Where next for a business and human rights treaty?
By Sikho Luthango
A decade has passed since the UN Human Rights Council began discussing a binding treaty on business and human rights. Some strides have been made in the latest negotiations but the question of which companies the treaty should apply to is still unresolved and much now depends on the buy-in of other key states and trade blocs, including the European Union, in what has been mostly a Global South-led process thus far.
Negotiations have been going on since a resolution proposing a legally binding human rights instrument for transnational corporations and other businesses was tabled by Ecuador in 2014 and co-sponsored by Bolivia, Cuba, South Africa and Venezuela.
The 9th session in 2023 was mostly stalled by disagreements between countries over process and the question of “scope”, or which businesses the treaty should apply to. However, there were some changes in process at the 10th session in December 2024 which indicate that negotiations will move forward in a much more effective manner.
Moving forward, thematic consultations will be held between sessions to resolve some of the most crucial debates, while legal experts have been selected to partake in the sessions and assist states with some of the contentious and urgent questions. The Chair of the session will now also publish a programme of work ahead of the planned sessions.
However, some crucial substantive issues continue to linger and may cause an impasse in the negotiations ahead, the most contentious being the scope of the treaty.
Transnational companies or all companies?
The main contention among states and civil society organisations (CSOs, which only observe the sessions) is the “application of scope”. Whether a treaty should apply only to transnational corporations or to all businesses is the main question here.
The current Third Revised Draft of the legally binding instrument covers all business entities and includes state-owned enterprises, which is a deviation from the initial resolution of the Human Rights Council’s working group back in 2014.
Some states, including China, India, Egypt, Bolivia and South Africa, support a narrow application to transnational corporations only, mostly citing the existence of national laws that already regulate domestic companies. These arguments usually centre the right to development for developing economies and not interfering with the regulation of domestic companies, especially small and medium enterprises.
The UK and the US support a broader scope for the treaty which includes all businesses, as does the EU which has been participating unofficially in the negotiations. This view is more in line with the United Nations Guiding Principles on Business and Human Rights: these states contend that a legally binding instrument with a more limited scope would not facilitate a level playing field for companies and would distort competition.
Some countries like Mexico and Panama have a more nuanced view. They also favour a broader scope, but for different reasons. According to their domestic laws, Mexico and Panama would be obliged to consider all transnational corporations operating on their soil as being, in effect, local companies and thus would not be covered by a treaty whose scope is limited to transnationals.
Civil society organisations also have mixed views on this question. Some believe that a treaty with a broader scope will support a level playing field between companies and ensure stronger protections for rights-holders, as does the International Confederation of Trade Unions. Others argue that transnational corporations benefit the most from governance gaps at international level and thus should be the focus of a treaty.
Some scholars argue, however, that an article on scope may not be necessary at all, and that states should focus instead on ensuring that a company from one state can bear legal obligations and accountability for activities that occur in another state. This could be done by ensuring that the treaty takes an expansive view of jurisdiction and liability.
China and Russia are strongly opposed to some jurisdictional clauses while South Africa, Egypt, Palestine and CSOs have called for clauses that support the removal of legal obstacles to be reinstated in the text. For instance, the removal of the doctrine of forum non conveniens in the treaty text will ensure that victims based in one jurisdiction are able to seek remedy in another jurisdiction. States like South Africa should try to get these states on board on these key provisions, either bilaterally or through BRICS.
What to expect from the European Union
There is an expectation that the EU, which is technically an observer but has made comments off the books during the negotiations, will shortly receive an official mandate from the European Council.
The EU’s participation could provide more buy-in to the negotiations which are currently led by countries of the global South, particularly since the Trump administration has pulled the U.S. out of the UN Human Rights Council. EU participation could also signal a commitment to address persisting gaps in the regulation of international supply chains.
Based on comments made so far, it is clear that the EU’s negotiating mandate will be based on its Corporate Sustainability Due Diligence Directive (CSDDD) which was enacted in mid-2024 and is the first instrument of its kind to regulate businesses in relation to human rights and the environment at the regional level. This will impact the debates on scope and other provisions like jurisdiction.
The CSDDD already falls short of what some countries and CSOs are looking for in a legally binding instrument. Brazil and some CSOs insist that the treaty include the financial sector which the CSDDD excludes from its scope.
The CSDDD’s liability regime excludes sanctions against a company which has properly conducted due diligence: this is strongly opposed by many CSOs which advocate that a treaty should require a company to cease operations if due diligence flags possible violations or harm in future. Palestine supports a provision that requires urgent divestment and disengagement where enhanced human rights and environmental due diligence has identified potential harm, including in conflict-affected areas.
But now, through its Omnibus Proposals, the EU is planning to weaken the CSDDD even further: for example, by limiting human rights and environmental due diligence obligations on companies to only their “tier one” (immediate) suppliers, and not to the rest of their global supply chains. This would exclude the upstream part of the raw materials supply chain where the most human and environmental impacts occur.
By doing so, the CSDDD will become even weaker than the current draft of the legally binding instrument, including on environmental due diligence which has now become an important issue.
The call to include environmental rights in the treaty was stronger than ever at the 10th session, for instance from Ghana. States like France have suggested that while the treaty applies broadly to the regulation of “adverse human rights impacts” and “human rights abuse”, it should also explicitly provide for a “clean, healthy and sustainable environment”. Ghana, Mexico, Panama and Columbia have argued for the treaty to require environmental impact assessments prior to and throughout operations.
The argument for including environmental rights in the treaty has been validated by the adoption by the UN General Assembly in 2022 of the right to a clean environment: no states voted against this and only eight abstained. This indicates that this right is widely recognised even though it is not binding in international law. On the other hand, states like Saudi Arabia are against the requirement for environmental remediation and ecological restoration where harm has occurred.
What happens next?
For the negotiations to move forward, substantive issues will need consensus. There also needs to be more constructive participation from the EU and other Global North states like Norway, Australia and Switzerland. If the EU and its member states come on board, then the negotiations would garner more buy-in.
Global South states, which mostly bear the negative human and environmental impacts of global supply chains, should maximise their diplomatic pressure on EU member states to give the EU a mandate to negotiate at the 11th session in October 2025. South Africa, during its G20 presidency, is well placed to take this up.
The key question, however, is how the negotiations will be affected if the EU does end up narrowing down the scope of the CSDDD even further, then using the weakened directive as the basis of its negotiating position. If the EU takes this position, and if most countries of the global South concede it, the result would be a watered-down treaty.
Sikho Luthango is a Senior Associate at the Cambridge Institute for Sustainability Leadership. Her research focus is in mineral and energy supply chains and the human and environmental governance thereof. Her views are personal and do not reflect those of CISL.