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Legally binding instrument on TNCs human rights: October session a successful step on the way forward

Between the 24th and 28th of October 2016, in Geneva, the open-ended working group (OEIGW) on transnational corporations (TNCs) and other business enterprises with respect to human rights successfully held its second meeting. The OEIGW was established by a Human Rights Council resolution adopted in July 2014. According to this resolution, the next meeting of the OEIGW, expected in October 2017, will see the Chairperson rapporteur “prepare elements for the draft legally binding instrument [on TNCs and other business enterprises with respect to human rights] for substantive negotiations” (hereinafter referred to as “the Instrument” or “binding Instrument”).

The second meeting of the OEIGW succeeded in drawing concrete inputs from States and experts in regard to the elements of a potential Instrument. The session saw active participation of civil society organizations (CSOs) representing hundreds of groups around the world. Their role has been crucial in advancing the mandate and the process. The session witnessed as well participation from the business sector represented by the International Chamber of Commerce (ICC) and the International Organization of Employers (IOE).

Among the core issues addressed during the meeting were the obligations of States, including extraterritorial obligations towards private entities’ conduct abroad and areas of international cooperation that need to be strengthened, obligations of TNCs and other business enterprises with respect to human rights and the standards of corporate liability, as well as the scope of a prospective Instrument.

Developing the legal framework and adapting it to today’s economic reality of corporations requires action on both sides of the corporate chain, including in home and host States. A prospective Instrument could focus on addressing the multitude of challenges that victims of corporate human rights abuse face when seeking remedy, especially in the case of transnational corporate conduct. These include constraints in the jurisdiction of the host State due to lack of adequate substantive and procedural laws, obstacles pertaining to jurisdiction of home State courts, as well as challenges in collection of evidence and information and proving the chain of liability between a subsidiary and a parent company, among others.

One decisive element is clarifying States’ extraterritorial obligations, including the responsibility to impose on parent corporations an obligation to comply with certain norms wherever they operate. These could include due diligence requirements on the parent company for prevention of harm, disclosure and reporting requirements, and requirement to internalize the cost burdens of their subsidiary pertaining to procedures and infrastructure essential for respect of human rights. It also could include clarifying the jurisdiction of courts in the home State of a corporation or where it has substantial business over cases brought by victims of human rights abuse done in the host State of the corporation. In addition, States’ cooperation in regard to investigation of cases pertaining to transnational corporate conduct and recognition and enforcement of judgments issued by national courts in such cases are major enablers for the a prospective Instrument.

Another crucial element to be addressed under a prospective Instrument is the liability of corporations in their transnational conduct. A comprehensive approach requires that corporations be subject to civil as well as criminal and administrative liability and be legally accountable for acts of their employees and agents. One option is establishing an obligation on State Parties to a prospective Instrument to ensure that national legislation and remedy mechanisms cover corporate conduct that would be considered a violation under criminal, civil or administrative rules. Accordingly, the measures will be defined under national laws, but controlled by the international Instrument. Such an approach would allow for achieving a certain level of convergence among jurisdictions in terms of how they address corporate conduct and liability while allowing for certain flexibility that attends to national legal practices.

This approach would fall within the accepted traditional norm for treaty making. Indeed, in most cases, international law regulates corporate conduct indirectly, through requiring States to enact and enforce regulation applicable to corporations. Private parties will then incur obligations by virtue of the domestic laws that give domestic legal force to the rights and obligations contemplated by the international treaty.

The subjective scope of the prospective Instrument has been another important issue under consideration. The wording of Resolution A/HRC/26/9 specifically focuses on the “transnational character” of the enterprises. Possibly, this stems from the fact that companies’ activities within the national ambit are subject to national legislative frameworks. A prospective Instrument focusing on transnational conduct of corporations would complement the action of strengthening domestic processes, and would be an additional means under international cooperation to support States in fulfilling their human rights obligations.

To be effective, the Instrument does not have to include a full specification of obligations for every area of human rights, but could provide an analytical framework that guides domestic systems on how these obligations can be determined. Moreover, given the nature of the corporate actor today, which changes dynamically in terms of economic and legal reality, it is important that a prospective Instrument be designed in a dynamic approach that could evolve respectively. Such an approach would enable the Instrument to effectively address the liability of corporations commensurate with their evolving sphere of influence.

Corporations upholding human rights and investing in best practices across contractual and production chains ought to have a clear interest in advancing this process. For an Instrument at the global level will help avoid the illegitimate corporate competition that could be carried out through exploiting differences in the applied standards and mechanisms available to uphold the implementation of rights. It will also help level the playing field across jurisdictions, bringing more clarity to corporations in regard to the context within which they conduct their operations and more certainty for victims of corporate abuse in regard to access to remedy.

Kinda Mohammadieh is a researcher at South Centre. Several of the briefings that informed this blog can be found on its website.

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