Guest Post: On Business and Human Rights in Illegal Territorial Regimes

[Valentina Azarova is a Research Fellow in the Institute of Law, Birzeit University. She has assisted and advised in the suits filed by Al-Haq against foreign corporations for involvement in abuses in occupied Palestinian territory and is a member of the legal committee, Global Legal Action Network (GLAN)].

On 19 January 2016, Human Rights Watch (HRW) released Occupation, Inc.: How Settlement Businesses Contribute to Israel’s Violations of Palestinian Rights, a report detailing the involvement of foreign and Israeli business in settlements and their support for unlawful Israeli acts. The report is an important piece of one-stop-shop documentation that brings together the work of Who Profits and others on the involvement of foreign businesses in the occupation through financing, servicing, or trading with Israeli settlements. As HRW argues, any business operations in settlements are associated with the human rights abuses and international law violations that ensue from Israeli settlement activity. However, the legal basis of HRW’s claims merit further consideration. The report takes the position that “to comply with their own human rights responsibilities” all companies should “stop working with and in Israeli settlements.” This responsibility derives, the report asserts, from the UN Guiding Principles on Business and Human Rights, which requires businesses to mitigate their involvement in abuses. According to HRW, businesses operating in the settlements cannot “mitigate,” and therefore must pull out to comply with these obligations.

Yet states, companies and scholars have argued that the UN Guiding Principles prescribe only a duty of due diligence on businesses and states (an obligation of means, not result, to reflect on how to mitigate involvement in abuses). In practice, this duty has been understood by even the most law-abiding states as having the purpose of warning business of the risks they incur to their reputation and economic integrity, rather than as being a positive obligation to firmly prohibit all business operations. Businesses’ involvement with the system of abuses underlying and ensuing from Israeli settlement activity has prompted some state measures – such as the recommendatory government advisories that have now been issued by 18 EU Member States (see e.g. the UK advisory). But home-states have stopped short of enforcing international law-based obligations by adopting measures that could redress the immitigable business involvement in the harm resulting from operations under the auspice of Israel’s illegal legislative and administrative regime in settlements – where all legislative acts are predicated on the entitlement of Israel to exercise sovereign authority in occupied territory.

Moreover, states perceive their obligations under the business and human rights framework in international law (set out in the UN Guiding Principles and the OECD Guidelines) as voluntary and politically discretionary. Home-states legal machinery to enforce human rights and other international law obligations against business has in practice been limited to the gravest forms of complicity in abuses that could result in civil or even criminal suits. As with other transnational enforcement actions, the success of such lawsuits is hinged on foreign policy concerns and considerations of non-interference in the domestic affairs of another state, even though the state’s own corporate nationals are involved. Home-states are unlikely to crack down on their corporate nationals abroad if their involvement in violations lacks sufficient proximity to the principal perpetrator or is not sufficiently substantial. Cases that meet these criteria are allowed to go forward only when they are meticulously evidenced and deemed politically prudent. Yet the track record on lawsuits for foreign business involvement in Israeli wrongdoing is dismal: French, Canadian and Dutch courts succumbed, to different degrees, to political and procedural barriers and brought an end to several straightforward claims against their corporate nationals’ involvement in wrongdoing.

While the HRW report focuses on businesses’ human rights responsibilities in international law, it also addresses demands to third states. Yet given the nascent nature of state practice on the enforcement of business and human rights, the following three issues (or caveats) are of note in relation to the report’s claims concerning the definition of the scope of corporate wrongdoing and the prescription of legal consequences under international and domestic law for business involvement in Israeli unlawful acts in relation to the settlements:

1) The report does not capture the scope or the nature of wrongdoing by business in settlements. The report’s case studies document settlement quarries that benefit from financial incentives while Palestinian quarries are subject to “discriminatory” restrictions; a bank that finances construction and a real estate company that sells properties in settlements, which profit from land confiscation; a company that supports settlement infrastructure by collecting garbage and operating a landfill; and a textile company that contributes to labor abuses against Palestinian employees. But not only are there types of less direct foreign business involvement in settlements that are not captured by this list – e.g. investment in Israeli companies operating in settlements, or procurement of products originating from settlements – it does not address the key underlying form of wrongdoing in international law resulting from the administrative and territorial regime that Israel maintains in occupied Palestinian territory.

What unifies all companies that have any kind of activity in the settlements is that they operate under the auspices of Israel’s illegal extension of its domestic administrative and legal jurisdiction in occupied territory, which is premised on its sovereign claims and the extension of Israeli sovereignty into occupied territory.

The report notes that Israel’s actions create a duty for third states not to recognise Israel’s illegal acts as lawful, but it appears to limit this duty to the specific types of wrongdoing on which the report focuses. Yet the duty of non-recognition is instead triggered by the simple, but crucial fact that all activities in settlements are conducted under Israeli domestic jurisdiction, which Israel extended into occupied territory (legislative and executive) — a state of affairs that constitutes an illegal territorial regime no state recognises as lawful. Since the report does not address per se the illegal territorial regime maintained by Israel in occupied Palestinian territory when it defines the scope of corporate wrongdoing, the report fails to substantiate its claim that “the only way settlement businesses can avoid or mitigate contributing to abuses is by stopping to operate in settlements or engage in settlement-related commercial activity.” The report’s claim that all business should cease and desist from all settlement activities risks appearing ambitious, given the lower-level demand of to exercise due diligence in international law.

2) The report makes the unfounded, aspirational claim that the duty of non-recognition requires states to stop or prevent their corporate nationals from becoming involved in settlements. The duty of non-recognition in international law addresses states, not businesses. A state has horizontal obligations to protect individuals from private abusers under human rights law, but the reality is that the legal force of these obligations is weak: most states consider them obligations of means and not result, and only a few states have developed national action plans to implement them (see 3). Moreover, the duty of non-recognition – which states interpret, as discussed above, as a mere ‘due diligence’ responsibility of means – does not have concrete content in terms of what it requires states to do. The duty of non-recognition does not require states to prevent their businesses from conducting any activities in a conflict zone. This claim (like arguments that base the demand that states ban trade with settlements on the duty of non-recognition) is aspirational, given the minimalist view that is reflected in state practice recorded in ILA recognition/non-recognition committee reports (.pdf) and in scholarly works. The duty of non-recognition – which Talmon calls a “hollow shell,” and is a “soap bubble” for Focarelli – can mean anything and nothing.

The most effective way to regulate the conduct of businesses and make sure they are not involved in settlements is based on states’ need to ensure consistency between their domestic public policy positions on the illegality of settlements, and the implementation of their domestic laws on corporate governance (intended to protect consumers, procurers, and investors). Since the application of Israeli domestic laws in the occupied territory is considered unlawful by all states, to uphold the integrity of their domestic rule of law, state authorities must ensure that their domestic law does not give legal effect to the basis for business activities in Israeli settlements. All business activities carried out under Israel’s illegal regime by the corporate nationals of law-abiding states would entail concrete legal risks under the company’s home-state law, insofar as those activities oblige the state to give legal effect to Israel’s internationally unlawful acts as though they were lawful.

3) The report’s recommendations to states fall short of adequately addressing foreign corporate involvement in extraterritorial wrongdoing. The report calls for states, in accordance with the UN Guiding Principles, to issue “guidelines” to prevent business from conducting activities in settlements. Many states continue to consider their UNGP obligations as soft norms and recommendatory standards, and do not enforce them as exigently as domestic law (most have not even initiated the implementation of a “national action plan”). Since the government advisories issued by foreign ministries and trade departments of EU countries are non-binding recommendations (suggesting compliance with human rights), they are insufficient to trigger exigent enforcement action.

However, if the home-state line ministries were to transpose and streamline these standards through specific domestic law provisions (e.g. procurement, consumer protections, proceeds of crimes laws), they would become as enforceable as any other domestic laws regulating corporate actors to business operations in a settlement (in whatever capacity or manner) by virtue of the legal basis for any activity, transaction or title there being Israeli domestic law. Such measures, intended to guarantee the consistent application of domestic law with public policy by ensuring non-recognition of Israeli unlawful acts as lawful, first require state authorities to provide their nationals with guidance to enable their ‘informed compliance’ with specific domestic law provisions.

While the HRW report should become a reference point for its case studies of business involvement in Israeli abuses, its recommendations to third states merit further consideration. The measures that can actually trigger vigorous domestic enforcement action to ensure the protection of consumers, procurers and investors from wrongdoing, are premised on the need to uphold the integrity of the home-state’s legal order by excluding internationally unlawful acts from their internal domain. Indeed, the wave of divestment from the settlements by European private actors, following EU’s ‘differentiation’ measures, coupled with a series of government advisories waiting to be operationalized, signals that this process is already underway.