Regulating Investor Responsibility, not just Investor’s ‘Rights’.

Dr. Daniel Aguirre, International Legal Advisor for the International Commission of Jurists in Yangon, Myanmar.

By Ludovic Courtès [CC BY-SA 3.0], via Wikimedia Commons

Governments must confront the dominance of corporate interests over human rights and the environment.

Recent political events like ‘Brexit’ and Donald Trump’s election have been in part fuelled by a backlash against a system of neoliberal international trade and investment. Its inherent inequality, injustice and environmental degradation have become clear. The status quo leaves too many behind to be sustainable.

It is clear that the international community’s priority is on promoting investment rather than regulating it.

Governments must confront the dominance of corporate interests over human rights and the environment. One way to address it is to ensure that international business – so well protected through investment and trade agreements and offshore tax havens – will also be regulated to protect and promote human rights.

The Regulatory Gap

It is clear that the international community’s priority is on promoting investment rather than regulating it. Investment laws do not mention human rights. They require investors to follow national law. The problem is that many states do not have adequate human rights and environmental protections in place. In other cases, states are unwilling or unable to enforce existing laws. Transnational businesses are able to select a venue that makes its operations cheaper even if it undermines human rights or harms the environment.

A Binding Treaty’s Contents

A binding treaty must address this regulatory shortfall. Like the Convention on the Elimination of all Forms of Discrimination Against Women (CEDAW), the Convention on the Rights of the Child (CRC) or the Migrant Workers Convention, which elaborate on existing standards to address a particular need identified by the international community, a binding treaty on business and human rights should codify and develop the responsibility of states to protect human rights.

A business and human rights treaty needs to develop standards for preventative measures and build national capacity. States must be bound to adopt regulations and enforcement measures to ensure business enterprises fulfill their responsibilities, including adopting an approved policy or code of conduct and human rights due diligence processes. Many states are developing these policies in absence of an international framework. Civil society is calling out for binding standards by which to measure new laws.

The treaty should help states adopt effective legislative and administrative measures for criminal and civil liability of corporations for human rights abuses. Crimes for which international law requires the imposition of criminal sanctions should be incorporated into national corporate criminal law, expanding the jurisdiction of national tribunals and law enforcement bodies to deal with transnational corporate crime. 

The regulatory process for approval of licenses and permits for some investments should include an obligation to obtain social license through fully informed community consent. It should also provide standards of public policy protection to be included in investment protection agreements.

The possibility for victims to initiate judicial complaints against companies directly in their domicile (whether it is in a host State or the home State) will further help to redress the inequality in rights and obligations that exist between companies on one side, and people on the other. 

Access to justice, including the right to an effective remedy, is essential for business accountability for human rights abuses. The treaty should codify and develop provisions for access to an effective remedy for wrongful conduct against both states and business enterprises. For states, the remedy would be in relation to situations of complicity or participation in business abuses or for failing to discharge their duty to protect against the wrongful conduct of business enterprises.

The possibility for victims to initiate judicial complaints against companies directly in their domicile (whether it is in a host State or the home State) will further help to redress the inequality in rights and obligations that exist between companies on one side, and people on the other. It is clear that the international community’s priority is on promoting investment rather than regulating it.It is clear that the international community’s priority is on promoting investment rather than regulating it. The doctrine of forum non conveniens rings hollow as companies argue for human rights cases to be heard in host jurisdictions while their interests must be upheld in international arbitration.

Regulation and Sovereignty

Some states claim that a binding treaty on business and human rights would interfere with domestic sovereignty, either through extraterritorial application of law, or by forcing developing states to adopt high standards that they cannot afford. Yet these same states are willing to sign binding investment treaties that apply international standards, sometimes overruling domestic regulatory sovereignty. This hypocritical stance helps fuel protest and opposition to economic globalisation. 

International investment law faces little opposition from states and is promoted as encouraging legal certainty. But locking in bad law or discouraging new standards by allowing foreign investors to challenge changes is extremely unpopular. While states are reluctant to regulate their companies extraterritorially, they are happy to negotiate protections for them, even at the expense of human rights.

An international treaty that guarantees an enhanced remedy system for harm caused by companies including extraterritorially would serve as a corrective instrument in this respect. 

The EU, the United States and the United Kingdom should support a binding business and human rights treaty to go along with their global investment agenda. It is advantageous for them to support the highest standards possible. Companies from Western states are increasingly held responsible by active civil societies and cannot compete in places where the rule of law does not exist. Other countries do not face such restrictions and their companies do not have the discerning glare of civil society back home upon them. It is in the developed home state’s interest to level the playing field. Ideological opposition to the regulation of markets no longer makes sense.

Try telling a local farmer or a worker that a foreign business enterprise will have access to justice and its interests protected by treaty while they will not. An international treaty that guarantees an enhanced remedy system for harm caused by companies including extraterritorially would serve as a corrective instrument in this respect. It might also convince people that globalisation is more than investment and includes the protection of human rights and the environment.

--------------------------------------------------------------------------------------- 

For more information see the ICJ’s Proposals for Elements of a Legally Binding Instrument on Transnational Corporations and Other Business Enterprises at: http://www.icj.org/wp-content/uploads/2016/10/Universal-OEWG-session-2-ICJ-submission-Advocacy-Analysis-brief-2016-ENG.pdf