims to appropriate access to information relevant to the pursuit of remedies.
  • Provide proper and effective legal assistance to victims throughout the legal process (for example, by informing victims of their procedural rights).
  • Assist victims in overcoming financial barriers to commencing proceedings.
  • Establish an International Fund for Victims to provide legal and financial aid to victims.
  • Provide effective mechanisms for the enforcement of remedies.
  • Protect victims, their representatives, families and witnesses from unlawful interference with their privacy, and from intimidation and retaliation.

The treaty also provides that in no case will victims be required to pay the legal expenses of the other party to a claim.

Human rights due diligence (Treaty, Article 9)

A key article of the treaty requires State Parties to ensure that their domestic legislation requires all businesses to which the treaty applies to undertake due diligence throughout their business activities. The due diligence must take into account ‘the potential impact of human rights resulting from the size, nature, context of and risk associated with the business activities’ (including the activities of its subsidiaries and controlled entities).

The due diligence undertaken by businesses must include:

a)     Preventing human rights violations within the context of its business activities.

b)     Monitoring the human rights impact of its business activities.

c)     Identifying and assessing any actual or potential human rights violations that may arise through its activities.

d)     Reporting publicly and periodically on non-financial matters (for example, environmental and human rights matters).

e)     Undertaking pre and post-environmental and human rights impact assessments covering its activities.

f)      Reflecting the requirements set out in a) to e) above in its contractual relationships.

g)     Carrying out ‘meaningful consultations with groups whose human rights are potentially affected by the business activities and other relevant stakeholders’.

h)     Establishing and maintaining financial security, if required.

Failure to comply with the above requirements will result in commensurate liability and compensation. However, the treaty provides that State Parties can exempt certain small and medium-sized businesses from selected due diligence obligations to avoid imposing undue administrative burdens on those businesses.

Legal liability (Treaty, Article 10)

The treaty requires State Parties to ensure that both natural and legal persons can be held criminally, civilly or administratively liable for human rights violations undertaken in the context of business activities through their domestic law.

The treaty also sets out the principles for civil and criminal liability. With respect to civil liability, businesses to which the treaty applies will be liable for harm caused by human rights violations in the context of their business activities in various circumstances, namely:

a.     to the extent it exercises control over the operations; or

b.     to the extent it exhibits a sufficiently close relation with its subsidiary or entity in its supply chain and where there is strong and direct connection between its conduct and the wrong suffered by the victim; or

c.     to the extent risk have been foreseen or should have been foreseen of human rights violations within its chain of economic activity. 

With respect to criminal liability, States are required to ‘provide measures under domestic law to establish criminal liability for all persons with business activities of a transnational character that intentionally, whether directly or through intermediaries, commit human rights violations that amount to a criminal offence’. Where criminal responsibility is not applicable to legal persons in the legal system of a State Party, that Party must ensure that legal persons are subject to ‘effective, proportionate and dissuasive non-criminal sanctions, including monetary sanctions or other administrative sanctions’.

Mutual legal assistance and international cooperation (Treaty, Articles 11 and 12)

States Parties must ‘cooperate in good faith to enable the implementation of commitments' under the treaty and the fulfilment of the treaty’s purposes. They must afford one another the widest measure of mutual legal assistance in initiating and carrying out investigations, prosecutions and judicial proceedings’. This includes taking evidence from persons, executing searches and seizures and facilitating the freezing and recovery of assets. However, a narrow exception to mutual legal assistance is also provided.

With respect to international cooperation, State Parties must undertake ‘appropriate and effective measures’ to allow for international cooperation among the States. This may include sharing experiences, good practices and challenges.

Enforcement and remedies (Treaty, Article 14; Optional Protocol, Articles 1, 3 to 8, 10 and 11)

The treaty does not contemplate any international enforcement or complaint mechanism. Instead, it establishes a monitoring and oversight mechanism – a Committee of experts. The Committee will perform a number of functions including making general comments on the treaty, considering and providing concluding observations and recommendations on reports submitted by State Parties and providing support to State Parties in order to allow for the implementation of the treaty.

In contrast, State Parties that ratify the Optional Protocol recognise ‘the competence of the Committee … to receive and consider communications from or on behalf of individuals or groups of individuals’. If the Committee receives a communication, it must bring it to the attention of the State Party concern and the involved person conducting business activities who can then submit written explanations or statements clarifying the matter and the remedy within six months. The Committee can then designate its members to carry out a confidential inquiry into the matter and report to the Committee urgently. The findings of the inquiry will then be provided to the State Party and the involved person conducting business activities, together with comments and suggestions.

Further, pursuant to the Optional Protocol, State Parties are required to establish a National Implementation Mechanism (NIM) ‘to promote compliance with, monitor and implement’ the treaty within two years. The functions of the NIM are to: (a) make the treaty content known to the general public, business and victims; (b) cooperation with other national institutions, foreign NIMs and civil society organisations ‘to raise awareness on the implementation’ of the treaty; and (c) make recommendations to a State Party’s competent authorities.

As such, NIMs will have the power to:

  • request necessary information from a State Party in relation to the implementation of the treaty, including financial and non-financial information. It also has the power to request information from other State Parties;
  • conduct reviews on the implementation of a State Party’s due diligence obligations when requested by ‘victims, natural or legal persons conducting business activities of a transnational character or all other persons with a legitimate interest’, or where the NIM deems it necessary;
  • where non-compliance is identified, provide recommendations to natural or legal persons conducting business activities in order for it ‘to bring its operation into compliance, [or] inform the competent authorities about such conduct or omission’;
  • receive, consider and investigate complaints of human rights violations alleged to have been committed by natural or legal persons conducting business activities brought by victims or a group of victims, their representatives or other interested parties’, and assist parties to reach an amicable settlement; and
  • monitor the compliance of parties that have reached an amicable settlement, and, in the event of any non-compliance, communicate the non-compliance to the Committee of experts, ‘without prejudice to the right to institute appropriate judicial or administrative procedures against the non-complying party.’

Implementation (Treaty, Article 15)

In order to implement the treaty, State Parties are required to, inter alia, ‘take all necessary legislative, administrative or other action’ to ensure the effective implementation of the treaty. The treaty does not elaborate on how State Parties are to do this in practice.

Next Steps

So where to from here? The working group’s next session is scheduled for 15 to 19 October 2018 in Geneva during which it will discuss the treaty and Optional Protocol. While the treaty and Optional Protocol are a step in the right direction to imposing human rights obligations on businesses there are still gaps that it needs to address, which will be explored in the next blog post.

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