Child of All Nations – The UN Treaty on Business and Human Rights

Corporate Social Responsibility (CSR) has now developed into a much-discussed range of human rights issues and can therefore also be placed, at least in part, in international law At the level of international law, there have been efforts since the 1970s to cast CSR as a legal concept in binding legal form. First and foremost, international law regulates relations between states and understandably rarely gives priority to economic stakeholder. But even here, initiatives can be triggered that have direct legal consequences for private stakeholders such as companies. It would be worthwhile to keep a very close eye on the current developments in international law around CSR.

In August 2020, the Second Revised Draft for a “legally binding instrument to regulate, in international human rights law, the activities of transnational corporations and other business enterprises” (CSR Treaty) was published. This is the third draft treaty to emerge from negotiations that have been ongoing since 2014 under the leadership of a specially created UN working group and with the participation of state delegations as well as representatives of business and civil society. The mandate to develop the CSR treaty was issued by way of a resolution of the UN Human Rights Council, supported by the General Assembly. The aim is to create an internationally binding legal basis to ensure that business operations worldwide comply with human rights. In the past, internationally operating companies have repeatedly been accused of forum shopping, i.e. deliberately choosing locations for the outsourcing of certain business processes where there are weak legal standards for the protection of workers’ and human rights.

 

Why binding regulation in international law?

International CSR standards are not a fundamentally new attempt. In 2011, the UN Guiding Principles on Business and Human Rights (UNGP) were endorsed by an overwhelming majority of the international community. The UNGP are aimed at both, states and companies and already provide for measures to promote human rights protection in business. This raises the question of the raison d’etre of the CSR treaty.

Although the UNGPs have triggered valuable positive developments, they are often still perceived as inadequate. The UNGPs are “soft law” and voluntary in their implementation. They are to be implemented primarily by means of so-called National Action Plans (NAPs), which are to be drawn up nationally. Such NAPs can either provide for the enactment of binding CSR laws for businesses (e.g. the French Loi de Vigilance) or rely on voluntary action. Germany chose the latter with its 2016 NAP. By 2020, at least 50% of the addressed companies (operation with more than 500 employees) were supposed to implement the NAP. The main content is a five-step corporate due diligence to identify and minimise human rights risks. A survey as of the due date in October 2020 showed however a compliance rate of just 13-17 percent (another 10 percent are “well on their way”, see here – Status: 13 October 2020, last call 15 January 2021).

In principle, it can be assumed that voluntary CSR compliance looks worse in less human rights-conscious states. Many developing countries are likely to be concerned with creating an environment that is as business-friendly as possible for investors, sometimes at the expense of human rights standards. This is commonly referred to as a “race to the bottom for human rights”, in which states undercut each other to attract investment.  The agreement of an indispensable internationally uniform minimum standard could effectively put a stop to this.

What does the CSR treaty bring?

It is impossible to predict whether and which exact regulations will be agreed in the CSR Treaty and which states will actually ratify it. However, the available drafts provide the following indications:

1. Companies are only indirectly obligated under the Treaty

This is one of the most contentious issues in the treaty negotiations. In principle, it would be legally possible to impose direct obligations on companies under international law. It would then no longer, or only marginally, depend on national legislative implementation of the treaty provisions to hold companies accountable for human rights misconduct.

So far, however, the resistance of many industrialised countries  has been too great. This treaty option therefore seems unlikely, but it has not been completely written off.

2. Access to legal remedies

An important aspect here is the planned extension of the jurisdiction of national courts to extraterritorial cases. Victims of human rights violations who have not been adequately dealt with by the courts in their home country would be able to enforce their rights abroad. To this end, the territoriality principle and the personality principle for determining local jurisdiction are considerably loosened. The possibility for foreign courts to invoke the doctrine of forum non conveniens for their own lack of jurisdiction is also restricted.

3. Consideration of human rights in investment protection

Companies have long benefited from international trade and investment protection agreements. A counterbalance to their rights arising in this context is to be created.

4. Establishment of supervisory authorities?

Contracting states would have to effectively monitor compliance with their CSR laws. The establishment of national supervisory authorities, comparable to the well-known data protection supervisory authorities, is conceivable. Although this is not yet provided for in the draft treaty itself, corresponding proposals have already been made and recorded in a report of the Human Rights Council.

 

In the context of the CSR treaty, the adoption of the Hague Rules on Business and Human Rights Arbitration of 2019 (Hague Rules) is noteworthy. These rules create arbitration law for human rights-related disputes involving companies. It is conceivable that the CSR Treaty could be combined with the Hague Rules to ensure effective redress for affected parties. The Hague Rules address many practical problems of affected parties that states would have to eliminate anyway with the implementation of the CSR treaty, such as procedural inequality of arms, difficulties with the burden of proof and the distribution of cost risks.

 

Outlook

The CSR Treaty negotiations are attracting great attention (see for example here ). This public impact deserves recognition, regardless of the outcome of the negotiations. Society is increasingly taking the view that business activity should be measured by the common good. In any case, it should not be harmful to society. Reputational damage that will be triggered by CSR misconduct and ultimately lead to financial disadvantages should not be underestimated, as: “[in] today’s world a TV exposé on working conditions can undo years of effort to build brand loyalty” (this was summed up by the CEO of Levi Strauss as early as 1994 in Business Week, 1 August 1994, p. 52.).

Conversely, CSR compliance may constitute a competitive advantage. Companies with adequate human rights awareness can use the developments around international CSR regulation to their advantage