United States: United Nations Continues Its Development Of A Treaty Imposing Liability On Companies For Human Rights Abuses

An ongoing debate exists regarding the nature and extent to which transnational companies should be held directly and legally liable for human rights impacts. Much of this debate has involved calls for additional regulation to impose top-down requirements, and associated liability, for larger transnational companies to police or otherwise bear responsibility for the actions of smaller businesses with whom they partner throughout the world. One such effort is spearheaded by a United Nations ("UN") working group, which recently took additional steps towards drafting a multilateral treaty on business and human rights that may seek to impose liability on companies for not only their actions, but also the actions of their global business partners.

While this proposed treaty is far from being finalized, its suggested scope and potential impact create a noteworthy chapter in the ongoing debate about how business and human rights issues should be legislated.

Background to the Treaty Process

Since their introduction in 2011, the UN Guiding Principles on Business and Human Rights (the "UN Guiding Principles") have provided a set of guidelines for UN Member States and business to address, mitigate, and, as necessary and appropriate, remedy human rights abuses committed within business operations.1 Multi-national companies have made great strides in complying with these UN Guiding Principles, implementing a wide array of thoughtful policies and practices to address human rights abuses in their operations. These efforts include policy statements committing to respecting human rights, identifying operations that pose a risk for susceptibility to human rights abuses, implementing zero-tolerance policies for such abuses in business-partner selection procedures, and training stakeholders on identifying and preventing abuses.

Against this backdrop, in June 2014, a plurality of the UN Human Rights Council member states, led by Ecuador and South Africa, established an Open-Ended Intergovernmental Working Group on Transnational Corporations and Other Business Enterprises with Respect to Human Rights (the "IWG"). The IWG's stated purpose is "to elaborate an international legally binding instrument to regulate, in international human rights law, the activities of transnational corporations and other business enterprises."2 The IWG was initiated, at least in part, based on some allegations that the UN Guiding Principles had not sufficiently spurred improvements in business practices.

The IWG's first meeting took place in July 2015, and the second in October 2016. During these two sessions, the potential function and content of a treaty was broadly debated among State and non-governmental organization (NGO) delegates, academics, practitioners, and a handful of business representatives.3 The business representatives argued that expending resources to negotiate, draft and then implement a treaty was imprudent because existing human rights abuses are principally not the result of insufficient legislation. Instead, the abuses are the result of ineffective enforcement of existing legislation and the political will in jurisdictions where human rights abuses are prevalent.

The "Elements" are Published in Advance of the IWG's Third Session

In mid-October 2017, in advance of the IWG's Third Session, the Chairperson of the IWG published a paper articulating the "Elements" of the proposed treaty. During the Third Session, held in late October 2017, these Elements were debated among State and NGO delegates, academics and a handful of business representatives.4 These business representatives argued, in part, that the Elements still do not address the lack of enforcement of existing laws in those States where abuse allegations are worst, or how expansive extra-territorial jurisdiction can meaningfully improve victims' access to remedies.

The Third Session ended without any indication as to how these debates would impact the contours of the Elements or any eventual binding instrument, or what compromises – if any – the IWG was willing to entertain in adapting the elements to the concerns voiced by the various parties at the Session. At the end of the Session, the Chairperson recommended the publication of a more refined draft proposed treaty in advance of the next IWG Session, which will likely occur in 2018.

The "Elements" in Summary

The Elements cover the following non-exhaustive concepts:

Liability on Companies

The Elements suggest imposing criminal, civil, and administrative liability on companies' transnational activities that abuse human rights. It is unclear whether this liability will be directly imposed by the Proposed Treaty itself, or whether the Proposed Treaty will require governments to create and implement laws to achieve this end.

Piercing the Corporate Veil

The Elements propose extending liability to all "natural persons" in the companies' operations who were involved in the decision-making process, including potentially, directors.

Due Diligence Requirements

The Elements suggest imposing due diligence requirements to prevent human rights abuses in their operations, including "throughout the supply chain." This element runs parallel to certain "mandatory due diligence" legislation that has been enacted in France , and that is being discussed in other jurisdictions, including Australia.

Extraterritorial Jurisdiction

The Elements reflect a broad conception of extraterritorial jurisdiction. This conception includes proposals to ensure claimants' access to the courts of companies' home nations, even though the alleged harm to the claimants occurred in other nations. It also includes suggestions to ensure courts can exercise jurisdiction over companies domiciled abroad where those companies allegedly committed abuses in the nations where those courts sit.

Jurisdiction over the Activities of Business Partners

The Elements also suggest such extraterritorial jurisdiction over companies even when the abuses were committed by entities that are "directly or indirectly controlled" by the companies. Thus, and particularly given the inclusion of the amorphous concept of "indirect" control, the Elements suggest that companies may be liable for activities of separate, stand-alone, businesses over which they may have little or no control.

Remove Jurisdictional Barriers

The Elements propose allowing claimants abroad access to courts both in the States where the harm occurred and in the nations where companies are domiciled. To this end, the Elements propose, among other things, limiting the use of the doctrine of forum non conveniens, and allowing class action and public interest litigation.

"Reversal of the Burden of Proof"

The Elements include this phrase as one of the means to ensure access to justice for claimants. However, the Elements provide no detail as to what this phrase means, and the discussions at the Third Session provided no clarity either.

Given this ambiguity, the proposed treaty may envisage that the onus is placed on companies facing allegations to prove their innocence. Alternatively, the proposed treaty may intend to create a "burden-shifting" mechanism in which the companies have the burden to prove certain defenses, while the ultimate burden of proof remains with the individual claimant.

The "Primacy" of Human Rights

The Elements suggest that the "primacy" of human rights should be recognized over other international law obligations, including those created under free trade agreements and other investment instruments. The Third Session provided no clarity on the legal basis of this hierarchy of international law obligations, or how such "primacy" would operate in practice.

International Tribunal

The Elements indicate that allegations arising under the proposed treaty should be addressed by international judicial mechanisms, including an International Court on Transnational Corporations and Human Rights.

While the Elements articulate each of the above concepts generally, many questions are left unanswered, including how these goals will be achieved in the face of significant legal, political, and practical barriers. For example, and as for the question of extraterritorial jurisdiction, it is unclear how this will be achieved if many multinational companies' home nations opt out of ratifying any binding instrument, as many such governments have previously indicated. These goals and their concomitant barriers will continue to be debated.

What Next?

Even though the Proposed Treaty continues to be debated, the IWG's Elements serve as additional notice that business and human rights legislation will continue to be aggressively pursued in sub-national, national, and supranational legislatures. Indeed, the broad reach for liability suggested in the Elements may serve as guide posts for national governments that are seeking to reform their laws. In fact, many nations—including the home nations of multinational companies—have already enacted various laws to that very end. These include mandatory disclosure laws such as the California Transparency in Supply Chains Act,5 the U.K. Modern Slavery Act,6 and mandatory due diligence laws such as the French law requiring companies to create and implement a "vigilance plan" aimed at identifying and preventing potential human rights violations, including those associated with subsidiaries and supply chain members.7 The proposed treaty will potentially add to this complex array of human rights obligations placed on companies. Ensuring both corporate awareness and compliance with these emerging "hard" laws is a complex, culture-specific and risk-specific exercise, requiring the involvement of experienced counsel and internal stakeholders.


1 United Nations, Office of the High Commissioner for Human Rights, Guiding Principles on Business and Human Rights, available at http://www.ohchr.org/Documents/Publications/GuidingPrinciplesBusinessHR_EN.pdf.

2 United Nations Human Rights Office of the High Commissioner, Open-ended intergovernmental working group on transnational corporations and other business enterprises with respect to human rights, available at http://www.ohchr.org/EN/HRBodies/HRC/WGTransCorp/Pages/IGWGOnTNC.aspx.

3 Littler Mendelson attorneys Michael Congiu and Lavanga Wijekoon participated in this session.

4 Littler Mendelson attorney Lavanga Wijekoon was among those representing the business community.

5 See John C. Kloosterman, California Employers Have Another Notice Posting Obligation – Have You Posted Your Human Trafficking Notice?, Littler Insight (Apr. 3, 2013).

6 See Tahl Tyson, United Kingdom: New Law to Combat Supply Chain Slavery and Human Trafficking, Littler ASAP (July 14, 2015).

7 See Michael Congiu, Stefan Marculewicz, John Kloosterman, Stephan Swinkels, Aaron Saltzman, and Lavanga Wijekoon, Dutch and French Legislatures Introduce New Human Rights Due Diligence Reporting Requirements, Littler Insight (Mar. 13, 2017).

The content of this article is intended to provide a general guide to the subject matter. Specialist advice should be sought about your specific circumstances.

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Michael G. Congiu
John Kloosterman
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