Binding Business to Human Rights

In October 2023, states gathered in Geneva for the ninth session of negotiations for a UN Binding Treaty on Business and Human Rights. The process began in 2014, established through the UN Human Rights Council’s (UNHRC) resolution 26/9 on elaborating a treaty to establish rights and obligations for transnational corporations (TNCs) and other business enterprises. A UN Intergovernmental Working Group (IGWG) was established to steer negotiations between states, leading to the development of the First (Zero) Treaty Draft in 2018. The first draft was released by the Working Group in August 2021.

During the ninth session held in October 2023, states debated the Third Revised Draft in what became one of the most contentious sessions to date. The Working Group’s ninth session highlighted the significant disagreements between states, and failed to produce a new, consolidated text building on the Third Draft. Those disagreements predominantly centred on questions of process and procedures, as well as application of scope relating to which businesses the treaty will apply to.

Established under Ecuadorian leadership, the process was co-sponsored mostly by states that usually host TNCs as producer states in supply chains, such as Bolivia, South Africa, Cuba, and Venezuela. These states are mostly located in the Global South and are subject to the human rights and environmental impacts of transnational companies’ activities. For example, the Democratic Republic of Congo’s valuable cobalt industry comes at a major supply chain risk — extraction of the mineral is linked to child labour, safety risks, environmental abuses, and corruption. Several civil society organizations have called for cobalt to be considered a conflict mineral.

The process to create an instrument to regulate supply chains has mostly been criticized for its lack of buy-in from states that are home to transnational companies, including the UK, Germany, Japan, the US, and trade blocs like the EU. These states favour voluntarism over binding regulations, especially given the non-implementation of the United Nations Guiding Principles on Business and Human Rights (UNGPs) by many states. However, as the scramble for critical minerals drives geopolitical shifts, acceptance of the process is growing, evident in the presence of more states in the negotiation room and the increased participation of states like the US, which attended for the second consecutive time after completely rejecting the process in its early stages. This is despite its continued reservations about the process, including with regard to the prescriptive nature of the current draft.

In total, 75 UN member states and Palestine participated in the ninth session, including the G7 countries. For the first time, the UK also provided textual proposals, however it noted that the current draft needed to be amended further, including its imbalanced focus on transnational businesses. For these states, the general sentiment remains that the UNGPs are sufficient. Greater acceptance of the process was also illustrated by substantive interventions from delegates, unlike in previous rounds of negotiations.

Geopolitical Factors in Human Rights Governance

The demand for minerals and metals is rising as a result of the transition towards renewable energy, mobility, and digitalization. Within the context of the United Nations Framework Convention on Climate Change (UNFCCC)’s 2015 Paris Agreement and the goal of achieving global climate neutrality by 2050, there has been an observable shift away from fossil fuel production and towards several “green” minerals. Meanwhile, the Russian invasion of Ukraine further politicized transnational supply chains.

Given the current geopolitical context, the US and EU have both enacted policies like the Inflation Reduction Act and the Critical Raw Minerals Act to reduce dependency on Chinese supply chains, leading to ambitious diversification targets. China controls over 75 percent of the world’s lithium-ion battery supply chain, and has become the most important actor in mineral supply due to its processing and refining capabilities.

The focus is mostly on those minerals for which dependency on China is high — decoupling rather than complete divestment. This led to the Minerals Security Partnership (MSP), an initiative by several states to secure a supply of minerals by catalysing investments from government and the private sector while ensuring higher environmental, social, and governance standards. Norway, Australia, the US, the EU, the UK, and South Korea are some of the states forming the MSP.

While the transition offers the African continent an opportunity to pivot away from export dependencies and towards benefit sharing and industrialization, overcoming what has been described as a natural resource curse — or, in more recent literature, an institutions curse —  must be accompanied by a push for sustainability and good governance. The African continent produces a significant share of the required deposits, including cobalt and lithium, rendering it an important player in the fight to uphold human rights standards.

The changing geopolitical context offers many producer states an opportunity to avoid repeating past mistakes.

Signalling to potential partners has become the name of the game in pursuit of trade relations and in competition with China, a practice known as “friendshoring”. While the practice has been criticized, the EU is increasingly embracing it. The concept combines economic cooperation by developing relationships with a network of trusted suppliers while also expanding political relations with states that share similar norms in order to develop independent supply chains. This calls for greater attention to be paid not only to economic cooperation, but also to states’ political or geopolitical objectives.

This, coupled with rising resistance to mining in some host communities, an uptake in litigation against several transnational companies, and their impact on social and environmental rights, makes environmental, social and governance (ESG) standards a strong value proposition. The trend has also been driven by increasing awareness of people’s rights as they relate to the environment in the context of climate change, expressed in the “Sustainable Development License to Operate” (SDLO). The SDLO is different from a social license to operate, which mostly takes social impacts like job creation as the main considerations for mining operations. The SDLO gives more weight to sustainability questions, including the impact of mining on the environment, often along the lines of “not in my backyard”.

The changing geopolitical context offers many producer states an opportunity to avoid repeating past mistakes, including in the governance of TNCs. This was reflected in the increased African participation in the ninth session. Nigeria, one of Africa’s oil-rich states criticized for its lack of participation in the process, attended for the first time. Other African states participating for the first time included Kenya, Algeria, Senegal, Djibouti, the Democratic Republic of Congo, Sierra Leone, Angola, and Ghana. Returning supporting states included South Africa, Namibia, and Cameroon. Côte d’Ivoire chaired the African Group and Cameroon remains one of the Friends of the Chair Group, a group of ambassadors in Geneva tasked with working out compromises to ensure the process moves ahead.

The growing strength of the African Group is a positive development amidst divestment fears, as it minimizes inter-state investment competition. It comes at a time of increased recognition of the leverage created by the current geopolitical tensions, including within the African Group. Moreover, as pointed out by the Algerian delegation, some states need to be more involved in the process than others, especially producing and exporting states.

Additionally, while ESG standards are an important element of the current geopolitical context, the right to development remains an important factor as well. For example, Brazil sees a need to move beyond the UNGPs; however, it notes that developing binding human rights standards must not impede states’ development goals, and especially those of small- and medium-sized enterprises.

This position is in line with that of other BRICS states. China also reiterated that the right to development and the right to life are fundamental rights, and through the UNGPs, developed the Chinese Forum on Business and Human Rights — a voluntary body. Chinese companies sometimes operate without following the same ESG standards that their competitors in other countries do. Zimbabwe’s growing lithium production sector, where Chinese companies are the main players, is characterized by displacement, lack of consultation, and violation of labour standards. Namibia also emphasized the importance of the right to development, adding a reference to the Declaration on the Right to Development with the support of states like South Africa.

Nevertheless, although the BRICS states are aligned on the importance of the right to development, there is no observed collaboration as a bloc at the negotiations.

The Global North at the Ninth Session

The EU and its member states remain without a mandate to negotiate. In the past, the bloc’s participation hinged on the consolidation and completion of the Corporate Sustainability Due Diligence Directive (CSDDD), which requires big businesses to identify and address negative human and environmental impacts in supply chains regardless of whether the harm occurs in or outside the EU. The coming negotiations are of major interest to observe whether the EU will establish a mandate to negotiate now that the CSDDD has been passed.

As the world’s biggest single market, the EU’s establishment of binding legal standards at a regional level like the CSDDD sends a positive signal to international partners who share similar norms, and is likely to be received well in its quest for “friendshoring”. However, the CSDDD is a weaker instrument than the legally binding instrument (LBI) currently being negotiated at the UN, and has been criticized as an imposition by the Global North on the Global South.

As a regional instrument with extraterritorial impacts, the CSDDD takes the form of an international instrument — even though it is not and has not been negotiated at a multilateral level with Global South states that are most affected by TNCs. The critique leveraged against the CSDDD presupposes that those affected by the rules should participate in creating those rules. This makes Global South acceptance of the CSDDD a difficult endeavour, with implications for international cooperation to regulate transnational supply chains. While the regionalization of ESG standards is important in the current geopolitical context, more needs to be done at the multilateral level with the states most impacted by transnational business.

To date, the EU’s participation has mostly been shaped by an “off the books” participation through general statements and comments. At the ninth session, the EU highlighted the issue of scope, comparing the UNGPs and the current Third Draft of the LBI. The EU supports an LBI that applies to all businesses. The CSDDD can be seen as a guide of what to expect when the EU acquires a mandate especially as it relates to scope — applying to all companies — with notable exceptions for size, number of employees, or profits generated. This would widen the scope of applicable companies and ruffle the feathers of the bloc’s desired cooperation partners like the African Group. The African Group is strongly united on the issue of scope, arguing that it should solely apply to TNCs.

Many civil society organizations saw the current draft as a step backwards, noting the elimination of multiple references to the impact of business on the environment and climate, conflict-affected areas, and labour rights instruments.

The EU expressed a commitment to upholding human rights and creating a level playing for companies. It also highlighted the importance of the UNGPs in this regard, demonstrated through its implementation of the CSDDD. In line with states like the UK and the US, the EU noted that an instrument like the LBI can enhance protection against human rights violations within the framework of the UNGPs, including on scope, and that it must be legally sound and implementable to garner the support of all states. In addition, it pointed out that the CSDDD encompasses even more than the current draft of the LBI, for example on issues relating to the environment. The CSDDD includes obligations for environmental impacts through its climate transition plan, in line with the Paris Agreement and the EU’s objective of achieving climate neutrality by 2050. The inclusion of environmental impacts is not clear in the current Third Revised Draft, with deletions suggested by some states for environmental related clauses.

The US also shares the same concerns about exploring more ways to achieve a broad consensus and multi-stakeholder support. Norway, having adopted its own regulations relating to supply chain transparency, also supports the UNPGs and their implementation. Furthermore, Norway noted that its interest in the negotiations is to ensure an LBI that adds value to the UNGPs, characterized by complementarity.

Germany fully aligned with the statements of the EU and its support for the CSDDD, noting that such an instrument can only succeed if it responds to the concerns raised by other states and avoids being overly intrusive in the matters of other states. The German government also noted that developing binding due diligence obligations and regulations on access to remedy could be achieved in the form of a framework agreement. The World Health Organization proposed a similar instrument, citing the Convention on Tobacco.

The proposal for a framework agreement is another suggestion that it is likely to be met with strong opposition from many Global South states. Some CSOs vehemently reject what they consider a watered-down instrument exclusively focusing on due diligence as in the case of the CSDDD, and note that an LBI on transnational businesses encompasses broader objectives. France and Portugal showed continued support for the process and remain part of the Friends of Chair Group.

Procedural Issues, the Chair, and a Crisis of Legitimacy

The Chair of the Working Group released a set of “informal” proposed amendments alongside the Third Draft LBI as a basis for negotiation. This caused procedural confusion and resistance. Represented by Côte d’Ivoire, the African Group called for a return to the Third Revised Draft as the basis for negotiation for the ninth session. The Chair’s informal proposals were criticised by several states, including Cuba, which noted that it excluded the human rights obligations of transnational corporations and that substantive language on issues such as sanctions for violations had been eliminated, reducing the capacity of any future instrument to suppress corporate human rights violations. Brazil also supported the African Group in using the Third Revised Draft as the only basis for negotiation.

Participating as observers, many civil society organizations saw the current draft as a step backwards, noting the elimination of multiple references to the impact of business on the environment and climate, conflict-affected areas, and labour rights instruments. Karoline Seitz notes in a report for Global Policy Forum that many relevant proposals put forward by states and civil society organizations during the eighth round of negotiations were ignored, including important provisions on prevention, liability, and jurisdiction.

Seitz argues that provisions included in the latest draft suggesting a state’s liability obligations should be compatible with its legal system are highly problematic. Liability is an important article for the African context, and instruments like the CSDDD are insufficient to address existing challenges. For example, the CSDDD’s exemption of liability by companies when due diligence has been conducted is likely to impede preventing harm and victims’ access to justice. Due diligence procedures are usually based on codes of conduct, action plans, and audit verification processes, which have yielded few positive results in the prevention of harm. While due diligence processes increase companies’ knowledge of their supply chains and make them more aware of risks, their influence on the companies’ overall behaviour, particularly deeper in the supply chain, is limited. It is thus important for an LBI to establish a liability regime that applies beyond due diligence obligations.

The CSDDD also does not contain provisions on jurisdiction to govern claims. As I recently argued, the CSDDD “does not contain provisions governing jurisdiction to deal with such questions and in this case, other EU laws apply. While it is clearer for those companies headquartered in the EU, the governance of companies headquartered elsewhere but with a turnover of €450 million would fall under the national laws of member states, making the determination of the appropriate court a more complex issue.”

The governance of complex supply chains without clearer jurisdictional challenges presents multiple problems. For example, in 2011, Leigh Day filed more than 2,000 claims against Anglo American South Africa, a subsidiary of Anglo American Group whose headquarters is based in the United Kingdom. The claimants waited for years for the court to decide on jurisdictional issues — to decide on the applicable court between South Africa and the UK. Eventually the case was referred to the UK Court of Appeal. However, due to the statute of limitations, the claim was instead filed in South Africa.

Structural constraints make it difficult to move away from fossil fuel investments and leave little space for swift policy change.

Questions around jurisdictional issues are not just a question of “forum shopping”, but rather important to ensure that rights holders receive the most effective and efficient form of remedy such as the possibility of obtaining higher damages. This is also important to obtain the most effective corporate accountability, where most of the corporate profits are made. As the saying goes, hitting the pocket where it hurts the most.

The Chair noted that the proposals presented in his informal proposals were a result of the preceding session rounds, including intersessional consultations. The Chair further pointed out that these inputs included an intersessional consultation hosted by the African Group in Accra, Ghana.  However, South Africa, Ghana, Sierra Leone, and Namibia clarified that the meeting in Ghana was not an intersessional consultation, although the Chair interpreted it as an official report from the African Group.

While the African Group tried to present a united front, questions remain as to why an intersessional consultation was not held and whether sufficient resources were allocated in the process to ensure that these sessions could be held. In addition, the Chair noted that the current draft was an attempt to bridge concerns over what has been described as the “unworkably prescriptive character” of successive drafts characterized by ambiguities.

States like the US, Australia, and the UK supported the Chair’s informal proposals, noting that the Third Revised Draft was a deviation from the UNGPs. In addition, the US reiterated that it remains open to a framework agreement. A framework agreement, supported by states like Germany, has been proposed as an alternative to a “broad spectrum treaty” due to the failures of instruments such as draft norms that preceded the UNGPs. It would aim to address concerns about a lack of buy-in and, possibly later, ratification.

Procedural questions around the fairness of the process and its continued legitimacy were also noted by Friends of the Earth (FoE). FoE described the process as undemocratic in nature and emphasized that it exemplified the asymmetries of power between states and TNCs, especially as they relate to Investor-state dispute settlement (ISDS). There are increasing debates around the legitimacy of the ISDS, especially in the context of the transition away from fossil fuel investments. ISDS also limits the space to enact human rights policies through, for example, so-called “regulatory chill” requirements, which make states liable for damages caused by changed regulations.

Regulatory chill suggests that investment arbitration — as an institution — may influence the course of policy development. This gives disproportional power to businesses and limits the amount of policy manoeuvre that states have to address human and environmental gaps. Latin American and Eastern European states have been the target of most ISDS cases. In Africa, Mozambique is one of the most vulnerable states to ISDS cases. These structural constraints make it difficult to move away from fossil fuel investments and leave little space for swift policy change. While states have to face these kinds of international limitations, the same cannot be said for TNCs.

The Chicken and Rice Recipe

Questions of scope and which companies would be covered by the treaty are dealt with in Articles 2 and 3. The main question of scope of application centres on whether the LBI should regulate all business activities or only transnational corporations and business activities of a transnational character.

In the end, the scope of application proved to be the most contentious topic on the negotiation floor, expressed metaphorically by the Cuban delegation as the “chicken and rice”. The metaphor refers to the different ingredients used to make chicken and rice across the world, while the negotiators try to find a recipe that would achieve corporate accountability in the most effective way. The Chair noted that the instrument should apply to all businesses and that obligations should be differentiated under domestic law according to enterprise size, etc., pointing to the risk that TNCs could restructure themselves to avoid coming under the treaty’s jurisdiction.

On the other hand, states like Algeria, Malawi, South Africa, Russia, Iran, and China opposed widening the scope and suggested that it should be limited to businesses of a transnational character. States like Mexico, Panama, the UK, and the US would prefer that the treaty cover all businesses, regardless of their transnational character, while states like Brazil are in favour of a treaty that can cover all business enterprises, but with a particular focus on TNCs. South Africa added that imposing due diligence obligations on small and medium enterprises would be burdensome. Panama noted that all TNCs are required to be registered as local entities under its law, meaning that without a treaty applying to all businesses, these kinds of businesses would fall outside the scope of the treaty. The UK added that the current resolution’s focus was skewed toward TNCs,  which was problematic in light of states’ territorial human rights obligations.

The African Group was the only group united on the application of scope and argued that it was important to remain faithful to the mandate and address the gaps in international law. States like Egypt supported this call, underscoring the weaknesses of soft law instruments, as in the case of the UNGPs. As Friends of the Chair, Cameroon also supported a return to resolution 26/9 and reiterated that some states struggle to find the capacity to properly carry out their international obligations to protect vulnerable populations, especially in the context of economic interest on one side and the attraction of foreign direct investment on the other.

The regulation of human rights has been a long-standing contested issue. Through the UNGPs’ “Protect, Respect and Remedy” framework, states’ duty to protect against human rights abuses by business enterprises was reinforced, providing that states “should set out clearly the expectation that all business enterprises domiciled in their territory and/or jurisdiction respect human rights throughout their operations”.

The current geopolitical context and the scramble for critical minerals in Africa urgently necessitates the development of binding regulations.

The UNGPs adopt a more cautious approach in terms of states implementing measures to prevent human rights violations that occur abroad by businesses incorporated under their laws, or operate their main operations under their jurisdiction. There is a thus a skewed focus on the role of the domestic state as the only party with obligations in its territory, preventing a more nuanced approach to regulating human rights in a globalized world.

The impact in African states can be dire, as illustrated by the Shell vs Nigeria case over an oil spill on farmland in the Niger Delta. Shell escaped liability in Nigeria because of a weak governance zone, a gap in the law that states that a company cannot be held liable for leaks caused by sabotage. However, a Dutch Court of Appeal exercised its extraterritorial obligation and ruled in favour of the Nigerian farmers, finding Shell Nigeria — as a subsidiary of the Dutch-based Shell — liable for damages in the form of compensation and environmental rehabilitation. The case was also filed in the UK, where the court also ruled in favour of the farmers. Due to “deteriorating relations” with the Netherlands, however, Shell has announced a major overhaul of its legal and tax structure that will see the company leave what has been its home country for a century to the UK.

This move can be seen as forum shopping — looking for better regulations and better deals, especially in the context of new supply chain regulations in the Netherlands — and should be raising alarm bells. While states do regulate businesses within their own territory, TNCs can be difficult to regulate due to institutional weaknesses, unwillingness caused by corruption in some contexts or as stated by Cameroon, and investment competition. At the same time, this issue raises questions about an Africa-wide business and human rights instrument to prevent intra-African competition, but still does not solve the other two, especially due to the power that TNCs exert in the states they operate in.

The Russian Federation also supported limiting the scope of application to TNCs and other business enterprises in order to allow domestic businesses to be provided for under domestic law, while noting that the current draft was not a basis for negotiation. Russia and China, while sharing sentiments similar to those of the African Group with respect to scope, did not see eye-to-eye on many other provisions, unlike the G7 group, which did.

South Africa, a long-standing supporter of the LBI and a co-sponsor of resolution 26/9, added that, in a context of unprecedented poverty, exploitation of labour, displacement of communities, forced evictions, and irrevocable environmental damages exacerbated by a lack of accountability, it was important to recall the mandate of resolution 26/9. South Africa noted that the mandate was established to close the gaps related to TNCs and other enterprises of a transnational character. The South African delegates further noted that, while the EU had taken important steps to move away from voluntarism in the form of the CSDDD, jurisdictional issues relating to access to remedy remain a challenge. In doing so, the South African government emphasized that finding areas of convergence to benefit victims was important for developing a victim-centred treaty.

Bolivia suggested that the scope of application needed to be part of the ongoing negotiations supported by Chile, while CSOs like FoE vehemently rejected a widened scope, noting that the IGWG overreached its mandate in imposing scope on all businesses.

Next Steps

Some states recognized that holding intersessional consultations requires more resources, while also acknowledging that tabling a new resolution would be a costly exercise. In May 2024, the Chair Rapporteur held a consultation in an attempt to move the process ahead and to iron out some of the procedural issues. A key outcome of the consultation was that, starting in 2025, additional resources will be allocated on an annual basis for convening intersessional, interregional consultations with the assistance of legal experts. Reports from these consultations will be made available before each IGWG is convened to support the sessions.

The current geopolitical context and the scramble for critical minerals in Africa urgently necessitates the development of binding regulations. Therefore, the coming negotiations should attempt to reach a conclusion on scope. Other important proposals include those concerning jurisdiction to facilitate rights holders’ access to different courts. African states developed a joint position on scope during the last round of negotiations. This can be done for other key provisions of the treaty to shape the direction of the negotiations. Located in the upstream level of mineral supply chains, these states are privy to most of the human and environmental impacts of extraction.

In addition, African states should use their leverage in the current geopolitical context to ensure the prospective cooperation of Global North states, especially EU member states, the G7, and the MSP countries. Some of these states are increasingly pursuing new cooperation partners through friendshoring. Developing human rights standards across the supply chain on a multilateral basis should be proposed as a non-negotiable aspect of diplomacy, especially with the EU, which has not developed a mandate to negotiate.

With the development of new EU human and environmental standards that aim to regulate supply chains (albeit indirectly in some contexts) such as the CSDDD, now is the opportune time for the EU to participate in the negotiations. Pressure on EU member states must be applied — including with a time-sensitive approach.

African states should also ensure that open dialogue with civil society organizations is maintained to ensure that the perspectives of those they represent is not lost. This will ensure that the binding treaty remains grounded in the perspectives of those most affected, making it a bottom-up instrument.