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SOUTHNEWS

 
No. 386, 25 October 2021

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South Centre webinar explores synergies in multilateralism and human rights for a just, fair & equitable post-pandemic recovery

 

In preparation for the 7th session[i] of the Open Ended Intergovernmental Working Group on the issue of transnational corporations and other business enterprises with respect to human rights (OEIGWG), the South Centre organized a webinar on 18 October 2021 bringing together representatives of developing countries, academia and civil society organizations to discuss how the International Legally Binding Instrument on Transnational Corporations and Other Business Enterprises (LBI) could support a better and fairer recovery after the COVID-19 pandemic.

The webinar facilitated participants to share their views on the 3rd revised draft of the LBI[ii], discuss how the negotiations may progress in and after the 7th session, and also explore the links of the proposed LBI and the ongoing reform of the international investment regime.

In his introductory remarks, Dr. Carlos Correa, Executive Director of the South Centre, highlighted that the OEIGWG process is a developing country initiative, started by Ecuador and South Africa in 2014 with Resolution 26/9[iii].

Dr. Correa explained that the discussions about the role of transnational corporations (TNCs) in the global economy and how to discipline their conduct started over four decades ago at the United Nations (UN). Since then, TNCs have grown in their economic importance, size and geographical scope; and have also emerged in the digital economy. They have become much more sophisticated in their dealings with national laws and regulations and in avoiding liabilities, in particular for violations of human rights.

The 7th session of the OEIGWG, where the 3rd revised draft will form the basis of discussions, will mark a very important phase of text based negotiations. This process may also be accelerated by the establishment of the group of Ambassadors as ‘Friends of the Chair’[iv] that will support the process in the intersessional period.

Regarding the OEIGWG process, Dr. Correa mentioned that it has been very open and transparent, with wide participation of civil society and academic experts. In the last few years, some developed countries such as France, Germany and Australia have adopted laws on mandatory human rights due diligence. This should be considered as a positive development in addressing many issues, in particular the problem of jurisdiction for addressing human rights violation claims. The third revised draft also contains a number of new elements, such as the strengthening of due diligence requirements, clarification of definitions, among others. He concluded that this new draft could help move the negotiations forward and that the South Centre will continue supporting this exercise and extend its full support to the Chairperson-Rapporteur towards achieving the objective of the process and adopting a LBI.

The first panellist was Prof. Surya Deva from Macquarie Law School, University of Macquarie, who spoke about the larger post-pandemic governance and how the LBI can engage with International Financial Institutions (IFIs). Prof. Deva said that the pandemic had a devastating impact on developing countries and supply chains, and there is more inequality and extreme poverty, with rising child labour and domestic violence. The influence of corporations was very visible during the pandemic, especially in the case of vaccine manufacturing.

In this context, there is a need for both voluntary and mandatory initiatives for businesses. For Prof. Deva, voluntary systems work better in the shadow of binding rules. States must act collectively to address the huge challenges they face and cooperate for avoiding a race to the bottom and regulating corporate behaviour.

Regarding the LBI, he said that by regulating ‘business activities’, Article 3.1 seeks to bypass the debate on the kind of business that will be covered by the LBI. However, when considering liability, it has to be placed on the actors. Reference to ‘financial institutions’ in Article 1.3 may also capture IFIs, but that is not clear. IFIs should be regulated in relation to their activities and adverse impacts, but as these IFIs are products of States acting collectively, countries must continue to uphold their own human rights obligations.

While IFIs have their own obligations, stemming from international human rights law, in practice, most IFIs have sustainability and impact assessment policy in place, as well as internal due diligence mechanisms. But IFIs may remain difficult to regulate under the LBI. The current text is still ambiguous as to who will be held accountable and liable for human rights violations. The case of JAM v. IFC[v] may provide some inspiration, as this US Supreme Court decision has said that IFIs have limited immunity in commercial cases. However, more explicit provisions are required in the LBI for regulating IFIs.

The next panellist was Jesse Coleman from the Columbia Centre on Sustainable Investment, who spoke about the human rights impact assessments (HRIAs) of international economic agreements. She explained that the obligation to undertake impact assessments of trade and investment agreements has been considered through the Guiding principles on human rights impact assessments of trade and investment agreements[vi], General Comment No. 24 of the Committee on Economic, Social and Cultural Rights[vii], and the recent report by the UN Working Group on business and human rights[viii], among others.

The LBI reflects the current narrative on this issue in Article 14 and HRIAs provide one avenue for compliance with this provision. Article 6 on Prevention, particularly Article 6.8 on protecting from corporate influences is also relevant in this regard. She elaborated that while the impacts of treaties are difficult to pin down, the process for implementation must be inclusive. Further, there must be potential for impact assessments to influence outcomes, and have the ability to revise treaties based on ex-post assessments.

The overall uptake of impact assessments by States is still limited. The LBI text is a useful footing to continue advocating for HRIAs, but the text of the LBI could be stronger in this regard, considering what could be learned from other instruments such as the Escazú Agreement which has provisions on meaningful access rights. Article 6.8 and 14 could be strengthened by incorporating elements of rights to information and participation in decision making.

The next panellist was Manja Bayang from Indigenous Peoples Rights International, who gave the perspective of indigenous peoples on the LBI. She highlighted that indigenous peoples have suffered during the pandemic, there is greater threat to their human rights, as well as marginalization in vaccine access. Corporate capture is strongly felt in developing countries with companies wielding economic and political power, but they have no obligations or accountability mechanisms under international human rights law.

The United Nations Guiding Principles on Business and Human Rights (UNGPs)[ix] still have many gaps in their implementation, and the adverse impacts of companies have increased over the last decade. The LBI is critical to regulate business operations in relation to human rights. For Ms. Bayang, the third draft of the LBI has evolved in relation to indigenous persons, now including provisions such as the standards of free, prior and informed consent (FPIC). However, it remains lacking in provisions on safeguarding substantive provisions for indigenous peoples and human rights defenders, including the right to self-determination, the right to own, control and manage land and resources, among others.

She added that indigenous peoples should have the right to stop business activities that violate human rights or destroy the environment, as well as to participate in  decision making at all levels. The call for prior consent for vulnerable groups should not be mixed with the right to FPIC for indigenous peoples. The treaty should recognize intergenerational equity, traditional environmental governance and resource management, as well as indigenous customary laws in the provisions on access to remedy and adjudicative jurisdiction. The LBI can be further strengthened to support rights defenders, and include provisions to ensure that all affected communities have full and unrestricted access to justice, without threat of retaliation or violence.

Erika Mendes from Justiça Ambiental/Friends of the Earth, Mozambique then spoke about the impacts of transnational corporations in developing countries, particularly on the African continent and the potential role of the LBI. She highlighted the many difficulties in holding corporations accountable. Despite national laws, cases targeting corporate impunity continue to lag, and companies do not provide timely reparation and compensation to victims. The pandemic induced economic recession has exacerbated fragilities, with the overwhelming power of TNCs eroding States’ ability to have a people-centred path to sustainable development. There is an urgent need to fill the regulatory gap with a strong and effective treaty that is binding and enforceable.

She urged participants to utilise the 7th session to define the structural problems in legal systems that can be fixed by the LBI. Regarding the 3rd revised draft, there are not many changes and loopholes continue to remain. The objective of the LBI cannot be achieved by watering down of the text and it needs to move beyond voluntary guidelines, given their proven ineffectiveness in dealing with corporate impunity. Ms. Mendes emphasized that the open ended nature of the process means that negotiations should continue till the text is finalized, and that such text should reflect the victims’ concerns with regards to access to justice and corporate accountability, and therefore States should not be satisfied with a still unclear text.

The LBI also needs to include provisions addressing State capture, power asymmetry and the complexity of supply chains. On the issue of legal liability, Article 8 should be modified to include violations by legal persons committed through global supply chains. Also it is necessary to list the legal obligations of TNCs in the text, rather than have it defined by individual States. Some provisions are subject to interpretation by courts, such as in Article 8.7 on human rights due diligence by corporations. She further suggested to include joint liability of companies, a proper enforcement mechanism, and to ensure the primacy of human rights, in particular over international trade and investment agreements. 

Finally, Ivan Gonzalez from Confederación Sindical de las Américas (CSA) reflected on the LBI from the trade union perspective. Regarding the definitions and scope of the LBI, the outcome is that it is lacking in strong enforcement mechanism. It does not include direct responsibility of corporations, but only recognises the business obligation of respecting human rights. The functions are left to the States, and in many cases they lack the necessary jurisdiction to effectively regulate TNCs.

He added that the definitions included in the treaty are pertinent. On the inclusion of transnational business activities as part of the supply chain, the text is vague and leaves space for interpretation. It should be clear, as use of the term ‘significant’ in Article 1.4.b. is ambiguous. Highlighting concerns that the whole supply chain may be falling outside the coverage of the treaty, he said that the lack of worker protection in supply chains, hiring processes using third parties, and no direct responsibilities of companies are important issues to address. Therefore, global supply chains must be centred in the text of the LBI.

On the issue of compliance, Article 3.3 is very limited in scope, as many of the human rights are included in international human rights instruments that do not require to be ratified by States for them to be applicable. The requirement of signature and ratification of human rights instruments can limit the effective implementation of the LBI. Further, the importance given to due diligence in the LBI does not ensure business compliance with human rights. Instead, it can be used as a loophole for corporations to avoid their human rights obligations. Thus, the liability of corporations for human rights violations can be absolved. For effective enforcement of the responsibility for businesses, it must be accompanied by sanctions.

The presentations by the panellists were followed by a lively interactive discussion among the participants. It covered a range of issues, including human rights due diligence as obligation of conduct or obligation of result; the use of shadow impact assessments; the continuing role of civil society in the treaty process; possibilities of implementation mechanisms under the LBI; and the political will required for having successful outcomes, among others.  Finally, for regulating transnational corporations and building back better from the pandemic, the need to continue engaging with the OEIGWG process and elaborating a strong and effective LBI in the near future was strongly underlined.

The full video of the webinar is available here: https://www.youtube.com/watch?v=mhFfKIVAOnM&t=635s

 
[i] The 7th session of the OEIGWG will take place in Geneva from 25 – 29 October 2021: https://www.ohchr.org/EN/HRBodies/HRC/WGTransCorp/Session7/Pages/Session7.aspx
[ii] 3rd Revised draft of the Legally Binding Instrument, 17 August 2021: https://www.ohchr.org/Documents/HRBodies/HRCouncil/WGTransCorp/Session6/LBI3rdDRAFT.pdf
[iii] UN Human Rights Council Resolution 26/9: https://undocs.org/A/HRC/res/26/9
[v] Jam v. Int'l Fin. Corp., 139 S. Ct. 759, 203 L. Ed. 2d 53 (2019): https://casetext.com/case/jam-v-intl-fin-corp-3
[vi] Report of the Special Rapporteur on the right to food, Olivier De Schutter, Guiding principles on human rights impact assessments of trade and investment agreements, A/HRC/19/59/Add.5, 19 December 2011: https://www.ohchr.org/Documents/HRBodies/HRCouncil/RegularSession/Session19/A-HRC-19-59-Add5_en.pdf
[vii] Committee on Economic, Social and Cultural Rights, General comment No. 24 (2017) on State obligations under the International Covenant on Economic, Social and Cultural Rights in the context of business activities, E/C.12/GC/24, 10 August 2017: https://docstore.ohchr.org/SelfServices/FilesHandler.ashx?enc=4slQ6QSmlBEDzFEovLCuW1a0Szab0oXTdImnsJZZVQcIMOuuG4TpS9jwIhCJcXiuZ1yrkMD%2FSj8YF%2BSXo4mYx7Y%2F3L3zvM2zSUbw6ujlnCawQrJx3hlK8Odka6DUwG3Y
[viii] Report of the Working Group on the issue of human rights and transnational corporations and other business enterprises on human rights-compatible international investment agreements, A/76/238, 27 July 2021: https://undocs.org/A/76/238
[ix] https://www.ohchr.org/documents/publications/guidingprinciplesbusinesshr_en.pdf

Author: Danish is Programme Officer of the Sustainable Development and Climate Change Programme (SDCC) of the South Centre. 
SOUTHNEWS is an e-newsletter service of the South Centre providing information and news on topical issues from a South perspective.

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For more information, please contact Anna Bernardo of the South Centre: Email bernardo@southcentre.int, or telephone +41 22 791 80 50.
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