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International Business Obligations

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Focus: UN resolution could be the start of a binding treaty on business and human rights

13 August 2014

In brief: The UN Human Rights Council has recently passed resolutions that provide for the establishment of a working group to develop an international legally binding human rights instrument for transnational corporations, as well as commissioning a report on the pros and cons of this approach. Partner Rachel Nicolson (view CV), Senior Associate Dora Banyasz and Associate Freya Dinshaw consider the implications of a new binding treaty for business and human rights.

How does it affect you?

  • These resolutions are the most significant international developments in business and human rights responsibilities since the UN adopted its Guiding Principles in 2011.
  • While no new responsibilities or obligations are currently being imposed, businesses should consider their internal policies and practices in preparation for future regulation in the area.
  • The resolutions represent the UN's next steps in formalising the human rights responsibilities of businesses, and demonstrate increased international commitment toward enforcement and regulation of transnational businesses.

Background

While respect for human rights is a normal part of business for many corporations, international law does not expressly impose binding obligations on states to ensure that corporations respect human rights or provide remedies for aggrieved individuals. However, there has been a recent international push toward the creation of a binding legal instrument to regulate the activities of transnational corporations and other business enterprises that have a transnational character in their operational activities (TNCs).

Last September, Ecuador brought this issue to the forefront by making a declaration proposing the creation of such an instrument. The declaration was supported by a number of African, Asian and Latin American countries, as well as more than 100 NGOs, and was ratified in Geneva last December. It is the pre-cursor to the two resolutions that were recently passed by the United Nations Human Rights Council (UNHRC).

After Ecuador's declaration, there has been a debate as to whether adopting a binding international instrument is the best way forward. Professor John Ruggie, founder of the 'Protect, Respect and Remedy' framework and the UN Guiding Principles on Business and Human Rights (the Guiding Principles) in his former role as UN Special Representative for Business and Human Rights, has repeatedly expressed concern that any rushed attempt to forge a treaty may fail to attract meaningful worldwide support given the legal and logistical complexities around development and enforcement of international human rights laws against businesses directly rather than via states. As a result, countries wanting to further progress international law initiatives in this space are divided by the way in which this should occur, giving rise to the two different resolutions that were passed.

The two resolutions

Resolution toward the creation of a new treaty

On 26 June 2014, a resolution drafted by Ecuador and South Africa was adopted at the twenty-sixth session of the UNHRC (with 20 votes in favour, 14 votes against and 13 abstaining). The resolution establishes 'an open-ended intergovernmental working group' with the mandate to 'elaborate an international legally binding instrument to regulate, in international human rights law, the activities of Transnational Corporations and Other Business Enterprises'. It expressly excludes regulation of non-transnational business enterprises governed by local domestic laws. The resolution also stresses that states have the primary responsibility to promote and protect human rights, including where human rights abuse by TNCs occurs within their territory or jurisdiction.

The agenda set out in the resolution for 'elaborating' a legally binding instrument is conservative, with the first substantive output of the working group being the submission of a report on its progress at the UNHRC's thirty-first session. The working group will hold its first session next year, with the first two sessions being dedicated to considering the content, scope, nature and form of the future international instrument, and collecting inputs from states and stakeholders on 'possible principles, scope and elements'.

Resolution commissioning report

On 27 June 2014, a resolution drafted by Norway (and supported by 22 countries, including Australia) was adopted by the UNHRC. The resolution requests the Working Group to launch an 'inclusive and transparent consultative process' to consider legal and practical measures to improve access to remedies for victims of business-related human rights abuses 'including the benefits and limitations of a legally binding instrument', and to prepare a report on its findings.

Implications for business

The passing of the two resolutions demonstrates the increased resolve of the international community to create a binding international framework in this area, particularly around enforcement options with respect to TNCs who are alleged to have engaged in, or have been complicit in, human rights violations. An internationally agreed framework, if workable and comprehensive, would be beneficial to corporations with overseas operations, as there would be increased certainty around obligations and enforcement options that would provide corporations with a strong understanding of how to manage risk and safely conduct their operations in high-risk jurisdictions.

However, it is too early to determine to what extent a binding legal instrument will be a positive step forward, due to the lack of existing consensus around fundamental issues that will need to feature in the legal framework, such as:

  • what types of human rights will be protected;
  • how enforcement will occur (ie whether this will be left to individual states, or whether a new international enforcement body will be created);
  • which corporations will be regulated, and whether this will depend on size, sector, or corporate structure; and
  • how any international framework will align with domestic laws and enforcement methods.

A further issue is that a number of states have openly opposed the development of a binding treaty, such as the USA and the EU. If this persists, a situation may develop where corporations could be exposed to multiple enforcement regimes. Politically, the lack of support by the US and EU has the potential to be an insurmountable obstacle in the eventual conclusion of any treaty.

Given these issues, businesses should pay close attention to the outcome of the work commissioned by Norway's resolution, as this will provide insight into the best way forward for business and human rights regulation.

Conclusion

The two resolutions passed by the UNHRC represent an international push for greater regulation of TNCs with respect to human rights, and will take time to take effect. In the meantime, businesses should continue to monitor state implementation of the Guiding Principles (including the development of National Action Plans), and align their practices to respect human rights obligations in order to prepare for the future legal landscape.

Allens assisted Professor Ruggie in his six-year mandate as the UN Special Representative for Business and Human Rights, which culminated in the establishment of the Guiding Principles, and is the leading firm for business and human rights regulation in Australia. It recently participated in the UN Global Compact Network Australia's first national multi-stakeholder dialogue on business and human rights.

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