The world needs a treaty on business and human rights

Chip Pitts
26 May 2014

Worldwide, laws regulating companies’ respect for human rights are inconsistent and rarely enforced; there is no accountability in most cases of business human rights abuse (according to the Business & Human Rights Resource Center among others). These facts alone justify support for the proposal to adopt a new international treaty that would require such accountability.  Indeed, a treaty is arguably required by the state duty to protect against abuses by private companies, coupled with the requirement of an effective remedy in the case of corporate harm, both principles that are widely endorsed.

Businesses currently have rights they can legally enforce at a global level, including intellectual property rights (under the TRIPS agreement), and rights as investors to sue states directly in arbitration tribunals established by bilateral investment treaties.  Yet, individuals whose rights are violated by such businesses have no standing and cannot seek damages at an international level.  That’s an obviously unfair imbalance that requires correction.

A treaty is also in the interests of most businesses given the mistrust, recurring instability, unpredictable outcomes, and unfair competition under the status quo, where a few bad businesses violate human rights to the detriment of business reputations everywhere.  More uniform global standards -- shoring up the playing field at a higher level -- would enhance compliance, reduce risk, and be good for everyone. Such standards would promote too the integrity and coherence of the global human rights system and of global business activity.

The legal elements for such a treaty are largely in place.  Numerous soft-law standards have converged in recent decades around the duty on companies to respect human rights reaffirmed by the UN Guiding Principles (GPs). The requirement that business should be liable for serious harms is at least universally agreed (if not often enforced), and amounts to what international law scholars have identified as a general principle of law. Elsewhere, I’ve referred to these legal developments as forming a “new customary global law.”  Sometimes this liability is civil (tort or delict), sometimes criminal, but corporate liability including for significant human rights violations exists  - at least in theory - across the world.

To mistakenly consider the duty on companies to respect human rights found in the non-binding GPs as simply ‘voluntary’ downplays its legal nature in many contexts, as well as the significance of the GPs.  They are already being implemented and/or promoted by the OECD, the International Standards Organization, the World Bank’s International Finance Corporation among many others, including companies.

For various reasons, however, actual legal remedies remain elusive.  Some of those reasons could be usefully addressed in a treaty; for example, promoting awareness among judges and state agencies of legal obligations on companies; clarifying questions of jurisdiction and the appropriate country in which to seek redress; removing barriers victims face in seeking redress; and providing for cooperation and technical assistance between states.  Other reasons preventing redress, including corruption and the need for legal aid, are probably best left to complementary efforts. As valuable as the GPs are, it’s unlikely that they or other soft law standards alone will make sufficient progress at sufficient scale any time soon.  John Ruggie, who led the UN process that prepared the GPs, noted in his recent book that most multinational companies probably haven’t even heard of the GPs. 

Further, it’s entirely normal for soft law standards like the GPs to be transformed into legally binding obligations in a treaty.  And as a former Chief Legal Officer charged with ensuring corporate compliance with standards, I can assure you that executives are more inclined to comply with hard law (like a treaty). They can more readily ignore or seek ways around soft law.

Some view continued global legal evolution and the GPs as an either/or proposition.  But that is a “false dichotomy,” as Ruggie has repeatedly noted.  Indeed, he urges an intergovernmental process to deal with “gross abuses, potentially amounting to international crimes” in conflict areas “where the human rights regime cannot be expected to function as intended.” 

For business abuses, however, the human rights system isn’t functioning as it should anywhere.  True, states should act now to improve domestic laws and enforcement; but in the real world there are many reasons they don’t, ranging from ignorance, to fear of losing foreign investment, to corruption, to lack of resources, to simple inertia.  It’s a classic collective action problem – one where clear legal norms expressed in a treaty, and stronger enforcement, would help.

Without a treaty, national courts make erroneous decisions on international law, as with the Kiobel decision in the US federal court that sought to immunize corporations (the US Supreme Court dismissed the case on other grounds), or last year’s AFPS decision in France purporting to immunize corporations even for potential war crimes. Treaties, by contrast, can help establish accountability; when incorporated into domestic law they close gaps in that law in ways that often go further than the treaty demands (for example, many states created corporate liability for international crimes when incorporating the ICC statute, even though it wasn’t required by the treaty).  The Dutch prosecutors successfully settling their case against Trafigura (for dumping toxic waste in Africa), were empowered by legislation enacted after the EU and then the Netherlands embraced the Basel Convention

There are difficulties. A treaty would cover many complex areas of law and would have to address many difficult questions.  Any monitoring body would have to deal with many potential corporate perpetrators; and many states would not quickly ratify such a treaty.  But many treaties have faced similar complexities, and many treaties start with relatively few states before ratifications expand. 

A significant number of states and hundreds of NGOs have called for a treaty.  It would be wrong and fruitless to try to shut down discussion.  But the process requires a careful and informed exploration of the issues. It will be necessary, even more than usual, to focus the treaty discussions within agreed terms of reference.  These should make clear that any treaty and accompanying process must: (i) complement and build on, and in no way fall short of, existing principles set out in the GPs; (ii) be evidence-based, and not an ideological anti-corporate or politically biased effort; and (iii) employ a careful, transparent and inclusive process which includes civil society, business and states, and that aims to build consensus for the right treaty at the right time.

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