The Third Session of the open-ended intergovernmental working group on a legally binding instrument on transnational corporations and other business enterprises with respect to human rights is taking place from 23 to 27 October 2017 in Geneva. This Session will shift the discussion on the elements of an international binding instrument on transnational corporations (TNCs) and other business enterprises with respect to human rights, to substantive negotiations on the binding instrument as established under the mandate of Resolution 26/9 adopted in July 2014.

In recent years, TNCs have reached a size similar to half of the leading 100 economies in the world[1]. Moreover, much of the global economic activity and trade transactions are concentrated within ‘global value chains’ controlled by a few TNCs[2]. The foundational principles of corporate law, such as that of ‘separate legal personality’, and the related doctrine of ‘limited liability’[3], have allowed certain TNCs to disregard “effective environmental and human rights management of the whole enterprise”[4].

The complexity prompted by these corporate structures has shaped a number of legal barriers that limit the ability of victims of corporate human rights abuses to access justice. These challenges include constraints in the jurisdiction of the host State due to the lack of adequate substantive and procedural laws to obtain effective remedy, obstacles related to the jurisdiction of foreign courts, collection of evidence and information, and uncertainty regarding the enforcement of domestic judicial decisions, as corporate actors could wind down their activities and liquidate their assets in the host States, thereby hampering the possibility for victims to claim compensation. An additional challenge is the economic constraints faced by victims, as TNCs usually have better financial capabilities than victims to sustain long and complicated judicial processes.

In this context, a binding instrument would complement domestic legislative frameworks and mechanisms to allow effective redress for victims of human rights abuses perpetrated by corporate actors, which unfortunately today can use their incorporation and contractual structures, and the gaps in international law to escape liability.

The feasibility of a binding instrument

 One of the most discussed issues in the process pertaining to a binding instrument has been how to address the corporate actor under international law. Today, international law does not entail a conceptual barrier for developing an agreement among States that imposes direct obligations on private actors. Nonetheless, in most cases, international law regulates the conduct of private entities indirectly through national legislation.

Several existing international human rights instruments take this approach when regulating private actors, by providing obligations for States to establish certain conducts as offences, and to establish the liability of legal persons subject to the legal principles of domestic laws[5], or by requiring certain conduct by or obligation on a private party[6]. A binding instrument could follow a similar approach by requiring States to develop national legislation in a way that clarifies liability standards of corporations under criminal, civil or administrative rules, based on State practices in this area. This would help States to converge towards a common approach and cover existing gaps in domestic systems.

Similarly, a binding instrument could clarify procedural elements under the domestic law of the State Parties with respect to the basis for the jurisdiction of the courts, in home States, host States and jurisdictions where corporations hold substantial business interests. It could also establish rules for international cooperation in investigations of cases, sharing of information among courts, and mutual recognition and enforcement of judgments.

Benefiting corporations [7]

The main discussion entailed in the process towards a binding instrument does not pertain to making regulations more stringent, but to making regulatory frameworks clearer and more certain in different jurisdictions. An instrument at the global level would help avoid illegitimate corporate competition that could be achieved through exploiting differences in the applied standards and in mechanisms available to uphold the implementation of rights.

Corporations upholding human rights and investing in best practices across contractual and production chains ought to have a clear interest in the movement towards developing a binding instrument regarding TNCs, and other business enterprises in the area of human rights.

An instrument at the global level will help to level the playing field across jurisdictions, bringing more clarity to corporations with regard to the context in which they conduct their operations and more certainty for victims of corporate abuse with regard to access to remedy.

[1] Presentation by Stephanie Blankenburg, head of the Debt, Development and Finance work at the United Nations Conference on Trade and Development (UNCTAD) Division on Globalization and Development Strategies at the UN Human Rights Council working group on the human rights effects of transnational corporations and other business enterprises (July 2015), reported in South Centre South Bulletin 87-88 (November 2015).

[2] Ibid.

[3] Stephen Tully, ed. (2012), International Corporate Legal Responsibility, page 29.

[4] Filip Gregor and Hannah Ellis, Fair Law: Legal Proposals to Improve Corporate Accountability for Environmental and Human Rights Abuses, European Coalition for Corporate Justice.

[5] The Optional Protocol to the Convention on the Rights of the Child on Sale of Children, Child Prostitution and Child Pornography (Article 3.4) and the United Nations Convention against Corruption (Article 26)

[6] The international Convention on Civil Liability for Oil Pollution (1992), Article VII (1)

[7] See: Kinda Mohamadieh, Corporations, Investment Decisions and Human Rights Regulatory Frameworks: Reflections on the discussion pertaining to FDI flows and the impact of a potential International Legally Binding Instrument on Business and Human Rights (2016), South Centre Policy Brief 32. 

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Daniel Uribe is a visiting researcher at the South Centre's Global Governance for Development Programme.

Kinda Mohamadieh is a senior researcher at the South Centre's Global Governance for Development Programme.