CYIL vol. 11 (2020)

CYIL 11 (2020) RESPONSIBILITY OF TRANSNATIONAL CORPORATIONS UNDER THE DRAFT … mainly the EU, the Revised Draft expanded the scope of application and is no longer limited to transnational corporations or activities of a transnational character, while still emphasizing businesses with transnational activities. The Draft Treaty shall apply to “ all business activities, including particularly, but not limited to, those of a transnational character .” 26 It provides a wide definition of a “business activity” 27 and determines when such activity is considered to be of “transnational character” using the broadly construed criteria. Pursuant to Article 3(2) of the Revised Draft, an activity is of a transnational character if: (a) it is undertaken in more than one national jurisdiction or state; (b) it is undertaken in one state through any contractual relationship but a substantial part of its preparation, planning, direction, control, designing, processing, or manufacturing take place in another state; or (c) it is undertaken in one state but has a substantial effect in another state. 28 In today’s interconnected world most business activities will meet the transnationality element under the Revised Draft. Compared to the Zero Draft, the business activity is no longer defined as “for-profit” which is a helpful improvement as some state owned enterprises can be engaged in (transnational) business activity but their mission does not necessarily need to be profit driven. 29 In addition, some state agencies, which can also be engaged in economic activities, do not possess a separate legal personality. As follows from the above, the Draft Treaty shall also apply to domestic businesses and state owned enterprises the omission of which in the Zero Draft was heavily criticized. 30 Small and medium size undertakings (SMEs) are covered as well as the possibility for states to adopt measures or incentives to facilitate SMEs’ compliance with the treaty requirements. 31 This revised scope is now more in line with the ratione personae application of the Ruggies Principles 32 and the turning point for greater participation of the EU in the debates on the 26 Article 3(1) of the Revised Draft. 27 Business activity is defined in Article 1(3) of the Revised Draft as “any economic activity of transnational corporations and other business enterprises, including but not limited to productive or commercial activity, undertaken by a natural person or legal person, including activities undertaken by electronic means.” Prof. Ruggie criticized the use of the term arguing that its novelty with no preceding history might not be fully adequate in the situation at hand where the legal liability of enterprises will be inferred. See RUGGIE, J.: Comments on the Zero Draft treaty on Business and Human Rights. Resource Centre blog [online]. Available at: . Visited on 1 June 2020. 28 Article 3(2) of the Revised Draft. 29 Prof. Ruggie gives an example of state instrumentalities established to advance governments’ geopolitical interests (not necessarily gaining profit) abroad and, thus, financed by the states. Another example can be the participation of the state-owned enterprise in a joint-venture partnership with a private corporation, whereas only the latter would have been responsible under the Zero Draft before its revision. See RUGGIE, J. Comments on the Zero Draft treaty on Business and Human Rights. Resource Centre blog [online]. . Visited on 1 June 2020. 30 On the other hand, some delegations expressed concern that the application of the Draft Treaty to all business activities exceeded the mandate of UN Resolution 26/9 which in its footnote stated that “Other business enterprises denotes all business enterprises that have a transnational character in their operational activities, and does not apply to local businesses registered in terms of relevant domestic law.” See Report on the fifth session of the open-ended intergovernmental working group on transnational corporations and other business enterprises with respect to human rights. 09/01/2020, A/HRC/43/55, p. 5, para. 16 and p. 7 paras. 33 and 36. 31 Article 5(6) of the Revised Draft. 32 The Ruggies Principles apply to all business enterprises, both transnational and others, regardless of their size, sector, location, ownership and structure. See in particular Article 11 or Article 14 of the Principles.

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