Key provisions on liability, adjudicative jurisdiction, statute of limitations and applicable law are subject of much reflection and discussion / EU delegation remains silent whilst France and Belgium engage with the text acknowledging the importance of the provisions and seeking clarifications.
[ECCJ’s blog on Day 2 of the negotiations can be found here]
The day started with the Chairperson-Rapporteur introducing the new and revised provisions as having undergone significant revision since the last draft. The experts to give reflection included Dr Jelena Aparac from the UN WG on Mercenaries; Carlos Lopez from the International Commission of Jurists, and Dr Richard Meeren from Leigh Day, bringing much appreciated case work experience to the discussions.
The liability provisions contain both civil and criminal measures, largely supported by most experts, states and CSOs who spoke to the topic. However, a common reflection was the need for a clear delineation between civil and criminal provisions. In the current draft those are either blended or presented in an ambiguous way, creating confusion and legal uncertainty. A clear and easy improvement would be to delineate the provisions from one another and treat them in separate sections.
On the provisions related to liability (be it civil, administrative or criminal) of businesses for criminal offences, state reactions were both welcoming and sceptical to the proposed list (provided in Article 6.7) of crimes for which businesses could be held liable, which included Torture, Enforced Disappearance, War Crimes, Forced Labour, Extra judicial executions, gender-based violence and others.
Afghanistan, Mexico, Namibia, Ecuador and Eqypt submitted that environmental harms should also be added to this list
; and they advocated to keep the list open. Namibia also suggested to add abuses to the right to privacy , hereas Afghanistan stressed the need to add financing of terrorist groups (relevant considering the recent ruling against La Farge in that region). CSOs proposed child labour to be added to the list.
Scepticism came from the Russian Federation, announcing it did not recognise some of these as crimes in its jurisdiction; a point seconded by Iran, Eqypt and Saudi Arabia. China suggested to eliminate the list entirely as the formulation of crimes should be left to the prerogative of sovereign domestic states. Brazil praised the deletion of provisions on universal jurisdiction as these were too controversial for the states present; noting alongside Uruguay and Egypt that – whilst potentially undesirable for some other states - criminal provisions should be made as flexible as possible (e.g. 'as appropriate' to the domestic legal order) in order to allow for the broadest possible uptake by states.
Dr Jelena Aparac from the UN Working Group on the use of mercenaries reminded the states that some of the listed crimes had in fact become part of International Customary Law (jus cogens) and are, therefore, recognised by all states.
On the issue of whether companies can themselves be criminally prosecuted, it was noted that states such as Ecuador and France already provide criminal provisions for companies as legal persons, whereas other states, such as the Russian Federation, do not provide for criminal prosecution of companies.
Expert Jelena Aparac gave another powerful reminder to the states present, namely that the four Geneva Conventions, the most ratified conventions in the world, contain in common Article 3 an application to non-state actors (i.e. could be companies). Moreover, she noted that the Nuremberg trials also found (even if they did not declare) that companies had committed war crimes. In this sense, she invited the states present to build on these historic developments from 70 years ago.
Regarding a key provision 6.6 on civil liability which foresees a form of parent company liability for harm caused throughout the supply chain, numerous states such as Egypt noted that the term 'parent company' is absent from the text and should be expressly used. The requirements that there be a 'contractual relationship' for liability to cover a parent company was challenged by most experts and states as highly problematic arguing that it should be replaced by the term 'commercial relationship' in line with the UNGPs.
Some states, such as China as well as business associations, defended the primacy of the principles of separate corporate person hood and limited liability; that to make one company liable for the behaviour of another is contrary to this worldwide fundamental tenant of company law. In response, experts Richard Meeren and Carlos Lopez clarified that what is proposed is nothing of the sort. Dr Meeren referred to an example from UK jurisprudence, where parent companies have been found liable vis-à-vis victims in their supply chain. He stressed that UK courts have not 'pierced the corporate veil' and made one company liable for the actions of another.
Rather, they have found that a parent company can be held liable for its own act or omissions vis-à-vis another company. By way of illustration, in the case against mining giant Vedanta the court ruled a parent company can be held liable, by victims, for issuing improper or negligent advice to its subsidiary, or for failure to issue effective advice such as health and safety protocols to the subsidiary (thereby leading to harm). Such real and demonstrative case examples were appreciated by the Chair as extremely useful at the end of the session, presumably because they exemplify that in practice such liability models are already in development by courts.
The Chair also stated that this was a general request from states that more case studies be utilised in explanation of the provisions.
In response to scepticism to these provisions from states such as Russia and China and to the idea that remedy is best sought in national courts, experts and CSOs continued to refer back to the fact that this has proven time and again to be inadequate. This was highlighted most powerfully by an intervention from a Nigerian community representative whose community and lands had been devastated by oil spills. He had struggled through the Nigerian judicial system but had consistently been frustrated.
Numerous experts and states, such as Namibia and France, recognised that prevention (HRDD) and liability should be connected. At the same time, it was noted that it is not yet clear enough how this is to be done. This led to discussion that two types of liability should be provided for: on the one hand there could be liability for failure to undertake HRDD (this is likely to be framed in administrative law) and liability for causing harm (framed in civil or tort law).
The provision 6.5 requiring state parties to ensure that business to maintain proper financial guarantees, such as insurance to cover potential claims was highlighted by experts as well as South Africa as essential, given the common scenario of a business causing harm and then going bankrupt during or after a claim against them. At the same time, victims are left without remedy. The International Organisation of Employers (IOE) complained such provisions would incentivise cases against companies to extort them of their money.
Concerning SMEs most interventions welcomed that the provision allowing for their exclusion was replaced with provisions obliging states to provide incentives for them to fulfil their responsibility to respect human rights. China challenged requiring SMEs to retain some form of remedy insurance due to their limited financial standing.
Suspension of the statute of limitation provisions elicited negative and positive responses, the former in acknowledgement of the fact that such cases take significant time to gather witnesses, elicit funding, and gather evidence etc., the KiK case was provided as a recent example.
It was also highlighted by legal practitioners that in many cases the harm takes time to eventuate, such as asbestos poisoning or carcinogenic or poison effects of products or waste materials. Therefore, it was noted that the time should run from the point at which the harm is discovered by the claimants, and children and peoples with mental disabilities should be exempt from time barriers altogether. The baby milk formula scandal involving Nestle was given as a powerful reminder of the need for such provisions. Additionally, it was stressed that the Convention against Torture prohibits time-barring cases.
South Africa raised the issue of directors' fiduciary duties, and the need to expand them beyond shareholders and profit-maximisation to include human rights protection, thereby adding to a string of reference to company law reform during the negotiations (e.g. India on its move to legislate from a 'shareholder' company model to a 'stakeholder' model). Professor David Bilchitz raised the point that the treaty could potentially cover company law reform.
Adjudicative Jurisdictions (Article 7) and Applicable Law (Article 9): the provisions provoked much discussion with references to existing regional and international private law and conflict of laws regimes, particularly those from the EU such as the Lugano Convention, Brussels Convention of 1968 and Brussels 2012 Recast, Rome II Regulation and European Court of Justice rulings. These discussions on the EU's significant legal advancements in these areas occurred whilst the EU sat absent from the discussions. Professor Markus Krajewski from the University of Nuremberg noted the need to evaluate the compliance of the instrument by looking at comparable existing International Private Law mechanisms.
Much support was voiced form states (Mexico, Namibia, South Africa), experts and CSOs for the notion of allowing victims to choose the applicable law to their case, as provided for by example in the EU Rome II regulation concerning environmental damage. Such a pro persona rule enabling victims to choose was put forward by Dr Ana Maria Suarez Franco (FIAN International) as also being applicable in the Inter-American Court system. The jurisdictional basis of where a business has a 'substantial business interest' raised a lot of questions, including from Switzerland who sought clarification on the point. The Chair replied in response that this could be where assets or capital is held, or where there is an office.
There was broad and notable support from states, experts and CSOs to prohibit the forum non conveniens doctrine whereby a court can deny hearing a case on the basis that another court is better placed to hear it. This doctrine has been responsible for many cases failing and has been found by European Court of Justice to be incompatible with the right to remedy. Similar support was voiced from Mexico for a forum necessitates provision enabling courts to hear a case in the event where no other court is able to hear the case.
China expressed concerns about the varied choice of laws provided in the text and extra-territoriality as impeaching on national sovereignty. This provoked the response from Professor David Bilchitz who noted that the solution to corporate impunity lies either with extra-territoriality or an international court, whereas the latter had not received sufficient political support in the course of this negotiation process.
Ecuador and Russia identified the issue of competing claims along the supply chain by various claimants in various jurisdictions. Professor Bilchitz suggested that a solution could be to only allow claim at one time on any one case.
CSOs finally reminded states in the room that the system of ISDS gives preferential treatment to corporations to sue states in numerous fora worldwide. This comment provided for some much needed perspective to the concerns raised against the above liability provisions.
In response to the concerns from business representatives as well as China that the proposed rules could potentially allow any victims anywhere to use any law; thereby opening business up to severe confusion for not knowing what law they may be liable under and where; Dr Richard Meeren suggested similar rules as those currently in place in the EU concerning tort law. These rules, however, state that the law applicable should be where the harm occurred – and this also applies to damages (compensation) meaning compensation is typically much lower for victims according to the law of the host (developing country) jurisdiction. He suggested that the best rule for victims therefore would be the law applicable in the company's home state.
[This blog series on the UN treaty is supported by the Rosa Luxemburg foundation].