Why a scope clause in the binding treaty on business and human rights is unnecessary
“World Humanitarian Day” is licensed under Creative Commons BY-NC-ND 2.0.
Editor’s note: this article was originally published on Business & Human Rights Resource Centre in a series titled “10 years on: Walking the talk for a powerful binding treaty”. The series focused on the negotiations of the Intergovernmental Working Group on a legally binding instrument to regulate, in international human rights law, the activities of transnational corporations and other business enterprises. The scope of the treaty has previously divided Global South (including African) states and civil society across the African continent has been actively involved throughout the treaty-making process to address business and human rights violations by multinationals.
To address the impasse that has arisen around the scope of the draft binding treaty on business and human rights, we need to question whether such a clause is necessary at all.
The clause has led to extensive discussions and remains a dividing point between states. Yet, if we actually focus on the key issues, there is no need for a separate provision on scope.
The focus of division has been on Article 3(1) of the updated Draft Treaty released in 2023 which is at present the subject of state negotiation. The current draft has adopted the stance that the treaty will apply to all business entities – whether they are transnational or not. That aligns with one approach that the instrument should not be confined to businesses of a transnational character.
That approach is in tension with the text of the mandate of the Intergovernmental Working Group set up to develop this treaty which specified that it applies to transnational corporations and other business enterprises, the latter defined in a contentious footnote. The alternative approach is that the development of a new treaty is only necessary to regulate the effect of businesses on human rights when the operations of those businesses crosses borders. Domestic regulation will cover businesses that wholly operate within particular countries.
If we persist with including a scope clause, a decision has to be made to adopt one or the other of these stances – in turn, losing the support of those countries that oppose the alternative approach. Doing away with such a clause can help maximise agreement between states without being distracted by an unnecessary binary opposition and allow for a sensible compromise.
Generally, existing human rights treaties do not have a provision on scope as they are understood to be binding on all state signatories. This treaty is no different: the drafters have thus far avoided recognition of direct obligations upon corporations (a mistake in my view, but a debate for another blog). The focus is instead on the signatory states’ duties to act in accordance with the provisions of the treaty. There is thus no need to decide on who is bound by the treaty – it is clear that it is signatory states that are so bound. The real question is the nature of the obligations undertaken by states. The operational provisions of the treaty define those obligations.
“The problem this treaty seeks to address relates to the fact that pursuing legal action only in the jurisdiction where the harm occurs (the host state) cannot create accountability for those who actually control or profit from the wrongs done - powerful multinational parent companies based in other jurisdictions (the home state).”
The treaty, as it stands, has two main elements. The first is prevention of human rights violations by businesses and rendering the due diligence process first articulated in the United Nations Guiding Principles (UNGPs) mandatory. The adoption of the UNGPs garnered consensus by states in the United Nations Human Rights Council. One of the key tenets of the UNGPs is that all businesses no matter where they operate have a responsibility to respect human rights (GP 11). This involves avoiding contributing to adverse human rights impacts through their own activities and through their business relationships including subsidiaries, sub-contractors and others (GP 13). The responsibility to respect involves conducting a human rights due diligence process (GP 17-21). Consequently, states have already accepted that businesses of all kinds – domestic and transnational – have these responsibilities. States willing to mandate due diligence in law should therefore not object to this obligation applying both to wholly domestic companies as well as those that have business relationships in other jurisdictions.
Matters are different, however, in relation to the second prong of the treaty: addressing the gaps in international law that enable businesses to evade liability through complex structures and supply chains that cross borders. States are already under an international law obligation to ensure access to remedy for rights violations within their own jurisdictions. The problem this treaty seeks to address relates to the fact that pursuing legal action only in the jurisdiction where the harm occurs (the host state) cannot create accountability for those who actually control or profit from the wrongs done - powerful multinational parent companies based in other jurisdictions (the home state). Victims are also often simply unable to acquire an adequate remedy for these harms within the host state.
To address these problems, the access to remedy elements of this treaty clearly relate to businesses that operate in multiple jurisdictions (particularly articles 7-13). The focus should be on these operational provisions: for instance, expanding the jurisdictions in which such claims can be heard. A centrally important article is the requirement for states to create a comprehensive system of legal liability for harms caused to fundamental rights by businesses through their extra-territorial business relationships. I am concerned here that the current definition of “business activities of a transnational character” allows for a clear loophole in that corporations can claim the activities they undertake in different jurisdictions are separate activities. Coming up with an adequate legal definition for when one activity is the same as another activity seems destined to fail. The key issue is rather whether one business can legitimately bear legal obligations (and hence accountability) for the activities of another business. There are a range of principles such as control, foreseeability, beneficiation that can provide the necessary legal foundation for such liability.
There is already significant agreement on the scope of the operational provisions which is all that matters. In the forthcoming round of negotiations, I urge states to focus on those provisions rather than being distracted by attempting to formulate fine-grained distinctions on scope that are only likely to exacerbate divisions.