Towards a new legal consensus on business and human rights: A 10th anniversary essay

2.1. Corporate Social Responsibilities

In April 2020, European Commissioner for Justice Didier Reynders announced an EU legislative initiative on mandatory supply chain due diligence. ⁹ The new legislation should establish horizontal human rights and environmental due diligence requirements for EU-based companies. It should cover the entire value supply chain and include legal sanctions and effective remedies for victims of business-related human rights violations inside and outside the European Union. The announcement was made on occasion of the presentation of a major EU-sponsored research study on due diligence requirements through the supply chain. ¹⁰ Building on the UNGPs, the study concluded that the prevailing ‘soft-law’ approach to business and human rights had proven insufficient. It also highlighted increasing stakeholder support for EU legislation that should set a single harmonised standard for business enterprises operating in the internal market. In February 2021, the European Parliament's Committee on Legal Affairs tabled a motion for a European Parliament Resolution recommending a European Directive on Corporate Due Diligence and Corporate Accountability, ¹¹ which the Parliament adopted in a landslide vote on 10 March 2021. ¹²

The new legislative initiative differs decisively from the European Commission's earlier approach to corporate social responsibility. In a 2001 Green Paper, the Commission had defined CSR as ‘a concept whereby companies integrate social and environmental concerns in their business operations and in their interaction with stakeholders on a voluntary basis […] not only fulfilling legal expectations, but also going beyond compliance by investing “more” into human capital, the environment and their relations with stakeholders’. ¹³ This definition epitomises the core elements commonly associated with CSR. ¹⁴ First, granted that ‘corporate citizens’ – as everyone else within the State's jurisdiction – are required to abide by the rule of law, corporate responsibilities towards society are considered voluntary in the sense of not being mandated by public regulation and backed up by legal enforcement. Second and related, while the inclusion of social and environmental concerns broadens the scope of these responsibilities from shareholders to (external) stakeholders and thus integrates other-regarding moral principles into business practices driven by economic self-interest, ¹⁵ CSR traditionally does not reference human rights. This not only shapes its normative aspirations – responding to bounded social expectations rather than to universal values. It also, and third, determines its modus operandi: corporate responsibility through self-regulation instead of third-party accountability through human rights and remedies. ¹⁶

From a broader institutional perspective, the traditional schism between CSR and (international) human rights law is rooted in the State-based distinctions between ‘public’ and ‘private’, and between ‘domestic’ and ‘foreign’. As Wettstein argues discussing the evolution of CSR, ‘while a focus on stakeholder relations may correct the overtly narrow perspective of the shareholder value doctrine […] it does not fundamentally challenge the still common perception of the firm as a predominantly private institution’. ¹⁷ This perception of the corporation as a private and a-political ‘network of contracts’ resists easy integration into the public and political universe of human rights. ¹⁸ Early attempts to steer CSR away from shareholder capitalism have tended to condition businesses’ voluntary contribution to implementing public policy objectives upon State commitments to creating a business-friendly environment, including through deregulation. As Buhmann notes in her analysis of the European Commission's CSR Alliance, coupling private voluntarism with public deregulation inverts the role of States and companies in relation to human rights. While international law identifies States as primary duty-bearers required to protect human rights against corporate abuse, CSR assigns to them a supportive role in promoting companies’ efforts towards responsible business practices. ¹⁹

Relatedly, while CSR as associated with private and ‘multi-national’ corporations globalises easily, human rights as associated with public politics have long been considered a prerogative of the sovereign State. ²⁰ The corresponding territorial constrictions imposed upon (domestic/democratic) human rights politics not only materialise in the often-noted imbalance between corporate rights and duties in international law. ²¹ They also explain the proliferation of global ‘soft-law’ instruments, most prominently the UN Global Compact, the OECD Guidelines on Multinational Enterprises, and the ILO Tripartite Declaration of Principles concerning Multinational Enterprises and Social Policy, which helped to root CSR in human rights norms, yet fell short of binding international regulation. ²²

From this broader institutional perspective, the core human rights challenge to CSR is not that the latter encourages companies to ‘go beyond’ compliance with domestic law applicable to private business enterprises. It is, rather, that corporate voluntarism appears ill-suited to close legal protection gaps caused by the exposure of the international State-based order to the human rights impacts of economic globalisation. Without ensuring corporate accountability through a dedicated focus on human rights and remedies, attempts to align CSR with public policy objectives quickly succumb to economic cost-benefit analyses driven by State-sponsored market incentives.

2.2. The Corporate Responsibility to Respect Human Rights

In 2011, the European Commission put forward a ‘modern’ definition of CSR that abandoned corporate voluntarism. Corporate social responsibility now means ‘the responsibility of enterprises for their impacts on society’, which should be met through ‘a process to integrate social, environmental, ethical, human rights and consumer concerns into their business operations’. ²³ The new approach reflects core tenets of the corporate responsibility to respect human rights – the second pillar of the UNGPs developed by the UN Special Representative on Business and Human Rights (SRSG) John Ruggie between 2005 and 2011. UN Guiding Principle 11 calls upon business enterprises to ‘avoid infringing on the human rights of others’ and to ‘address the adverse human rights impacts with which they are involved’. ²⁴ Business enterprises should publicly signal their policy commitment to human rights; exercise human rights due diligence (HRDD) to ‘identify, prevent, mitigate and account for how they address their impacts on human rights’; and remedy ‘any adverse human rights impacts they cause or to which they contribute’. ²⁵

While the UNGPs barely touch directly on CSR, they have contributed much towards integrating human rights into global corporate governance. The SRSG impressed upon business enterprises that corporate respect for human rights was not voluntary but mandated by their social licence to operate – a ‘global standard of expected conduct’ that ‘exists independently of States’ abilities and/or willingness to fulfil their own human rights obligations’. ²⁶ This global standard of expected conduct applies to all business enterprises regardless of size, sector, operational context, ownership, and structure. ²⁷ It refers to all internationally recognised human rights and is operationalised through corporate human rights due diligence. Next to ‘identifying and managing material risks to the company itself’, HRDD should ‘include risks to rights-holders’, thus integrating a rights-based approach into corporate self-regulation. ²⁸ It ‘should cover adverse human rights impacts that the business enterprise may cause or contribute to through its own activities, or which may be directly linked to its operations, products or services by its business relationships’, thus extending business responsibilities for human rights to the global value chain. ²⁹ The UNGPs neither envisage a ‘tier-based’ approach to value chain due diligence (for example, by discriminating between direct and indirect suppliers), nor do they (as the earlier ‘sphere of influence’ approach) delimit corporate human rights responsibilities in virtue of control or leverage that a company (may) exercise over business partners or business activities. Rather, the decisive criterion for determining the scope of HRDD are the actual and potential adverse human rights impacts associated with a company's own activities and its business relationships. ³⁰ Finally, where business enterprises ‘have caused or contributed to’ adverse human rights impacts, ‘they should provide for or cooperate in their remediation through legitimate processes’. ³¹

The endorsement of the UNGPs by the Human Rights Council in 2011 followed a failed attempt to directly impose human rights obligations on private business enterprises in public international law. The ‘Norms on the Responsibilities of Transnational Corporations and Other Business Enterprises with Regard to Human Rights’ (UN Draft Norms), put forward by the UN Sub-Commission on the Promotion and Protection of Human Rights in 2003, acknowledged the primacy of State obligations in international human rights law. Yet, they also envisaged corresponding legal obligations for multi-national corporations and other business enterprises within their ‘spheres of activity and influence’. ³² Whatever the shortcomings of the UN Draft Norms, an important reason for their eventual failure were the vested interests of powerful corporations and their (Western) home-States not to see corporate responsibility for human rights extended beyond the ‘soft’ model of self-regulation through corporate codes of conduct, corporate social responsibility, and the like. ³³ A false dichotomy was construed between the UN Draft Norms’ attempt to prevent and redress corporate human rights violations (the UN's ‘anti-business agenda’) ³⁴ and the positive contributions corporations can make to global prosperity, technological innovation, and international development. Yet another dichotomy – that between ‘public’ States and ‘private’ corporations – fuelled concerns that the direct imposition of human rights obligations on corporations would undermine State sovereignty and dilute State responsibility for human rights violations. ³⁵

Different from the UN Draft Norms, the UNGPs maintain a clear distinction between State duties to protect human rights against corporate abuse within their territory and/or jurisdiction (first pillar) and corporate responsibilities to respect human rights throughout their global operations (second pillar). While business enterprises are indirectly bound by international human rights law through States’ domestic implementation of their own human rights obligations and must comply with applicable national law wherever they operate, the corporate responsibility to respect responds to social expectations rather than legal requirements: ‘This responsibility is neither based on nor analogises from state-based law. It is rooted in a transnational social norm, not an international legal norm. It serves to meet a company's social licence to operate, not its legal licence’. ³⁶

Political prudence and his limited mandate cautioned the SRSG against reviving the debate on international corporate human rights obligations: ‘The Guiding Principles’ normative contribution lies not in the creation of new international law obligations but in elaborating the implications of existing standards and practices for States and businesses’. ³⁷ Yet, his justification for discriminating between State duties and corporate responsibilities also remains indebted to the distinction between the public-as-political and the private-as-economic that previously served to insulate CSR from human rights: ‘While corporations may be considered “organs of society”, they are specialised economic organs, not democratic public interest institutions. As such, their responsibilities cannot and should not mirror the duties of States’. ³⁸

The SRSG's endeavour to intertwine the UNGPs (‘protect, respect and remedy’) with international human rights law (‘respect, protect and fulfil’) has raised issues concerning the proper scope and operation of the second pillar, including whether the corporate responsibility to respect – akin to the State's duty to protect – does or should extend beyond a ‘no harm’ requirement to encompass positive obligations; ³⁹ and whether corporate human rights due diligence – which borrows from business management and international human rights law – is or should be complemented by strict (no fault) responsibility of business enterprises for their own human rights impacts. ⁴⁰ At the same time, the SRSG's approach to distinguishing private human rights responsibilities from public human rights obligations may have contributed to the – by now widely acknowledged – poor implementation of pillar two by a majority of business enterprises. ⁴¹

Problems range from a limited uptake of the corporate responsibility to respect human rights beyond mere policy commitments; to an unduly narrow approach to HRDD often confined to first-tier suppliers and the use of contractual clauses and codes of conduct; a lack of dedicated focus on human rights in corporate governance and a ‘mismanagement’ of human rights risks; a misalignment between companies’ social human rights commitments and their legal (litigation) strategies; and an undue reliance on the ‘business case’ for human rights that ties their protection to economic performance, reputational risks, and the expectations of investors and consumers. As with the earlier CSR discourse, these problems call into question the capacity of legally non-binding corporate responsibilities to respect human rights to engender a shift towards ‘stakeholder capitalism’ from within the liberal private sphere that should correct the shareholder bias of prevailing business models associated with profit maximisation, risk externalisation, and corporate short-termism. ⁴²

3.1. Home-State Regulation and the UNGPs

The UNGP's protect, respect and remedy pillars form a complementary whole in which States are duty-bound to ‘translate’ international human rights norms into domestic laws and policies regulating corporate activities, while corporations respect human rights as globally recognised standards of expected conduct (their ‘social licence to operate’), with both States and corporations ensuring remediation for breaches of these overlapping governance systems within their respective jurisdictions. ⁴³ As part of their duty to protect, States have to assume a proactive role in incentivising and where necessary requiring corporate respect for human rights through appropriate policies, legislation, adjudication, and enforcement. ⁴⁴ Institutionalising corporate human rights due diligence is thus not only expected of business enterprises in virtue of their ‘social licence to operate’ but also required of States to comply with their international human rights obligations.

To close ‘governance gaps’ at the international level, States should ensure that business enterprises respect human rights throughout their global operations: ‘There are strong policy reasons for home-states to set out clearly the expectation that businesses respect human rights abroad, especially where the State itself is involved in or supports those businesses’. ⁴⁵ The main extraterritorial instruments envisaged by the UNGPs for this purpose are ‘direct extraterritorial legislation and enforcement’ and ‘domestic measures with extraterritorial implications’. ⁴⁶ As elaborated in an earlier report to the Human Rights Council, this distinction principally turns on whether a State is permitted to exercise jurisdiction over business enterprises because they are considered corporate nationals of that State or because they are domiciled within its territory. ⁴⁷ While the UNGPs do not explicitly call upon States to impose substantive HRDD requirements on corporations throughout their global operations, such home-State regulation follows the model of domestic measures with extraterritorial implications and is encompassed by the ‘smart mix of measures – national and international, mandatory and voluntary –` required of States to ensure business respect for human rights. ⁴⁸ Home-State regulation plays an important role in the effective implementation of the UNGPs because it renders HRDD legally binding with extraterritorial effect, thus contributing to a ‘hardening’ of the soft-law requirements bound up with the corporate responsibility to respect human rights. ⁴⁹

The envisaged EU Directive on Corporate Due Diligence and Corporate Accountability follows a trend in various countries, especially in Europe, to impose on business actors and activities within the State's territory and/or jurisdiction legal HRDD requirements that extend into the corporate group and the global value chain. Existing examples of home-State regulation range from attempts to enhance corporate transparency through disclosure and reporting to the imposition of substantive due diligence obligations on business enterprises to protect human rights and the environment. Apart from the business enterprise's place of incorporation (‘parent-based’ due diligence legislation), the necessary jurisdictional link can also be established in virtue of products and services placed on the State's domestic market (‘market-based’ due diligence legislation). On the former model, a business enterprise domiciled within the State's jurisdiction is legally required to exercise HRDD in relation to foreign operations by its subsidiaries and suppliers. On the latter model, market access by business enterprises is conditional upon compliance with certain product and process (due diligence) standards protecting human rights and/or the environment abroad. The proposed EU Directive combines both models by imposing HRDD requirements on business enterprises incorporated in the European Union and/or operating in the internal market. ⁵⁰

3.2. From Transparency to Remedy: The Quest for Corporate Legal Accountability

Transparency legislation – such as the EU Non-Financial Reporting Directive (NFRD) or the UK Modern Slavery Act – aims to promote corporate respect for human rights by imposing on business enterprises non-financial reporting requirements about their global value chains. Rather than mandating corporate HRDD, transparency legislation creates market incentives for companies to develop a socially responsible approach to business by enabling investors and consumers to evaluate their human rights and environmental performance. As noted in the NFRD, ‘disclosure of non-financial information is vital for managing change towards a sustainable global economy by combining long-term profitability with social justice and environmental protection’. ⁵¹ Desk research and stakeholder interviews conducted during the EU Supply Chain Due Diligence Study have confirmed the limited impact of transparency legislation on sustainable corporate governance. ⁵² A main challenge to date has been the poor quality of company responses, which led to concerns about mere ‘paper compliance’ and a ‘managerialisation’ of human rights reporting. ⁵³

While States have begun to address these concerns through legislative amendments and dedicated (sector-specific) reporting guidelines, the reliance of transparency legislation on market incentives also points to an ‘inherent limitation of mandated disclosure as a regulatory strategy, which cannot by itself force changes in conduct and offer reparations for harm’. ⁵⁴ Even where, as with the more recent Australian Modern Slavery Act, ⁵⁵ reporting requirements are mandatory and tailored to human rights risks to third parties, corporate disclosure tends to focus on information about material risks to the company and ex-post measures taken to address them. Even where, as in the case of the EU NFRD, compliance with reporting requirements is subject to State enforcement, ⁵⁶ transparency legislation cannot compel companies to exercise human rights due diligence.

Market-based due diligence legislation conditions market access by business enterprises upon compliance with substantive human rights due diligence requirements that reach out into the global value chain. Examples in Europe include the EU Timber Regulation (EUTR), the EU Conflict Minerals Regulation, and the Dutch Child Labour Due Diligence Law. EUTR requires operators placing timber (products) on the internal market to develop a due diligence system to identify, assess, and mitigate the risk of illegally lodged timber being sold in the European Union. EU Member States must apply effective, proportionate, and dissuasive penalties in case of non-compliance, which may include fines and trading suspensions. The Dutch Child Labour Due Diligence Law adopted in May 2019 imposes due diligence (gepaste zorgvuldigheid) obligations to prevent child labour in the supply chain on business enterprises selling goods and providing services to Dutch end-users. ⁵⁷ The Act applies to all business enterprises (whether domiciled in the Netherlands or abroad) that supply goods and services to consumers in the Netherlands. Companies must issue a due diligence statement to the effect that they investigate reasonable suspicions of, and implement an action plan to address, instances of child labour in their supply chains. They can also discharge their HRDD obligations by sourcing from (lower tier) companies that have issued a due diligence statement. In either case, due diligence is construed as a one-off exercise, which will limit the effectiveness of the legislation in the longer term. The Act provides for public monitoring and enforcement that combines administrative and criminal sanctions but does not include civil remedies.

While market-based due diligence legislation addresses some of the shortcomings of reporting requirements, existing examples still fall short of the requirements of the UNGPs. Confining the scope of due diligence to specific economic sectors and/or groups of rights holders contravenes the universality and indivisibility of human rights and may disincentivise business enterprises to address other (and potentially more salient) human rights risks. The possibility to ‘pass on’ HRDD requirements to suppliers indirectly introduces a tier-based approach into corporate governance that may hamper the effectiveness of global supply chain due diligence. ⁵⁸ Finally, as the justification of market-based due diligence legislation relies heavily on the protection of domestic consumers, none of the considered examples include civil remedies for victims of business-related human rights violations inside or outside the European Union.

The Norwegian Transparency Act, the German Law on Corporate Due Diligence in Supply Chains and the French Duty of Vigilance Law are presently the only examples of HRDD legislation that cover all sectors of economic activity and all groups of rights-holders. ⁵⁹ However, these examples of ‘parent-based’ due diligence legislation only apply to comparatively large business enterprises and/or do not cover the entire supply chain. The French Duty of Vigilance Law confines human rights due diligence to ‘established commercial relationships’, which is a narrower standard than the UNGPs’ notion of ‘business relationships’. ⁶⁰ While not necessarily confined to first-tier suppliers, the French standard would appear insufficient to ensure human rights protection in the lower tiers of the value chain – characterised by arms-length supply relationships based on insecure, short-term, and often unwritten contracts. The German Law is more narrowly focussed on direct suppliers, with HREDD further down the supply chain only being required where a company fraudulently circumvents the direct supplier or obtains substantiated knowledge of potential human rights abuses by indirect suppliers. ⁶¹ The envisaged EU Directive goes further on both counts: it imposes cross-sectoral HRDD obligations on small and medium-sized undertakings that are publicly listed or that operate in high-risk sectors; and it extends the scope of these obligations to all business partners and value chain relationships.

Civil remedies – and therewith the broader question whether corporate human rights due diligence should translate into a legal standard (duty) of care enforceable by victims through private litigation – remains among the most contentious issues of home-State regulation in Europe. A popular initiative in Switzerland to make human rights and environmental supply chain due diligence mandatory for Swiss-based companies by amending the Swiss constitution was narrowly rejected in a public referendum in late November 2020. The original proposal would have enabled foreign victims of human rights and environmental harm to seek civil redress in Switzerland, with a company's exercise of adequate due diligence serving as a defence against liability. ⁶² The counterproposal by the Swiss Council of States eventually adopted narrowly confines HRDD obligations to conflict minerals and child labour and does not contain a civil liability provision. ⁶³ Under the German Law, NGOs and trade unions are empowered to represent victims in civil proceedings before German courts. Following protracted negotiations and persistent pushback from Ministry of Economic Affairs and major business associations, the law no longer includes a dedicated provision on civil liability. ⁶⁴

Only the French Duty of Vigilance Law currently provides for a civil remedy mechanism that enables victims to sue the parent/controlling company in France for violations of human rights in its supply chain. The law establishes parent liability for harm caused by the activities of the company and of those companies it controls, directly or indirectly, as well as the activities of subcontractors or suppliers with whom there is an established commercial relationship. ⁶⁵ The European Directive envisaged by the EP Resolution would extend the scope of civil liability to the entire supply chain, on the condition that business enterprises within the personal scope of the Directive, and undertakings under their control, have caused or contributed to human rights harm abroad. ⁶⁶ To ensure that the Directive's HRDD requirements also apply in transnational tort litigations for damages that occurred outside the European Union, Member States are to denominate these requirements as overriding mandatory provisions of the forum. ⁶⁷ A more encompassing reform of EU private international law envisaged in two Annexes to a previous European Parliament Report was not put to parliamentary vote, ⁶⁸ and the EP Resolution presently awaits its (dis-)approval by the European Commission's Regulatory Scrutiny Board.

To date, existing examples of home-State regulation in Europe only offer limited and patchy protection against business-related human rights violations in the lower tiers of global supply chains. Leaving aside transparency legislation that does not include substantive HRDD requirements, the effectiveness of ‘market-based’ due diligence legislation is hampered by its confinement to particular sectors of economic activity and/or to selected groups of rights-holders. ‘Parent-based’ due diligence legislation presently only applies to comparatively large business enterprises and does not cover the entire value chain. As concerns civil remedies, strategic litigation initiated by civil society organisations has brought some relief to victims of corporate human rights abuse in the Global South – in spite of persistent legal and practical barriers to access to justice in European courts. ⁶⁹ Much of the legislative debate surrounding the human right to remedy, by contrast, still thrives on the old juxtaposition of global yet voluntary/soft corporate social responsibilities (to respect human rights) with mandatory/hard yet territorialised corporate human rights accountability. While, as noted by the UN High Commissioner on Human Rights, ‘the realities of global supply chains, cross-border trade investment, communications and movement of people are placing new demands on domestic legal regimes and those responsible for enforcing them’, many of these regimes ‘focus primarily on within-territory business activities and impacts’, often rendering the quest of foreign victims for corporate human rights accountability ‘elusive’. ⁷⁰

These shortcomings notwithstanding, the new prominence of home-State regulation is also evidence of an increasing recognition among (European) States that the adverse human rights impacts of global business operations should be brought under the purview of human rights law. With increasing political momentum, global reporting requirements have been complemented by substantive due diligence obligations; the scope of home-State regulation has expanded to include smaller companies and to reach beyond first-tier suppliers; and there is a discernible preference for general (horizontal) human rights due diligence over the earlier sector-specific approach tailored to specific sectors of economic activity and/or groups of rights-holders.

4.1. Human Rights Jurisdiction in International Law: A Restrictive Approach

In a much-debated passage, the UNGPs decouple States’ domestic regulation of corporate human rights impacts with extraterritorial effect from their international human rights obligations – with the latter being confined to human rights abuse within the State's ‘territory and/or jurisdiction’:

At present States are not generally required under international human rights law to regulate the extraterritorial activities of business domiciled within their territory and/or jurisdiction. Nor are they generally prohibited from doing so, provided there is a recognised jurisdictional basis. Within these parameters, some human rights treaty bodies recommend that home-states take steps to prevent abuse by business enterprises within their jurisdiction. ⁷¹

This approach, which re-entrenches the territorialisation of human rights protection at the level of State obligations, is rooted in a restrictive understanding of jurisdiction in international human rights law.

States’ exercise of jurisdiction operates as a threshold criterion for the applicability of international human rights treaties. ⁷² Jurisdiction circumscribes the scale and scope of international human rights obligations by predicating them upon a sufficiently concrete normative relation of power, authority, and control between the State qua duty-bearer and the individual rights-holder. ⁷³ At the most general level, two countervailing principles inform the relationship between jurisdiction and extraterritorial human rights obligations. ⁷⁴ On the one hand, a State's exercise of jurisdiction to protect human rights outside its borders should not unduly interfere with the sovereign rights that other States wield over their territory and people therein. This explains why the scope of extraterritorial human rights obligations is commonly delimited by States’ jurisdictional competence, determined in accordance with a recognised basis of jurisdiction in public international law (the territoriality principle; the nationality principle; etc.). On the other hand, a State should not be permitted to circumvent its international human rights obligations by exceeding its jurisdictional competence in public international law. This explains why the decisive criterion for allocating human rights obligations to States is not the international lawfulness of the extraterritorial exercise of State powers but a jurisdictional relationship of authority, power, or control between the State and an individual located outside its borders. According to the Inter-American Commission of Human Rights, for example, jurisdiction ‘turns not on the presumed victim's nationality [the nationality principle] or presence within a particular geographic area [the territoriality principle], but on whether, under the specific circumstances, the State observed the rights of a person subject to its authority and control’. ⁷⁵

While the text of the major international human rights treaties does not suggest that States’ human rights obligations should be confined to individuals within their borders, concerns with State sovereignty have nevertheless tended international courts towards a ‘primarily territorial’ interpretation of human rights jurisdiction. ⁷⁶ In Al Skeini – one of the leading cases on the extraterritorial application of the European Convention on Human Rights (ECHR) – the European Court of Human Rights (ECtHR) considered that ‘jurisdiction is presumed to be exercised normally throughout the State's territory. Conversely, acts of the contracting States performed, or producing effects, outside their territories can constitute an exercise of jurisdiction within the meaning of Article 1 ECHR only in exceptional circumstances’. ⁷⁷ Similarly, the Inter-American Court of Human Rights noted in its Advisory Opinion on the Environment and Human Rights that whereas jurisdiction was not confined to territory, the conditions under which extraterritorial State conduct qualifies as an exercise of jurisdiction within the meaning of Article 1 of the Inter-American Convention on Human Rights (IACH) required a restrictive interpretation. ⁷⁸

The two constellations of extraterritorial jurisdiction recognised by the ECtHR in Al Skeini – acts ‘performed’ and ‘producing effects’ outside the State's territory – correspond to a more commonly used distinction between extraterritorial State conduct and the extraterritorial effects of States’ domestic laws and policies. As traditionally framed in the case-law, neither constellation easily lends itself to establishing home-State obligations to prevent and redress business-related human rights violations for the benefit of individuals located outside its borders. Establishing extraterritorial jurisdiction through acts ‘performed’ outside the State's territory requires State agents to exercise authority, power or control over persons and/or an area located on the territory of another State. ⁷⁹ Accordingly, traditional variations of the ‘control over persons’ test (such as the detention or abduction of individuals) and the ‘control over an area’ test (such as military occupation) are premised on the physical presence of home-State agents on foreign soil. In the standard case of home-State regulation, by contrast, the extraterritorial human rights violation is committed by a non-State actor operating in the host State of corporate investment.

The best-known examples of ‘extraterritorial effects’ cases concern the extradition or deportation of an individual to a country where she faces substantial risks of serious human rights violations (non-refoulement). The protection of non-refoulement extends to threats to human rights caused by private (non-State) actors abroad. ⁸⁰ In Rantsev, the ECtHR furthermore recognised that States can be under an obligation to regulate private actors on their own territory in order to prevent and redress human rights violations committed outside their borders. ⁸¹ Nevertheless, both in non-refoulement cases and in the Rantsev scenario, the necessary jurisdictional link is established through the victim's initial presence on home-State territory. In the standard case of home-State regulation, by contrast, a constituent part of the parent or controlling company will be domiciled within the State's territorial jurisdiction while the victim is permanently located on the territory of the host State of corporate investment.

There is some case law to suggest that the ECtHR is prepared to recognise extraterritorial human rights obligations absent from effective control over a foreign person or area, ⁸² and to dispense with the requirement that the applicant in extraterritorial effects cases must be located on the State's territory. ⁸³ . Moreover, foreign victims seeking to vindicate their human rights through private litigation in the domestic courts of the home-State can come under that State's international human rights jurisdiction. ⁸⁴ However, this case-law has not yet translated into a robust and coherent approach to international extraterritorial obligations to prevent and redress business-related human rights violations.

4.2. Transnational State Power and Extraterritorial Human Rights Obligations

A guiding assumption behind the restrictive approach to human rights jurisdiction is that perpetrators and victims of business-related human rights violations will reside in the same territorial space and will therefore be subject to the authority, power, and control of a single State. This State-sovereigntist approach not only belittles the ‘governance gaps’ created by the exposure of the international State-based order to the human rights impacts of global business operations. ⁸⁵ It also fails to respond to a core concern in the business and human rights domain, namely human rights obligations of the home-State of the parent or controlling company of ‘multi-national’ corporations to prevent and redress human rights violations committed in the host State of corporate investment.

The Maastricht Principles address this concern by including within the scope of extraterritorial human rights obligations ‘obligations relating to the acts and omissions of a State, within or beyond its territory, that have effects on the enjoyment of human rights outside that State's territory’. ⁸⁶ Specifically in relation to extraterritorial corporate human rights abuse, this entails that ‘all States must take necessary measures to ensure that non-state actors which they are in a position to regulate […] [such as] transnational corporations and other business enterprises, do not nullify or impair the enjoyment of economic, social and cultural rights’. ⁸⁷ Similarly to the UNGPs, the Maastricht Principles stipulate that a home-State is in a position to regulate business actors and activities abroad ‘where the corporation, or its parent or controlling company, has its centre of activity, is registered or domiciled, or has its main place of business or substantial business activities, in the State concerned’. ⁸⁸ Yet, different from the UNGPs, a State's authority, power, and control over corporate actors and activities within its territorial jurisdiction not only justifies the regulation of business enterprises with extraterritorial effect but also establishes corresponding State obligations to protect foreign victims against business-related human rights violations. ⁸⁹

The Maastricht Principles find support in various ‘transnational’ and ‘functional’ approaches to extraterritorial human rights protection discussed in the literature. ⁹⁰ They build upon, and are further corroborated by, the interpretation of international extraterritorial obligations endorsed by the UN Treaty Bodies. Alongside general comments on extraterritorial State obligations concerning business activities that impact on the right to water, the right to work, and the right to social security, the UN Committee on Economic, Social and Cultural Rights (CESCR) published a statement in 2011 on human rights and the corporate sector in which it called upon States to ‘take steps to prevent human rights contraventions abroad by corporations which have their main seat under their jurisdiction, without infringing the sovereignty or diminishing the obligations of the host States under the Covenant’. ⁹¹

In its General Comment No. 24 on State Obligations in the Context of Business Activities, CESCR considered that ‘the extraterritorial obligation to protect requires States Parties to take steps to prevent and redress infringements of Covenant rights that occur outside their territories due to the activities of business entities over which they can exercise control, especially in cases where the remedies available to victims before the domestic courts of the State where the harm occurs are unavailable or ineffective’: ⁹²

Consistent with the admissible scope of jurisdiction under general international law, States may seek to regulate corporations that are domiciled in their territory and/or jurisdiction: this includes corporations incorporated under their laws, or which have their statutory seat, central administration, or principal place of business on their national territory. ⁹³

States should further require business enterprises domiciled within their territory and/or jurisdiction ‘to act with due diligence to identify, prevent and address abuses to Covenant rights by their subsidiaries and business partners, wherever they may be located’. ⁹⁴

The other UN Treaty Bodies have expressed similar views. In a 2017 Communication concerning Canada's responsibility for human rights violations involving Canadian building companies in the occupied Palestinian territories, the Human Rights Committee noted that ‘there are situations where a State Party has an obligation to ensure that rights under the [International Covenant on Civil and Political Rights] are not impaired by extraterritorial activities conducted by enterprises under its jurisdiction’. ⁹⁵ According to the Concurring Opinion of two Committee Members, the necessary jurisdictional link between the State and third-country victims could be established on the basis of ‘(a) the effective capacity of the State to regulate the activities of the businesses concerned and (b) the actual knowledge that the State had of those activities and their necessary and foreseeable consequences in terms of violations of human rights recognised in the Covenant’. ⁹⁶

An important doctrinal justification for this transnationalisation of extraterritorial obligations is the prohibition in customary international law, initially recognised in the context of transboundary pollution, for a State to use or permit the use of its territory such that it causes injury to another State or persons therein. In the Corfu Channel Case, the International Court of Justice derived from ‘every State's obligation not to allow knowingly its territory to be used for acts contrary to the rights of other States’ duties to prevent such harmful acts from occurring or continuing. ⁹⁷ In its Advisory Opinion on the Environment and Human Rights, the Inter-American Court of Human Rights linked State obligations to prevent transboundary environmental harm to the human rights entitlements of third-country victims. According to the Court, the required jurisdictional link (Article 1 IACHR) could be established in virtue of a ‘causal relationship’ between the polluting activities within the State's borders and extraterritorial human rights violations, provided the State exercised ‘effective control’ over the relevant activities and was in a position to prevent the harm from occurring:

In cases of transboundary damage, the exercise of jurisdiction by a State of origin is based on the understanding that it is the State in whose territory or under whose jurisdiction the activities were carried out that has the effective control over them and is in a position to prevent them from causing transboundary harm that impacts the enjoyment of human rights of persons outside its territory. The potential victims of the negative consequences of such activities are under the jurisdiction of the State of origin for the purposes of the possible responsibility of that State for failing to comply with its obligation to prevent transboundary damage. ⁹⁸

As with the considered examples of home-State regulation that juridify the corporate responsibility to respect human rights across State borders, extraterritorial State obligations to prevent and redress business-related human rights violations remain contested terrain. The present contribution does not aspire to resolve all doctrinal issues thrown up by the debate – ranging from causation to attribution and State responsibility. Yet, the previous discussion suggests a significant shift in the interpretation of human rights jurisdiction towards an approach more attuned to the realities of transnational State power wielded through and against global business enterprises. Different from traditional variations of the ‘effective control’ test, the required jurisdictional link between the State and foreign victims is established virtue of power and authority that States (may) exercise over business actors and activities located on their territory or that are otherwise within their legal capacity to control. Consequently, States are not merely permitted (UNGPs) but also required (Maastricht Principles) to regulate the adverse human rights impacts of business enterprises within their territory and/or jurisdiction with extraterritorial effect, including through ensuring access to justice and effective remedies for foreign victims of business-related human rights violations.

4.3. Towards an International Business and Human Rights Treaty

International extraterritorial obligations are also at the heart of the draft international business and human rights treaty currently under negotiation. In June 2014, the UN Human Rights Council adopted Resolution 26/9 that established an open-ended intergovernmental working group on transnational corporations and other business enterprises with respect to human rights (OEIGWG), with a mandate to ‘elaborate an international legally binding instrument to regulate, in international human rights law, the activities of transnational corporations and other business enterprises’. ⁹⁹ In August 2021, the OEIGWG Chairmanship published a third revised draft treaty text. ¹⁰⁰

For its sponsors in the Global South, a business and human rights treaty is necessary to close protection gaps in international law left untouched by the UNGPs’ polycentric global governance framework:

We are mindful that soft law instruments such as the Guiding Principles […] are only a partial answer to the pressing issues relating to human rights abuses by transnational corporations. These principles and mechanisms fall short of addressing properly the problem of lack of accountability regarding transnational corporations worldwide and the absence of adequate legal remedies for victims. ¹⁰¹

Early reactions to the international treaty initiative by the European Union and other States in the Global North were complacent if not defensive. ¹⁰² There was a widely held perception that attempts at international legal reform would prove unfeasible or ineffective, jeopardising the global consensus built around the UNPGs in 2011. ¹⁰³ Discussions of previous drafts by States, business enterprises, and civil society organisations were accordingly protracted and conflict-ridden. Meanwhile, there is at least a growing recognition of the complementarity between the two processes, with the more recent draft treaty texts clearly referencing the UNGPs’ notion of corporate human rights due diligence. The treaty negotiations have somewhat revived arguments to include corporate ‘responsibilities’ alongside State ‘duties’ in international law (the public-private divide). ¹⁰⁴ Yet overall, the debate now gravitates towards extending the purview of international human rights law to global business operations through an extraterritorial application of international human rights norms (the domestic-foreign divide) – with similar regulatory effects.

Regarding prevention, Article 6 of the 2021 draft provides that ‘States Parties shall regulate effectively the activities of all business enterprises within their territory, jurisdiction, or otherwise under their control’ to ensure that these business enterprises ‘respect all internationally recognised human rights and prevent and mitigate human rights abuses throughout their operations’. To comply with their international extraterritorial obligations, ‘States Parties shall require business enterprises to undertake human rights due diligence’ concerning their own business activities and their business relationships with third parties. Regarding redress, Article 7 requires States Parties to endow their domestic courts ‘with the necessary jurisdiction […] to enable victims’ access to adequate, timely and effective remedy’. This includes ensuring civil liability of business enterprises for their failure to prevent human rights abuse in their global supply chains, provided they controlled, managed or supervised the entity causing or contributing to the abuse, or should have foreseen risks of such abuse in the conduct of their business activities. ¹⁰⁵ As an exception to the otherwise applicable lex loci delicti rule, Article 11 provides that, upon request of the victim, the applicable law in transnational tort litigations shall be the domestic law of the home-State court.

If adopted, the international business and human rights treaty would ensure greater consistency between the UNGPs’ corporate responsibility to respect human rights and States’ imposition of corporate human rights due diligence requirements on business enterprises as a legal standard (duty) of care. It would also further consolidate States’ international extraterritorial obligations to prevent and redress business-related human rights violations, as envisaged by the Maastricht Principles. ¹⁰⁶ This could contribute to rectifying present shortcomings of home-State regulation in Europe, both concerning the limited reach of legal HRDD requirements in the global value chain and concerning the misalignment between corporate duties to prevent and to remedy adverse human rights impacts that they cause or to which they contribute.