I. Introduction
The idea that economic, social and cultural (ESC) rights are real rights deserving of full protection in domestic constitutions and international law on a par with civil and political rights had been the subject of protracted controversy until 2011 when the United Nations (UN) adopted Optional Protocol to the International Covenant on Economic, Social and Cultural Rights.Footnote 1 This Protocol establishes a complaints mechanism for ESC rights, marking a formal end to the treatment, in international law at least, of ESC rights as second-rate rights. The long history of the marginalization of ESC rights in comparative constitutional law and international law hinges in part on the disquiet with the idea of imposing obligations on states that they might not be able to fulfil.Footnote 2
This disquiet assumes more significance in the context of corporationsFootnote 3 which, unlike states, do not have the institutional and political resources such as the legislature, law enforcement and regulatory agencies, and the bureaucratic machinery to enable them to fulfil their responsibilities. Thus, even as the idea that corporations and other business enterprises have a ‘responsibility’ to respect human rights has increasingly received formal acceptance in various UN resolutions and other documents,Footnote 4 the nature of such responsibility remains unclear. First is the question whether such responsibility constitutes, or should constitute, a legal duty, and second is the issue whether corporations have more than the duty to respect human rights in general and ESC rights in particular.
Confusion about the nature of duties of corporations in relation to human rights has been heightened in recent years by the introduction in various UN resolutions – prominent among which are the UN Guiding Principles on Business and Human Rights (UNGPs) and other Human Rights Council (HRC) resolutions on business and human rights – of two dichotomies: one between responsibility and duty, and the other between primary and secondary duties/responsibilities of states and corporations. More recently, an investment arbitral award of Urbaser v Argentina Footnote 5 uncritically accepted these dichotomies and introduced a third dichotomy – obligations of compliance versus obligations of performance – in an apparent bid to distinguish between obligations which do not require positive action and those which require positive action.
This article rejects these dichotomies. Focusing on ESC rights, it argues that corporations, like states, have or ought to have a legal duty to respect all rights. Such a duty does not merely require inaction or refraining from acting; it also requires positive action. More importantly, this article argues further that corporations could be bound by positive obligations, some of which are already recognized in international law.
This discussion is particularly relevant in the context of the Sustainable Development Goals (SDGs)Footnote 6 which emphasize the role of business and public and private partnerships to facilitate sustainable development and realize selected development goals. There can be no doubt that the implementation of ESC rights is pivotal to the realization of SDGs. This means that understanding the obligations of corporations in relation to ESC rights is critical to the realization of SDGs. It also requires revisiting the fundamental assumptions and principles of corporate law which place too much premium on satisfying shareholder profit interests.
Section II explores the relationship between ESC rights and the SDGs to emphasize the interdependence of state and corporate action regarding the provision of basic services and, hence, the realization of ESC rights. Section III then reviews some of the common objections to imposing ESC rights obligations on corporations and demonstrate that these objects rehash well-known arguments premised on false distinctions between positive and negative obligations, the public and the private spheres, and state and private action. This is followed in section IV by a critical discussion of the UNGPs and other HRC Resolutions which suggest that corporations only have the responsibility to respect human rights while states have the primary duties to respect, protect and fulfil human rights. Section V shifts to a discussion of Urbaser, where we offer a critique of the concepts of ‘obligations of compliance’ and ‘obligations of performance’, and tease out the obligations that corporations involved in a partnership with the state or privatization arrangement concerning the provision basic services such as water could or ought to have. This award is critical to this discussion as it highlights the limits of maintaining the public and private divide as far as the application of ESC rights is concerned where private actors enter into concessions to provide basic services such as water. Section VI reflects on the limits of corporate law in ensuring that public/private partnerships facilitate the realization of ESC rights.
II. ESC Rights and the SDGs
In 2015 the UN adopted the 2030 Agenda for Sustainable Development,Footnote 7 replacing the UN Millennium Development Goals (MDGs) adopted in 2000.Footnote 8 The 2030 Agenda is a comprehensive, far-reaching and demanding international agreement, consisting of 17 goals, 169 integrated and indivisible targets, and 230 indicators. The SDGs build on the successes of, and pulls together, all the strands of the 1972 Stockholm Declaration,Footnote 9 the 1987 Brundtland Report, the 1992 Rio DeclarationFootnote 10 and the MDGs.Footnote 11
The SDGs focus on the five Ps: people, planet, prosperity, peace and partnerships.Footnote 12 They commit participating countries to achieving sustainable development in its three dimensions – economic, social and environment – in a balanced and integrated manner. By subscribing to the SDGs, all states pledged to strengthen and revitalize the global partnership towards ending poverty, improving health and education, and reducing inequality.
The International Covenant on Economic, Social and Cultural Rights (ICESCR)Footnote 13 is a fundamental pillar of the 2030 Agenda, both of which aim to lift everyone out of poverty and ensure that everyone maintains a life worthy of human dignity. In explaining the links between the ICESCR and SDGs, the UN Committee on Economic, Social and Cultural Rights (CESCR), which monitors the implementation of the ICESCR, has said:
The concept of leaving no one behind in the 2030 Agenda is in its essence a commitment by States to prioritize the needs of the most disadvantaged and marginalized in realizing the Sustainable Development Goals. Similarly, the Covenant requires State parties to protect and realize the rights of those left behind by poverty, socioeconomic and cultural exclusion and marginalization. Both the 2030 Agenda and the Covenant also seek to respond to the needs and circumstances of fragile countries, including least developed countries, small island developing States and countries in conflict and post-conflict situations. This demonstrates the heightened concern expressed in both the Covenant and the 2030 Agenda for those groups and countries that are the least privileged and face multiple challenges.Footnote 14
The ESC rights enshrined in the ICESCR detail obligations of result and obligations of conduct: the former define the outcomes and targets that must be realized by duty bearers, while the latter define the manner in which the realization of ESC rights must take place.Footnote 15 SDGs speak to both these obligations.Footnote 16 Not only do they specify the goals and targets that states collectively and individually must realize, they also stress the importance of ensuring that these goals and targets are realized through methods that are sustainable so as to ensure that ESC rights ‘are secured both for present and future generations’.Footnote 17
Many of the 17 SDGs can be linked directly to ESC rights. For example, SDG 1 on ending poverty speaks to the raison d’être of all ESC rights.Footnote 18 SDG 2 on ending hunger is linked to the right to food. SDG 3 on ensuring a healthy life and wellbeing for all relates to the right to a health, while SDG 4 about quality education is directly connected with the right to education.
The 2030 Agenda recognizes that, most importantly within the context of this article, realizing the SDGs and hence ESC rights is not a responsibility that can be borne by the state alone. Hence, SDG 17 specifically speaks about promoting cooperation and partnership towards achieving the SDGs. This is particularly crucial considering that the implementation of ESC rights is dependent not only on political but very importantly also on the available economic and financial resources. SDG 17 encourages and promotes effective public, public–private and civil society partnerships, building on the experience and resourcing strategies of partnerships. Fostering of global partnership between state actors and non-state actors has become more imperative than ever in light of the dwindling economic resources at the disposal of many states against the reality of the increase in power, influence and resources available to private actors including corporations.Footnote 19
The CESCR has long recognized the role of private actors in the realization of ESC rights. For instance, in its General Comment No. 4, it stated that:
Measures designed to satisfy a State party’s obligations in respect of the right to adequate housing may reflect whatever mix of public and private sector measures considered appropriate. While in some States public financing of housing might most usefully be spent on direct construction of new housing, in most cases, experience has shown the inability of Governments to fully satisfy housing deficits with publicly built housing. The promotion by States parties of ‘enabling strategies,’ combined with a full commitment to obligations under the right to adequate housing, should thus be encouraged.Footnote 20
More recently, the CESCR has recognized the positive and negative impact of corporations on the realization of ESC rights.Footnote 21 In General Comment No. 24, the CESCR observed:
Businesses play an important role in the realization of economic, social and cultural rights, inter alia by contributing to the creation of employment opportunities and – through private investment – to development. However, the Committee on Economic, Social and Cultural Rights has been regularly presented with situations in which, as a result of States’ failure to ensure compliance, under their jurisdiction, with internationally recognized human rights norms and standards, corporate activities have negatively affected economic, social and cultural rights.Footnote 22
Similarly, in Government of the Republic of South Africa and Others v Grootboom and Others (Grootboom),Footnote 23 the South African Constitutional Court said: ‘It is not only the state who is responsible for the provision of houses, but that other agents within our society, including individuals themselves, must be enabled by legislative and other measures to provide housing.’Footnote 24 Section 8 of the South African Constitution expressly provides that ‘[a] provision in the Bill of Rights binds a natural or a juristic person if, and to the extent that, it is applicable, taking into account the nature of the right and the nature of the duty imposed by the right’. As noted below, several other African countries have adopted constitutions that allow for the application of constitutional rights to private actors.
These pronouncements acknowledge the involvement in the provision of basic services both as sole providers or in partnership with the state or other non-state actors, which is precisely what the SDGs do and encourage, as shown above. There is no doubt about the interdependence between the state and businesses as regards sustainable provision of public goods and services and the realization of ESC rights. With their strong emphasis on climate change and ecological consciousness,Footnote 25 the SDGs call attention to sustainable and equitable use of resources so that both current and future generations can realize their ESC rights. The SDGs can thus be seen as bringing to the fore a neglected aspect of the current jurisprudence on ESC rights,Footnote 26 which seems to prioritize satisfying the needs of the living with limited or no regard for the needs of those yet to be born. They also point to the need to temper the emphasis on profit-making and material accumulation at the expense of the environment, the poor and the marginalized. The UNGPs and CESCR General Comment No. 24 elaborate the duty of states to protect citizens and other persons within their territories or under their jurisdiction from violations of ESC and other rights that may be committed by corporations and other third parties. However, the implementation of the state’s duty to protect cannot address all human rights issues raised by corporations. This is why talk of human rights duties of corporations has remained on the international agenda.Footnote 27
III. ESC Rights Obligations and Corporations: A Response to Objections
There are those who reject completely the idea of assigning human right obligations to corporations.Footnote 28 Hsieh, for example, has argued that ‘[t]o assign human rights obligations to MNEs and their managers … involves attributing to them a status that is at odds with the position they occupy in society as private, profit-seeking entities’.Footnote 29 Hsieh also argues that imposing human rights obligations on MNEs and their managers ‘risks undermining an ideal central to human rights’ – the protection of ‘equal standing’.Footnote 30
Hsieh’s objection to assigning human rights obligations to transnational corporations and other business enterprises draws on the traditional public–private dichotomy which has been much criticized. The idea that the private sphere consists of ‘all members of society [who] have equal moral standing not just in the eyes of the state but also with respect to one another’ has been shown to be a misrepresentation of private relations which are also constituted by power asymmetries, hierarchies and repressive practices.Footnote 31 Those who rely on the public–private dichotomy to resist the reach of human rights to the private sphere assume that power is hegemonic, unitary, and inseparably linked to the state. This assumption misses the point that power is pluralistic, diffused, overt or covert, and manifests itself in various forms, in public and private spheres. Contrary to the supposition of equality between individuals in the private sphere, power asymmetries are endemic in the private sphere. The sources of such power imbalances range from gender to race, heredity, socio-economic status, and place of origin. If locus of power is pluralistic, decentralized and dispersed in society, the threat to human rights is thus also diverse and not limited to state or public power.
Then there are those who accept that corporations have human rights obligations but argue that such obligations should not be extended to ESC rights,Footnote 32 or only to some ESC rights.Footnote 33 Arnold, for example, seems to advocate an approach to business and human rights rooted in basic rights such as liberty, physical security, and subsistence, which serve as ‘side-constraints’ on corporations to refrain from violating these rights.Footnote 34 These views are reminiscent of, and draw largely on, the much-discredited hierarchies and dichotomies such as first, second and third generation rights, positive and negative rights, positive and negative duties. Seen as positive rights, ESC rights are believed to engender onerous obligations that corporations cannot fulfil. Expecting corporations to bear these obligations, it has been argued, would divert primary responsibility to ensure the realization of human rights from states to corporations which in turn would derail them from achieving their principal goal which is to make profit for their shareholders.Footnote 35 Linked to these arguments is the way in which positive obligations have been developed and conceived and the institutional and political framework within which they are expected to be implemented and fulfilled. The implementation of the duties to protect and fulfil envisages the legislative apparatus, the policymaking and implementation processes and mechanisms, and the law enforcement agencies and adjudicatory of the state. Corporations are said to lack the resources or the political legitimacy to exercise the power that comes with wielding such resources. According to Cheadle and Davis, ESC rights flow from a social democratic vision of the state, which sees the state as the sole provider of the basic services necessary to facilitate basic equality of the citizenry, which in turn, is essential to achieving equal and fair participation in democratic processes.Footnote 36
Attempts at hierarchizing rights derive from efforts to impose one philosophical tradition on the diverse corpus of international human rights law. It is now settled that all human rights are indivisible, inter-related and interdepended.Footnote 37 Arguments that ESC rights are fundamentally different from civil and political rights, or that some rights are more important than others, have been shown to be wrong.Footnote 38 The same could be said about the distinction between negative and positive duties.Footnote 39 Henry Shue famously demonstrated that civil and political rights ‘are more “positive” than they are often said to be and subsistence (ESC) rights are more “negative” than they are often said to be’.Footnote 40 Critically, he argued that every basic right entails three duties: ‘to avoid depriving’, ‘to protect from deprivation’, and ‘to aid the deprived’.Footnote 41 This classification of duties was adopted and refined by Asbjørn Eide in 1987, who refrained them as duties ‘to respect’, ‘to protect’ and ‘to fulfil’, respectively.Footnote 42 International human rights practice has now accepted these categories.Footnote 43 This means that both civil and political rights and ESC rights generate negative and positive obligations on duty bearers. This does not mean that duty bearers have the same kind of obligations.
The problem of the feasibility of corporations fulfilling the positive duties is no different from that raised in connection with states. Many claims have been made about the vagueness of such obligations and how difficult it is to enforce them against the state. There is now considerable ESC rights jurisprudence which shows that appropriate standards can be developed to guide states to fulfil their duties and for bearers of ESC rights to enforce these rights.Footnote 44 Curiously, those who oppose the idea of imposing positive obligations on corporations take it for granted that the state’s duty to protect is enforceable. This duty is positive in nature and, not long ago, it was not recognized as an enforceable obligation.Footnote 45 Although ESC rights have been developed in a state-centric fashion thus far, this does not mean that it is impossible to adapt the existing concepts to corporations or to develop entirely new ones. Already, in relation to the workplace, the family, parent–child relationship, marriage and other social institutions, for example, private individuals and institutions have already been assigned positive and negative human rights obligations most of which are socio-economic in nature.Footnote 46 The implementation of these duties does not depend on the institutional resources of the state and do not raise the legitimacy concerns alluded to earlier.
In short, no sound new arguments have been offered to justify restricting the application of human rights to corporations to civil and political rights or to negative obligations only.
IV. Critique of the Three Dichotomies
For all their merits, the UNGPs heralded two false dichotomies: the duty–responsibility distinction and, rather fortuitously, the primary–secondary duty-bearer distinction. The third dichotomy between obligations of compliance and obligations of performance is drawn in Urbaser.Footnote 47 These distinctions have a bearing on both whether corporations have ESC rights duties and, if they do, to what extent. In this section, we critique each of these dichotomies.
A. The Duty–Responsibility Distinction
As regards the first dichotomy, in defining obligations of states with regard to human rights, the UNGPs use the term ‘duty’ or ‘obligation’, while the term ‘responsibility’ is used with respect to business enterprises.Footnote 48 In his 2008 report to the HRC, John Ruggie said: ‘The [Protect, Respect and Remedy] framework rests on differentiated but complementary responsibilities. It comprises three core principles: the State duty to protect against human rights abuses by third parties, including business; the corporate responsibility to respect human rights; and the need for more effective access to remedies.’Footnote 49 In explaining the distinction between duty and responsibility, Ruggie said that the state’s duty to protect lay ‘at the very core of the international rights regime’ but the corporate responsibility to respect arose from ‘the basic expectation society has of business’.Footnote 50
In a later report, Ruggie shed further light on this distinction:
The term ‘responsibility’ to respect, rather than ‘duty’, is meant to indicate that respecting rights is not an obligation that current international human rights law generally imposes directly on companies, although elements may be reflected in domestic laws. At the international level, the corporate responsibility to respect is a standard of expected conduct acknowledged in virtually every voluntary and soft-law instrument related to corporate responsibility, and now affirmed by the Council itself.Footnote 51
It is clear that Ruggie aimed to distinguish between ‘duty’ and ‘responsibility’ based on his understanding of the state of international law as regards the obligations of states and corporations. According to his reports, international law placed a clear duty on the state to protect human rights, but corporations did not have any human rights duties, only soft-law responsibilities.
However, this distinction, which has been recycled over and over by the HRC resolutions, is based on a mistaken understanding of the legal meanings of both terms.Footnote 52 Duties arise from human rights norms protected in international law. Such norms constitute what are called ‘primary rules’ of international law. These norms lead to legal responsibility, which means that a duty bearer could be held accountable through the available means of enforcing the norms at hand. The rules governing how duty bearers are held accountable for violating primary norms are called ‘secondary rules’.
Thus, the distinction drawn by Ruggie confuses the legal meaning of the two terms. The state has duties in relation to human rights and can be held responsible for failing to perform those duties. The same can be said about corporations.Footnote 53 The terms duty and responsibility can be applied to corporations where there are norms that bind corporations and mechanisms for holding them accountable. It is thus not surprising that in describing the responsibility of corporations, the UNGPs effectively define ‘duties’, not the rules for holding corporations accountable. These two main duties presented as responsibilities are ‘to respect human rights’ and to conduct human rights due diligence to ‘identify, prevent, mitigate and account for how they address their impacts on human rights’.Footnote 54 The UNGPs define other duties related to access remedy, but even here too, the emphasis is not on the rules of attribution of responsibility and the mechanisms of enforcement, but rather on specifying what business enterprises or states should do. These, to be sure, are primary rules on which responsibility depends.
Although Ruggie’s distinction was informed by the laxity with which the Draft UN Norms on the Responsibilities of Transnational Corporations and Other Business Enterprises with Regard to Human Rights (Draft UN Norms)Footnote 55 had conflated the obligations of states with those of corporations, by consigning all duties of corporations to the status of soft-law norms, he failed to recognize the rapidly evolving nature of comparative constitutional and international law on human rights and corporations and the various ways in which domestic jurisdictions are imposing duties on corporations and holding them responsible.Footnote 56 He also ignored some of the international treaties and declarations which define human rights in a non-state-centric fashion or impose duties of individuals.Footnote 57 It can therefore be argued that the duty–responsibility distinction serves as an impediment to the evolution of international human rights law as far as the issue of business and human rights is concerned.
B. The Primary–Secondary Duty-Bearer Distinction
While John Ruggie took pains to reject the primary–secondary dichotomy used by the Draft UN Norms in defining the obligations of states and corporations,Footnote 58 and tried to avoid using these terms in the UNGPs, various HRC resolutions have promoted the use of this language.Footnote 59 These resolutions have repeatedly stressed that ‘the obligation and the primary responsibility to promote and protect human rights and fundamental freedoms lie with the State’, while emphasizing that ‘transnational corporations and other business enterprises have a responsibility to respect human rights’.Footnote 60 This suggests that corporations have secondary responsibility for human rights; and that the fulfilment of secondary duties depend on the fulfilment of primary duties. Ruggie was correct to reject this distinction. He argued: ‘The corporate responsibility to respect exists independently of State’s duties. Therefore, there is no need for the slippery distinction between “primary” State and “secondary” corporate obligations – which in any event would invite endless strategic gaming on the ground about who is responsible for what.’Footnote 61
Saying that ‘the obligation and the primary responsibility to promote, protect and fulfil human rights and fundamental freedoms lie with the State’ creates the false impression that corporations cannot or do not have corresponding or simultaneous direct duties in relation to human rights. For example, the duty of the state to protect human rights depends on the supposition that the state will enforce the prior duty of corporations to respect human rights.
Again, both the state and corporations have the duty to respect human rights. Neither can be complicit in violating human rights. The corporations’ duty to respect human rights does not depend on the implementation of the state’s duty to respect human rights. In short, neither the state nor a corporation can wait for the other to implement its human rights duties before attending to theirs. Even with regard to the duty to protect, it cannot plausibly be said that corporations or other non-state actors have to wait for the state to discharge its duty before corporations and other non-state actors carry out their duties. For example, while the state might be obliged to pass legislation regarding workplace safety, corporations might simultaneously be obliged to guarantee that the workplace is safe for workers.
In conclusion, while the primary versus secondary duty-bearer distinction seeks to emphasize the critical role of the state in the protection of human rights, to the extent that it suggests hierarchy or temporal order in the implementation of duties, it undermines the interdependence and inter-relation between duties of states and corporations which is critical to creating a culture of respect for human rights by all duty bearers concurrently and severally.
C. The Obligations of Compliance and Obligations of Performance Distinction: Urbaser v Argentina
In Urbaser, the arbitral tribunal introduced a third distinction based on the concept of positive and negative obligations in order to distinguish between the obligations of states and of corporations with regard to the right to water and sanitation. This arbitral award is critical because it deals with a private–public partnership of the kind envisaged by the SDGs. It introduces this distinction in a context that would ideally warrant imposing more positive ESC rights obligations on corporations than in normal circumstances, and yet the tribunal failed to do so. This section critically engages with the nature of this distinction and circumstances under which it was invoked.
1. Facts and Holding
Under the framework of a 1991 bilateral investment treaty (BIT), Agreement Between the Argentine Republic and the Kingdom of Spain on the Reciprocal Promotion and Protection of Investments,Footnote 62 Argentina had granted a water and sewage concession contract to Aguas Del Gran Buenos Aires SA (AGBA). Urbaser SA and Consorcio de Aguas Bilbao Bizkaia, Bilbao Biskaia Ur Partzuergoaa, the claimants in this case, were shareholders of AGBA. Soon after the concession was concluded, the claimants failed to obtain loans to finance the expansion of water and sanitation services. Following severe economic crisis experienced by Argentina between 2001 and 2002, Argentina introduced emergency measures that had a further impact on the financial position of the claimants and after several unsuccessful attempts to renegotiate the concession, the authorities of the Province of Buenos Aires terminated the concession. The claimants commenced arbitration proceedings under the BIT. In contesting the claimants’ action, Argentina also filed a counterclaim alleging that the claimants had violated the human right to water guaranteed under international human rights law by failing to fulfil their obligation to raise funds to invest in the project to provide water and sanitation services as required by the terms of the concession. In short, Argentina argued that the failure to make appropriate investments was not only a violation of concession terms, it was also a breach of the right to water and sanitation which is recognized in the International Bill of Rights.Footnote 63
The tribunal rejected the claimants’ argument that corporations could not by their very nature be subjects of international law in a state-to-state system. It held that ‘while such principle had its importance in the past, it has lost its impact and relevance in similar terms and conditions as this applies to individuals’.Footnote 64 The tribunal stressed that considering recent developments in international law, it could no longer be admitted that corporations operating internationally fell out of reach of international law. It said:
The Tribunal may mention in this respect that international law accepts corporate social responsibility as a standard of crucial importance for companies operating in the field of international commerce. This standard includes commitments to comply with human rights in the framework of those entities’ operations conducted in countries other than the country of their seat or incorporation. In light of this more recent development, it can no longer be admitted that companies operating internationally are immune from becoming subjects of international law.Footnote 65
However, noting that several initiatives have been undertaken at the international level to bring corporate conduct under human rights scrutiny, the tribunal doubted whether these initiatives were, ‘on their own, sufficient to oblige corporations to put their policies in line with human rights law’.Footnote 66 According to the tribunal, ‘[t]he focus must be, therefore, on contextualizing a corporation’s specific activities as they relate to the human right at issue in order to determine whether any international law obligations attach to the non-State individual’.Footnote 67
After considering several sources of international law including the provisions of the Universal Declaration of Human RightsFootnote 68 and the ICESCR,Footnote 69 the tribunal concluded: ‘it is therefore to be admitted that the human right for everyone’s dignity and its right for adequate housing and living conditions are complemented by an obligation on all parts [sic], public and private parties, not to engage in activity aimed at destroying such rights’.Footnote 70 Here, the tribunal can be seen to accept without qualification that the right to human dignity and the related rights to housing and living conditions impose the same obligations on public and private parties to refrain from violating these rights.
As regards the duty of an investor in a water reticulation system to provide water and sanitation services to the population, the tribunal drew a sharp distinction between the obligations of state actors and private actors. It held that the state had such an obligation, but in this case, the claimants did not have such a direct obligation,Footnote 71 drawing a distinction between obligations of compliance and obligations of performance. According to the tribunal:
The human right to water entails an obligation of compliance on the part of the State, but it does not contain an obligation for performance on part of any company providing the contractually required service. Such obligation would have to be distinct from the State’s responsibility to serve its population with drinking water and sewage services.Footnote 72
According to the tribunal, Argentina’s argument conflated the concessionaire’s contractual obligation to provide water and sanitation services under the BIT with the obligation to fulfil the human right to water. The Tribunal stated that ‘for such an obligation to exist and to become relevant in the framework of this BIT, it should either be part of another treaty or it should present a general principle of international law’.Footnote 73 According to the tribunal, the situation would be different if a negative obligation was at stake (for example, an obligation to abstain).Footnote 74 In the end, the respondent’s counterclaim based on the right to water and sanitation services was dismissed.
2. The Distinction Between Positive and Negative Obligations
Although the tribunal held, correctly, that corporations were bound by the right to water and sanitation, it drew a problematic distinction between ‘obligations of compliance’ and ‘obligations of performance’.Footnote 75 This arises from the supposed difference between positive and negative obligations. Obligations of compliance, being essentially negative, are presumed easier to meet while obligations of performance are deemed not feasible to fulfil by corporations because they require action and the deployment of resources. This distinction is too sharp to hold. Obligations of compliance can be positive in nature and hence require positive action. For example, a corporation involved in waste production might need to spend significant amounts of money to ensure that it does not pollute the environment and, hence, not violate the right to clean water, the right to food, or the right to health. To comply with such a duty, the corporation might also need to employ qualified personnel or train its existing staff. Furthermore, a human rights impact assessment might be necessary for a corporation to take steps to prevent violations of the duty to respect ESC rights.
As noted earlier, the UNGPs themselves acknowledge the link between positive and negative aspects of the concept of ‘business responsibility to respect’, but they muddle the concept of ‘respect’ in the process. This responsibility under the UNGPs includes the concept of due diligence to prevent and mitigate human rights violations and to account for them if they have already occurred. This is practically the definition of the duty to protect as it has been developed in international human rights law.Footnote 76
In drawing the distinction between obligations of compliance and obligations of performance, the tribunal relied on the distinction between the primary obligations of the state and secondary responsibility of corporations, something which we have already questioned above.Footnote 77 The tribunal held that international human rights law does not recognize positive obligations of corporations in relation to the right to water and sanitation.Footnote 78
This holding is problematic, especially in a context of privatization arrangements involving the provision of water and sanitation services, as was the case here. Corporations entering into such an arrangement know that the service to be provided relates to an important human right whose realization cannot take place without the cooperation of both the state and the private partner. The tribunal sought to separate the obligation Argentina had in relation to the right to water and sanitation arising from international human rights law (the duty to respect) from the obligations the concessionaires had arising from the concession, which it said did not flow from international law. It did so at the risk of contradicting an earlier dictum saying that an enforceable covenant between the government and the corporations to provide water and sanitation services had to be read in line with all relevant international laws.Footnote 79
There are some obvious obligations that require positive action that should be considered binding on corporations providing water services. For example, the CESCR has stated the normative content of the right to water includes the following key elements:
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• ‘The water supply for each person must be sufficient and continuous for personal and domestic uses’;Footnote 80
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• ‘The water required for each personal or domestic use must be safe, therefore free from micro-organisms, chemical substances and radiological hazards that constitute a threat to a person’s health’;Footnote 81
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• ‘Water, and adequate water facilities and services, must be within safe physical reach for all sections of the population’;Footnote 82
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• ‘Water, and water facilities and services, must be affordable for all. The direct and indirect costs and charges associated with securing water must be affordable’;Footnote 83 and
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• ‘Water and water facilities and services must be accessible to all, including the most vulnerable or marginalized sections of the population, in law and in fact, without discrimination on any of the prohibited grounds’.Footnote 84
Where water services are provided by a concessionaire as was the case with Urbaser, it cannot be said that the state could retain the duties connected to them while the concessionaire is free from such duties. For example, the obligation to provide clean and safe water, free from pollution, cannot be borne by the state in this situation. The provision of adequate services is another obligation that the concessionaire takes over by reason of the concession. This obligation is inseparably tied to water services provision. Regarding the duty to provide water to those who cannot afford it, there is a degree to which a concessionaire can be bound by aspects of this duty. It is possible that a water concession can result in higher water tariffs causing the poor to have less access to water or result in neglect of services to the poor. In this regard, the CESCR has noted:
The Committee is particularly concerned that goods and services that are necessary for the enjoyment of basic economic, social and cultural rights may become less affordable as a result of such goods and services being provided by the private sector, or that quality may be sacrificed for the sake of increasing profits. The provision by private actors of goods and services essential for the enjoyment of Covenant rights should not lead the enjoyment of Covenant rights to be made conditional on the ability to pay, which would create new forms of socioeconomic segregation.Footnote 85
This scenario could constitute a retrogressive measure which has to be justified by the state and by extension the concessionaire.
As noted earlier, it must be conceded that Argentina’s claim based on the right to water and sanitation did not expressly indicate whether it was invoking the collective or individual right of all or the affected Argentinians to water. This confusion was evident in the lack of details provided in the claim about the actual remedy that Argentina sought. It seems clear though that Argentina could have removed doubt about the obligations of the state and the concessionaire by being more explicit in the contract about which duties arising from the right to water would be borne by the state, which ones would be borne by the concessionaire, and which ones would be borne by both jointly.
Despite this caveat, the distinction between obligations of compliance and obligations of performance cannot be sustained. It builds on the old distinction between positive and negative obligations, which has been much criticized. In the context of a concession to provide water, positive duties become even more relevant. It does not make sense to say that the state retains the full range of obligations even when it is not in charge of the provision of water. In the next section, we discuss one specific barrier to the implementation of the duties arising from ESC rights by corporations.
V. Corporate Law as a Barrier to the Implementation of ESC Rights Duties by Corporations
The SDGs have once more highlighted the importance the interdependence of state and non-actor activities (including public–private partnerships) to the sustainable realization of ESC rights. The encouragement of partnerships and cooperation between the public and private sectors does not mean that corporations should betray their commercial focus. However, the pursuit of profit should not be at the risk of ESC rights. So far many corporations have not had the balance right. We suggest that one of the reasons lies in the foundational ideology underpinning corporate legislation and business arrangements called the shareholder primacy model. The shareholder primacy business ideology is not new. It has been criticized as much as it has been widely researched.Footnote 86 The model proceeds on a fundamental assumption that corporations are exclusive private properties of their incorporators, and as such the success of the company must be narrowly taken as the success of its shareholders. It is about the assemblage of rules and regulations towards a quasi-constitutional protection of investments. Furthermore, the shareholder primacy model essentially sees corporate governance from the prism of the agency problem.Footnote 87 Therefore, corporate governance is a simple agency problem. Having placed the shareholders at the centre of corporate governance discourse and in whose interests the corporations must be exclusively managed, the only relevant corporate governance question being how directors (as agents) should act in the best interests of their principals (the shareholders) or how they should exercise their corporate fiduciary duty for the benefit of shareholders.
The dominance of the shareholder primacy model has led to the ‘financialization’ of the global economy, meaning the increasing role of profits motives, financial incentives and motives, financial markets, financial actors and financial institutions in the operations of the world economies.Footnote 88 The implication of the foregoing is that this widespread ideology has succeeded in isolating corporation and their governance principles from wider societal concerns such as corporate responsibility to fulfil ESC rights. This shareholder primacy model has been supported by the nexus-of-contract theoryFootnote 89 with the assumption that the sole purpose of the company should be to maximize shareholders’ profits and that the wider stakeholder groups together with their ESC rights are only protected to the extent that the provisions of their contracts with the corporation allow.Footnote 90 Put bluntly, shareholder primacy is the main barrier to businesses behaving responsibly and fulfilling the ESC rights. Sjåfjell has noted that:
… shareholder primacy is the main barrier to sustainable business, understood as business that contributes to and does not undermine society’s possibility of achieving sustainability: of securing the social foundation for humanity now and in the future within planetary boundaries. This article positions the discussion of securing business respect for human rights in the context of achieving the contribution of business to the transition to sustainability. Achieving sustainability is intrinsic to securing human rights – and vice versa.Footnote 91
The shareholder primacy theory has fostered the entrenchment of company law principles which have in turn encouraged complex business arrangements making corporate regulation and accountability for human rights violation extremely difficult. Premised on the fact that ESC rights have been strongly tied to availability of economic resources, the financialization of the global economy underpinned by the shareholder primacy will probably ensure that ESC rights continue to play second fiddle to other rights. The shareholder primacy model is among the reasons why ESC rights remained permanently controversial in the quest for sufficiency and never seemed plausible.Footnote 92 Further acknowledging this Achilles heel to effective human rights safeguard, Moyn has noted that:
The real trouble about human rights, when historically correlated with market fundamentalism, is not that they promote it but that they are unambitious in theory and ineffectual in practice in the face of market fundamentalism’s success. … And the critical reason that human rights have been a powerless companion of market fundamentalism is that they simply have nothing to say about material inequality. Footnote 93
In light of the foregoing, the way forward for the sustainable fulfilment of the corporate responsibility for ESC rights is for states to revisit the current corporate law ideology underpinning their respective corporate legislations and business arrangements. Unless this is done, even the concept of the state’s duty to protect will remain undermined, if not rendered meaningless. It would be useful for states to enact corporate legislation which is more society-friendly and stakeholder-oriented. While a few states have made some legislative efforts to jettison the shareholder primacy model,Footnote 94 they are hardly enough to address all the relevant issues. In addition, states could stipulate human rights due diligence requirements as part of financial reporting necessary for the public trading of securities.Footnote 95
VI. Conclusion
There can be no doubt that the SDGs and ESC rights are interlinked and mutually reinforcing. On the one hand, the SDGs represent obligations of result implicit in ESC rights. On the other hand, the SDGs have placed sustainability at the centre of the realization of the goals and targets which lie at the core of ESC rights. Thus, the realization of ESC rights for the current generation must not be done at the expense of the planet. Equally important is the fact that the SDGs have placed public–private partnerships at the centre of the realization of the stipulated goals. The role of the private sector in the realization of ESC rights has long been recognized within the jurisprudence on ESC rights.
Yet, objections to recognizing the obligations of corporations in relation to human rights in general and to ESC rights in particular have continued to be made. For the most part, these objections rehash old arguments. Despite this, the UNGPs and several HRC resolutions have introduced distinctions that draw on these objections and create the impression that only states have human rights obligations, but not corporations. This article has shown that the duty–responsibility dichotomy makes no legal sense and is untenable. In particular, the UNGPs conflate the duty to respect and the duty to protect as regards corporations by presenting both as the responsibility to respect.
More recently, Urbaser introduced yet another distinction: between obligations of compliance and of performance, a replay of the distinction between positive and negative obligations. As this article has shown, the context of public–public partnerships or concessions involving corporations in the provision of basic services like water make it even more relevant for burdening corporations with duties arising from relevant ESC rights.
The current state of human rights is dynamic, not static; commodious, not stale. It is important that dichotomies that serve no plausible explanatory function are avoided or discarded.
