It is a fraught time in Europe and the battle to end corporate impunity is in full swing.
Since the long-awaited publication of the EU Commission’s proposal for a Corporate Sustainability Due Diligence Directive (CSDDD) in February 2022, the issue of binding rules on corporations for their impact on human rights and the planet has been high on the political agenda in Brussels. With Europe exiting the pandemic, the Russian invasion of Ukraine and the related energy crisis, the debate over how (and how much) to regulate companies is heating up.
Yet in Geneva, the EU’s activity on the topic is much less intense, judging by the Union’s continued bystander role in similar discussions at the UN.
This October, UN Member States will meet for the 8th round of negotiations on a UN Legally Binding Instrument to regulate the activities of transnational corporations and other businesses in international law.
Two EU Member States, France and Portugal, have joined the Friends of the Chair, a group of friendly countries set up to push states towards consensus on the draft Treaty. Yet the EU line remains one of so-called ‘partial engagement’ in the process, a timid strategy for an institution that purports to being a global champion of human rights and sustainability.
In recent years, the European Commission has advanced the absence of EU rules as a reason for their failure to engage. With the arrival of the CSDDD proposal this argument is slowly but surely falling apart. However, we still do not know if the existence of the draft directive will result in a more significant participation by the EU and its Member States in the 8th session.
There are good reasons for EU engagement in the negotiations process – largely due to the shortcomings of the proposed directive and possible solutions a Treaty offers.
As it stands the CSDDD is a fraught text with glaring loopholes. It will cover a minority of EU businesses and their value chains, and it will have limited coverage of EU financial institutions. Companies will be able to escape and discharge their duties through contractual cascading, be held liable for damage only under very restrictive parameters, and could even use their due diligence as a shield against liability. Even if these flaws were satisfactorily addressed, the Directive would be bound by its inevitably limited reach (due to its regional nature) and the limit scope of EU legislative competence.
An upcoming study commissioned by six European NGOs highlights how a UN Treaty could work in tandem with CSDDD to hold companies accountable globally. A UN treaty would fill the major gap left by CSDDD on access to justice for victims, for example, by setting international standards on applicable law and choice of jurisdiction, two issues that plague transnational court cases against companies. It could also improve the implementation of the EU’s law by reaching those segments of global value chains and non-EU corporations left out by the Directive’s proposal.
The same study outlines the EU’s current efforts to legislate (on the request of Parliament, Council and swaths of civil society) on binding rules to prevent human rights and environmental abuses, actually increases the Union’s legal right – and therefore (we argue) its obligation – to seek a mandate to negotiate as a bloc. The study also insists on the ongoing role EU Member States must continue to play in the process, as several of the hot topics dealt with by the Treaty draft are those the European Commission cannot negotiate alone.
While the new analysis shows the two instruments can mutually reinforce each other, there are also places where they risk diverging – for instance on how and when to make companies liable for harms. On this the treaty is far broader, while CSDDD goes for a very narrow approach, and introduces a possible due diligence defence for companies, which the Treaty explicitly rules out. The EU should take inspiration from the Treaty to make sure its own law does not create new burdens on victims who already face an uphill climb for justice. The EU should engage in the negotiations now, before the texts diverge to an irreconcilable point.
The EU is at a moral and political precipice. To cope with the energy crisis triggered by Russia’s invasion of Ukraine, the EU is now looking at gas extraction in other countries including Mozambique, where explorations are contributing to a devastating humanitarian crisis and threatening an ecological disaster. The global scramble for metals and minerals needed for the energy transition continues to generate violations of human rights and often irreparable harm to territories and communities.
Will the EU turn a blind eye to corporate abuse, using complex global problems as an excuse? Or, will it navigate its way through this tumultuous time by upholding human rights in the face of corporate power?
If the EU is serious about its commitments to protect human right globally and to make a sustainable and just transition that protects people, the environment and climate – it must engage in the negotiations for a global treaty to regulate corporations at home and abroad.
Giuseppe Cioffo is the Corporate Regulation and Extractives Officer at CIDSE.
Photo Credit: Ike Teuling.