Doing Business Right Blog

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.

Since the release of the first draft of the BHR Treaty (from herein referred to as the ‘treaty’), a range of views have been exchanged by commentators in the field in relation to the content of the treaty (a number of them are available on a dedicated page of the Business and Human Rights Resource Centre’s website). While many have stated that the treaty is a step in the right direction to imposing liability on businesses for human rights violations, there are a number of critiques of the first draft, which commentators hope will be rectified in the next version.

This second blog of a series of articles dedicated to the proposed BHR Treaty provides a review of the key critiques of the treaty. It will be followed by a final blog outlining some recommendations for the working group’s upcoming negotiations between 15 to 19 October 2018 in Geneva.

Critiques of the Treaty

Scope

As stated in the first blog post, the treaty applies to ‘business activities of a transnational character’. This aspect of the treaty has been criticised by many for being too limited as it makes a distinction between businesses that have activities abroad and those that do not, and it only imposes obligations on States to implement the treaty requirements with respect to the former.[1] By doing so, the treaty does not align with the UN Guiding Principles on Business and Human Rights (UNGPs) and suggests that all businesses should not be held equally responsible.

Larry Catá Backer, Professor at Pennsylvania State University, comments that the limitation of the scope of the treaty detracts from the assertion in the preamble that human rights are ‘universal, indivisible, interdependent and inter-related’ as the scope is ‘defined in a way to effectively protect local business …from effective compliance with thew high values’. [2] He notes that cynics may see this as ‘an effort to protect the local economies of certain states’ and perhaps a confirmation that ‘only certain states and their citizens [are] mature enough to undertake the burdens of legal responsibility, in this case for human rights.’[3]

The Business & Human Rights Resource Centre’s experience has shown that ‘allegations of corporate abuse are made against both national and international companies and national laws currently too often provide no adequate protection or remedy from either source of abuse.’[4] Accordingly, if the scope of the treaty is not altered, it will effectively deprive victims of human rights violations committed by businesses with exclusively domestic activities from obtaining redress under the treaty.

With respect to the definition of ‘business activities of a transnational character’, Professor John Ruggie notes that it is unclear and unnecessarily narrow such that it will be difficult to operationalise as it is ‘nowhere defined in the law or the social sciences’.[5] Accordingly, there may be difficulties in ‘monitoring and attributing legal liability’, particularly given the complex nature of global supply chains. [6] He also states that it could ‘exclude state-owned enterprises (SOEs) engaged in transnational business activity whose mission is not strictly profit-driven’.[7] As Professor Baker notes, ‘SOEs occupy an increasingly important place in the global economic order’ and the lack of clarity as to whether covered by the scope of the treaty is ‘troublesome’.[8]

Scale

The treaty has been criticised for its scale, that is, ‘the magnitude of the task at hand in seeking to regulate transnational business enterprises or ‘activities’.’ [9] Despite the lack of clarity surrounding the definition of ‘business activities of a transnational character’, it would capture a large number of businesses and their operations and activities. Professor Ruggie notes that it should be ensured that the ‘instrumentalities for monitoring and provisions for attributing legal liability are up to the magnitude of the task.’ [10] Surya Deva, Associate Professor of the School of Law of the City University of Hong Kong, notes that the number of entities captured could not be ‘regulated effectively by each state acting alone’; therefore, he suggests that States take collective action under the treaty. [11]

Imposition of obligations on businesses

To date, the international legal personality of corporations and the ability to hold corporations responsible for human rights violations under international law is not settled. Accordingly, the treaty does not impose human rights obligations directly on businesses; instead it seeks to indirectly impose obligations on businesses by providing States with the primary responsibility to adopt legislation that is consistent with the treaty requirements.[12] Professor Nicolás Carrillo-Santarelli, Professor of Law at La Sabana University, notes that ‘this approach coincides with the archetype of international law dealing with non-state conduct indirectly, through the mediation of required domestic law and State action’.[13] It has been argued that the treaty ‘fail[s] to genuinely innovate beyond existing principles of public international law’ and, as a result, give corporations the ability to continue to ‘hide their failure to act behind the alleged shortcomings of states’.[14] Associate Professor Deva argues that the treaty ‘should state explicitly the obligation of businesses to respect of internationally recognised human rights’, and that the treaty, as currently drafted, ‘will not work’ as the treaty provides for legal liability but does not clearly impose a corporate obligation to respect human rights.[15]

Notably, the preamble of the treaty states that all businesses shall respect human rights, regardless of their ‘size, sector, operational context, ownership and structure’, which Professor Carrillo-Santarelli considers could suggest that the direct corporate obligations exist because the word ‘shall’ has a ‘strong obligation connotation’.[16] He also points out that it could be read that ‘all corporations … are under binding responsibilities to respect human rights.’[17] However, on the face of the treaty, it is unclear. Nonetheless, ratification of the treaty may be viewed as ‘expression of certain opinio juris on the existence of corporate duties that are implicitly and indirectly’ in the treaty.[18]

Intersection with investment law

Another critique of the treaty is how it deals with trade and investment treaties. Pursuant to article 13(3), the treaty does not have any primacy over existing State obligations under relevant treaties.[19] Accordingly, victims of human rights abuses that arise in the context of those trade and investment treaties will not be able to rely on the treaty. As noted by Carlos Lopez, the treaty pays ‘scant attention to the role of the State and the need for accountability and remedy in that context’.[20] Nonetheless, pursuant to article 13(6), new trade and investment treaties must not contain any provisions that conflict with the implementation of the treaty and should “[uphold] human rights in the context of business activities by parties benefiting from such agreements.”

Due diligence

The treaty has been praised for including an article on prevention of human rights violations which imposes a prescriptive list of measures to be undertaken by businesses in order to conduct due diligence (for example, reporting publically and periodically on non-financial matters). Associate Professor Deva argues that, in addition to ensuring that the due diligence process in the treaty aligns with the UNGPs, it should also be informed by best practice recommendations, for example, the European Coalition for Corporate Justice’s Position Paper on the ‘Key Features of Mandatory Human Rights Due Diligence Legislation’, to ensure that consistent processes are implemented by businesses.[21]

Nonetheless, the due diligence article (article 9) have been critiqued because it departs from the human rights due diligence process set out in the UNGPs. The UNGPs defines the parameters of human rights due diligence and sets out a four-step process to be carried out by businesses. Businesses should ‘identify, prevent, mitigate and account for how they address their adverse human rights impacts’.[22] While the treaty broadly covers each of these steps (for example, It requires businesses to identify and assess human rights violations), it goes further than the UNGPs and requires businesses to undertake a number of other measures, including reflecting due diligence requirements in their contractual relationships. In practice, this diversion may cause confusion for businesses that have implemented due diligence processes that align with the UNGPs.

Further, the ability for State Parties to exempt small and medium-sized businesses from the due diligence requirements in the treaty (article 9(5)) has been criticised on the basis that it ‘may be abusively taken advantage of by developing or other States in order to favor the “impunity” of abuses perpetrated or assisted by ‘strategic’ corporations or in ‘strategic sectors’.’ [23]

Separately, Professor Ruggie notes that a very high standard is imposed with respect to prevention of harm – the treaty requires businesses “to prevent” harm, which is ‘an extremely tall order for any due diligence requirement, which typically is expressed as “seek to prevent,” suggesting a standard of conduct.’[24] This language is reflected in article 13 of the UNGPs, which calls on businesses to ‘seek to prevent or mitigate adverse human rights impacts’ and, accordingly, use of this language in the treaty would align it with the UNGPs.

Legal liability

As stated in the first blog post, article 10.6 of the treaty provides three grounds upon which businesses may be held civilly liable for human rights violations in connection with their activities, 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.

This article has been criticised due to its lack of clarity, particularly with the use of the following words and phrases: ‘control’, ‘sufficiently close’, ‘strong and direct connection’ and ‘foreseen’.[25] None of these words or phrases are defined in the treaty, and no guidance is provided on how they should be interpreted. Doug Cassel, Professor Emeritus of Law at the University of Notre Dame, has stated that the language needs to be ‘made more precise … to avoid clashing with entrenched national law doctrines that limit piercing of the corporate veil.’[26]

With respect to criminal liability, as Professor Carrillo-Santarelli notes, it is disappointing that State Parties would only be required, pursuant to article 10(8), to ‘provide measures under domestic law to establish criminal liability for all persons with business activities of a transnational character’, as violations of human rights are violations regardless of whether they are committed through domestic or transnational business activities. [27] Further, it is unclear from the face of the treaty as to whether businesses will be held criminally liable under the treaty, or only individuals. Nadia Bernaz, Associate Professor of Law of Wageningen University, notes that if the treaty does not include corporate criminal liability, there is a greater likelihood that it will be accepted.[28] However, she also argues that ideally international corporate criminal liability for international crimes should be included in the treaty, particularly given that the treaty does not impose direct corporate liability.[29]

Rights of victims

While the treaty’s focus on the rights of victims is likely to be viewed as its ‘key positive feature’, Professor Backer argues that the definition of the term ‘victims’ may ‘cause some concern’. [30] ‘Victims’ are defined to mean ‘persons who individually or collectively alleged to have suffered harm, including physical or mental injury’ (article 4). Professor Backer claims that this definition could ‘appear to divide the world between victims … and everyone else’ and that it seems to ‘incapacitate’ victims as a class because it suggests that they are ‘not individuals who can act but who must be guided and protected like children’.[31] He suggests that victims should be identified as ‘individuals to which certain rights vest’, that is, as rights holders.[32]

Additionally, commentators have also criticised article 8(5)(d) which states that ‘in no case shall victims be required to reimburse any legal expenses of the other party to the claim.’ Professor Lopez notes that this article ‘may be seen as an incentive to frivolous litigation’.[33] Professor Carrillo-Santarelli agrees with Professor Lopez’s comment and adds that article 8(5)(d) along with article 8(6) (which states that ‘States shall not require victims to provide a warranty as a condition for commencing proceedings’) ‘could be taken advantage of to smear the reputation of some corporations when there are no grounds.’[34]

Enforcement

The treaty does not establish any sort of international enforcement or complaint mechanism to provide victims with redress. However, the absence of such mechanisms is said to be likely to make the treaty more attractive to State Parties.[35]

Although there is no international mechanism, the Optional Protocol has attempted to address concerns relating to lack of enforcement by requiring State Parties to establish a National Implementation Mechanism ‘to promote compliance with, monitor and implement’ the treaty. Further details on the role and function of this mechanism are set out in the first blog post.

Conclusion

Despite the flaws of the treaty that have been noted by commentators, overall commentators have welcomed the introduction of a treaty on business and human rights. The treaty is viewed as a step forward in addressing critical issues including preventing human rights violations by businesses and ensuring access to remedy for victims of such violations. However, it is clear that the treaty will need to be refined and clarified before it has any chance of being adopted by States.

[1] Alison Berthet, Peter Hood and Julianne Hughes-Jennett (Hogan Lovells), ‘UN treaty on business and human rights: Working Group publishes draft instrument’; Carlos Lopez, ‘Towards an International Convention on Business and Human Rights (Part I)’; Nicolás Carrillo-Santarelli, ‘Some Observations and Opinions on the “Zero” Version of the Draft Treaty on Business and Human Rights (Part I)’; Phil Bloomer and Maysa Zorob (Business & Human Rights Resource Centre), ‘Another Step on the Road? What does the “Zero Draft” Treaty mean for the Business and Human Rights movement?’; Sara McBreaty, ‘The Proposed Business and Human Rights Treaty: Four Challenges and an Opportunity’.

[2] Larry Catá Backer, Making Sausages?: Preliminary Thoughts on the "Zero-Draft," the first official draft of the legally binding instrument to regulate, in international human rights law, the activities of transnational corporations and other business enterprises.

[3] Ibid.

[4] Phil Bloomer and Maysa Zorob (Business & Human Rights Resource Centre), ‘Another Step on the Road? What does the “Zero Draft” Treaty mean for the Business and Human Rights movement?’.

[5] John Ruggie, ‘Comments on the “Zero Draft” Treaty on Business & Human Rights’.

[6] Ibid.

[7] Ibid.

[8] Larry Catá Backer, Making Sausages?: Preliminary Thoughts on the "Zero-Draft," the first official draft of the legally binding instrument to regulate, in international human rights law, the activities of transnational corporations and other business enterprises.

[9] John Ruggie, ‘Comments on the “Zero Draft” Treaty on Business & Human Rights’.

[10] Ibid.

[11] Surya Deva, ‘The Zero Draft of the Proposed Business and Human Rights Treaty, Part II: On the Right Track, but Not Ready Yet’.

[12] Nadia Bernaz, ‘The Draft UN Treaty on Business and Human Rights: the Triumph of Realism over Idealism’.

[13] Nicolás Carrillo-Santarelli, ‘Some Observations and Opinions on the “Zero” Version of the Draft Treaty on Business and Human Rights (Part I)’.

[14] Charlie Holt, Shira Stanton and Daniel Simons (Greenpeace), ‘The Zero Draft Legally Binding Instrument on Business and Human Rights: Small Steps along the Irresistible Path to Corporate Accountability’.

[15] Surya Deva, ‘The Zero Draft of the Proposed Business and Human Rights Treaty, Part II: On the Right Track, but Not Ready Yet’; European Coalition for Corporate Justice’s Position, ‘Key Features of Mandatory Human Rights Due Diligence Legislation’ (June 2018).

[16] Nicolás Carrillo-Santarelli, ‘Some Observations and Opinions on the “Zero” Version of the Draft Treaty on Business and Human Rights (Part I)’.

[17] Ibid.

[18] Ibid.

[19] Doug Cassel, ‘At Last: A Draft UN Treaty on Business and Human Rights’.

[20] Carlos Lopez, ‘Towards an International Convention on Business and Human Rights (Part I)’.

[21] Surya Deva, ‘The Zero Draft of the Proposed Business and Human Rights Treaty, Part II: On the Right Track, but Not Ready Yet’.

[22] UNGPs, principle 17.

[23] Nicolás Carrillo-Santarelli, ‘Some Observations and Opinions on the “Zero” Version of the Draft Treaty on Business and Human Rights (Part II)’.

[24] John Ruggie, ‘Comments on the “Zero Draft” Treaty on Business & Human Rights’.

[25] Doug Cassel, ‘At Last: A Draft UN Treaty on Business and Human Rights’; John Ruggie, ‘Comments on the “Zero Draft” Treaty on Business & Human Rights’.

[26] Ibid.

[27] Nicolás Carrillo-Santarelli, ‘Some Observations and Opinions on the “Zero” Version of the Draft Treaty on Business and Human Rights (Part I)’.

[28] Nadia Bernaz, ‘The Draft UN Treaty on Business and Human Rights: the Triumph of Realism over Idealism’.

[29] Ibid.

[30] Larry Catá Backer, Making Sausages?: Preliminary Thoughts on the "Zero-Draft," the first official draft of the legally binding instrument to regulate, in international human rights law, the activities of transnational corporations and other business enterprises.

[31] Ibid.

[32] Ibid.

[33] Carlos Lopez, ‘Towards an International Convention on Business and Human Rights (Part II)’.

[34] Nicolás Carrillo-Santarelli, ‘Some Observations and Opinions on the “Zero” Version of the Draft Treaty on Business and Human Rights (Part II)’.

[35] Doug Cassel, ‘At Last: A Draft UN Treaty on Business and Human Rights’; Surya Deva, ‘The Zero Draft of the Proposed Business and Human Rights Treaty, Part II: On the Right Track, but Not Ready Yet’.

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).[1] 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 Guidelines, and, 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 contested today.

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.[2] Thus, a successful drafting requires the identification of shortcomings of the previous legislation, to be developed and specified. Three main issues have been identified:[3] 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.[4]

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.[5] 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.).[6]

Which enterprises?

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.[7] 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.[8] 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 responsibility.

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.[9]

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 rules.[10]

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.[11] 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 extraterritorial clauses.

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,[12] 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.[13]

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 chain.[14] In 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.

Up until now, the notion of due diligence has been accompanied by very vague concepts, as, for example, the one of sphere of influence.[15] This notion reflects the idea that the more the company is powerful and influential, the stronger responsibility it has vis-à-vis human rights, because it will be able to leverage the entity in its supply chain committing the abuse.[16] The envisaged Treaty will need to provide legal certainty on how this concept will be operationalized, and how far this due diligence obligation extends. While it is feasible to conceive of a due diligence obligation of the parent company toward its subsidiaries, it becomes harder and harder the more the network of contractors and subcontractors expands.

Extraterritoriality

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.[17] 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 host State.

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.[18] Although the Maastricht Principles on Extraterritorial Obligations might provide guidance, they seem overly vague for this purpose.

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

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 successful Treaty.

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.

Conclusion

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 negotiations.

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.

^{^[1]} B. Sheehy, Understanding CSR: an empirical study of private regulation, in Monash University Law Review, 2012, 105

^{^[2]} K. Mohamadieh, Approaching States’ Obligations Under a Prospective Legally Binding Instrument on TNCs and Other Business Enterprises In Regard to Human Rights, in South Centre Policy Brief, October 2016, 1

^{^[3]} O. De Schutter, Towards a legally binding instrument on business and human rights, in CRIDHO Working Paper 2015/2 2015, 17

^{^[4]} S. Mc Brearty, The Proposed Business and Human Rights Treaty: Four Challenges and an Opportunity, in Harvard International Law Journal, 2016, 12

^{^[5]} K. Mohamadieh, Ibid., 3

^{^[6]} S. Mc Brearty, Ibid., 13

^{^[7]} K. Mohamadieh, Ibid., 2

[8] See also N. Gal-Or et al., Responsibilities of the Non-State Actor in Armed Conflict and the Market Place, Brill Nijhoff, The Hague, 2015; M. Karavias, Corporate Obligations under international law, Oxford monographs in international law, Oxford, 2013.

^{^[9]} L. Mc Connell, Assessing The Feasibility Of A Business And Human Rights Treaty, in International and Comparative Law Quarterly, 2017, 162

^{^[10]} L. Mc Connell, Ibid., 151

^{^[11]} S. Mc Brearty, Ibid., 14

[12] R. P. Barnidge, The Due Diligence Principle Under International Law, in International Community Law Review, 2006, 92

^{^[13]} O. De Schutter, Ibid., 20

^{^[14]} O. De Schutter, Ibid., 19

[15] The concept was first used in the 2003 Draft Norms and it is still used in current negotiations

^{^[16]} O. De Schutter, Ibid., 21

^{^[17]} K. Mohamadieh, Ibid., 4

^{^[18]} K. Mohamadieh, Ibid.

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