How do the International Law Commission’s draft principles on corporate conduct compare to the UN Guiding Principles on Business and Human Rights?
Last year, the International Law Commission adopted 28 draft principles on the protection of the environment in relation to armed conflicts. This included two principles on corporate due diligence and liability. In this blog, Dr Taygeti Michalakea examines how these principles compare to the standards established by the United Nations Guiding Principles on Business and Human Rights.
Introduction
The International Law Commission’s (ILC) study into the Protection of the environment in relation to armed conflicts (PERAC) is expected to conclude in 2021 with the adoption of a set of draft legal principles (DPs) intended to guide the conduct of both state and non-state actors. As environmental harm in areas affected by conflict is not restricted to damage caused by state militaries or armed groups, the ILC has included two principles on the responsibilities of corporations. These might include mining or timber companies, or Private Military and Security Contractors.
The principles focus on three key themes, corporate due diligence, corporate liability for harm, and the provision of effective procedures and remedies to address such harm. All three themes have featured prominently in the discourse around business and human rights (BHR), which has been developing since the 1970s. In 2011, this discourse led to the publication of the United Nations Guiding Principles (GPs) on Business and Human Rights, and this blog seeks to compare the ILC’s two principles to the obligations established by the UN.
While the GPs address the increased risk of serious human rights violations in conflict-affected areas, they made little mention of the need for environmental protection in these contexts. The ILC’s newly adopted DPs – DPs 10 and 11 – aim to address this gap, and are intended to apply before, during and after armed conflicts. The two principles have not been universally welcomed by states, with the United States querying why ‘…the ILC has singled out corporations for special attention. The draft principles do not address any other non-State actors such as insurgencies, militias, criminal organizations, and individuals. This has the effect of suggesting that corporations are the only potential bad actors when it comes to non-State activity in the context of protection of the environment.’
Corporate due diligence
DP 10 recommends that states take appropriate legislative and other measures to ensure that corporations operating in or from their territories exercise due diligence in relation to environmental protection, including human health and the purchase of natural resources.1 According to the ILC’s accompanying commentary, the extent of DP 10’s due diligence is equivalent to that proposed by the GPs, in terms of the steps required to operationalise it. However, the range of corporate structures to be covered by due diligence, as well as the way that state and corporate obligations would be shaped, differs between the two sets of principles.
Regarding the state obligation to adopt mandatory due diligence measures, the DPs cast the net wider than the GPs. Firstly, this is because they address states where corporations “operate in or from their territories.”2 Quite importantly, the DPs recommend the adoption of mandatory due diligence legislation for both the host and the home state. In this respect, Sierra Leone, having had first-hand experience of the issue, rightly noted before the Sixth Committee of the UN General Assembly that ‘the scope of the duty will be higher in relation to the State of domicile of the corporation given that the State of business/operation may itself be facing governance challenges during or in the aftermath of conflict.’
By contrast, the GPs require less from states. The commentary to GP 7 simply provides that host and home states “should help ensure” that businesses operating in conflict zones are not involved in abuses, with due diligence being one of the measures proposed.3 The same commentary dilutes a home state’s duty to adopt due diligence laws, by stipulating that ‘[w]here transnational corporations are involved’, home states have ‘roles to play in assisting both those corporations and host States to ensure that businesses are not involved with human rights abuse.’
If home states do not have an explicit duty to impose due diligence obligations on their companies operating in conflict zones, it can be extrapolated that the GPs envision due diligence quite narrowly, limiting it to the confines of home states’ territorial jurisdiction and thus excluding subsidiary companies. It is only in the voluntary second pillar on the corporate responsibility to respect that the GPs clarify that subsidiaries should be covered by due diligence.4
Given the importance of framing due diligence as a duty, instead of a voluntary commitment, as well as extending it to cover subsidiaries alongside parent companies, it appears that the GPs fall short of achieving these objectives. The GPs also limit due diligence in corporations’ value chains, by conditioning it upon the number of entities within the chain.
The ILC’s DPs help to rectify the situation by relocating due diligence as an obligation of both the host and home states. Importantly, and by providing that ‘natural resources are purchased or obtained in an environmentally sustainable manner’, the DPs also require that due diligence covers corporate entities in the supply chain.
However, the DPs do not indicate specific actions tailored to the nature of environmental harm, nor the appropriate processes that have to be put in place to ensure that corporate entities comply with their due diligence obligations. In addition, they also fail to clarify what exactly due diligence will entail for the allocation of legal responsibility. This is important as the notion of ‘due diligence’ raises questions in relation to both criminal and civil corporate liability.
Corporate liability
In relation to parent company liability, ILC DP 11 urges states to take legislative and other measures to ensure that corporations and other business enterprises operating in or from their territories can be held liable for the harm they cause, including that caused by their subsidiaries acting under their de facto control.5 In this, the DPs differ significantly from the GPs by explicitly providing for the direct and primary liability of parent companies.
In DP 11’s commentary, the ILC refers to various theories for the attribution of liability to the parent company, including the agency theory and the ‘duty of care’ theory. However, the choice of the words “de facto control” hints towards the interpretation of the duty of care in line with recent case law, such as the Vedanta case before the UK Supreme Court.6 This suggests that the ILC accepts a broader notion of parental liability, and its focus on “control” may also provide opportunities for supply chain liability.
The GPs instead employed a more permissive approach, opting in favour of a sliding scale based on business size and geographical location. Under the GP’s framework, adopting laws on parent company liability was not intended to be an obligation of home states, but merely something that they “may explore”, among other measures.7
The DPs also take a firmer stance on the issue of extraterritoriality. While the GPs evaded delving into states’ extraterritorial obligations, the DPs seem to be aligned with the respective Maastricht Principles on Extraterritorial Obligations of States in the Area of Economic, Social and Cultural Rights.8
In spite of their important contributions, the DPs are silent on some issues that might prove very important. Firstly, they attach liability only to an enterprise “causing” harm. While this might have been used as an umbrella term, it would be better to include the terms ‘contribution’ and ‘benefit’ as well, in order to better capture other ways of being involved in environmental harm. Furthermore, neither the principles nor the commentaries offer any clue regarding the resolution of other jurisdictional issues, such as forum non conveniens.9 Such issues are arguably left to the relevant provisions of each state’s national law, and hence states enjoy a wide margin of discretion in this regard.
Remedies for harm
Turning to the issue of remedies, DP 11 on corporate liability mentions that states should provide adequate and effective procedures and remedies, in particular for the victims of environmental harm, including in relation to human health. The commentary indicates that states are urged to establish procedures at the state level through which victims can claim remedies by the liable corporation.
Conceptually, coupling remedy obligations to the finding of liability, echoes Principle 15 of the Basic Principles and Guidelines on the Right to a Remedy and Reparation, which stipulates that ‘…in cases where a person, a legal person, or other entity is found liable for reparation to a victim, such party should provide reparation to the victim or compensate the State if the State has already provided reparation to the victim.” Regrettably, the wording of the DPs is not as clear cut. As mentioned in paragraph (11) of DP 11’s commentary, this was aimed to “allow states a certain flexibility when applying this provision at the national level.”
Beyond that, it is interesting to note that the DPs contain one more principle relating to reparation, DP 26 on relief and assistance, which applies after armed conflict.10 At first sight this might prompt enthusiasm for proponents of corporate remedies, since it seemingly assumes that any non-state actor, which caused environmental damage, should be called to provide reparations, before triggering the respective state obligation.
Regrettably, a closer examination of the commentary to DP 26 and the Special Rapporteur’s report reveals that the principle was not intended to address environmental harm caused by non-state actors in relation to armed conflict. Rather, DP 26 was prompted from the need to restore and compensate environmental harm even when responsibility cannot be properly apportioned to the liable party due to legal, factual or other reasons.
Overall, the corporate duty to provide remedy in the ILC DPs is triggered without the limiting conditions found in the GPs, where it was conditioned upon the size and the location of the entities of the corporate group, as well as their involvement in the harm. It also channels reparations through state-based judicial mechanisms rather than through the myriad of non-state remedy mechanisms evoked by the GPs (third pillar). Apart from efficiency considerations, this demonstrates a perception of remedies as obligatory, rather than voluntary.
Connecting the dots
The corporate duty to respect the environment in relation to armed conflicts, as articulated in the DPs, goes beyond that required by the GPs. It is not only about avoiding causing or contributing to adverse human rights impacts. The DPs actively demand the exercise of due diligence covering parents and subsidiaries to the extent that the latter acts under the parent’s de facto control, as well as in supply chains. When harm to the environment is caused, the respective entity will be liable and under an obligation to repair such harm.
The DP’s due diligence depends equally on the corporate relation and the environmental harm caused, without containing concepts, such as ‘leverage’ or ‘mitigation,’ which provoked criticism of the GPs. Due diligence in the DPs is not used as a risk management tool, but as an enforceable legal concept undergirded by a legally binding duty of care. They therefore refrain from the do-no-harm approach and provide the means for due diligence to be meaningful. On the contrary, the GPs preferred the term “responsibility” and did not specify any theory of liability. Instead they envisioned a polycentric governance system that afforded primary importance to the voluntary commitments of corporate entities.
The DPs focus their attention on home state capacity, with states asked to adopt and enforce corporate due diligence legislation. They also refrain from drawing a dividing line between state duties and corporate responsibilities, thus avoiding attaching voluntariness to the measures that they prescribe. In the absence of voluntariness, they seemingly reject the idea that corporations are free from any human rights obligations entailing the adoption of environmental measures.11
The ILC commentary, by citing various developments in case law and theory, seems to endorse the view that corporations do not only have a responsibility to respect, but something more than that, approaching an obligation to protect. On closer inspection of the wording of the due diligence principle, it seems that the DPs envisage the protection of the environment in relation to armed conflict as a legitimate aim to be pursued not only by states but also by businesses.
Finally, one should not downplay the potential role of the DPs in the evolving relationship between international law and corporate entities. The DPs can be added to a growing list of international law documents with progressive views on corporate regulation, such as the draft treaty on Business and Human Rights, the Draft Articles on Prevention and Punishment of Crimes Against Humanity, the Malabo Protocol, the Human Rights Committee General Comment 36 on the right to life and others. In this respect, the ILC should be commended, not only for addressing gaps in the GPs but also for a valuable contribution to the wider Business and Human Rights discourse.
Dr Taygeti Michalakea is a Re:Constitution Fellow at the European University Institute. She is on Twitter @TaygetiMic
- Draft principle 10, Corporate due diligence: States should take appropriate legislative and other measures aimed at ensuring that corporations and other business enterprises operating in or from their territories exercise due diligence with respect to the protection of the environment, including in relation to human health, when acting in an area of armed conflict or in a post-armed conflict situation. Such measures include those aimed at ensuring that natural resources are purchased or obtained in an environmentally sustainable manner.
- This avoids the limiting domicile requirement of the GPs, see Principle 2 of the GPs.
- “States should warn business enterprises of the heightened risk of being involved with gross abuses of human rights in conflict-affected areas. They should review whether their policies, legislation, regulations and enforcement measures effectively address this heightened risk, including through provisions for human rights due diligence by business.” For non-conflict areas, see also commentary to GPs 3 and 4.
- See principle 17 of the GPs.
- Draft principle 11, Corporate liability: States should take appropriate legislative and other measures aimed at ensuring that corporations and other business enterprises operating in or from their territories can be held liable for harm caused by them to the environment, including in relation to human health, in an area of armed conflict or in a post-armed conflict situation. Such measures should, as appropriate, include those aimed at ensuring that a corporation or other business enterprise can be held liable to the extent that such harm is caused by its subsidiary acting under its de facto control. To this end, as appropriate, States should provide adequate and effective procedures and remedies, in particular for the victims of such harm.
- In contrast to the previously established test of knowledge and foreseability, in the recent Vedanta case, the court accepted that control (or the claim of control) over the subsidiary might suffice.
- Commentary to GP 7. But even in such a case, namely when home states choose to explore the liability option, home states are called to address instances where enterprises commit or contribute to gross human rights abuses, thus leaving outside of the scope of liability companies that might be directly linked or otherwise connected to harm, such as parent companies for the harm caused by business partners.
- Asking from a home state to enforce mandatory due diligence legislation on parent and subsidiary companies for their actions abroad seems not only to permit but rather to require the exercise of prescriptive extraterritorial jurisdiction on the basis of the active personality of the parent company. The issue is not equally clear in relation to the extraterritorial applicability of the liability principle, as this seems to depend on the approach to parent company liability chosen in the domestic jurisdiction.
- Whereby a court acknowledges that another forum or court is more appropriate and sends the case to such a forum. A change of venue, where another venue is more appropriate to adjudicate a matter, such as the jurisdiction within which an accident occurred and where all the witnesses reside.
- ILC Draft principle 26 on Relief and assistance provides that ‘when, in relation to an armed conflict, the source of environmental damage is unidentified, or reparation is unavailable, States are encouraged to take appropriate measures so that the damage does not remain unrepaired or uncompensated, and may consider establishing special compensation funds or providing other forms of relief or assistance.’
- This assumption was made by the GPs. See Mihir Kanade, ‘The United Nations Guiding Principles on Business and Human Rights: Presenting the Problem’ in Laura Westra and Mirian Vilela (eds) The Earth Charter, Ecological Integrity and Social Movements (Routledge, 2014) 39; Florian Wettstein, ‘Normativity, Ethics, and the UN Guiding Principles on Business and Human Rights: A Critical Assessment’, (2015) 14(2) Journal of Human Rights 162.
