CYIL vol. 11 (2020)

CYIL 11 (2020) RESPONSIBILITY OF TRANSNATIONAL CORPORATIONS UNDER THE DRAFT … controlling entity over the activities of its subsidiary or entity in the supply chain. From the victim’s perspective the provisions on the accountability of foreign companies and competence of foreign courts to decide such disputes are determinative for the effective exercise of victim’s rights. The criterion of control is the classical approach of how to try to invoke the liability of a parent company. Courts usually have difficulties with deriving liability just on the basis of control. Usually, a duty of care or other circumstances must exist. It will be necessary in the next draft of the proposed treaty to provide further clarity on the term of control as different interpretations can be found under various national laws. For example, a company can exercise de facto control without supporting legal documents. In other cases, control evidenced in binding corporate documents or a contract is required. Under the criterion of foreseeability, the liability of the main company can be established to the extent risks of human rights violations have been foreseen by it or should have been foreseen by it in the conduct of business activity, regardless of where the activity takes place. It is similar to the concept of duty of care of a parent company that it owes to entities it controls and this criterion can help to overcome the national doctrines banning the lifting of the corporate veil. The link between the failure of a company to undertake due diligence and the liability based on foreseeability of risks remains unexplained. Unlike the Zero Draft, the revised document stipulates a non-exhaustive list of particularly serious criminal offences (e.g. war crimes, torture, forced labour, slavery, the use of child soldiers) to be sanctioned and provided for in national legislation. 54 The Revised Draft no longer operates with criminal liability of both individuals and companies as the latter is not recognized in the legal systems of many states. The Revised Draft anticipates that states can require companies engaged in business activities to establish and maintain financial security (e.g. financial guarantees or insurance bonds) to cover potential claims of compensation. 55 4. Climate Protection and Environmental Concerns The Revised Draft does not address any climate protection issues or liability of businesses for contributing to the loss and damage from climate change. In 2019, the Treaty Alliance Germany called on the German government and the EU to further reflect in the Draft Treaty the sustainable development prerogative and to clarify that business activities are often accompanied by considerable resource consumption and CO 2 emissions and that economic growth can pose a risk for climate protection and biodiversity. 56 It is to be seen whether and how further discussion on this aspect will develop, taking into account climate change being on the political agenda of the EU and the recently released report by the Special Rapporteur on human rights and the environment appointed by the UN Human Rights Council. 57 56 Treaty Alliance Germany, Towards Global Regulation on Business and Human Rights. Statement of the Treaty Alliance Germany on the draft for a legally binding UNTreaty on Business and Human Rights (“Revised Draft”), October 2019, p. 1. Available at < https://www.ohchr.org/Documents/HRBodies/HRCouncil/WGTransCorp/ Session5/add/Others/Treaty_Alliance_Germany.pdf>. Visited on 1 June 2020. 57 See BOYD, D.R. Report of the Special Rapporteur on the issue of human rights obligations relating to the enjoyment of a safe, clean, healthy and sustainable environment, UN Document A/74/161, transmitted to the 54 Article 6(7) of the Revised Draft. 55 Article 6(5) of the Revised Draft.

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