Corporate Actors as Human Rights Advocates?
The UN Guiding Principles’ Cross-National Differences in Corporate HumanRights Standards addressed by a Business and Human Rights Treaty
Master’s thesis in Public International Law By Vera Baaij, student number 11004460
Under the supervision of Prof. Dr. Janne Nijman
European and International Law: Public International Law Track University of Amsterdam, 28 July 2016
Abstract
The human rights practices and policy statements upheld by transnational corporations (TNCs) differ across countries, both within and between TNCs. These differences emerge in the race to the bottom, in which TNCs aim to minimize costs because of competitive pressure, and thereby lower human rights standards where possible. This paper adopts the normative perspective that cross-national differences in human rights standards should be reduced, for the purpose of human rights protection and realization. A legal path is proposed to support an ideological change of corporate culture, by which human rights violations by corporate actors are reduced and their powerful and unique positions as suppliers of essential products and services are used for the realization of human rights. This paper identifies four contributing aspects in the United Nations Guiding Principles on Business and Human Rights (UNGPs) to cross-national differences in corporate human rights standards. These aspects are argued to be best addressed by a binding business and human rights treaty, the current topic of elaboration of a working group of the UN Human Rights Council. As a result, the human rights standards upheld by TNCs should become less dependent on the capability and willingness of the country concerned to enforce human rights. Instead, the standards should be determined by the TNC’s capability to contribute to the realization of human rights, and should be upheld everywhere, regardless of the country concerned.
Table of Contents
Abbreviations ... - 3 -
Introduction ... - 4 -
I. The Issue: Cross-National Differences in Corporate Human Rights Standards ... - 5 -
II. Contributing to the Issue: The UNGPs ... - 8 -
A. OBSCURING A FRAGMENTED FIELD ... - 8 -
B. INSTRUMENTAL RESPECT FOR HUMAN RIGHTS ... - 13 -
C. INTERPRETATION ON A NATIONAL LEVEL ... - 15 -
D. NATIONAL CORPORATE LIABILITY ... - 17 -
III. Addressing the Issue: A Business and Human Rights Treaty ... - 18 -
A. SUBSTANTIVE HUMAN RIGHTS OBLIGATIONS ... - 18 -
B. INHERENT RESPECT FOR HUMAN RIGHTS ... - 19 -
C. INTERPRETATION ON AN INTERNATIONAL LEVEL ... - 23 -
D. INTERNATIONAL CORPORATE LIABILITY ... - 25 -
Abbreviations
BHR Business and human rights
CSR Corporate social responsibility
HRC Human Rights Council
IGWG Intergovernmental working group
IHRL International human rights law
ILC International Law Commission
ILO International Labour Organization
NGO Non-governmental organization
OECD Organisation for Economic Co-operation and Development SRSG Special Representative of the United Nations Secretary-General
TNC Transnational corporation
Introduction
Children, as young as 12 years old, work long hours for low pay in Cambodian factories, stitching garments for H&M, whereas in the United Kingdom store employees are 16 years or older, and enjoy discounted shopping and educational opportunities.1 This is an example of human rights, both labour and children’s rights, that are violated in one country and progressively realized in another, within the supply chain of one transnational corporation (TNC).2 Differences across countries also exist between different transnational corporations,
both between practices that affect human rights and between human rights policy statements, in which TNCs express their approach to human rights. Practices and policy statements can together be referred to as corporate human rights standards. The differences reveal the so-called race to the bottom, in which competitive pressure causes TNCs to minimize costs, including through the reallocation of activities, with consequent lower human rights standards. Furthermore, cross-national differences demonstrate discrepancies between corporate and state power. For example, Shell has been accused of paying military personnel in Nigeria to drive away indigenous people from oil-rich land, next to many other grave human rights violations.3 In the Netherlands the transnational corporation exerted pressure on the ministry of economic affairs to ignore the increased risk of earthquakes, and not cut gas extraction in the province of Groningen.4 This demonstrates that weak governance can allow for grave corporate human rights violations, but also in countries with stronger governance corporate actors can for example influence policies and thereby neglect human rights. The capability and willingness of the state concerned to enforce corporate respect for human rights affect the standards that are upheld by TNCs, but the cross-national differences also exemplify what TNCs are capable of doing for the realization of human rights, such as educational opportunities for store employees, but is not being done everywhere.
1 Human Rights Watch ‘“Work Faster or Get Out”: Labour Rights Abuses in Cambodia’s Garment
Industry’ (2015).
2 In this paper the term ‘transnational corporation’ refers both to transnational and multinational
corporations.
3 For example Kiobel v Royal Dutch Petroleum Co 569 US 133 S Ct 1659 (2013).
I. The Issue: Cross-National Differences in
Corporate Human Rights Standards
This paper takes the normative point of view that cross-national differences in corporate human rights standards are an issue and hence should be reduced. The corporate human rights standards of one corporation should be more similar in different countries of operation, as well as those of different corporations operating in different countries, but with similarities such as their sector or size. Corporate practices that affect human rights and policy statements, often as a part of a broader corporate social responsibility policy, should be less dependent on the country concerned. This is not to say that differences between corporate human rights standards should not exist, but the capability of the transnational corporation should be determinative for the corporate human rights standards that are upheld, and these standards should be upheld wherever the TNC operates. This paper takes the perspective that this will reduce human rights violations by corporate actors and make better use of the unique positions of TNCs, for example as suppliers of pharmaceutical products and food, for the realization of human rights. A legal path is proposed to support such an ideological change of corporate culture, by first analysing the factors that contribute to cross-national differences in corporate human rights standards, and then proposing ways to mitigate these factors. It is first argued that specific features of the United Nations Guiding Principles on Business and Human Rights contribute to this issue,5
after which aspects of a future business and human rights treaty are set out as capable of addressing these features. Together this forms the subject matter of the analysis in this paper, with the objective to answer the research question: ‘What aspects of a business and human rights treaty can reduce the cross-national differences under the UNGPs in corporate human rights standards?’
Before conducting the analysis to answer the research question, the desirability of reducing cross-national differences in corporate human rights standards is substantiated by the following normative framework. An incentive for TNCs to uphold different standards across countries follows from their objective to make profit. In pursuit of this objective, costs are to be minimized. In an increasingly globalized world, TNCs have to compete with an increased number of suppliers. From this intensification of competition, TNCs are further pressured to
5 Special Representative of the Secretary-General on the Issue of Human Rights and Transnational
Corporations and Other Business Enterprises ‘UN Guiding Principles on Business and Human Rights: Implementing the United Nations “Protect, Respect and Remedy” Framework’ (by John Ruggie) UN Doc A/HRC/17/31 [hereinafter UNGPs].
minimize costs. This phenomenon is classified as a race to the bottom because a corporation cannot stay behind once competitors have reduced costs, and these cost reductions often involve lower human rights standards such as labour standards.6 Globalization further eases reallocating and outsourcing corporate activities, for example to countries with weak governance and less strictly enforced human rights. To make matters worse from a human rights perspective, this mechanism moves human rights violations further down supply chains of TNCs, such that the responsibility of the TNC can be debated. The case of H&M, that claims to be unaware of child labour in their supply chain, exemplifies this. According to the report, the worst cases of child exploitation took place in a factory that was subcontracted by H&M’s supplier.7
Hence, cost minimization forms an incentive to uphold lower standards where possible, with cross-nationally different standards as a consequence. The extent to which it is possible for TNCs to uphold lower standards is in part determined by the discrepancies between corporate power and state power. For example in Ogoni land, Nigeria, Shell not only managed to have military personnel helping their cause, the corporate activities that involved many flagrant human rights violations were a joint venture with the government.8 Countries with weak governance are often unable to regulate the corporate activities that they host, and sometimes unwilling because of the economic benefits they derive from them.9 The necessity of foreign investments or joint operations with corporate actors are barriers for states to enforce human rights on TNCs. As demonstrated by Shell’s actions in the Netherlands, corporate actors can also influence policies and legislation. Furthermore, lenient policies can be motivated by the fear that stricter regulation forms a competitive disadvantage, that reduces the attractiveness of the country for TNCs to conduct business.
The competitive pressure to minimize costs combined with discrepancies between corporate and state power can cause TNCs to uphold lower corporate human rights standards where possible. The desirability to reduce the consequence of this, cross-national differences in corporate human rights standards, is based on the point of view that it will reduce corporate human rights violations. Especially in countries with weak governance, where human rights are generally less respected and realized, detaching corporate standards from the willingness
6 S Deva Regulating Corporate Human Rights Violations: Humanizing Business (Routledge 2012). 7 Human Rights Watch (n1).
8 Kiobel v Royal Dutch Petroleum Co (n3).
9 A Grear and BH Weston ‘The Betrayal of Human Rights and the Urgency of Universal Corporate
and capability of the state, and connecting them more closely to what the TNC is capable of doing, should have a positive impact on the realization of human rights.
Based on this normative framework, this paper argues for an international legal path to support the reduction of cross-national differences in corporate human rights standards. In the next chapter, contributing features to the issue are distinguished. This part of the analysis focuses on the UNGPs because it is currently the most significant international instrument in the field of business and human rights. It is praised for its unanimous adoption by the UN Human Rights Council and relatively swift uptake by international organizations, states and corporations,10 but critiqued by many civil society organizations. 11 However, four features are distinguished and demonstrated to contribute to the issue. Firstly, the UNGPs obscure the already fragmented field of initiatives and instruments that aim to inform corporate human rights standards. Secondly, it adopts an instrumental, self-serving notion of corporate respect for human rights. Thirdly, the UNGPs fail to streamline the extensive room for interpretation it leaves to be filled in on a national level. Lastly, it lacks an international definition of corporate liability. These four features are demonstrated to aggravate the race to the bottom of TNCs, because it allows them to further lower their human rights standards. Informed by the normative framework, a future business and human rights (BHR) treaty is argued to be the optimal legal path to address these features in Chapter III. A binding BHR instrument is the current topic of elaboration of an open-ended intergovernmental working group (IGWG) of the UN Human Rights Council, adding to the relevance of the analysis for the field of business and human rights. 12 Firstly, the treaty should include substantive human rights norms for TNCs, such that the applicable norms for TNCs are clarified and independent from the country of operation. Secondly, a treaty should impose the direct obligations on TNCs to respect human rights and contribute to their realization, which will support the corporate culture change from instrumental to inherent respect for human rights. Thirdly, it is recognized that a treaty instrument requires interpretation as well, but through the creation of a central treaty body, the inclusion of secondary rules and the translation of human rights standards to address TNCs guided by their societal functions, a treaty is demonstrated to streamline interpretation on an international level.
10 MK Addo ‘The Reality of the United Nations Guiding Principles on Business and Human Rights’
(2014) 14 Human Rights Law Review 133.
11 For example in ‘Joint Civil Society Statement on the Draft Guiding Principles on Business and
Human Rights’ <https://www.fidh.org/IMG/pdf/Joint_CSO_Statement_on_GPs.pdf>.
12 UN Human Rights Council Res 26/9 ‘Elaboration of an international legally binding instrument on
transnational corporations and other business enterprises with respect to human rights’ (14 July 2014) UN Doc A/HRC/RES/26/9.
Lastly, an international definition of corporate liability is proposed, that is argued to improve the accountability of TNCs for corporate human rights violations. These four treaty address the identified aspects of the UNGPs, such that the race to the bottom in which TNCs uphold lower human rights standards where possible is slowed down, and the resulting cross-national differences in human rights standards are reduced.
II. Contributing to the Issue: The UNGPs
A. OBSCURING A FRAGMENTED FIELD
H&M’s human rights standards are based on the UNGPs, but are also informed by the ILO International Labour Organization’s Declaration on Fundamental Principles and Rights at Work, The Children's Rights and Business Principles, the OECD Guidelines for Multinational Enterprises and the United Nations Global Compact.13 The corporation has a separate policy statement on child labour in which it emphasizes that child labour is not accepted throughout its supply chain, with reference to the International Labour Organization (ILO) Conventions and the United Nations Convention on the Rights of the Child.14 In addition, H&M is a member
of the multistakeholder Ethical Trading Initiative, which also addresses issues such as child labour. Unfortunately, this impressive list did not actually stop child labour from occurring in H&M’s supply chain. A case study by Human Rights Watch revealed child exploitation in one of its subcontracted Cambodian factories,15 and recently accusations were made of Syrian refugee children working in Turkish factories that are suppliers of H&M.16 This illustrates the position of TNCs to choose from a variety of initiatives and instruments to inform their corporate human rights standards.
This section sets out the argument that the UNGPs contribute to cross-national differences in corporate human rights standards by expanding the possibility for TNCs to choose themselves the initiatives and instruments they comply with. Firstly, it is argued that the UNGPS, as a non-binding instrument, cannot legally determine the applicability of other instruments that aim to inform corporate human rights standards, and that their authority as a soft law instrument can
13 –– ‘H&M’s Human Rights Policy’ (2012)
<http://sustainability.hm.com/en/sustainability/downloads-resources/policies/policies/human-rights-policy.html> (10 July 2016).
14 ––‘H&M’s Policy on Child Labour’ (2014)
<http://sustainability.hm.com/content/dam/hm/about/documents/masterlanguage/CSR/Sustainability Commitment/Child labour policy.pdf> (10 July 2016).
15 Human Rights Watch (n1).
be disputed. Secondly, the status of the majority of initiatives and instruments in the field is not addressed in the UNGPs. Thirdly, for the instruments that are addressed in the UNGPs it is not clear how they should inform corporate human rights standards. In these ways, the UNGPs obscure the fragmented field of business and human rights initiatives and instruments. The failure to adequately assess its position in the field extends the leeway for TNCs to lower standards.17 As the example illustrates, TNCs can claim compliance with the UNGPs and other initiatives and instruments but motivated by cost minimization, standards are lowered and human rights are violated. The choice for specific instruments is affected by national characteristics. In this way the UNGPs contribute to cross-national differences in corporate human rights standards.
The variety of initiatives and instruments that aim to inform corporate human rights standards differ in subject-matter, geographical scope and origin. Private initiatives such as guidelines and codes of conduct from civil society organizations,18 industry-specific initiatives,19 and
multistakeholder initiatives of various social partners,20 often address corporate social
responsibility, a concept that is broader than human rights, covering various social and environmental concerns.21 Furthermore, regulation by international and regional intergovernmental organizations, legal frameworks from TNC home and host states, and international human rights law (IHRL) instruments can be taken into account by TNCs in their human rights practices and policy statements. The UNGPs were envisioned to clarify this field,22 and to offer a platform for TNCs to define the binding and non-binding mechanisms through which they comply with human rights. The instrument falls into the category of
17 See for example S Deva Regulating Corporate Human Rights Violations: Humanizing Business
(Routledge 2012); RC Blitt ‘Beyond Ruggie’s Guiding Principles on Business and Human Rights: Charting an Embracive Approach to Corporate Human Rights Compliance’ (2012) 48 Texas International Law Journal 33.
18 For example The Danish Institute for Human Rights, The International Corporate Accountability
Roundtable and UNICEF, ‘Children’s Rights in National Action Plans (NAPs) on Business and Human Rights’ (2015).
19 For example guidance for companies in the extractive sector: The Voluntary Principles on Security
and Human Rights, see http://www.voluntaryprinciples.org.
20 Such as the SA8000 of Social Accountability International (SAI), a non-governmental,
international, multi-stakeholder organization. The standards are on its turn based on ILO standards and UN Human Rights Conventions.
21 TE Lambooy Corporate Social Responsibility: Legal and Semi-Legal Frameworks Supporting CSR
(Kluwer 2010).
22 JG Ruggie ‘Life in the Public Domain: Response To Commentaries on the UN Guiding Principles’
[2015] available at SSRN 2554726; JG Ruggie ‘Report of the Special Representative of the Secretary-General on the Issue of Human Rights and Trans-National Corporations and Other Business
instruments from intergovernmental organizations, in this case the UN. It can be labeled as a soft law instrument, which is not legally binding. It therefore cannot modify or trump treaty law. Whether it is capable of for example excluding other soft law instruments, or private initiatives depends on whether it is considered sufficiently authoritative as a soft law instrument, largely determined by the extent of support by states.23 The UNGPs can be considered authorative because they enjoy widespread support by both states and corporate actors.24 However, many civil society organizations have rejected the UNGPs, while they have an important part in the field of business and human rights. 25 As opposed to corporations and states that were consulted extensively during the emergence of the UNGPs, civil society organizations were not. Their opposition to the UNGPs makes it harder to assess the authority of the UNGPs. Not in general, nor in the UNGPs, there exists much guidance on the relative position of soft law instruments. From a legal perspective the UNGPs are not capable of addressing the status of other initiatives, let alone legally-binding instruments, but also as an authoritative statement it is inconclusive.
The applicability of private initiatives and guidelines is not addressed in the resulting UNGPs, such that TNCs can choose whether to take them into account.26 In practice, TNCs do not ignore civil society organizations. The choice to be involved in a private initiative or take into account private guidelines is affected by for example the active civil society organizations in their sector or country of operation, and the social awareness of certain corporate human rights impacts in a host country, such as the risk of child labour in Cambodia.
According to Principle 15(a) of the UNGPs, TNCs should define their human rights responsibilities with reference to international human rights law in a policy commitment, in order to comply with their responsibility to respect human rights.27 For this purpose, TNCs have to determine what human rights and what labour rights they will take into account for their corporate human rights standards. In Principle 12 the UNGPs refer to the ILO’s Declaration on Fundamental Principles and Rights at Work and the International Bill of Human
23 T Fajardo ‘Soft Law’ (Oxford Bibliographies in International Law)
<file://www.oxfordbibliographies.com/document/obo-9780199796953/obo-9780199796953-0040.xml> (19 April 2016).
24 Addo (n10) 141.
25 Joint Civil Society Statement on the Draft Guiding Principles on Business and Human Rights (n11). 26 S Deva ‘Guiding Principles on Business and Human Rights: Implications for Companies’ (2012) 9
European Company Law 101, 108.
Rights as rights to be respected by business enterprises.28 The regulatory regime of the International Labour Organization (ILO) focuses on labour rights.29 However, the reference to the ILO Declaration is a curious choice. Although the relevance of labour rights in business is obvious, Ruggie himself recognized that TNCs can have an impact on virtually every kind of human right. 30 Moreover, as opposed to the ILO core conventions, the ILO Declaration is a non-binding instrument. It has less parties and less formalized enforcement mechanisms than the ILO core conventions, or the core UN human rights Conventions, 31 which are not all implied by this Principle. Principle 12 does refer to the rights expressed in the International Bill of Human Rights, that consists of the Universal Declaration of Human Rights, the International Covenant on Civil and Political Rights with its two Optional Protocols and the International Covenant on Economic, Social and Cultural Rights.32 It remains unclear what the status is of rights contained in other core UN human rights treaties, such as instruments for the rights of children, women, and other vulnerable groups.33 According to the Commentary on
Principle 12, these core human rights instruments may need to be respected by businesses in certain circumstances, for example when there is an adverse impact on the human rights of a specific vulnerable group.34 The distinction between the rights contained by the IBHR and those contained by other core UN human rights treaties gives the impression that the latter are inferior to the IBHR rights, while special attention to vulnerable groups was part of Ruggie’s mandate, the Special Representative of the Secretary-General (SRSG) on this matter.35 To obscure matters further, the UNGPs’ General Principles require TNCs to comply with all applicable laws and to respect human rights. The suggested distinction between ‘to comply’ and ‘to respect’ is not defined in the text. Based on the General Principles and Principle 12, TNCs have to comply with the UN Human Rights Conventions that are ratified and
28 ILO ‘Declaration on Fundamental Principles and Rights at Work’ (1988) [hereinafter ILO
Declaration]; UNGPs (n1) Principle 12.
29 ILO ‘Tripartite Declaration of Principles concerning Multinational Enterprises and Social Policy'
(2006) International Legal Materials 422.
30 Blitt (n17) 46.
31 United Nations Human Rights Office of the High Commissioner ‘The Core International Human
Rights Instruments and Their Monitoring Bodies’
<http://www.ohchr.org/EN/ProfessionalInterest/Pages/CoreInstruments.aspx> accessed 19 April 2016.
32 UNGA Res 217 A(III) ‘The International Bill of Human Rights’ (10 December 1948) (IBHR). 33 S Deva (n26) 105.
34 UNGPs (n5) Principle 12 and Commentary.
35 Blitt (n13) 45; Human Rights Council Res 8/7 'Mandate of the Special Representative of the
Secretary-General on the Issue of Human Rights and Transnational Corporations and Other Business Enterprises' (June 18, 2008) UN Doc A/HRC/RES/8/7 para 4(d).
implemented as national legislation by the state where they are incorporated or operating, and respect the ILO Declaration, the rights expressed in the IBHR, whereas the other core UN Human Rights treaties should only be respected in certain circumstances.
The drafters of the UNGPs might have sensed the lack of clarity for corporate actors, especially when they are operational in multiple countries. TNCs are advised to rely on external advice and expertise for ascertaining their human rights responsibilities.36 Similarly, in complex contexts, business enterprises are advised to rely on external expertise.37 These principles contribute to the cross-national differences in corporate human rights standards because external expertise and advice is likely to differ cross-nationally due to different schools of thought among scholars and cultural differences. This has become for example apparent in the debate on a binding BHR instrument, with a division along the lines of developed and developing countries, for example about the nature and the role of TNCs on an international level.38
In the case of conflicting requirements, Principle 23 advises business enterprises to seek ways to honour human rights principles in the case of conflicting requirements. The Commentary on Principle 23 imposes the same responsibility on businesses to respect human rights, regardless of where they operate, but this is immediately mitigated by the next sentence. Human rights are only expected to be respected to the greatest possible extent in complex contexts. This has been considered an ambiguous and weakly-formulated standard by opponents of the UNGPs,39 but it also directly contributes to the race to the bottom, in which complex contexts legitimize lower standards, with the objective to minimize costs. The UNGPs’ implementation Working Group further intensifies this, because its priorities depend on characteristics of the country concerned, such as the level of development, the strength of the legal regime and local culture and customs. The country visits by the Working Group responsible for implementing the UNGPs show that regional characteristics are given considerate attention.40 The focus of the visits depends on the level of development of the country in question, and the priorities and opportunities of the implementation of the UNGP are different for each region according to the
36 Lambooy (n21) 362; UNGPs (n5) Principle 16(e). 37 UNGPs (n5) Principle 23 and Commentary.
38 S Deva and D Bilchitz Human Rights Obligations of Business: Beyond the Corporate
Responsibility to Respect? (Cambridge University Press 2013).
39 Blitt (n17) 50. 40 Addo (n10) 140.
Working Group. The intention is to improve implementation,41 but this simultaneously reduces incentives for corporate actors to uphold higher human rights standards.
The non-binding nature of the UNGPs and its lack of clarity on the status of other initiatives and instruments to inform corporate human rights standards leaves TNCs with much leeway to ascertain their human rights responsibilities. It allows them to choose instruments that they comply with or can claim to comply with, which impairs the significance of the instruments. This choice is affected by national characteristics including social awareness of corporate human rights violations, active civil society, industry, multistakeholder and intergovernmental organizations, and the strength of the legal system of the country concerned, influencing both the instruments that are taken into account by TNCs and the possibility to uphold the appearance of complying with them. When TNCs uphold lower standards where possible, in the pursuit of cost reductions, this effect of the UNGPs contributes to new and existing cross-national differences in corporate human rights standards instead of mitigating them.
B. INSTRUMENTAL RESPECT FOR HUMAN RIGHTS
In the Netherlands, oil companies Shell and Exxon managed to influence the ministry of economic affairs. As a consequence, safety was ignored in the decision to not reduce gas extraction according to a report by the Dutch Safety Board.42 Thereby human rights such as the right to safety and protection of property were violated. This illustrates the discrepancies that can exist between the power of transnational corporations and of states, even for states with a relatively strong governance system. Transnational corporations have become mobile enough to avoid national legislation, and are capable to persuade national governments to not adopt more stringent regulation or to not enforce regulation.43 This section argues that the instrumentalist notion of corporate respect for human rights adopted by the UNGPs contributes to this imbalance, and thereby to cross-national differences in corporate human rights standards. It reinforces the corporate culture of profit maximization as the sole objective, such that TNCs will use their influence on states to be able to uphold lower and hence cheaper human rights standards. The extent they are able to do so depends on the strength of governance of the country concerned.
41 Addo (n10) 140.
42 Onderzoeksraad voor Veiligheid, ‘Aardbevingsrisico’s in Groningen: Onderzoek Naar de Rol van
Veiligheid van Burgers in de Besluitvorming over de Gaswinning (1959-2014)’ (2014).
43 A Triponel ‘Business & Human Rights Law: Diverging Trends in the United States and France’
The corporate responsibility to respect human rights in the UNGPs is based on the societal expectations of business.44 It is an instrumentalist notion of respect for human rights, based on the idea that it is in TNCs’ best interest. Respecting human rights grants TNCs a social license to operate. This implies that the corporate interest is limited to making profit. This is confirmed by Ruggie, that believes that imposing other interests on TNCs such as respect for human rights out of a moral obligation would endanger their economic viability.45 According to Deva societal expectations cannot be considered a normative basis, because they differ in nature and content per society, and it is unclear how the concept can be measured.46 Wettstein does try to define the expectations that society has from businesses, by considering the annual global study ‘the Edelman Trust Barometer’, standpoints of scholars, and of experts on corporate social responsibility. The outcome suggests that companies are expected to do more than mere non-violation of human rights, by making a positive contribution to the promotion and protection of human rights. TNCs have gained much power over the past decades, are the producers of many vital products and services, and are often able to influence national human rights policies. No longer can they be seen as mere economic actors, but as social institutions and political actors as well. According to this definition, the instrumentalist notion of corporate respect for human rights in the UNGPs would contradict the societal expectations.47
The UNGPs are accused of lacking ethics, because of the instrumentalist instead of inherent corporate respect for human rights. Wettstein argues that precisely this instrumentalism of societal expectations constitutes ethics. If corporate respect for human rights is based on the courts of public opinion, capable of granting or denying a social license to operate, the groups in society that are capable of influencing TNCs are heard. This is paradoxical because it contradicts the very essence of human rights, the protection of the groups and individuals that are more vulnerable. If the expectations or interests of more vulnerable groups conflict with more powerful groups, the latter should be given priority based on the courts of public opinion. This not only resembles a form of vigilante justice, the attempt to protect the weak but favouring the powerful is according to Wettstein a conceptual mismatch.48 Another argument
44 JG Ruggie ‘Protect, Respect and Remedy: A Framework for Business and Human Rights’ (2008) 3
Innovations: Technology, Governance, Globalization 191.
45 JG Ruggie, ‘Business and Human Rights: Further Steps toward the Operationalization of the
“Protect, Respect and Remedy” Framework’ (9 april 2010) UN Doc A/HRC/14/27 14.
46 Deva (n26) 104.
47 F Wettstein ‘Normativity, Ethics, and the UN Guiding Principles on Business and Human Rights: A
Critical Assessment’ (2015) 14 Journal of Human Rights 162, 172.
against inherent corporate respect for human rights is the fear for moral imperialism, where culturally biased values are imposed on others. However, the instrumentalist notion of the social license in the UNGPs also imposes culturally biased views on others, namely that of the Western free market capitalism, of which the race to the bottom is a consequence.49
The instrumentalist corporate respect for human rights in the UNGPs is problematic, because the societal expectations on which it is based require inherent respect for human rights from TNCs. Moreover, it contradicts with the essence of human rights to protect vulnerable individuals and groups. If TNCs are capable of influencing states, it is unlikely that the concept of a social license can force TNCs to comply with human rights. Finally, the instrumentalist notion reinforces the corporate culture of profit maximization as their sole objective. Together this further intensifies the race to the bottom, contributing to cross-national differences.
C. INTERPRETATION ON A NATIONAL LEVEL
The human rights policy of H&M is based on the UNGPs, but it does not actually impose obligations on the corporation. The UNGPs are guiding principles to improve corporate respect for human rights, and only through national legislation rules can be enforced on TNCs. However, it is questionable how, for example, the right of the child to be protected from child labour can be enforced through a national court. Article 32 of the UN Convention on the Rights of the Child addresses the government to protect the child, and there are no secondary rules to determine when the corporation has exactly breached an obligation. This section argues that the UNGPs allow for conflicting interpretations of the same norms, lack guidance on the translation of state-addressed human rights instruments and secondary rules for the enforcement of corporate human rights responsibilities. These lacunae contribute to cross-national differences, because interpretation occurs primarily on a cross-national level.
Business and human rights regulation is an example of functional fragmentation, the specialization and autonomization of areas in international law. Issues, such as the flagrant violations by corporations that led to BHR regulation,50 are increasingly addressed by the expansion of international legal activity.51 The downside of the expansion is the increase in conflicting and incompatible rules. Within international human rights law, the proliferation of instruments for specialized areas are a form of functional fragmentation. Due to the shared
49 Wettstein (n47) 177.
50 G Teubner ‘Transnational Constitutional Subjects: Regimes, Organizations, Networks’,
Constitutional Fragments (Oxford University Press 2012) ch 1.
51 International Law Commission ‘Fragmentation of International Law: Difficulties Arising from the
normative basis of these instruments, the proliferation rather leads to issues related to institutional fragmentation.52 Within each specialized regime, conflicting jurisprudence can emerge because different institutions interpret the same norms. Norms are especially prone to be interpreted in a contradicting manner when they are highly open for interpretation, such as human rights. The influence of regional institutions on the interpretation of human rights by national courtsstimulate alignment, but the so-called margin of appreciation acknowledges the competence of each country to interpret human rights in the context of their society.
TNCs have unique responsibilities that are not to be entangled with state obligations, according to Ruggie, the Special Representative.53 In the UNGPs, the difference between the two should be depicted by the state duty to protect human rights, and the corporate responsibility to respect human rights.54 This respect for human rights can be interpreted as, at least, doing no harm. Paradoxically, the no-harm principle is not unique, but holds for every agent that can be held accountable for its actions.55 Further casting doubt on the distinct responsibilities of TNCs, is
the fact that Principle 11 refers to IHRL instruments to be respected by TNCs, while these instruments have states as their specific addressees. Apart from not expressing unique corporate responsibilities, the translation to corporations as duty bearers, or responsibility bearers, comes with conceptual problems.56 The IHRL instruments adopt a state-centered view to the protection of human rights protection, that is based on the stringent distinction between public and private. The UNGPs refer to these instruments as rights to be respected by TNCs, but simply changing state actor for non-state actors in the instruments does not suffice, because these actors have different functions in society. Among non-state actors, heterogeneity exists as well, covering for example both TNCs and NGOs. The UNGPs contain no guidance on how to transform a state-addressed human right to a TNC.
Furthermore, the UNGPs do not specify when a TNC is actually disrespecting a human right. Secondary rules on the corporate infringement on human rights, the possibilities for justification and proportionality, would be necessary to actually enforce IHRL on corporate actors.57 For example, there is no guidance on when to qualify a failure to act, as failing to
52 M Payandeh ‘Fragmentation within International Human Rights Law’ (2015) A Farewell to
Fragmentation: The ICJ’s Role in the Reassertion and Convergence of International Law 1, 2.
53 Ruggie (n44) 189.
54 UNGPs (n5) Principle 1 and 11 respectively. 55 Wettstein (47) 170.
56 Deva (n26) 103.
57 D Bilchitz ‘The Moral and Legal Necessity for a Business and Human Rights Treaty’ (2014)
protect of a fundamental right, which is beyond the corporate responsibility, and when it is characterized as disrespecting the right.58 This determination is left to national courts.
The UNGPs allows for much room for interpretation, that has to be filled in on a national level. Without guidance, this induces conflicting interpretations of the same norms. As the enforcement of human rights on TNCs takes place primarily on a national level, the translation of human rights to address TNCs and the applied secondary rules can differ per country. This contributes to the cross-national differences in corporate human rights standards because it affects the standards that TNCs decide to uphold.
D. NATIONAL CORPORATE LIABILITY
H&M has been accused of the use of child labour in their supply chain. It is unlikely that they can be held accountable for this violation, because it took place in a factory that was subcontracted by H&M’s supplier. For the enforcement of national legislation on a TNC, the activity has to fall within its liability. This legal fiction is a matter of national legislation. This section argues that the lack of an international definition for corporate liability induces TNCs to organize their supply chains such that they cannot be held liable for human rights violations, and forms a barrier for the exercise of jurisdiction by states over TNCs. This allows for corporate human rights standards to be lowered, for example through subcontractors or subsidiaries.
The UNGPs do address liability, in two forms. According to Principle 13, the own activities of a TNC should not cause or contribute to adverse human rights impacts. Such impacts should be prevented or mitigated for activities directly linked to TNCs. It remains unclear how to put corporate activities into one of the two categories. 59
The state’s duty to protect against human rights violations within its territory or jurisdiction is not controversial.60 National legislation can, in addition to the implementation of international law, address the conduct of TNCs on human rights. As applicable law, obviously differing per country, TNCs should comply with these norms too when incorporated or operational in a country. Furthermore, the second Principle encourages, in careful wording, the exercise of extraterritorial jurisdiction by home states over TNCs. The actual encouragement that follows
58 Wettstein (n47) 173. 59 Deva (n26) 105.
from this provision has been doubted, because the UN treaty bodies have already adopted a stronger approach towards the exercise of extraterritorial jurisdiction.61
For activities abroad, the TNC also has to comply with the national legislation of the host state, regardless of the exercise of extraterritorial jurisdiction by the home state.62 The state where the activities take place has possibly a stronger duty to protect against human rights abuses compared to the home states, when the activities are not own activities but are directly linked to TNCs. For own activities abroad, it is not clear how the balance between the jurisdiction of home and host states should be struck. 63 Together with the already cautious formulation of extraterritorial jurisdiction by home states, contravening the UN human rights bodies, and the lack of a universal definition of subsidiaries and activities directly linked to corporation, extraterritorial jurisdiction is unlikely to be exercised.
The failure of the UNGPs to incorporate an international definition for corporate liability, grants TNCs leeway to organize their supply chain such that they avoid liability for human rights violations. It also forms an impediment for states to exercise jurisdiction, especially extra-territorially. TNCs that are seeking to minimize costs can do so by lowering standards without being held liable, and as a consequence uphold human rights standards that differ per country of operation.
III. Addressing the Issue: A Business and Human Rights Treaty
A. SUBSTANTIVE HUMAN RIGHTS OBLIGATIONS
Under the UNGPs, transnational corporations are left much room to decide what initiatives and instruments inform their corporate human rights standards. This choice is affected by the characteristics of the country of operation, and has in the context of upholding lower standards where possible, for cost minimization, cross-national differences in corporate human rights standards as a consequence. To address this issue, this section sets out the argument that a business and human rights treaty should include the substantive human rights norms for TNCs, such that the applicable norms are independent of the country of incorporation or operation of a TNC.
61 O de Schutter ‘Towards a New Treaty on Business and Human Rights’ (2016) 1 Business and
Human Rights Journal 41, 45.
62 See also UNGPs (n5) General Principles (b), requiring business enterprises to comply with all
applicable laws.
A business and human rights treaty should include an exhaustive set of human rights norms for transnational corporations, such that the applicable human rights norms for TNCs are universal and not a matter of selection by TNCs or policy by states. Non-legal instruments are no longer applicable, because they are trumped by the binding nature of the treaty. Semi-legal frameworks from intergovernmental organizations have to align with the treaty, after its ratification by member states. Non-binding soft law instruments, and the special status of the ILO Declaration under the UNGPs in particular, are excluded, because the uncertainty around their status obscures the determination of applicable substantive norms. The same holds for national legislation of home and host states, that will have to be adjusted in the case of conflicting rules with the treaty. Opposed to the UNGPs, the applicable human rights norms are not an addition to national human rights laws, but replace them, and do not depend on the strength of governance or the ratification of IHRL instruments in the country of incorporation or operation of TNCs.
By determining the applicable substantive human rights norms for TNCs on an international level, the human rights standards that TNCs uphold will exhibit less cross-national differences. It moves away from the state-centered perspective, that is even criticized by an outspoken proponent of the UNGPs. Backer expresses his disappointment in the UNGPs for not internationalizing the corporate human rights norms into a framework that is applied and developed by non-state actors, and holding on to the territorially-limited state-centricity.64
B. INHERENT RESPECT FOR HUMAN RIGHTS
The instrumentalist notion of corporate respect for human rights in the UNGPs induces TNCs to uphold lower human rights standards whenever it is in their best interest to do so. According to this notion, profit maximization is the sole incentive for TNCs to respect human rights. Unfortunately, it will always be cheaper to have a 12-year old stitching your garments, instead of an adult whose labour rights are fully respected. Only inherent respect for human rights, out of a moral obligation, could mitigate the incentive to uphold lower standards where possible. This section suggests a new approach to corporate power, to support the change of corporate culture in which human rights are inherently respected instead of instrumentally. Human rights norms should be imposed on TNCs as direct obligations. In addition to the non-violation of human rights, TNCs should make a positive contribution to the realization of human rights, in order to match corporate power with the adequate level of responsibility. This detaches
64 LC Backer ‘Reflections on Bilchitz and Deva “Human Rights Obligations of Business: Beyond the
corporate human rights standards from the country concerned, and links it more closely to the capability of TNCs.
As Goodhart explains, the UN human rights framework is based on the idea that human rights are natural.65 This entails the universality of human rights, meaning that every human being has human rights in an equal manner, and only consensual interference is legitimate. By consent of individuals through social contracts, governments are granted power to protect the natural human rights. This power comes with the risk of abuse of power, and is nowadays by analogy applicable to corporate actors. Human rights are intended to reconcile the effectiveness of state power with the protection against state power.66 This paradox of the capability to protect fundamental rights and the capacity to violate them is inherent to human rights. If human rights are assumed to be natural, and power of states is based on the consent by human beings granted to them in order to protect human rights, then the unwillingness or inability of states to successfully do so calls into question the legitimacy of state sovereignty.67 This is in
part a consequence of the increase in power of non-state actors such as transnational corporations, that individual states are no longer capable to control. Globalization has led to a decline in state sovereignty, meaning that interference within a state has become more acceptable. This offers new opportunities for human rights, that is to say to be protected and promoted by non-state actors.68 In the early days of international human rights instruments, states invoked sovereignty as a response to accusations of human rights violations within their territory. Sovereignty was challenged and led to progress for human rights protection, because nowadays it is universally accepted that human rights are not internal state matters.69 By analogy, TNCs are to an extent protected from interference in their internal matters, because state power is restricted by the presumption of non-interference in the private sphere.70 To address corporate human rights violations, the protection TNCs enjoy as private actors should be challenged as well. States are no longer the only violators of human rights, non-interference of the private sphere cannot be defended on the grounds of human rights protection. The individuals and groups in the private sphere whose human rights are violated by TNCs need to
65 M Goodhart ‘Human Rights and Non-State Actors: Theoretical Puzzles’ in G Andreopoulos, ZFK
Arat and P Juviler (eds) Non-State Actors in the Human Rights Universe (Kumarian Press 2006) 24.
66 E Bates ‘History’ in Daniel Moeckli and others (eds) International human rights law (Oxford
University Press 2010).
67 Goodhart (n64) 31. 68 ibid 32.
69 ibid 38. 70 ibid 33.
be protected.71 Direct obligations acknowledge the non-state governance order that transnational corporations consist of.72 Moreover, these direct obligations adhere with the idea that any agent can be held morally accountable for its actions.73 As Wettstein explains, this ethical consideration is capable of uncovering, criticizing and preventing moral imperialism and trigger a deeper engagement of TNCs with the normative bases of respect for human rights.74
The exhaustive set of human rights norms in a BHR treaty should be based on the underlying norms of the core IHRL instruments, that are a perfect match with transnational corporations because of their universal nature. Similar to the application of IHRL instruments to states, these norms can take into account national differences, because they are universal but do not require uniformity. The set of applicable human rights should be formulated on the level that TNCs are active, which is globally. A new transnational regime emerges, where countries drop out of the equation and corporate actors are the constitutional subjects because they are the addressees of the norms. Human rights areas in particular qualify for transnational constitutionalism because of the underlying universal norms.75 The recognition of TNCs as constitutional
subjects can emerge, according to Teubner, through legally structured and constitutionally legitimized processes, that codify and validate the human rights norms, and make them binding within the transnational regime. It is conceivable that the emergence of a binding human rights treaty within the UN Human Rights Council answers to the requirements of such a process. Hence, human rights obligations should be directly imposed on TNCs to balance their power to violate human rights with the obligation to protect and promote them, similarly to how state-power was curbed by legally binding human rights obligations when international human rights instruments emerged. These obligations go further than mere non-violation, because the paradox of the capacity to both protect and violate is by analogy applicable to transnational corporations.76 This capacity was no reason for Ruggie, despite claiming to take a pragmatist approach, to include a corporate obligation to protect human rights into the UNGPs. A truly pragmatist approach to human rights protection does not leave the capability of TNCs to do so unused. The power of TNCs is reflected in the impact on the private sphere on virtually every 71 ibid 31 72 Backer (n63). 73 ibid 170. 74 Wettstein (n47) 177. 75 Teubner (n50) ch 5.
76 A Clapham ‘The Challenge of Non-State Actors for Human Rights Law’ in Daniel Moeckli and
level and in their leverage on states, and should come with the adequate level of responsibility.77 This obligation, to not only refrain from violating human rights but also to protect and promote them, is not about the causal link between TNCs and human rights violations, but about their capacity to address them.78
Although beyond the scope of a BHR treaty, for this pragmatist approach to be successful, it should apply to all actors with this capacity, that is, wherever governance occurs.79 For states, this entails acknowledging the erosion of their sovereignty, because holding on to the idea of the state as the sole protector and violator of human rights is at odds with the contemporary function of non-state actors such as corporations. Human rights within the influence sphere of states should be protected by states, and by the same token TNCs should do so in their influence sphere.80 This is not at odds with the UNGPs’ basis of societal expectations for corporate respect for human rights, because in reality societies expect a positive contribution from TNCs to the protection and promotion of human rights.81
As explained by Sen, an author which Ruggie claims to be inspired by,82 human rights are not
legal claims but the expression of ethical values.83 The only way to have TNCs really respect
these values, and positively contribute to their realization, is to base this on inherent respect and concern for the moral autonomy of individuals, and not to serve own interests. The functional respect for human rights in the UNGPs cannot be expected to change the way business is done, the primacy of making profits, because it uses human rights to promote it.84 Imposing direct obligations on TNCs cannot force them to inherently respect human rights, but it is instrumental for the required corporate culture change, that acknowledges that the objectives of TNCs go beyond making profits.85 In this manner, cost minimization and the race to the bottom can be slowed down. Corporate human rights standards will depend less on the country of operation, and more on the capability of TNCs to address human rights. This should have a positive impact on the realization of human rights around the world.
77 Wettstein (n47) 171. 78 ibid 173. 79 Goodhart (n64) 37. 80 ibid. 81 Wettstein (n47) 172. 82 Ruggie (2015) (n22) 9.
83 A Sen ‘Elements of a Theory of Human Rights’ (2004) 32 Philosophy & Public Affairs 315, 321. 84 Wettstein (n47) 175.
C. INTERPRETATION ON AN INTERNATIONAL LEVEL
The interpretation of the UNGPs on a national level contributes to cross-national differences in corporate human rights standards. More specifically, conflicting interpretations of the same norm, the absence of guidelines on the translation of state-addressed international human rights law instruments to address corporate actors and the absence of secondary rules for the enforcement of corporate human rights responsibility were identified to contribute to the issue. This section argues that a business and human rights treaty is suitable to address this matter. A treaty requires interpretation as well, and because of its binding character it is more likely to be directly interpreted by national courts. However, as a treaty instrument there are also more possibilities to streamline interpretation by national courts on an international level, such that TNCs have less leeway to uphold lower standards where possible. Firstly, it is argued that a BHR treaty should create a treaty body. Secondly, the treaty should include secondary rules, and thirdly, a guideline to translate state-addressed human rights norms to TNCs is suggested. Conflicting interpretations of the same norm are a consequence of institutional fragmentation. This can be addressed by the creation of an institution on the level of the treaty, to guide the interpretation of the treaty by national courts.86 The objective of the treaty body, consisting of independent experts, should be twofold. Firstly, it should guide the interpretation of the treaty by national courts through general comments and advisory opinions, in specific cases on the request of national courts. Secondly, it can resolve conflicting interpretations, by serving as a networking platform for national courts.87 Connecting the courts that are interpreting the treaty
will support the development of the norms contained by the treaty and strengthen the legal system.88 On its turn this contributes to the validity of the central body, as a part of the circular process of validation of the transnational regime as a whole between private actors, national courts and regime-specific institutions.89
To give a business and human rights treaty operational content, the nature and the extent of corporate obligations have to be determined. Centralizing the secondary rules facilitates enforcement on a national level. Technical streamlining is also one of the recommendations of Koskenniemi in the ILC report on fragmentation of international law to mitigate the issues stemming from institutional fragmentation, such as conflicting interpretations.90 In formulating
86 Payandeh (n52) 4. 87 Teubner (n50) ch 6. 88 ibid ch 5.
89 ibid.
these rules, the business and human rights treaty could benefit from other work by the ILC, on the secondary rules for the responsibility of states and international organizations. For a business and human rights treaty, especially with direct obligations for TNCs, it should be clear when an obligation is breached by formulating analytical criteria of the right and the violation.91 Such secondary rules formulate for example potential justifications of breaches and corresponding proportionality requirements.92 Furthermore, if the business and human rights treaty emerges into a transnational regime with corporate actors as its constitutional subjects, concrete standards for legal procedures further improve the validity of the regime.93
International human rights instruments were drafted to address states, or actually their political power.94 The translation of human rights to address corporate actors is not addressed in the UNGPs. Moreover, to adopt the new approach suggested in the previous section to impose human rights norms as direct obligations, the obligations have to be tailored to the function of the addressed actor.95 Although each substantive norm to be included in a BHR treaty has to
be reformulated individually, this section describes a few conjectures to be taken into account in this process.
Teubner, who envisions corporations as constitutional subjects of a transnational human rights regime, analyzes the issues that arise when IHRL instruments are applied to corporate actors.96 Human rights violations in the traditional sense can require the involvement of an element of state action. The formulation of agent-specific norms for corporate actors starts with the generalization of IHRL instruments, that address political power, to the underlying universal norms, that address all actors in a society.97 This is followed by the respecification of the norms in the social context of TNCs to adjust to the rationality and normativity of corporate actors. This social context involves their specific qualities and capabilities, like their economic and social power.98 However, adjustment to corporate rationality and normativity does not entail that human rights are used for corporate interests, like in the UNGPs. Clearly TNCs are economic actors, but as providers of essential goods and services, such as food and pharmaceutical products, they have enormous impact on public and private actors all over the
91 Goodhart (n64) 36. 92 Bilchitz (n57). 93 Teubner (50) ch 5. 94 ibid.
95 ibid; Goodhart (n64) 34; Wettstein (n47) 175. 96 Teubner (n50) ch 5.
97 ibid 132. 98 ibid 135.
world,99 and with that impact the corresponding capability to protect and promote human rights. The translation of human rights norms should acknowledge the societal functions of TNCs, that go beyond making profits. With the broad societal functions of TNCs as the basis of the translation, the corporate human right norms use the productive nature and unique capabilities of TNCs for the realization of human rights.100
Another reason to base corporate human rights obligations on the broad societal function of TNCs is to improve the social embedment of the transnational regime as constitutional system.101 Constitutional fragmentation comes with the same risk of conflicting interpretations of the same norm as institutional fragmentation, but the social embedment of the norms can reduce this risk.102 According to Teubner, norms are less embedded when they are more specialized and part of self-contained regimes with an independent rationality. The social embedment of a transnational regime for corporate human rights obligations is thus improved by basing it on universal human rights norms and a broad definition of TNCs’ function, rationality and normativity.
The room for interpretation of the UNGPs, that is to be filled in on a national level, allows for TNCs to uphold lower standards where possible. A business and human rights treaty requires interpretation as well, and is therefore susceptible to the same pitfall. The creation of a central treaty body to guide the interpretation of the treaty, the inclusion of secondary rules and the translation of human rights norms to TNCs by taking into account their contemporary societal function, have been argued to mitigate this risk. As a result, TNCs have less leeway to lower their human rights standards, and cross-national differences are reduced.
D. INTERNATIONAL CORPORATE LIABILITY
The lack of an international definition of corporate liability in the UNGPs has been demonstrated to induce corporate actors to organize their supply chains in a manner that avoids responsibility for human rights violations, and forms an impediment for states to exercise jurisdiction over TNCs. This section proposes a way to include a definition of corporate liability in a business and human rights treaty that is capable of addressing these issues.
99 Wettstein (n47) 170. 100 ibid 170-171. 101 Teubner (n50) ch 6. 102 ibid.
Several options to pierce the so-called corporate veil are proposed by de Schutter, in his discussion of options for consideration for the negotiations of the BHR treaty.103 The liability of corporate actors can be determined by the examination of the factual situation, where the degree of factual control is determinative instead of the legal fiction of separated entities. The factual relationship between a parent company and a subsidiary can adhere to the legal fiction, but it can also constitute a principal-agent relationship, or even operating as one entity.104 This approach gives the parent company the incentive to limit its control over subsidiaries to assure that it is not held accountable for subsidiaries’ actions.105 Alternatively, the treaty can include a provision on the presumption of unity of the TNC, such that the parent company and its subsidiaries are presumed to be one entity, with the corresponding responsibility for all actions.106 Thirdly, a treaty could depart from the determination of the boundaries of limited liability. The alternative is to focus on the direct liability of the parent company, for meeting its due diligence obligations to control the actions of its subsidiaries.107 Due diligence is a
principle that is also used in the context of state responsibility,108 and can mitigate the
difficulties with the attribution of actions of subsidiaries under limited responsibility. The latter two options, the presumption of unity and due diligence, trigger the parent company to exercise strict control over its subsidiaries, to avoid actions, such human rights violations, for which it can be held accountable.109 Therefore, these options are to be preferred in a business human rights treaty. Simultaneously, defining the boundaries of the liability of TNCs affect the exercise of jurisdiction by home and host states. In practice it is unlikely that states will exercise extraterritorial jurisdiction over actions of a corporations that is domiciled outside its territory, which is another reason to prefer the presumption of unity or direct due diligence obligations.110 Under both options the parent company is held liable, either for actions attributed to it based on the presumption of unity, or for its own failure to exercise due diligent control over subsidiaries. Hence, in these cases jurisdiction can be exercised over activities abroad, but is only indirect extraterritorially because it is exercised over the parent company by its country of incorporation.111 De Schutter’s recommended solution is to impose a direct due diligence 103 De Schutter (n61) 47. 104 ibid 48. 105 ibid 52. 106 ibid 49. 107 ibid 50.
108 ICJ, Corfu Channel case, Judgment, ICJ Reports 1949. 109 De Schutter (n61) 52.
110 ibid 52. 111 ibid.
obligation on the parent company to control the subsidiaries.112 Based on stock ownership the capability of the parent company to control the subsidiaries is presumed to exist, unless the parent company can rebut the presumption by proving that it was not capable of controlling the subsidiary. In this manner there is no incentive for parent companies to limit control, because it is about the capability to control instead of factual control.
This solution addresses both the issue of supply-chain management in order to avoid responsibility for human rights violations, and the barrier for the exercise of extraterritorial jurisdiction by states. This limits the possibilities for TNCs that are seeking to minimize costs to lower the human rights standards they uphold. As a consequence, these standards will depend less on the country concerned.
Conclusion
In the decades-long debate on corporate human rights violations, the international community is at the early start of another initiative, a binding business and human rights treaty. The positive contribution of the UNGPs to the field of business and human rights is beyond doubt, but with continuing human rights violations by corporate actors and their simultaneously ever-increasing power, the international community might be ready to address the issue on another level. The paper has argued that the UNGPs contribute to cross-national differences in corporate human rights standards. These differences emerge in the race to the bottom, in which TNCs because of competitive pressure aim to minimize costs, and thereby lower human rights standards where possible. The increasingly globalized world has not only intensified this competitive pressure, but also offers new opportunities for the realization of human rights. The identified aspects of the UNGPs that contribute to cross-national differences in human rights standards were argued to be best addressed by a treaty. The suggested solution within the context of a binding business and human rights treaty are topical and relevant to the field, because a business and human rights treaty is currently the topic of elaboration of a working group of the UN Human Rights Council.
Concluding, the paper has identified the following answer to the research question: ‘What aspects of a business and human rights treaty can reduce the cross-national differences under the UNGPs in corporate human rights standards?’ The following aspects of the UNGPs were identified to contribute to cross-national differences in corporate human rights standards. The non-binding nature of the UNGPs, and its lack of clarity on the status of other initiatives and
