In the process of drafting a legally binding instrument on business and human rights, which began in 2014, attention has been directed towards the following issues: whether it will specify the obligations of companies under international law; how it will impose extraterritorial obligation on States to protect human rights with respect to the activities of their own companies beyond their territory. To find agreement on these issues, international relations  are important in the Treaty negotiations. Ecuador, serving as the chair, and South Africa, Cuba, Bolivia and Venezuela, as co-sponsors of the Treaty process, aim to take the lead in translating companies’ international legal obligations into a treaty, while the United States and the European Union (EU) support the UN Guiding Principles on Business and Human Rights (UNGPs) and intend to respond solely to companies’ obligations under domestic law.

First, the language on corporate obligations has changed over the years. In the 2017 Elements for the Draft Legally-Binding Instrument, there was a provision for ‘obligations of transnational corporations and other business enterprises’. These included respect for internationally recognised human rights throughout the supply chain, human rights policies, due diligence and remediation and remedy obligations, as well as not engaging in activities which could undermine the efforts of national governments to respect human rights. However, the obligations of companies were not included in the draft Treaty from 2018 onwards and were instead included in Article 2(b) of the third revised draft published during the seventh session in 2021: ‘to clarify and ensure the respect and fulfilment of the human rights obligations of business enterprises’. The United States and the EU, in accordance with international law and the UNGPs, opposed the term “obligations of business enterprises”, and the EU requested the replacement to “responsibilities of business enterprises”. The 2023 updated draft proposed for the ninth session, includes proposals from the EU, Brazil and the United States. The wording was changed to: ‘to clarify and ensure the respect and fulfilment of the human rights responsibilities of business enterprises’, which is seen as weaker, according to civil society organisations.

The second point concerns the extra-territorial obligations of states. While the draft of the proposed Treaty has weakened attempts to impose obligations on corporations under international law, the draft Treaty increasingly require States to regulate human rights violations in transnational business activities and provide remedies for victims. Article 6(4) in requires State parties to take mandatory legislative measures to compel companies to exercise due diligence. However, if this were to happen, the host country, which is a party, would need to impose sanctions (import regulations, etc.) on companies from other countries based on their actions in a third country. If there is an objection, how should the company or its home country respond? Article 18 of the Settlement of Disputes states that if a dispute cannot be resolved through negotiations between the parties, it shall be settled by the International Court of Justice and/or arbitration based on the agreement of the parties. However, in light of the Uyghur Forced Labor Prevention Act in the United States, is this sufficient? Furthermore, the purpose of mandatory due diligence is to create a level playing field in the international community through respect for human rights in the supply chain. However, unilaterally applying pressure to vulnerable companies, such as small and medium-sized enterprises lacking sufficient knowledge, know-how and resources for human rights initiatives, will not lead to respect for human rights in the supply chain. Providing superficial information for future transactions may obscure human rights violations. Capacity-building in the supply chain is important. Article 13 requires States to take measures for international cooperation, such as effective technical cooperation and capacity building. The 2021 document, ‘ UNGPs 10+: A Roadmap for the Next Decade of Business and Human Rights ’, reaffirms the importance of making business respect for human rights a core element of just transition and sustainable development strategies. To create a sustainable society, respect for human rights throughout the supply chain is essential. Building the capacity of companies, including small and medium-sized enterprises, is a prerequisite.

By Professor Emi Sugawara, Osaka University of Economics and Law