Editor's note: Sara Martinetto is an intern at T.M.C. Asser Institute.
She has recently completed her LLM in Public International Law at the University of
Amsterdam. She holds interests in Migration Law, Criminal Law, Human Rights and
European Law, with a special focus on their transnational dimension.
Since the adoption by the UN Human Rights Council of Resolution 26/9 in
2014, an Open-ended Intergovernmental Working Group (WG) is working on a
binding Treaty capable of holding transnational corporations accountable for
human rights abuses. Elaborating on the proposal presented by Ecuador and South
Africa, the WG has been holding periodical sessions. In much
trepidation for what is supposed to be the start of substantive negotiations –
scheduled for October 23-27, 2017 – it is worth summarising and highlighting
the struggles this new instrument is likely to encounter, and investigating whether
(and how) such an agreement could foster transnational corporations’ (TNCs)
human rights compliance.
Shortcomings of instruments already in place.
In past decades, corporations have come to acknowledge
the need to go beyond their mere economic dimension, in view of their
increasing impact on society as a whole. From the 1970s, they started to create
a “private self-regulatory system”, today known as Corporate Social
Responsibility (CSR). The
expression indicates a body of voluntary measures, aiming at tailoring
enterprises’ operations on perceived societal needs.
Undeniably, the adoption of such codes and standards
has played a role in advancing compliance of TNCs with human rights. However,
there is a stark difference between CSR and “business and human rights” (BHR) instruments:
the latter endeavour to provide a broader coverage – both ratione materiae and ratione personae – with regard to the self-regulation
of human rights violations by TNCs, thereby referring to relevant international
standards. As examples of this, it is worth recalling, among others, the UN Global
Compact, the ILO
Declaration of 1998, the OECD
ultimately, the UN Guiding Principles on Business and Human Rights of 2011 (UNGP). The major downside of these sources
is to be found in their soft-law nature: they create no true legal
accountability, nor are they currently enforced by courts.
It is worth reminding that the 2014 Resolution does
not constitute the first attempt to negotiate a binding instrument on the
matter: the 2003 Norms
on Transnational Corporations, drafted by the UN Sub-Commission on the Promotion and Protection of
Human Rights, were ultimately not adopted. This failure was mainly attributable
to the lack of consensus around several concepts, which are essentially still
The decision to re-engage in such a project largely
relies on a rekindled consensus, triggered by the adoption of the UNGP. In
fact, the UNGP has formed unprecedented agreement on relevant issues: it shaped
common standards to which relevant stakeholders can refer when corporate
interests and human rights collide.
Do we need new commitments?
The decision to pursue a binding agreement has not yet
resulted in the abandoning the UNGP. The Human Rights Council keeps fostering
and monitoring the implementation of
the Guiding Principles in national law. Albeit slowly, States are
adopting national action plans and a variety of other instruments, which aim at
operationalising the UNGP. The new Dutch Agreement on Sustainable Garment and Textile or the 2015 UK Modern Slavery Act are examples of this trend. Thus, the question would be… do we really
need a new Treaty?
Certainly, the prospective instrument cannot
constitute a mere repetition of its predecessors. Thus,
a successful drafting requires the identification of shortcomings of the
previous legislation, to be developed and specified. Three main issues have
the question of monitoring mechanisms and remedies; the development of
extraterritorial clauses establishing State responsibility for TNCs
incorporated under their laws; the actual extent of the due diligence
obligation designated by the UNGP (especially in Principles 15 and 17).
Moreover, delegates have to take into account the lack
of consensus, which has
immediately marred Resolution 26/9: notwithstanding the intense lobbying
carried out by numerous NGOs, several States are opposing the formation of a
new Treaty. In particular, the EU argues against its
usefulness, deeming the implementation of the UNGP sufficient to tackle the
problem, without undergoing further lengthy negotiations. This vision is
endorsed by some scholars, who believe that the
adoption of effective domestic measures, rather
than an international Treaty, could better tackle the problem.
Furthermore, there are still major disagreements on
some basic concepts and theoretical foundations. Therefore, delegations will
need to agree on a precise and coherent framework; to take a normative stance
on some key issues; to identify the right level of abstraction, agreeing on the
grade of depth, precision, and prescriptiveness these rules ought to have; and,
probably, to limit the content and scope of the treaty, leaving aside aspects
which would be better tackled on the national level. Of
course, this is easier said than done. From the reports of the first and second sessions of
the WG, it appears clearly that, even when delegations agree on the desired
result, discrepancies on the means still remain.
Ultimately, if not solved, these disagreements could
lead to two possible outcomes: either negotiations will bog down, or meaningful
instances and the identification of precise obligations will be sacrificed on
the altar of compromise. In the next sections, I will review what I consider
the burning issues and choices ahead for the negotiators.
Would there be a catalogue of rights?
There are two contrasting views on this issue. On one
side, the inclusive approach – i.e., the decision to protect all human rights,
without further specification – has the undoubted perk of averting the
possibility of undue prioritization of
social and political rights over social and economic rights. On the other, it
is a risky tactic, since quantity might prevail over quality: the category of
rights covered will be inflated, thereby potentially resulting in an overall
lower standard of protection.
Moreover, including a catalogue inside the Treaty
could have two main advantages: with regard to TNCs, it could provide better
guidance on the actual obligations they are supposed to implement; more generally, it could be a way of
developing the interpretation of certain rights, which still rely on quite vague
concepts (e.g. standard of living, the concept of ‘living wages’, etc.).
Drawing on the text of the Resolution, some have
argued that the new Treaty will focus merely on TNCs, narrowing the scope of
UNGP. Some delegations (in particular, the EU), have
strongly criticised this stand,
submitting that even local companies and State-owned companies can violate
human rights. Thus, a restricted scope would ultimately result in discrimination
not only between different companies, but between victims, who will have
different access to remedies depending on the perpetrator.
Ultimately, this issue boils down to the need to adopt
a definition of TNC susceptible to include all the actors of the supply chain. Nonetheless,
it is still unclear whether the proposed instrument will include such a
definition. Instead, some delegations have
proposed to include all enterprises within the scope of the Treaty, but to
provide for more specific norms for TNCs.
Imposition of direct obligations upon TNCs
This question essentially depends on whether TNCs are
to be considered as subjects of international law. The complex and lengthy
literature on this matter falls outside the scope of this post.
However, this much debated issue cannot be easily dismissed, since its answer
establishes the existence of international legal personality and, ultimately,
of responsibility of TNCs.
The growing consensus on the legal personality of
corporations under international law is mainly based on an application, by
analogy, of the reasoning of the ICJ in Reparations of Injuries. The argument
is further supported by the existence, in international law, of rights enjoyed
by corporations, especially in the context of Investor-State Dispute Settlement
(ISDS). Logically, an entity provided with legal rights should be also capable
of being bound by legal obligations.
Furthermore, it is believed that UNGP already attached
legal personality to TNCs. However, the Human Rights Council has
clarified that the second pillar of the Principles, i.e., the responsibility of
TNCs to respect human rights, does not per
se entail a legal obligation, but more of a moral and social
The inclusion of direct obligations on TNCs to respect
(or even protect) human rights has the purpose to avert the so-called “race to
the bottom”, namely, a situation in which the State is too weak to uphold human
rights in its territory and finds itself incapable of resisting to the pressure
of TNCs, fearing a negative impact on their economy.
Nonetheless, the idea remains quite controversial,
especially because there is no general rule in international law providing for
responsibility of TNCs. Therefore, a Treaty would need to set up an
all-comprehensive construction which would deal both with primary and secondary
Thus, it might be considered more appropriate to
maintain the regulatory focus on States. Indeed, there is an inherent value in
keeping them at the centre of the system: since the States which are major
supporters of the Treaty also have a poor human rights record, one wonders
whether the focus on TNCs will lead to a blame game between different subjects.
However, this does not mean that a satisfactory result cannot be achieved by
mean of indirect obligations on TNCs, which would result in a direct
responsibility of States. This could be put into practice by providing for
precise due diligence obligations to be implemented, probably, with the help of
Due diligence obligations
There are mainly two dimensions of due diligence which
are relevant in this context. On the one hand, a due diligence obligation
stemming from international law would provide ground for States’ responsibility
for its breach, in case of a violation perpetrated by TNCs incorporated under
their domestic law; on the other hand, due diligence might be required from
TNCs for acts of other entities which are part of their supply chain.
At the outset, it is important to stress that State
responsibility will be broader or narrower, depending on the degree of due
diligence a State is asked to exercise. Since there is no general obligation of
due diligence in international law, the Treaty
would have to provide for it: this will allow to cover the conduct of private entities,
whose acts cannot be traced back to the State by means of a rule of attribution
or by using the framework of complicity. Thus, most likely, these new
obligations would serve the purpose of clarifying the level of control a State must
exercise on the conduct of private actors in any given moment.
Without denying the need for new rules on the matter,
it would be hard to conceive that a single instrument could carry out such a
task with the sufficient degree of precision effectiveness requires. A decision
will have to be taken on what a State could reasonably be expected to exercise
control over, presumably drawing from the landmark case Velásquez Rodríguez (Inter-American Court of Human Rights), and on the obligation posed by art. 2(1) International Covenant on
Civil and Political Rights (ICCPR). Of course, this does not take away States’ international
obligation to provide remedies for violations perpetrated by private actors on
their territory. This issue will be further discussed below.
As far as the second dimension is concerned, UNGP
already provided for a due diligence obligation for TNCs. However, for it to
become prescriptive and operational, the extent of this duty would need to be
further clarified. Corporations have already a wide set of responsibilities
under national laws as domestic legal systems provide for different legal obligations
(from tax to labour, from environment to anti-discrimination). Responsibility
for a breach of those obligations is reflected in different types of liability.
However, defining the scope of responsibility of TNCs has become increasingly
difficult also in domestic law. This is largely due to the maze of different
subsidiaries, suppliers, and (sometimes even illegal) subcontractors a parent
company might have.
In order to appraise that, one should take a step back
to consider the much-debated question of the corporate veil, i.e. the obstacles
created for accountability by the doctrine of separate personality, and the
distinction between different legal entities. This veil exists even between a
company and its shareholders, as clearly affirmed by the ICJ in Barcelona Traction, and even more so between different companies.
However, the ICJ in the very same judgement (§38-39) has held that the veil can
be lifted in some circumstances, such as when the privilege given by the
doctrine of separate personality has been abused. This reasoning has slowly
been expanded in order to create direct liability of the parent company in case
of breach of due diligence with regard to other legal persons belonging to its supply
this way, it will be possible to avoid the problem of undercapitalisation of
subsidiaries or suppliers, which are often unable to pay compensation when a
case is decided against them.
Were the delegates to agree upon the actual scale of
the due diligence obligation required, the putative ruling against the parent
company for a breach of due diligence could have some extraterritorial effects
against the subsidiaries. Extraterritorial clauses would entail the direct
jurisdiction of foreign States on companies incorporated in another State,
provided that there is a link between the two actors. The
possibility of including such extraterritorial clauses in the Treaty would be
revolutionary, since it would challenge one of the core principles of human
rights jurisdiction, i.e. territoriality. Moreover, such a provision could be
subject to criticism, because of its possible impact on the sovereignty of the
It is probably right that extraterritorial clauses will
have a greater deterrent effect on TNCs. However, clarifying the link between
the forum State and the State of incorporation, or between the two companies,
will be essential in practice. Particularly, while in the case of subsidiaries
thresholds and standards can be borrowed from other fields of law (e.g.
competition law, consumer law), an effective control test might need to be
developed in order to capture the required link between a company and another
contractor. Although the Maastricht Principles on Extraterritorial Obligations might provide guidance, they seem overly vague for
Thus, the Treaty will probably need to phrase the
extraterritoriality question as a conflict of jurisdictions. An international
binding instrument governing the relationship between different jurisdictions
on the matter would ensure cooperation between States, while limiting the
above-mentioned possible disruptive effect of extraterritorial clauses. This
would obviously have a direct impact on the issue of access to remedies
During the negotiations, some have advanced the
idea of a new international body to monitor compliance. Yet, the enforcement of
the prospective instrument will most likely rely on domestic courts. The
current hurdles to access to justice for victims of human rights violations are
largely related to jurisdictional issues, lack of recognition of foreign
judgements, and extensive use of the principle of forum non conveniens. Therefore, obligations dealing with
procedural matters regarding remedies are of the upmost importance to a
One might discuss whether to criminalise certain
conducts: perpetration of certain human rights abuses is deemed to be criminal
in nature, and, hence, linked to the remedies attached to criminal liability. However,
the interplay between corporations and criminal law is still uncertain even in
some domestic jurisdictions.
In conclusion, there are a number of key issues which
will define the impact of the future Treaty and be at the heart of the upcoming
First, who is primarily responsible for the human
rights violations of a TNC broadly speaking (including subsidiaries and
subcontractors)? The home State, the TNC, or both? The answer provided will
most likely condition the practical bite of the Treaty and the ease or
difficulty to enforce the obligations it will set out.
Second, the definition of core concepts, such as ‘due
diligence’ and ‘sphere of influence’, is an important semantic battleground.
They will define the scope of the responsibility of TNCs and States and the
extent to which they are deemed responsible for activities occurring outside of
their immediate (contractual or territorial) surroundings.
Finally, the capacity of victims to access remedies
will be crucial to the practical effect of the new Treaty. This could entail
the recognition of the extraterritorial nature of due diligence obligations and
the potential responsibility of States vis-à-vis third country nationals.