Article 9. Prevention
1. State Parties shall ensure in their domestic legislation that all persons with business activities of transnational character within such State Parties’ territory or otherwise under their jurisdiction or control shall undertake due diligence obligations throughout such business activities, taking into consideration the potential impact on human rights resulting from the size, nature, context of and risk associated with the business activities.
2. Due diligence referred to above under Article 7.1 shall include, but shall not be necessarily limited to:
a. Monitoring the human rights impact of its business activities including the activities of its subsidiaries and that of entities under its direct or indirect control or directly linked to its operations, products or services.
b. Identify and assess any actual or potential human rights violations that may arise through their own activities including that of their subsidiaries and of entities under their direct or indirect control or directly linked to its operations, products or services.
c. Prevent human rights violations within the context of its business activities, including the activities of its subsidiaries and that of entities under its direct or indirect control or directly linked to its operations, products or services, including through financial contribution where needed.
d. Reporting publicly and periodically on non-financial matters, including at a minimum environmental and human rights matters, including policies, risks, outcomes and indicators. The requirement to disclose this information should be subject to an assessment of the severity of the
potential impacts on the individuals and communities concerned, not to a consideration of their
materiality to the financial interests of the business or its shareholders.
e. Undertaking pre and post environmental and human rights impact assessments covering its activities and that of its subsidiaries and entities under its control, and integrating the findings across relevant internal functions and processes and taking appropriate action.
f. Reflecting the requirements in paragraphs a. to e. above in all contractual relationships which involve business activities of transnational character.
g. Carrying out meaningful consultations with groups whose human rights are potentially affected by the business activities and other relevant stakeholders, through appropriate procedures including
through their representative institutions, while giving special attention to those facing heightened risks of violations of human rights within the context of business activities, such as women, children, persons with disabilities, indigenous peoples, migrants, refugees and internal displaced persons.
h. Due diligence may require establishing and maintaining financial security, such as insurance bonds or other financial guarantees to cover potential claims of compensation.
3. State Parties shall ensure that effective national procedures are in place to enforce compliance with the obligations laid down under this article, and that those procedures are available to all natural and and legal persons having a legitimate interest, in accordance with national law, in ensuring that the article is respected.
4. Failure to comply with due diligence duties under this article shall result in commensurate liability and compensation in accordance with the articles of this Convention.
5. States Parties may elect to exempt certain small and medium-sized undertakings from the purview of selected obligations under this article with the aim of not causing undue additional administrative burdens.
Article 9 of the Legally Binding Instrument on Transnational Corporations and Other Business Enterprises was scheduled for discussion on Tuesday 16 October 2018, from 16 PM to 18 PM.
After an introduction by the Chair, Luis Gallego Chiriboga, permanent representative of Ecuador at the UN in Geneva, comments on Article 13 were submitted by 4 experts. Written comments specific to Article 13 were submitted by:
• 9 states (China, Costa Rica, France, India, Mexico, Namibia, Russian Federation, South Africa, Switzerland)
1 observer state (Palestine)
• 13 NGOs
Comments by Experts
Baskut Tuncak, UN SR on human rights and toxics:
1. States should compel all businesses in their territory or jurisdiction to actively monitor, identify and prevent human rights violations. Due diligence requirements may seem obvious, but human rights due diligence is not conducted in a number of chemical companies. Existing initiatives do not follow the letter of the Guiding Principles on Business and Human Rights, nor the spirit of human rights in general.
2. HR due diligence must be traceable throughout supply and value chains. However, the limitations placed on the scope of monitoring, identification, prevention, as well as environmental and human rights impact reporting, seem to leave the potential for human rights abuses to persist in supply chains. The provisions also do not seem to adequately cover suppliers, such as those to companies in electronics and textiles sectors whose products are made with toxic products that again poison workers and their families. For these and other sectors, the most significant risks to workers and local communities may be buried deep within supply chains, including the activities of small and medium enterprises, which could be exempted. Also, subsection (e) seems unnecessarily limited to those under direct control. Perhaps include language on the lifecycle approach to business activities
3. Due diligence should be transparent. Transparency about toxic chemicals in products and production processes has been the key to advancing change in most instances where companies have transitioned away from carcinogens, chemicals that alter hormone systems and impact fertility and brain development. The intent of the language is section “d” is very much welcome. However, I am concerned that it does not go far enough to ensure transparency.
4. Due diligence should explicitly include actual and potential exposures to hazardous substances. The due diligence applied under this treaty may not adequately address crosscutting thematic human rights issues such as the insidious threat posed by hazardous substances and wastes to human rights. The section may wish to highlight some key issues that should be included in the due diligence requirements, such as the exposure of communities and workers to hazardous substances.
Written comments by Elżbieta Karska, UN Working Group on Business and Human Rights are not available on the OHCHR website.
Robert McCorquodale, Inclusive Law: Article 9 uses the wrong terminology of “due diligence”, while the UNGPs use the term “human rights due diligence”. These are substantially different. Human rights due diligence was introduced not to confuse it with business due diligence and to link it with international human rights law. My strong recommendation is that “human rights” must be added before “due diligence” wherever it occurs in this Article and in the Treaty and Optional Protocol.
Article 9 does broadly – but not precisely – cover the four elements set out by the UNGPs as mandatory human rights due diligence. There is, though, no specific “mitigation” or “tracking” aspects, and these should be added as both are important elements of HRDD. The OECD Guidance on Responsible Business Conduct in relation to HRDD is a very good template.
Article 9.2(c) includes “financial contributions” within the coverage of the operations for which there are HRDD requirements. I think that the role of the financial institutions is significant in this area. The specific inclusion of financial institutions within the businesses covered by this Article and across the entire draft should be made clearer.
The responsibility of international organizations should be included in the draft.
I have concerns about the ability of States expressly to exclude small and medium-sized businesses (SMEs) from the obligations under Article 9.5. This exclusion could lead to a form of immunity of SMEs, and the creation of new new legal structures by transnational corporations of a series of SMEs, which would undermine the purpose of the treaty. States could raise awareness, provide support and incentives to SMEs to implement the Treaty. SMEs may rely on the HRDD of larger businesses in their supply chain.
Article 9.2(c) refers to “preventing harm”. Some concerns have been raised that this is different from “seeking to prevent” human rights impacts under GP 13. A duty to prevent human rights harms on a business for its own activities that cause or contribute to human rights harms, would reinforce the core concern of the draft Treaty of prevention of human rights impacts. It also moves the obligations from being on victims to show a business link, a causal connection and a necessary forum, to that on the business to have the burden of showing that it is serious about its implementation of effective HRDD for its own activities. If this duty to prevent on business extends beyond subsidiaries and those under the control of a business to those in a business relationship, it would go beyond the UNGPs. There is, though, some national legislation, such as the French Duty of Vigilance Act and the UK’s Modern Slavery Act, which does extend this duty to suppliers
Including a defence of effective HRDD would be a powerful incentive for businesses to undertake HRDD and to act to prevent human rights abuses. Such a defence could be added simply by inserting a new sentence in Article 9.4: “This liability may not arise if the business enterprise/legal person or association of legal persons can prove that it took all reasonable precautions within the circumstances, had an effective policy and procedure in place, and exercised all human rights due diligence to prevent the adverse impact”.
Written comments by Gabriella Rigg Herzog, USCIB are not available on the OHCHR website.
Gabriela Quijano (Amnesty International): A future draft should clarify who exactly would be placed under such a requirement as “persons with business activities of transnational character” is equivocal. The obligation to conduct due diligence should be premised on a duty to respect human rights, or to prevent human rights abuses. This is consistent with the responsibility to respect human rights under the UNGPs. To avoid confusion and streamline international standards, we would recommend following the key due diligence steps under the second pillar of the UNGPs more strictly, and only add language where necessary to make concepts clearer or more detailed.
This article should be expanded to include obligations to ensure critical procedural rights that enable individuals and communities to defend their rights and prevent abuses, such as access to information; participation in decision making, meaningful consultation and the need to ensure the FPIC of IPs; protection of HRDs; the possibility to claim injunctive or precautionary measures; and provisions to address the differentiated, and often disproportionate negative impact of corporate activities on women.
Comments by States
China: the concept of due diligence in human rights is related to balancing human rights and development, and promoting respect of human rights in business activities, while avoiding an excessive burden on enterprises, that may affect their contribution to development. The core content of Article 9 is to establish a legal obligation to due diligence, which may be beyond the basis consensus of our negotiations. As the Chairman clearly stated yesterday, the proposed instrument does not seek to create new rights and obligations. There is a consensus on cautiosness in the implementation of human rights in industry and commerce, but countries at different stages of development may have different understandings. If a legal concept is clarified in the text, an examination is needed to see if conditions are mature, and a commonly accepted rule of international law exists. The UNGPs mainly “encourage” human rights due diligence.
Given the core purpose of the Draft Treaty is to provide effective relief mechanisms to victims, from a legal-technical point of view we do not need specific provisions on prevention. The absence of overly specific provisions on prevention does not affect the implementation of the UNGPs, or approriate caution of States in accordance with their national legal principles.
Costa Rica: the delegation asked the following questions:
Does this article have the goal to give a binding force to UNGPs 17 to 20? If so, how can a uniform capacity to comply with these obligations be guaranteed throughout the world? If all states had the same legal basis to acknowledge the main international legal instruments on human rights, and the same capacity to implement them, we would not be performing this exercize.
Prevention should start from taking into account the capacity of states, because Article 9.3 introduces an obligation for states to ensure that effective national procedures are in place to enforce compliance. This would imply creating an ad hoc national institution to regulate the operations of TNCs.
How can the state provide a legal guarantee of due diligence by enteprises, in addition to its existing obligation to have law respected? Is the establishment of a national institutions to monitor due diligence by enterprises, with respect to the human rights obligations of enterprises, which are enshrined in national legislation?
France: the French delegation described legislation on the duty of care for business companies, promulgated in March 2017 (Loi de devoir de Vigilance), inviting states and the OEIGWG to take into consideration this type of mechanism and the cases to which it applies. The French delegation stated it believed that prevention is the first guarantee of respect for human rights in business, and that because of this reason the scope of the Treaty cannot be limited to TNCs.
India: the duty to prevent human rights violations as elucidated in article 9.2.c is an onerous one and the threshold must be reduced to ‘seeking to prevent’ human rights violations which is a reduced standard. Further, ‘seeking to prevent’ human rights violations should be treated as a mitigating factor while affixing liability under Article 10.
Article 9.4 also needs to be re-drafted to make ‘due-diligence’ understood as a ‘standard of conduct’ and not as a ‘standard of result’.
India appreciates the exemption clause provided in article 9.5 for protection of certain small and medium enterprises from additional undue administrative burdens. However the carve out is only for select obligations under Article 9. Considering the importance of SMEs in the economy, more flexibility in exemptions may be provided to SMEs.
Mexico: implementing obligations under Article 9 will require the setting of deadlines to adapt national legal systems, and a deep process of legal harmonization.
We would like to propose an amendment to Article 9.1, to avoid limiting the adverse impact of transnational business activities to direct consequences, and also extend it to indirect and foreseeable consequences:
“…taking into consideration the potential impact on human rights resulting from or associated with the size, nature, context of and risk associated with of the business activities.”
Paragraph 9.2(g) can, as the Convention 169 of the ILO, recognize the right to consultation and participation of various groups, but the elderly an other vulnerable groups should be included in the consultations referred to in this article.
It would be worth considering whether it would be desirable to include a general provision on the obligation to carry out a prior, free and informed consultation, when from impact evaluations is apparent that there could be a negative impact on human rights. Consultations would not be limited to groups in a position of vulnerability.
The Mexican delegation expressed reservations about Article 9.2, given its high degree of discretion and legal uncertainties. The option to exempt SMEs from due diligence obligations would result in a weak protection regime.
Namibia: Article 9 should refer to the term “human rights due diligence”, as indicated by one of the panellists, as this will capture the essence of the prevention sought through the treaty. We further propose that the listing in Article 9 (g) be carefully considered in order to be all-inclusive as the list currently poses a risk of exclusion of groups with a heightened risk of violation, especially farmers and/or farmworkers. We also propose this sub-article to include awareness raising as a specific element of the consultations alluded to. Whilst SME’s should not be encumbered with unnecessary due diligence administrative burdens, they should not be excluded from the primary obligations to prevent abuses from occurring. We reiterate our preference to use the term “abuses” or “adverse impacts” with respect to the human rights violations caused by the transnational activities of the companies.
Russian Federation: states should be able to independently determine the forms and mechanisms that will be used to ensure that obligations are fulfilled and violations are prevented. States will take into account their legal systems, capability, regional circumstances and legal traditions. The main thing is ensuring a universal standard! In this regards we do not see the need to include extensive provisions on preventive measures.
We are concerned about Article 9.2(f) because it does not take into account the nature of the content of commercial contracts, including the mechanisms for resolving disputes over them. Inclusion of human rights clauses in such agreements would mean that the jurisdiction of courts should include a category of cases on compliance with human rights standards, fundamentally different from commercial relations. The same considerations are fully applicable to Article 13.6. Inclusion of human rights provisions would induce a radical reform of the international system for resolving trade and investment disputes. In addition, it is unclear what “all” contractual relations mean? The inclusion of human rights committment may become a formality, and such an approach may not be correct.
We would prefer not to include provisions on preventive measures in the Draft Treaty. It would be more correct to issue them as comments or recommentations, following the UNCITRAL practice. This would allow to adjust provision during the implementation of the Treaty.
South Africa: this article must be guided by the “duty of care” which creates the legal obligation for transnational corporations and other business enterprises to adhere to a standard of reasonable care while performing any acts that could foreseeably harm others.
Article 9.1 should refer to the consideration of human rights impacts as well as environmental impacts and these assessments must be conducted independently and transparently at cost to the company involved.
The reporting referred to in Article 9.2(d) should include financial and non-financial matters.
The principle of Free Prior Informed Consent should be explicitly mentioned and guide the consultations in Artcle 9.2(g). The notion of “continuous consent” should be added to ensure that communities have the right to suspend or stop developments that were not previously agreed upon.
Under Article 9.5, it is very important that TNCs and OBEs understand that Prevention Mechanisms should be an integral part of the business model as opposed to being viewed as “additional administrative burden”, and subsidiaries, agencies, representatives and so forth should be held acccountable for violations.
The text should refer to clear obligations to halt production, and mitigating strategies. The article should make provisions for prevention mechanisms in situations of conflict and occupation.
Switzerland: the concept of due diligence and the terminology used in the Draft Treaty are not aligned with those in the UNGPs and the OECD Guidelines for Responsible Business Conduct. The Draft Treaty recognizes that enterprises can be involved in human rights abuses but the categories used in the Draft Treaty do not correspond to notions of direct and indirect involvement in corporate abuses, as contained in the UNGPs.
Comments by Observer States
Palestine: in its current format the Treaty does not shed light on the importance of requiring strict due diligence by both the state and corporate actors in situations of conflict. “Special attention” under article 15 remains insufficient to address the increasing role of corporations in the commission of and involvement in grave breaches of international law, as well as their significant role in protracting and sustaining conflicts, particularly those relevant to the arms industry and natural resources. Adding a provision under Article 9 on prevention requiring enhanced due diligence in conflict areas is essential. Where a tiaution violates international law in conflict areas, the Treaty must require states to create regulations to ensure that companies refrain from activities contributing to such violations and/or terminate existing business activities.
Comments by NGOs
Amnesty International: “persons with business activities of a transnational character” is ambiguous, so a future draft should clarify who exactly would be placed under due diligence obligations. This obligation should be premised on a duty to respect human rights, or prevent abuses. This is consistent with the UNGPs. We would recommend following kay due diligence steps under the second pillar of the UNGPs more strictly, and add language only where necessary to make concept clearer or more detailed. This article should be expanded to include obligations to ensure critical procedural rights that enable individuals and communities to defend their rights and prevent abuses, such as: access to information; participation in decision making, meaningful consultation and the need to ensure the FPIC of IPs; protection of HRDs; the possibility to claim injunctive or precautionary measures; and provisions to address the differentiated, and often disproportionate negative impact of corporate activities on women.
Association for Women’s Rights in Development (AWID) and Feminist for a Binding Treaty group: effective prevention absolutely depends on a gender justice approach, seeking to address impacts of abuses on women. Article 9 should include the obligation as part of due diligence to carry out gender impact assessment. The need for gender integration in human rights impact assessments has been recognised by the CESCR, the UNWG on TNCs and OBEs and even in the new OECD Due Diligence Guidance for Responsible Business Conduct. Monitoring and reporting should include gender-disaggregated data. The appropriateness of persons undertaking the assessment in Article 9 should be measures against the minimum criteria of independence; appropriate expertise; adequate funding; diversity including but not limited to gender balance; and engagement of affected communities. Article 9 does not include any measure regarding due diligence in the context of business activities in conflict-affected and high-risk areas, which is a major gap.
Brazilian AIDS Interdisciplinary Association (directly coordinating 17 NGOs in Brazil, indirectly representing more than 600 movements and organizations): TNCs should have direct obligations to prevent violations of the riht to health. They should be held responsible under civil, administrative and criminal law. In practical terms, the instrument must state that TNCs have the obligation to prepare, publish and effectively implement vigilance plans, and to evaluate their activities in light of human rights obligations. The consultation process must be: transparent and ensure the participation of independent, public interested-oriented groups. Those processes cannot be a mere formality
Groups listed in Article 9.2(g) should include “LGBT and people living with chronic and non-communicable diseases”.
CAFOD, CIDSE (International family of Catholic social justice organisations), Trócaire and CCFD-Terre Solidaire: the references to mandatory due diligence in article 9 build on the UN Guiding Principles and offer an opportunity for the Treaty to complement and significantly strengthen the impact of all existing National Action Plans. The UN Guiding Principles were adopted 7 years ago. We can learn from experiences on Human Rights Due Diligence in the interim to develop the zero draft text here and ensure that the final Binding Treaty is effective in practice.
It is also important to further explore the link to liability set out in the draft. This link is more likely to drive actual change by company directors when it comes to their decisions about the activities of their subsidiaries, environmental practices, negotiating prices with firms in their supply chain and consultations with workers and affected communities.
Centre Europe Tiers Monde: the definitions included in Article 9 suppose a distancing from original parameters. Its current formulation reflects important deficiencies in the monitoring and accountability of TNCs. We are dealing with a concept of due diligence close to voluntariness, in line with the spirit of the UNGPs, and not a truly binding regulation. The control of compliance with due diligence falls on states, and the original vector of Resolution 26/9 has been diverted, because the goal of directly regulating the international obligations of companies has been abandoned in favor of establishing obligations for states.
FIAN International: it is important that the Treaty includes a more adequate concept of consultation with affected persons, changing the concept from “meaningful consultation” to “free, previous and informed consultation”, according to Convention 169 of the International Labor Organization; guarantee that decisions taken by affected communities be respected; clearer dispositions about the right to consultation, emphasizing how consultation should be independently organized by states, rather than by corporations.
Friends of the Earth International: to the concept of “due diligence”, we prefer the concept of duty of care, inspired from the French law, which includes not only the obligation to develop preventive measures, but also the obligation to implement them effectively, to evaluate their effectiveness. Above all it includes the obligation to repair with a mechanism to incur the liability of the company. It is also important to stress the responsibility of parent and outsourcing companies for the activities of companies in their corporate group (subsidiaries) but also throughout their supply chain. Article 9 (1c) should thus more clearly include subcontractors and suppliers.
With regard to paragraph 2g, the term “meaningful consultations” is too vague; an explicit reference must therefore be made to the obligation for States to obtain the free prior and informed consent of the communities potentially affected by any investment project in their territories. Preventive measures must be developed with the participation of affected communities and social organizations. A gender perspective should be integrated in the Draft Treaty.
International Association of Democratic Lawyers (IADL): Article 9 should follow the mandate of Resolution 26/9 which is regulating the activities of TNCs and other business enterprises, therefore it should establish direct obligations for TNCs and their supply chains. Obligations related to prevention should be differently addressed both to states and TNCs. Global supply chains should be included in this article, and language that may narrow down the scope of application of due diligence should be avoived. Human rights due diligence should not be confused with other forms of due diligence. As signalled by the Human Rights Commissioner in 2018, the key difference is that we are not elaborating a mechanism to riduce economic risk, but to prevent corporate crimes. Therefore, we do not understand the inclusion of “financial security, such as insurance bonds or other financial guarantees to cover potential claims of compensation.”
Under Article 9.2(g) the inclusion of women among groups in need of special attention should be avoided in favor of measures integrating gender in impact assessments.
Regarding the elimination of the reference to vigilance plans, we consider it fundamental to include the obligation to elaborate, publish and implement such plans, independently evaluate their efficiency, with the full guarantee of information and transparency.
Indigenous Peoples International Centre for Policy Research and Advocacy: for indigenous peoples, mere consultation as provided in Article 9, sub para 2 g is inadequate. We therefore recommend that a provision on Free Prior and Informed Consent be added to the treaty. FPIC for indigenous peoples is protected in international law, including International Labour Organization Convention (ILO) 169 and the UN Declaration on the Rights of Indigenous Peoples (Articles 10,11,19,28, 29). We also refer members of this Honorable Working Group to the study made by the Expert Mechanism on the Rights of Indigenous Peoples submitted to the Human Rights Council in September 2018 (A/HRC/39/62), to further support this recommendation.
International Commission of Jurists: the language of Article 9 is not entirely satisfactory. Prevention amount only to human rights due diligence but the Draft could contemplate additional ways for states to prevent human rights abuses by companies, or to require companies to prevent abuses. The form of human rights due diligence in the Draft departs from existing standards of due diligence. Article 9 brings additional requirements to the four-step process of due diligence, such as “meaningful consultation” with affected groups, the requirement of financial security to cover potential compensation claims, the incorporation of some measures into transnational contract. Greter alignment with UNPGs 17 to 21 and existing practices would be desirable.
International practice and the French Loi de devoir de Vigilance should be taken into account, and a separate article should be included to provide more specific guidance on human rights due diligence.
The Draft should address other forms of prevention, that could be modelled on those identified by UNGPs 3, 15, General Comment 16 of the Committee of the Rights of the Child, and General Comment 24 of the Committee on Economic, Social, and Cultural Rights.
International Organization of Employers: Article 9 unduly mess with and creates confusion with the four-step human rights due diligence process under the UNGPs, that is understood and carried out by more and more businesses. The Zero Draft Treaty formulation is unworkable by establishing human rights due diligence as a standard of outcome.
Attaching liability for non-compliance with human rights due diligence exposes parent companies, buyers and retailers to legal risks regardless of their involvement in the harm. Companies would need to adopt stricter policies in cross-border suppy chains, that would require vastly greater abilities and powers. This approach would further undermine the state as some of its traditional functions would be transfered to global business.
Article 9.5 trying to offer exemption to SMEs offers no assurance that an exemption would happen in reality, and offers to clarity as to the application of its vague language. The provision requiring “all persons with business activities of a transnational character” to undertake due diligence obligations is completely unrealistic. The speaker referred to the IOE Paper on State Policy Responses to Human Rights Due Diligence.
RIDH: the delegate described the human rights adverse impacts of transnational businesses in Colombia, and domestic legislation limiting the binding character of existing forms of popular consultation. The Colombian national environmental movement supports the inclusion of a right to a binding consultation as a central element of implementation of projects of TNCs.
Sudwind and International Clean Clothes Campaign: conceptual alignment with Pillar II of the UNGPs is needed to reduce definitional and operational ambiguities in the Draft Treaty.
Article 9.2 deviates from the formulation adopted in the UNGPs and does not provide that mitigation measures shall be taken, to to assess any adverse impact on human rights. The OECD Due Diligence Guidance frames the tracking and monitoring impacts and responses and the public reporting as crucial and intrinsic parts of Due Diligence. The reference to due diligence measures should follow the sequence foreseen in the UNGPs to avoid confusion and potential difficulties in interpretation. Greater alignment with the UNGPs would provide more precision, greater clarity and an increased level of comfort by all parties stakeholders who are already familiar with the concepts. The UNGPs are clear on this front and reflect a consensus among states and stakeholders.
Meaningful public disclosure is a cornerstone of making this article meaningful, and we would invite to consider stronger and clear language on this. Clarity needs to be provided on the point that human rights due diligence is a dynamic concept. We suggest a continuous obligation and not an exercise confined to pre- and post-event assessments; so, we would encourage article 9.2.e, which refers to “pre and post’ assessments, to be modified to be continuous.
On SMEs, responsibility is no longer a function of the size of the company, but needs to be commensurate with the human rights risks at hand.