United States: United Nations Takes Another Step In Developing A Treaty On Business And Human Rights

Since it was established in 2014, a United Nations Inter-Governmental Working Group ("IGWG") has met annually to develop a multilateral treaty to attempt to hold businesses legally accountable for harms that may be related to their global operations (the "Proposed Treaty").  Littler Mendelson attorneys have provided testimony at all of these sessions.1 The IGWG held its most recent session from October 14-18, 2019, during which certain member States of the United Nations ("States") and other stakeholders discussed a "Revised Draft" of the Proposed Treaty.2 This Revised Draft is the second full draft of the Proposed Treaty that the IGWG has produced.   

At first glance, compared to the first draft, the latest iteration of the Proposed Treaty appears to address some of the concerns the business community and others have articulated in previous sessions.3  However, closer inspection of the Revised Draft reveals that the scope of the duties and liability imposed upon businesses by the Proposed Treaty continues to be problematic and that many of the same issues and ambiguities remain. 

Despite this, some State delegates and other commentators at the recent session lauded the draft as an improvement on the previous iteration, signaling their hope for more  States to support some version of the Proposed Treaty.  Indeed, whereas previous sessions debated whether a treaty was the proper mechanism for addressing human rights violations, this session focused on the substance of the Revised Draft. 

Background to the Proposed Treaty

The Proposed Treaty arrives on the scene against the backdrop of the UN Guiding Principles on Business and Human Rights (the "UN Guiding Principles").  Since their advent in 2011, the UN Guiding Principles have constituted an authoritative set of standards for governments and businesses to prevent, mitigate, and, as necessary and appropriate, remedy human rights abuses by third parties, including business enterprises.4  Businesses have made great strides in complying with these UN Guiding Principles, implementing a wide array of thoughtful policies and practices to address human rights abuses in their activities and operations.5

Nevertheless, in June 2014, a number of the UN Human Rights Council member states, led by Ecuador and South Africa, established the IGWG "to elaborate an international legally binding instrument to regulate, in international human rights law, the activities of transnational corporations and other business enterprises."6 

The IGWG's first session took place in July 2015, and has met annually since then.  At this most recent fifth session held in October 2019, the IGWG debated the Revised Draft of the Proposed Treaty. 

On the whole, the Revised Draft requires ratifying States, through their domestic laws, to both require that "all [legal and natural] persons conducting business activities ... undertake human rights due diligence"7 and to provide for "a comprehensive and adequate system of legal liability for human rights violations ... in the context of business activities ...."8 

In doing so, the Revised Draft raises the following significant concerns for businesses with international operations:     

  • Multi-National Companies Are The Primary – if not the Exclusive – Target

In previous iterations of the Proposed Treaty, it appeared that Multi-National Companies ("MNCs") were the exclusive target, a focus that failed to acknowledge that domestic companies can and do engage in covered violations.  At first glance, the Revised Draft appears to rectify this flaw by mentioning "other business enterprises" in certain provisions.9  The Revised Draft, however, also makes explicit that ratifying States may shield their domestic small and medium-sized businesses from the Proposed Treaty's scope "to avoid causing undue additional burdens," at least with regard to "respect[ing] human rights and prevent[ing] human rights violations or abuses."10  If many States take advantage of this exemption, in effect, MNCs may once again be the exclusive targets of the Proposed Treaty.    

  • MNCs are Required to Conduct Due Diligence of Entities that are not Under their Control and that May Not Even be Visible to MNCs

The Revised Draft requires States to impose due diligence requirements on MNCs, including monitoring human rights impacts, undertaking human rights impact assessments, preventing human rights violations, and reporting to the public about the due diligence steps taken.11  Critically, MNCs are required to conduct this due diligence not only with regard to their own operations, but also those with which they have "contractual relationships," which is a term so vaguely defined that it encompasses "any relationship ... to conduct business activities, including but not limited to, those activities conducted through affiliates, ..., suppliers, any business partnership or association, ... or any other structure ...."12 

In other words, "contractual relationships" are not limited to MNCs' relationships that involve actual contracts, and instead may extend to any relationship that involves business activities.13  Thus, the Proposed Treaty requires that MNCs police the activities of business partners that may neither be visible (for example, because they are situated multiple levels deep within a global supply chain) nor have any contractual relationship with the MNC.   

  • Accepted Due Diligence Standards Remain Rejected in Favor of "Outcome-Based" Standards

In a significant departure from the UN Guiding Principles, the Revised Draft's due diligence process requires that MNCs actually prevent human rights violations.  Indeed, and despite some commentary, the Revised Draft's article on "Prevention" states that, as part of their human rights due diligence duties, MNCs must "[t]ake appropriate actions to prevent human rights violations,"14 and the article on "Legal Liability" requires that State Parties ensure that domestic law impose liability for MNCs' "failure to prevent" harms occurring in the MNCs' operations, as well in the operations of their business partners.15  

The UN Guiding Principles, on the other hand, more appropriately presented human rights due diligence as a process in which companies take adequate measures to seek to prevent, mitigate and account for human rights impacts.16  The Revised Draft thus may seek to transform due diligence from a process-based standard to an outcome-based standard, which may, in some instances, be impossible for businesses to satisfy. 

  • Liability is Potentially Extended to MNCs' Directors and Shareholders

The Revised Draft requires that States provide for a "comprehensive and adequate system of legal liability for human rights violations ... in the context of business activities ...."17 This comprehensive liability regime requires that criminal, civil, and administrative liability be imposed not only on businesses as corporate entities, but also on "natural persons" within those businesses. 

This language opens the door for States to hold liable MNCs' directors or even shareholders based on the individual State's definition of such legal standards as proximate cause, mens rea, and actus reus.  Thus, the Revised Draft seeks to "pierce the corporate veil" in imposing broad liability on a broad swath of entities and individuals. 

  • Broad Extraterritorial Jurisdiction

The Revised Draft reflects a concept of extraterritorial jurisdiction so vast that businesses are faced with grave uncertainties as to where they may be hauled into court, or to which set of laws they will be subject.  Indeed, the Revised Draft allows for concurrent jurisdiction in the MNC's host country where the harm occurred, the home country where the MNC is located, or even in a third country where the MNC is deemed to have "substantial business interests," which is a phrase that is not defined and, therefore, susceptible to problematic interpretations. 

The vastness of the Revised Draft's jurisdictional scope is even further enhanced when considering the "business activities" to be regulated.  "Business activities" is defined as "any economic activity ... undertaken by a natural or legal person, including activities undertaken by electronic means."  While not entirely clear, the inclusion of language covering "activities undertaken by electronic means" may purport to cover electronic commercial transactions or certain technology platforms. 

By encompassing technology and electronic mechanisms, the Revised Draft has exponentially widened its jurisdictional reach. 

Moreover, the Revised Draft allows the forum court to apply the public laws of another state – including the home country, host country, or where the MNC has "substantial business interests." Not only does this create uncertainties as to which laws will apply, it also creates issues of competence in that jurists in one country may not be equipped to interpret the laws of another. 

While the Revised Draft has no explicit mention of universal jurisdiction (as did the previous iteration of the Proposed Treaty), the broad language highlighted above means that there is no significant improvement to the jurisdictional scope of the Proposed Treaty.  Indeed, the Revised Draft allows plaintiffs to shop from a wide variety of forums and a wide variety of laws.  This broad conception of extraterritorial jurisdiction is contrary to the general presumption against extraterritorial jurisdiction under international law, as the UN Guiding Principles explains: "States are not generally required under international human rights law to regulate the extraterritorial activities of businesses domiciled in their territory and/or jurisdiction."18   

  • States Have Restricted Ability to Refuse Recognition of Foreign Judgments

Under international law, an important check on a foreign court's adjudicative jurisdiction has always been the power of a national court to refuse to recognize the enforcement of that foreign court's decision.19  This is an important safeguard that allows a national court to reject a foreign court's decision to exercise jurisdiction over a defendant located in the country of the national court.  A common basis for non-recognition of foreign judgments is the foreign court's lack of personal jurisdiction over the defendant or lack of subject matter jurisdiction. 

However, this important safeguard has been removed by the Revised Draft because it mandates that all State Parties recognize and enforce another State Party's court order.20 While some limited grounds for non-recognition are provided, those exceptions do not consider lack of jurisdiction over the defendant or lack of subject matter jurisdiction to be one of them.21 Thus, the Revised Draft has denied a critical tool that States could have used to prevent the extraterritorial overreach of other States.    

What Next?

The Revised Draft is not final.  Indeed, there is still no consensus among the participating States as to the direction of the Proposed Treaty, and an additional session is envisaged in 2020 to discuss a "second" Revised Draft Treaty.

For now, individual States' positions on the Proposed Treaty run the gamut.  Countries like Ecuador, South Africa and Namibia, have been supportive of the treaty process from the outset and lauded the Revised Draft at the most recent session.  Russia and China, on the other hand, voiced serious concerns with the draft, and stated their opposition to entire articles, as well as made clear that the Revised Draft was not a basis for negotiations.  The E.U., in previous sessions, also voiced concerns with the Proposed Treaty, but in the most recent session, stated nothing substantive.  Other countries like Canada, Australia, South Korea, Norway and Japan were absent from the session altogether.  The United States, which is no longer a member of the Human Rights Council, under which the IGWG operates, was also absent from the session and issued a written statement maintaining that the "treaty process continues to detract from the valuable foundation laid by the UN Guiding Principles."22 

Nonetheless, the generally appreciative comments on the Revised Draft from various State delegates suggest that a consensus may be slowly building towards supporting some version of the Proposed Treaty, or some of its elements. 

In any event, the ongoing treaty process is one of many global initiatives that seek to provide guide posts for national governments that are seeking to update their policies and reform their laws on human rights in the context of business operations.  In fact, many countries—including the home countries of many MNCs—have already enacted various laws to that very end.  These include mandatory disclosure laws such as the California Transparency in Supply Chains Act, the U.K. Modern Slavery Act, and the Australian Modern Slavery Act 2018,23 and mandatory due diligence laws such as a French law requiring companies to create and implement a "vigilance plan" aimed at identifying and preventing potential human rights violations,24 and a similar draft law being debated in Germany.25 

Thus, businesses need to be keenly aware of the direction of the treaty process because, whether or not the Proposed Treaty is finalized, businesses will likely be subject (if they are not already) to similar liability and requirements under national laws.  

Footnotes

1  At the most recent session, Lavanga V. Wijekoon provided testimony.  In previous sessions, Lavanga and Michael G. Congiu have provided testimony. 

2 Open-ended intergovernmental working group on transnational corporations and other business enterprises with respect to human rights, Legally Binding Instrument to Regulate, In International Human Rights Law, the Activities of Transnational Corporations and Other Business Enterprises  (July 16, 2019), available at https://www.ohchr.org/Documents/HRBodies/HRCouncil/WGTransCorp/OEIGWG_RevisedDraft_LBI.pdf (hereinafter "Revised Draft").

See Lavanga V. Wijekoon, Michael G. Congiu, and Stefan J. Marculewicz, United Nations Further Deliberates a Treaty Seeking to Impose Corporate Liability for Human Rights Violations, Littler Insight (Nov. 7, 2018).

4 United Nations, Office of the High Commissioner for Human Rights, Guiding Principles on Business and Human Rights, available at http://www.ohchr.org/Documents/Publications/GuidingPrinciplesBusinessHR_EN.pdf

5 For a survey of various corporate efforts to comply with the UN Guiding Principles, see  U.S. Chamber of Commerce, Eliminating Human Trafficking:  The Case for Corporate Self-Regulation, available at https://www.uschamber.com/sites/default/files/eliminating_human_trafficking_-_a_case_for_corporate_self-regulation.pdf see also Modern Slavery Registry, Business and Human Rights Resource Center, https://www.business-humanrights.org/en/uk-modern-slavery-act-registry; Lavanga V. Wijekoon & Michael G. Congiu, Imposing Liability on Employers Under the Shadow of the United Nations Guiding Principles on Business & Human Rights, in EMPLOYMENT LAW UPDATE, 2017 EDITION 4-5 (2017) (describing the steps employers have taken to implement UN Guiding Principles).

6 United Nations Human Rights Office of the High Commissioner, Open-ended intergovernmental working group on transnational corporations and other business enterprises with respect to human rightsavailable at http://www.ohchr.org/EN/HRBodies/HRC/WGTransCorp/Pages/IGWGOnTNC.aspx.

7 Revised Draft, Article 5.

8 Revised Draft, Article 6.

See e.g.  Revised Draft, Article 1.3.

10 Revised Draft, Article 5.6. 

11 Revised Draft, Article 5.3.

12 Revised Draft, Article 1.4 (emphasis added). 

13 At the recent meeting, some State delegates and experts argued that the phrase "contractual relationships" was actually too limiting and proposed replacing it with "business relationships," which more accurately reflected the broad scope of the definition of "contractual relationships."

14 Revised Draft, Article 5.2.b. 

15 Revised Draft, Article 6.6. (emphasis added).

<16 UN Guiding Principles 17, 19. 

17 Revised Draft, Article 6.1.

18 UN Guiding Principles 2.

19 See Lucasfilm Ltd. v. Ainsworth, 2009 EWCA (Civ) 1328 (Eng.).

20 Revised draft, Article 10. 

21 This contrasts with, for example, the mandatory grounds for non-recognition under U.S. law, which explicitly include lack of personal jurisdiction and subject matter jurisdiction.  See  1962 Uniform Foreign Money-Judgments Recognition Act.  U.S. courts also have the discretion to refuse recognition if "in the case of jurisdiction based only on personal service, the foreign court was a seriously inconvenient forum for the trial of the action" or if the "integrity" of the foreign court is at issue.  See  2005 Uniform Foreign-Country Money Judgments Recognition Act.

22 U.S. Mission to International Organizations in Geneva, The United States Government's Continued Opposition to the Business and Human Rights Treaty Process  (October 16, 2019) available at https://geneva.usmission.gov/2019/10/16/the-united-states-governments-continued-opposition-to-the-business-human-rights-treaty-process/.

23 See Naomi Seddon, Lavanga Wijekoon, Merille Raagas, Alexander MacDonald, Michael Congiu, and Stefan Marculewicz, Australia Passes Law Requiring Large Companies to Report on Modern Slavery, Littler Insight (Dec. 4, 2018).

24 See Michael Congiu, Stefan Marculewicz, John Kloosterman, Stephan Swinkels, Aaron TesSaltzman, and Lavanga Wijekoon, Dutch and French Legislatures Introduce New Human Rights Due Diligence Reporting Requirements, Littler Insight (Mar. 13, 2017).

25 See  Jan-Ove Becker, Lavanga Wijekoon, Courtney Osborn, Michael Congiu, and Stefan Marculewicz, Germany Seeks to Mandate Human Rights Due Diligence for Companies and Their Global Partners, Littler Insight (Apr. 25, 2019).

The content of this article is intended to provide a general guide to the subject matter. Specialist advice should be sought about your specific circumstances.

To print this article, all you need is to be registered on Mondaq.com.

Click to Login as an existing user or Register so you can print this article.

Authors
Similar Articles
Relevancy Powered by MondaqAI
 
In association with
Related Topics
 
Similar Articles
Relevancy Powered by MondaqAI
Related Articles
 
Related Video
Up-coming Events Search
Tools
Print
Font Size:
Translation
Channels
Mondaq on Twitter
 
Mondaq Free Registration
Gain access to Mondaq global archive of over 375,000 articles covering 200 countries with a personalised News Alert and automatic login on this device.
Mondaq News Alert (some suggested topics and region)
Select Topics
Registration (please scroll down to set your data preferences)

Mondaq Ltd requires you to register and provide information that personally identifies you, including your content preferences, for three primary purposes (full details of Mondaq’s use of your personal data can be found in our Privacy and Cookies Notice):

  • To allow you to personalize the Mondaq websites you are visiting to show content ("Content") relevant to your interests.
  • To enable features such as password reminder, news alerts, email a colleague, and linking from Mondaq (and its affiliate sites) to your website.
  • To produce demographic feedback for our content providers ("Contributors") who contribute Content for free for your use.

Mondaq hopes that our registered users will support us in maintaining our free to view business model by consenting to our use of your personal data as described below.

Mondaq has a "free to view" business model. Our services are paid for by Contributors in exchange for Mondaq providing them with access to information about who accesses their content. Once personal data is transferred to our Contributors they become a data controller of this personal data. They use it to measure the response that their articles are receiving, as a form of market research. They may also use it to provide Mondaq users with information about their products and services.

Details of each Contributor to which your personal data will be transferred is clearly stated within the Content that you access. For full details of how this Contributor will use your personal data, you should review the Contributor’s own Privacy Notice.

Please indicate your preference below:

Yes, I am happy to support Mondaq in maintaining its free to view business model by agreeing to allow Mondaq to share my personal data with Contributors whose Content I access
No, I do not want Mondaq to share my personal data with Contributors

Also please let us know whether you are happy to receive communications promoting products and services offered by Mondaq:

Yes, I am happy to received promotional communications from Mondaq
No, please do not send me promotional communications from Mondaq
Terms & Conditions

Mondaq.com (the Website) is owned and managed by Mondaq Ltd (Mondaq). Mondaq grants you a non-exclusive, revocable licence to access the Website and associated services, such as the Mondaq News Alerts (Services), subject to and in consideration of your compliance with the following terms and conditions of use (Terms). Your use of the Website and/or Services constitutes your agreement to the Terms. Mondaq may terminate your use of the Website and Services if you are in breach of these Terms or if Mondaq decides to terminate the licence granted hereunder for any reason whatsoever.

Use of www.mondaq.com

To Use Mondaq.com you must be: eighteen (18) years old or over; legally capable of entering into binding contracts; and not in any way prohibited by the applicable law to enter into these Terms in the jurisdiction which you are currently located.

You may use the Website as an unregistered user, however, you are required to register as a user if you wish to read the full text of the Content or to receive the Services.

You may not modify, publish, transmit, transfer or sell, reproduce, create derivative works from, distribute, perform, link, display, or in any way exploit any of the Content, in whole or in part, except as expressly permitted in these Terms or with the prior written consent of Mondaq. You may not use electronic or other means to extract details or information from the Content. Nor shall you extract information about users or Contributors in order to offer them any services or products.

In your use of the Website and/or Services you shall: comply with all applicable laws, regulations, directives and legislations which apply to your Use of the Website and/or Services in whatever country you are physically located including without limitation any and all consumer law, export control laws and regulations; provide to us true, correct and accurate information and promptly inform us in the event that any information that you have provided to us changes or becomes inaccurate; notify Mondaq immediately of any circumstances where you have reason to believe that any Intellectual Property Rights or any other rights of any third party may have been infringed; co-operate with reasonable security or other checks or requests for information made by Mondaq from time to time; and at all times be fully liable for the breach of any of these Terms by a third party using your login details to access the Website and/or Services

however, you shall not: do anything likely to impair, interfere with or damage or cause harm or distress to any persons, or the network; do anything that will infringe any Intellectual Property Rights or other rights of Mondaq or any third party; or use the Website, Services and/or Content otherwise than in accordance with these Terms; use any trade marks or service marks of Mondaq or the Contributors, or do anything which may be seen to take unfair advantage of the reputation and goodwill of Mondaq or the Contributors, or the Website, Services and/or Content.

Mondaq reserves the right, in its sole discretion, to take any action that it deems necessary and appropriate in the event it considers that there is a breach or threatened breach of the Terms.

Mondaq’s Rights and Obligations

Unless otherwise expressly set out to the contrary, nothing in these Terms shall serve to transfer from Mondaq to you, any Intellectual Property Rights owned by and/or licensed to Mondaq and all rights, title and interest in and to such Intellectual Property Rights will remain exclusively with Mondaq and/or its licensors.

Mondaq shall use its reasonable endeavours to make the Website and Services available to you at all times, but we cannot guarantee an uninterrupted and fault free service.

Mondaq reserves the right to make changes to the services and/or the Website or part thereof, from time to time, and we may add, remove, modify and/or vary any elements of features and functionalities of the Website or the services.

Mondaq also reserves the right from time to time to monitor your Use of the Website and/or services.

Disclaimer

The Content is general information only. It is not intended to constitute legal advice or seek to be the complete and comprehensive statement of the law, nor is it intended to address your specific requirements or provide advice on which reliance should be placed. Mondaq and/or its Contributors and other suppliers make no representations about the suitability of the information contained in the Content for any purpose. All Content provided "as is" without warranty of any kind. Mondaq and/or its Contributors and other suppliers hereby exclude and disclaim all representations, warranties or guarantees with regard to the Content, including all implied warranties and conditions of merchantability, fitness for a particular purpose, title and non-infringement. To the maximum extent permitted by law, Mondaq expressly excludes all representations, warranties, obligations, and liabilities arising out of or in connection with all Content. In no event shall Mondaq and/or its respective suppliers be liable for any special, indirect or consequential damages or any damages whatsoever resulting from loss of use, data or profits, whether in an action of contract, negligence or other tortious action, arising out of or in connection with the use of the Content or performance of Mondaq’s Services.

General

Mondaq may alter or amend these Terms by amending them on the Website. By continuing to Use the Services and/or the Website after such amendment, you will be deemed to have accepted any amendment to these Terms.

These Terms shall be governed by and construed in accordance with the laws of England and Wales and you irrevocably submit to the exclusive jurisdiction of the courts of England and Wales to settle any dispute which may arise out of or in connection with these Terms. If you live outside the United Kingdom, English law shall apply only to the extent that English law shall not deprive you of any legal protection accorded in accordance with the law of the place where you are habitually resident ("Local Law"). In the event English law deprives you of any legal protection which is accorded to you under Local Law, then these terms shall be governed by Local Law and any dispute or claim arising out of or in connection with these Terms shall be subject to the non-exclusive jurisdiction of the courts where you are habitually resident.

You may print and keep a copy of these Terms, which form the entire agreement between you and Mondaq and supersede any other communications or advertising in respect of the Service and/or the Website.

No delay in exercising or non-exercise by you and/or Mondaq of any of its rights under or in connection with these Terms shall operate as a waiver or release of each of your or Mondaq’s right. Rather, any such waiver or release must be specifically granted in writing signed by the party granting it.

If any part of these Terms is held unenforceable, that part shall be enforced to the maximum extent permissible so as to give effect to the intent of the parties, and the Terms shall continue in full force and effect.

Mondaq shall not incur any liability to you on account of any loss or damage resulting from any delay or failure to perform all or any part of these Terms if such delay or failure is caused, in whole or in part, by events, occurrences, or causes beyond the control of Mondaq. Such events, occurrences or causes will include, without limitation, acts of God, strikes, lockouts, server and network failure, riots, acts of war, earthquakes, fire and explosions.

By clicking Register you state you have read and agree to our Terms and Conditions