Abstract: As China’s overseas investment and business operations continue to expand, the issue of human rights risks faced by Chinese transnational corporations abroad has attracted sustained attention from society. In recent years, China has enacted a series of laws, regulations, and policies to better regulate the overseas business conduct of transnational corporations, urging them to respect the human rights of the people in host countries and fulfill their social responsibilities to achieve sustainable development. Meanwhile, China has actively participated in the formulation of the Legally Binding Instrument on Activities of Transnational Corporations and Other Business Enterprises in International Human Rights Law, providing a Chinese solution to promote global governance of transnational corporations. However, in practice, the lack of institutional mechanisms, systems, and industry rules to supervise and guide transnational enterprises in fulfilling their human rights responsibilities, as well as the limited awareness of human rights risks among these enterprises, have resulted in ongoing human rights risks in their overseas business operations, particularly regarding labor rights and environmental rights. In response, China should take its national conditions into consideration and focus on the development trends of human rights issues in the business sector at the international level. Drawing on the experiences of other countries, China should explore and establish institutional and practical measures to regulate the human rights responsibilities of transnational enterprises through legislation, administration, and judiciary actions, in order to address the risks and challenges faced by Chinese enterprises in foreign investments and contribute to the sustainable development of the world and global human rights governance.

 

Keywords: transnational corporation · extraterritorial human rights responsibility · corporate social responsibility · compliance construction · human rights due diligence

 

With the deepening of globalization, Chinese business enterprises have been carrying out economic and trade activities all over the world. China’s outward direct investment (ODI) stock amounted to $2.58 trillion by the end of 2020, ranking third in the world. A total of 28,000 Chinese investors have established 45,000 foreign direct investment enterprises in 189 countries (regions) worldwide. The total assets of overseas enterprises amount to $7.9 trillion, and the number of foreign employees reaches 2.188 million, accounting for 60.6% of all employees of overseas enterprises.¹ While having contributed to the development of China and the world economy with such a tremendous amount of outward investment, Chinese business enterprises have also caught attention due to exposure to a series of extraterritorial human rights risks.

 

Due to limited awareness of human rights risks management, there have been cases from time to time of Chinese transnational corporations adversely impacting the labor rights and environmental rights of the people in the host country, leading to a series of significant economic losses and even threatening their normal extraterritorial operations. In response, China should attach further importance to the issue of human rights responsibilities of transnational corporations, actively participate in the compilation of international rules in the human rights field, strengthen human rights compliance construction for corporations going out and urge them to respect relevant laws and regulations, as well as enhance people’s well-being while promoting local economic and social development, and promote the common development of countries around the world.

 

So far, scholars in China have conducted in-depth discussions on the issue of business and human rights from various perspectives, thereby laying a solid foundation for this paper. In terms of China’s participation in the formulation of business and human rights rules, He Zhipeng pointed out that China should put forward a Chinese solution based on its own needs and by reference to the model established by the Legally Binding Instrument on Activities of Transnational Corporations and Other Business Enterprises in International Human Rights Law (Zero Draft).² Liang Xiaohui pointed out that, while actively participating in the negotiations of international governance and treaties on business and human rights, China should also accelerate the establishment of a domestic regulatory system for human rights due diligence and a multi-party governance system.³ In terms of the implementation of rules on business and human rights, some scholars have conducted studies from the legislative and policy levels. For example, Wang Xiumei suggested that China formulate its National Action Plan on Business and Human Rights in a timely manner to encourage corporations to fulfill their social responsibilities so as to tell better “Chinese stories” to the world.⁴ Some scholars have put forward suggestions from a practical perspective on the fulfillment of human rights responsibilities by Chinese enterprises. For example, Liang Xiaohui stated that, while fulfilling its own obligations to protect human rights, China should continuously strengthen guidance and regulation of enterprises in their obligations of respecting human rights, so as to support them in meeting inward human rights challenges in China and addressing outward human rights challenges abroad in terms of concepts, regulations and practices.⁵ Zhang Wanhong stated that China could refer to the path provided in the United Nations Guiding Principles on Business and Human Rights to build a mechanism from the government, enterprise and social levels to ensure that the environmental human rights responsibilities of enterprises are fulfilled in achieving the goal of carbon peaking and carbon neutrality.⁶ Some studies have proposed solutions to address the extraterritorial human rights risks faced by Chinese enterprises. For example, Tong Lihua said that Chinese enterprises should actively strengthen human rights compliance construction in extraterritorial operations by fostering responsibility consciousness, enhancing risk awareness, conducting in-depth research and study, strengthening industry self-discipline, and improving internal management systems, so as to strengthen global competitiveness and achieve sustainable development.⁷ Juan Xin pointed out that China should supervise and strengthen the corporate responsibilities of enterprises by formulating policies and laws, and expanding publicity. Enterprises should fulfill their human rights due diligence, pay attention to communication with stakeholders in the host country, and fully respect human rights in business operations._⁸ At the same time, some scholars addressed enterprises’ human rights responsibilities from the perspective of protecting specific groups. For example, Cheng Qian emphasized the enhancement of national obligations, corporate responsibilities and rights remedies to comprehensively promote equal employment rights for people with disabilities in China.⁹ In addition, some scholars also focused on the human rights due diligence and remedy obligations of enterprises, and conducted relevant studies on the countermeasures. For example, Tang Yingxia has conducted preliminary studies of the scope of and core obligations involved in human rights due diligence legislation in various countries for the theoretical and practical circles in China to make comparisons and predict their development trends and impacts.¹⁰ Also, as Li Zhuolun proposed, China may adopt a mixed model which is mainly based on policies and supplemented by treaties and defensive laws to facilitate the fulfillment of human rights due diligence and promote the progress of human rights protection along with economic development.¹¹ Wang Huiru said that, under the state-centered implementation system of International Human Rights Law, judicial remedies for human rights abuses by transnational corporations often face many legal and practical difficulties such as jurisdiction dilemmas and corporate veil barriers. In response, China needs to re-examine and improve the existing legal systems to undertake its remedy obligation by balancing the relationship between sovereignty and human rights, and between human rights and development.¹²

 

Although the above papers have carried out further academic studies in the fields of business and human rights from different perspectives, most of them have failed to focus on the issues of China, especially the extraterritorial human rights issues of transnational corporations. They have also failed to make comprehensive and systematic analyses and investigations by fully incorporating China’s systems and practice, as well as practical issues such as human rights risks faced by Chinese enterprises in extraterritorial operations. In this context, this paper analyzes the human rights risks faced by Chinese transnational corporations and the related causes by focusing on China’s practice and from the standpoint of sorting out China’s regulations and policies for regulating the extraterritorial behaviors of transnational enterprises, as well as its participation in the compilation of relevant international laws. Based on the analysis, it has proposed to strengthen China’s governance of extraterritorial human rights responsibilities of transnational corporations through legislative, administrative and judicial channels, so as to provide intellectual support for the development of China’s foreign trade and economic cooperation and the smooth implementation of the Belt and Road Initiative.

 

 

In recent years, China has gradually increased its efforts in regulating the overseas business conduct of transnational corporations by issuing a series of regulations and policies concerning corporate social responsibility, foreign investment and environmental protection responsibility to provide guidance for Chinese transnational corporations to prevent and manage human rights risks in their extraterritorial operations and achieve sustainable development.

 

 

 

In order to help various organizations including corporations to better fulfill their social responsibilities, the International Organization for Standardization (ISO) issued the ISO 26000 Guidance on Social Responsibility (ISO 26000: 2010) in 2010, which identified organizational management, human rights, labor practices, environment, fair operation practices, consumer issues, community participation and development as the seven themes of social responsibility, and pointed out that countries should take measures to encourage various organizations to respect human rights in extraterritorial operations as well. In 2015, by reference to ISO 26000:2010, China developed the GB/T 36000-2015 Guidance on Social Responsibility in line with China’s economic, cultural and social situation. Compared with ISO 26000:2010, this Guidance has adjusted the overall structure of the standards, simplified the content, highlighted technical rules, and incorporated relevant development backgrounds and trends in China.

 

In addition, the State Council also issued a series of regulatory documents urging Chinese corporations “going out” to assume social responsibility for better development in the host country. In 2015, the State Council issued the Guiding Opinions on Promoting International Cooperation in Industrial Capacity and Equipment Manufacturing, requiring enterprises and transnational corporations to regulate their overseas business conduct, strictly abide by the laws and regulations of the host country, respect local culture, religion and customs, safeguard the legitimate rights and interests of employees, protect intellectual property rights, save resources and protect the environment, assume social responsibility, promote local economic development, and achieve mutual benefit and win-win results.¹³

 

In order for enterprises to reduce compliance risks and guide various organizations to carry out compliance management, the General Administration of Quality Supervision, Inspection and Quarantine of China and the Standardization Administration of China published the Compliance Management Systems Guidelines in December 2017. The Guidelines aim to provide guidance and suggestions for various enterprises in China to establish and operate a compliance management system, identify, analyze and evaluate compliance risks, and respond to and control related risks, so as to help enterprises to reduce the risk of legal sanctions, regulatory penalties, significant property losses and reputation damage, as well as guide them to assume social responsibility and reduce human rights violations.

 

 

In addition to the national standards and guidelines mentioned above, some government institutions have also issued regulations and regulatory documents related to extraterritorial investment by enterprises. For example, in response to the environmental issues enterprises and transnational corporations have faced in overseas investment, the Ministry of Commerce and the Ministry of Environmental Protection (renamed the Ministry of Ecology and Environment in 2018) published the Guidelines for Environmental Protection in Foreign Investment and Cooperation in February 2013, aiming to guide Chinese enterprises to actively fulfill their social responsibilities in environmental protection and promote the sustainable development of foreign investment and cooperation.¹⁴ In September 2014, the Ministry of Commerce published the Administrative Measures for Overseas Investment (2014), requiring enterprises with overseas investment to fulfill their social responsibilities, ensure environmental protection, protect labor rights and build corporate culture.¹⁵ Considering that many allegations involving the finance and banking industries are related to loans that pose human rights risks,¹⁶ the China Banking Regulatory Commission (CBRC) published the CBRC Notice on Further Strengthening the Administration of Overseas Operation Risks of Banking Financial Institutions in 2016, requiring banks to strengthen the management of overseas institutions and urging them to strictly comply with local laws and regulations, regulatory rules and environmental protection requirements.¹⁷ In January 2017, the State-owned Assets Supervision and Administration Commission of the State Council published the Measures for the Supervision and Administration of Overseas Investments by Central Enterprises, clearly stipulating that central enterprises should abide by the laws and regulations, business rules and cultural customs of China and the host country in their overseas investment, strengthen the risk management of overseas investment, and strengthen the public relations with the government, media, enterprises, communities and other social sectors of the country (region) where the investment is located, and actively undertake social responsibilities.¹⁸ In December 2017, the National Development and Reform Commission published the Administrative Measures for Overseas Investment by Enterprises, urging enterprises with overseas investment to safeguard the legitimate rights and interests of employees, respect local orders and customs, undertake social responsibilities, and pay attention to ecological environment protection.¹⁹ In the same month, government institutions including the National Development and Reform Commission, the Ministry of Commerce and the People’s Bank of China jointly published the Code of Conduct for Overseas Investment and Operations of Private-owned Enterprises. This document not only emphasizes undertaking social responsibilities in practical areas of “respecting cultural traditions,” “strengthening social communication,” and “improving information disclosure,” but also requires private-owned enterprises to strengthen talent education from the perspective of talent development, and enhance the awareness and ability of dispatched personnel to comply with laws and regulations, and prevent security risks.²⁰ To further promote the Belt and Road Initiative, government institutions including the Ministry of Commerce, the People’s Bank of China and the State-owned Assets Supervision and Administration Commission jointly published the Interim Measures for Foreign Investment Filing (Approval) and Reporting in January 2018, requiring domestic enterprises with overseas investment to submit key information of overseas investment to relevant authorities on a regular basis, including major issues in overseas investment, compliance with local laws and regulations, protection of resources and environment, protection of the legitimate rights and interests of employees, undertaking of social responsibilities and implementation of safety protection systems.²¹ In November 2018, the State-owned Assets Supervision and Administration Commission published the Guidelines for Compliance Management of Central Stateowned Enterprises (Trial), identifying safety, environmental protection and employment as key areas to be further strengthened in compliance management.²² In December, to strengthen the compliance management of enterprises in overseas operations, government institutions including the National Development and Reform Commission, the Ministry of Foreign Affairs and the Ministry of Commerce jointly published the Guide for the Compliance Management of Corporations’ Overseas Operations, requiring enterprises to fully comply with the specific requirements in areas such as labor rights protection and environmental protection in overseas project contracting and daily overseas operations, and define compliance as an important part of corporate philosophy and social responsibility.²³

 

 

 

With the growth of overseas investment of Chinese enterprises, especially the implementation of the Belt and Road Initiative, the human rights impact of Chinese enterprises is no longer limited within China, but has increasingly become a focus of attention for many countries and the international community.²⁴ The Chinese government has attached great importance to this issue. The National Human Rights Action Plan of China (2016-2020) published by the State Council Information Office on September 29, 2016, clearly stated: “Support and encourage enterprises and institutions to strengthen human rights education and training, foster a human rights culture, and consider respect and protection of human rights as an important decision-making factor in domestic and foreign investments;” “promote Chinese overseas enterprises to comply with the laws of the host country and fulfill their social responsibilities in foreign economic and trade cooperation, assistance and investment.”²⁵ It can be seen that the extraterritorial human rights responsibilities of transnational corporations have become an important part in the development of China’s human rights cause.

 

The National Human Rights Action Plan of China (2021-2025) published by the State Council Information Office on September 9, 2021 pointed out that China should participate in global human rights governance, promote the improvement of the global human rights regulation system and the building of a community with a shared future for mankind, and make China’s contributions to the global human rights cause, with particular emphasis on “promoting responsible business practices in the global supply chain. Promoting business corporations to follow the United Nations Guiding Principles on Business and Human Rights (hereafter referred to Guiding Principles) in foreign economic and trade cooperation and investment, fulfilling human rights due diligence, and undertaking the social responsibility of respecting and promoting human rights. Constructively participating in the negotiation process of UN Legal Instrument.” “Strengthening training on human rights knowledge for overseas Chinese enterprises.”²⁶ This is the first time that China has incorporated the Guiding Principles into its National Human Rights Action Plan, reflecting its emphasis on the human rights responsibilities of business enterprises and its proactive attitude toward fulfilling international obligations.

 

 

In addition to the above-mentioned human rights action plan, China has also adopted a series of macro policies on economic and trade development, which also show its emphasis on the human rights responsibilities of transnational corporations. For example, China’s National Plan for the Implementation of the 2030 Agenda for Sustainable Development adopted in 2016, in order to implement the innovative, coordinated, green, open and shared development concept and accelerate the implementation of the agenda for sustainable development, specifically pointed out under the “Goal 12: Ensure sustainable consumption and production patterns” to “encourage companies, especially large and transnational companies, to adopt sustainable practices and to integrate sustainability information into their reporting cycles to fully implement the extended producer responsibility system, encourage enterprises to fully implement sustainable development concepts in production management, strengthen green management throughout the entire product lifecycle, support enterprises in promoting green design, developing green products, and integrating sustainability information into their reporting cycles.” As a result, new concepts and new requirements of business models have been put forward for transnational corporations and other business enterprises to foster their transformation into environmentally friendly businesses and achievement of sustainable development. For another example, in 2019, the Joint Communique of the Leaders’ Round Table of the Second Belt and Road Forum for International Cooperation specially emphasized the sustainability of the Belt and Road cooperation projects to ensure they are economically viable and environmentally friendly. It called on all cooperating participants to fulfill their corporate social responsibilities, and abide by the United Nations Global Compact.²⁷ It also advocated enterprises to protect the environment and respect and protect human rights in their business operations, so as to achieve the goal of shared development and improvement of people’s livelihoods.

 

 

As a major foreign investor, China has actively participated in the compilation of various United Nations international rules on business and human rights, actively promoted global human rights governance of business enterprises, and proposed China’s solution to further promote transnational corporations to fulfill their human rights responsibilities.

 

 

The United Nations has formulated a number of voluntary norms to promote transnational corporations and other business enterprises to fulfill their human rights responsibilities, among which, the UN Global Compact and Guiding Principles play an important role. The UN Global Compact is formulated in accordance with the Universal Declaration of Human Rights, the ILO Declaration on Fundamental Principles and Rights at Work, the Rio Declaration on Environment and Development, the United Nations Convention Against Corruption and other documents, aiming to provide a universal and eternal framework for sustainable development and responsible business practices of enterprises.²⁸ The Human Rights Principles (Principles 1 and 2) of the UN Global Compact emphasize that “businesses should support and respect the protection of internationally proclaimed human rights” and “make sure that they are not complicit in human rights abuses”.²⁹

 

As the world’s second-largest economy, China’s participation in the UN Global Compact plays an important supporting role in achieving its global strategy. In this regard, the UN Global Compact believes that China is an important contributor to promoting the 2030 Agenda for Sustainable Development, and expects Chinese enterprises to play a greater role in implementing the Global Compact. At the Leaders’ Summit on June 1, 2022, the UN Global Compact released the China Strategy in particular, and committed to strengthening cooperation with China, and increasing support for the Belt and Road Initiative and the Global Development Initiative, so as to accelerate the early realization of the Sustainable Development Goals.

 

In response, Ambassador Zhang Jun, permanent representative of China to the United Nations, said: “As the world’s largest corporate sustainability initiative, the UN Global Compact should fully leverage its unique advantages, strengthen guidance for member businesses, create stronger public-private partnerships, and promote the international community to accelerate the implementation of the 2030 Agenda. We welcome the UN Global Compact and all member businesses to participate in the Global Development Initiative, provide suggestions on its implementation, and carry out practical cooperation in key areas to inject new impetus into the global development cause. China is willing to continue to strengthen exchanges and cooperation with the UN Global Compact, and looks forward to member businesses continuously increasing their ambition and action in implementing the 2030 Agenda. Let’s work together to make greater contributions to global recovery and sustainable development.”³⁰

 

The Guiding Principles adopted by the United Nations are global standards developed to prevent and address the adverse human rights impacts of business activities,³¹ which are playing an internationally recognized important role in guiding businesses to fulfill their human rights responsibilities. In this regard, China has repeatedly expressed firm support for the Guiding Principles in the Human Rights Council sessions. For example, it shared the following views at the 2009 Human Rights Council session: “The Chinese Delegation appreciates the report submitted by the Special Rapporteur on the issue of human rights and transnational corporations and other business enterprises, and fully supports his work. Under the current global financial crisis, we are facing unprecedented challenges in our continuous efforts to promote and protect citizens’ economic and social rights. This issue should be highly valued by all parties in the international community, and it also requires the international community, including both public and private sectors, to shoulder their corresponding responsibilities and work together to tide over the difficulties. China appreciates the ‘protect, respect and remedy’ framework proposed by the Special Rapporteur, and believes that all countries should carefully study this proposal. Meanwhile, cooperation between transnational corporation, home country and host country is also crucial under this framework. Only through mutual trust and cooperation can we truly achieve mutual benefit and win-win situation, and achieve the common goal of promoting and protecting human rights.”³² At the UN Human Rights Council session in 2011,China once again expressed its appreciation for the human rights “protect, respect and remedy” framework set out in the Guiding Principles aimed for joint implementation by states and businesses, and introduced in detail the measures taken by the Chinese government to promote corporate social responsibility in China.³³ As mentioned earlier, China has also incorporated the Guiding Principles into the fourth phase ofthe National Human Rights Action Plan to promote its implementation through practical actions. In this context, certain industries in China including textile, infrastructure and electronic information, have also formulated or updated their industry standards and guidelines of social responsibility according to the Guiding Principles to promote its practical implementation. 

 

 

The Legally Binding Instrument to Regulate, in International Human Rights Law, the Activities of Transnational Corporations and Other Business Enterprises (hereinafter referred to as Legal Instrument or its Revised Drafts) is a UN document that aims to promote the development of business and human rights from the perspective of national obligations. Since the publication of the Zero Draft³⁴, there have always been divergent views in the international community regarding the goals, framework and content of the Legal Instrument. Among the controversies, the Chinese Delegation has also stated its own position and proposition so as to promote the smooth progress of the compilation work.³⁵

 

 

The preamble of the Zero Draft stipulates the purpose of the Legal Instrument as follows: “The primary obligation of respecting, protecting, fulfilling and promoting human rights and fundamental freedoms lie with the State,” “all business enterprises are able to respect internationally recognized human rights, labor rights, health and safety standards, environment and climate in accordance with relevant international standards and agreements, and promote sustainable development.” In response, the Chinese Delegation, during the discussion of the Zero Draft, proposed that the Legal Instrument shall give equal treatment to human rights and development; an accountability mechanism should be guided by the principle of legality to ensure certainty and predictability of relevant rules; and maximum consensus should be sought.³⁶ Regarding the Revised Draft, the Chinese Delegation, by adhering to the aforementioned principles, clearly proposed to properly handle the relationship between the home country responsibility and host country responsibility, and suggested that the host country should assume the primary responsibility of safeguarding and promoting the human rights of its own people, rather than impose additional obligations on State Parties.³⁷ In addition, regarding the Second Revised Draft, the Chinese Delegation proposed the principle of complementarity and reiterated the principle of predictability, aiming to serve the Legal Instrument as a supplement to the national legislation of each state to show respect for the judicial sovereignty and existing legal principles and rules of each state. At the same time, it emphasized that the Legal Instrument shall clearly define the responsibilities of transnational corporations to create a stable business environment for them.³⁸

 

 

The Zero Draft stipulates that the Legal Instrument shall apply to human rights violations in the context of any business activities of a transnational character. The Revised Draft revised the scope to include all business activities, including particularly but not limited to those of a transnational character. The Second Revised Draft further revised the scope to include all business enterprises, including but not limited to transnational corporations and other business enterprises that undertake business activities of a transnational character. In response, the Chinese Delegation pointed out that the Legal Instrument authorized by Resolution 26/9 is to regulate the activities of transnational corporations and other business enterprises. It clearly goes beyond the scope of the Resolution to apply it to the business activities of all enterprises.³⁹ However, the Third Revised Draft still stipulates that the Legal Instrument shall apply to all business activities without fundamental change. 

 

For the scope of human rights, the Zero Draft stipulates that the Legal Instrument shall cover all international human rights and those rights recognized under domestic law. The Revised Draft expanded the scope to include all human rights. In response, the Chinese delegation pointed out that the definition of “all human rights” is vague, and may violate the principle of state consent. The Legal Instrument shall limit the scope of human rights to those stipulated in international treaties to which a state is a party.⁴⁰ The good news is that the Second Revised Draft revised the scope of human rights in line with China’s suggestion to cover “all internationally recognized human rights and fundamental freedoms emanating from the Universal Declaration of Human Rights, any core international human rights treaty and fundamental ILO convention to which a state is a party, and customary international law.” In response, the Chinese delegation further suggested that the Legal Instrument shall follow the principle of complementarity to focus on human rights in business activities that are most pivotal, most common, with the most adverse impact and under less protection.⁴¹

 

 

The Zero Draft initially defines the prevention obligations of the state as “State Parties shall ensure in their domestic legislation that all persons with business activities of transnational character within such State Parties’ territory or otherwise under their jurisdiction or control shall undertake due diligence obligations throughout such business activities.” Due to some state parties’ opposition to this article, the Revised Draft and the Second Revised Draft revise the prevention obligations as to regulate “business activities” and “business enterprises” respectively and remove the restricted condition of “under control.” The Third Revised Draft, based on the previous three drafts, re-defines the prevention obligations of the state as “States Parties shall regulate effectively the activities of allbusiness enterprises within their territory, jurisdiction, or otherwise under their control.” And they shall take appropriate legal and policy measures to ensure that such business enterprises respect internationally recognized human rights and prevent and mitigate human rights abuses throughout their business activities and relationships. In response, the Chinese Delegation said that this article requires state parties to regulate enterprises “under their control” without a clear definition of “control.” Such vague wording may lead to enterprises having to supervise the violation of human rights by their business partners, which will bring a huge burden and great uncertainty to the enterprises in their normal production and operation. At the same time, the introduction of concepts such as “business relationships” may violate the principle of independent corporate personality and liability, which may increase the burden on enterprises and affect the acceptance of Legal Instrument by state parties.⁴² The Chinese Delegation once again reiterated that the Legal Instrument shall not cause an unnecessary extra burden to the enterprises in their fulfillment of human rights due diligence, which is an important prerequisite for protecting the legal rights and interests of the enterprises and safeguarding their right to develop.

 

 

From the Second Revised Draft, the Legal Instrument clearly stipulates that the state parties shall hold transnational corporations and other enterprises legally liable, that is, human rights due diligence shall not automatically absolve the enterprises from liability for violations of human rights. In response, the Chinese Delegation pointed out that the Legal Instrument shall not only focus on post remedy and accountability, but also encourage enterprises to establish human rights compliance policies and fulfill human rights due diligence. If enterprises that fulfill their human rights due diligence are not exempted from liability, they will be demotivated to fulfill their responsibilities. Therefore, the Legal Instrument shall follow the principle of “exemption of liability with due diligence” as set out in the Guiding Principles.⁴³

 

 

The provisions regarding jurisdiction are all very broad in the four drafts of the Legal Instrument and tend to further broaden. The Zero Draft stipulates that the jurisdiction shall vest in the court where the human rights abuse occurred or the alleged persons are domiciled. The Revised Draft stipulates that the jurisdiction shall vest in the court where the human rights abuse occurred, the victims are domiciled, or the alleged persons are domiciled.The Second Revised Draft stipulates that the jurisdiction shall vest in the court where the human rights abuse occurred and/or produced effects, or the alleged persons are domiciled. The Third Revised Draft stipulates that the jurisdiction shall vest in the court where the human rights abuse occurred and/or produced effects, the alleged persons are domiciled, or the victim is a national of or is domiciled. In addition, the Second Revised Draft and Third Revised Draft both stipulate that courts vested with jurisdiction shall avoid imposing any legal obstacles, including the doctrine of forum non conveniens, to initiate proceedings. In response, the Chinese Delegation stated that, considering that the doctrine of forum non conveniens can avoid a de facto “universal jurisdiction” and victims’ “selection of courts” may lead to reduced fairness and justice, it is reasonable to prohibit its use to some extent.⁴⁴ However, it may constitute improper interference with the judicial sovereignty of state parties if the Legal Instrument prohibits the use of the doctrine. Therefore, the Chinese Delegation insisted at the seventh session of the working group that the Legal Instrument should remove the provision prohibiting the use of the doctrine of forum non conveniens.⁴⁵

 

 

The provisions regarding applicable laws in Zero Draft are very flexible. The Revised Draft stipulates that all matters regarding claims before the competent court shall be governed by the law of that court, including any rule of such law relating to a conflict of laws. In addition, upon the request of the victim, the claims can also be governed by the law where the human rights abuse occurred, the victim is domiciled, or the alleged person is domiciled. The Second Revised Draft, based on the Revised Draft, removes the application of law where the victim is domiciled upon the request of the victim. In response, the Chinese delegation pointed out that the applicable laws should be distinguished between civil and criminal laws, and allowing victims to freely choose the applicable laws in civil cases will bring uncertainty to enterprises and increase their burden. At the same time, including rules of the law of the competent court relating to conflict of laws will also lead to uncertainty as to applicable laws.⁴⁶ The Third Revised Draft removes the statement of including rules of the law of the competent court relating to conflict and restricts the laws the victim can choose to laws where the human rights abuse occurred or the alleged person is domiciled. 

 

The above viewpoints proposed by China during the compilation of the Legal Instrument reflect China’s adherence to respecting state sovereignty and legal order on the issue of human rights responsibilities of transnational corporations. While promoting the fulfillment of human rights responsibilities by transnational corporations, it also maintains its attitude and position of treating transnational corporations fairly in coordination with economic development.

 

 

For the past decade, though China has continuously increased its legislative norms regarding the extraterritorial human rights responsibilities of transnational corporations, and actively participated in international soft law governance and the compilation of international conventions, the practice of using existing rules to promote the fulfillment of human rights responsibilities by transnational corporations is still in the exploratory stage. In response, China needs to focus on the human rights risks faced by transnational corporations in their current extraterritorial operations and comprehensively analyze the causes.

 

 

The human rights risks of transnational corporations and other business enterprises are arising from the adverse human rights impacts of their business conduct. Human rights risks faced by Chinese transnational corporations in their operations mainly include allegations of inadequate information disclosure and environmental impact assessment, violation of land rights, impact on livelihood, violation of labor rights, and environmental issues such as pollution and environmental health threats.⁴⁷ Below we will analyze the risks faced by Chinese transnational corporations in their extraterritorial operations from the two most common human rights issues, namely, labor rights and environmental rights, for the understanding of human rights issues from a practical perspective. 

 

 

Transnational corporations have the most direct legal relationship with employees of the host country in their extraterritorial operations, hence posing the greatest risk of labor rights violation. In 2008, the UN special representative of the Secretary-General on human rights and transnational corporations and other business enterprises analyzed 320 cases of human rights abuses by businesses, and found that most cases involved allegations of labor rights, including the right to equal access to work, the right to fair and appropriate remuneration, the right to a safe working environment, and the right to rest and leisure.⁴⁸

 

In practice, due to a lack of accurate understanding of labor rights and its standards, as well as awareness of rights protection, Chinese transnational corporations have experienced a series of labor rights abuses. For example, in 2007, a collapse accident occurred at an oil sand mining site in Canada invested and constructed by China Petroleum and Chemical Corporation, resulting in the death of two Chinese workers and the injury of four others.⁴⁹ The company was fined US$1.5 million as a result. For another example, in 2017, three companies including MCC International Incorporation Ltd. were charged by the host country for suspect of illegal use of labor, wage arrears and accidental death of workers in the contracted resort project in Saipan. Not only did the companies had to undertake a series of civil liabilities according to law, but the person in charge was also held criminally responsible. Similar cases continue to happen frequently in recent years. The news of UK TikTok employees quitting jobs due to heavy overtime burden in June 2022 undoubtedly sparked a new round of social attention to the protection of extraterritorial labor rights.⁵⁰

 

In response, China, as a state party to the International Covenant on Economic, Social and Cultural Rights, carries the responsibility to adopt policies and regulations to urge transnational corporations to reduce work environment risks in their extraterritorial operations. In particular, it should supply enterprises with data, notifications and warnings to prevent and respond to accidents, conduct appropriate monitoring and supervision, and impose appropriate penalties for illegal activities.⁵¹

 

 

Environmental rights are an emerging right that has been continuously legalized and concretized in recent years⁵². Respect for and protection of environmental rights have been achieved to a certain extent through domestic laws in various countries. In International Human Rights Law, the environmental right is considered derived from the health right. It states in Article 12(2)(b) of the International Covenant on Economic, Social and Cultural Rights that the improvement of environmental hygiene is a step to achieve the full realization of the health right. In addition, with 161 votes in favor and 8 abstentions, the UN General Assembly adopted a landmark resolution on July 28, 2022, recognizing the right to a clean, healthy and sustainable environment as a human right, calling on all countries to accelerate the implementation of human rights obligations and commitments.

 

Chinese transnational corporations often suffer serious economic losses due to their impact on the local environment. For example, in July 2013, the African country Chad withdrew five exploration licenses granted to China National Petroleum Corporation due to its local crude oil leakage problem, and sued to the International Arbitration Chamber of Paris for compensation, which ultimately resulted in a compensation of $400 million.⁵⁴ For another example, in 2021, the Myanmar Myitkyo Hydropower Station project, undertaken by Yunnan International Power Investment Co., Ltd. with a total investment of $3.6 billion, was announced to be put on hold by the Myanmar government on the grounds of “damaging the environment,” causing the company to suffer huge economic losses including billions of interest payments, maintenance costs and compensation for breach of contract.⁵⁵

 

Though China has strengthened its corporate social responsibilities and enhanced the compliance management of transnational corporations through the continuous introduction of new laws and regulations, incidents that damage the environment of the host country still occur from time to time. On August 20, 2021, the governor of South Kivu Province of the Democratic Republic of the Congo suspended the operations of six Chinese companies in the Mwenga area for their illegal mining activities and adverse environmental impacts. In order to respect and support the actions of the Congolese government, China demanded the companies concerned to withdraw from the country as soon as possible. Though China has actively fulfilled its regulation on human rights obligations and related responsibilities of transnational corporations, and maintained its economic and trade cooperation relationship with Congo, the economic losses involved will not be recovered.⁵⁶

 

The above cases have shown that if transnational corporations are involved in environmental pollution even causing threats only, they will attract high attention from the host country and be imposed various forms of penalties, ultimately leading to serious economic losses. The risks of transnational corporations damaging the environment often exist in the primary and secondary sectors of the economy such as energy exploitation, printing and dyeing, and engineering construction, which involve complex disputes of interests. The Chinese government and transnational corporations should fully assess and prevent such human rights risks. In response, China should establish relevant supervision mechanisms to urge relevant enterprises to fulfill human rights due diligence, and guide transnational corporations to avoid human rights risks and achieve healthy development in their overseas business operations.

 

 

The adverse impacts on human rights of transnational corporations in their operations are fundamentally caused by them taking advantage of the political, economic, social and legal differences between the host country and the home country to capture extra profits. In addition, the lack and inadequacy of national systems and industry rules to regulate the overseas business conduct of transnational corporations, as well as the limited awareness of these enterprises, have further led to human rights risks.

 

 

Through the analysis of the systems and policies regulating the overseas business conduct of transnational corporations, as well as the human rights risks faced by these enterprises, it can be seen that the legal system concerning transnational corporations in China still needs to be improved, specifically in the following areas:

 

(a) Documents such as the GB/T 36000-2015 Guidance on Social Responsibility, Guidelines for Environmental Protection in Foreign Investment and Cooperation, and Guidelines on the Compliance Management of Enterprises in Overseas Operations, mainly address the social responsibility of enterprises rather than human rights risks. At the same time, the part of human rights responsibility in these documents is also lack of complete standards, abstract in content and vague in provisions. (b) China lacks regulation and supervision over enterprises fulfilling their human rights due diligence. Human rights due diligence is a core obligation stipulated in the Guiding Principles. It is also an important aspect for China to fulfill its human rights protection obligations and prevent the violation of the human rights of individuals by enterprises or other third parties. The lack of relevant legal systems not only leads to enterprises neglecting their human rights due diligence obligation, but also limits the government departments to specifically guide and effectively supervise the enterprises to fulfill this obligation. (c) China lacks a complete mechanism to supervise the overseas business conduct of transnational corporations. Currently, although some departments and regulations also regulate the overseas business conduct of enterprises, they are not yet specific and complete enough to form a unified and detailed guiding system. For example, the scope of business covered by relevant documents is too narrow, such as the Administrative Measures for Overseas Investment issued by the Ministry of Commerce. In terms of preliminary review, relevant regulations and documents have limited the review to overseas investments by certain entities. Not only isthe scope of projects subject to review as narrow as sensitive areas and industries, but also the review itself does not pay much attention to the human rights responsibilities of enterprises, and there are significant loopholes in terms of mandatory and feasible review. In terms of supervision in the act, there is no clear regulatory document for continuous and effective supervision. Due to the lack of regulatory documents, administrative departments can hardly perform their duties on a legal basis, and transnational corporations can hardly prevent and remedy human rights risks based on rules and regulations, which may result in significant casualness and loopholes. (d) China lacks relevant institutions and regulations regarding the state providing remedy to victims and urging enterprises to provide remedy. “No remedy, no rights.” In terms of the human rights responsibilities of transnational corporations, attention should also be paid to the remedy for victims. Providing remedy for rights is not only a human rights obligation of the state, but also a fundamental responsibility of enterprises. At present, the international society is promoting the process of countries accepting human rights appeals against extraterritorial transnational corporations, and some cutting-edge explorations are being made. In response, it needs to be gradually put on the agenda to discuss the issues regarding how China should respond to this trend with its judicial system and appropriately adjust the existing jurisdiction.

 

 

In the lack of systematic legal norms, industry rules should play a complementary role in guiding transnational corporations and other business enterprises to respect human rights and undertake social responsibilities. However, due to that the current industry standards on human rights responsibilities of business enterprises in China only exist in a few fields such as rubber, textiles, agriculture and mining, they are just playing a limited role. In addition, the promotion of human rights responsibilities within the industry has a certain degree of randomness, as it also depends, to some extent, on the development and operation of industry organizations.

 

In China, industry associations that have made achievements in promoting corporate social responsibility often work under the support and guidance of government departments or in close cooperation with government departments, which has become the norm for industry associations in China to promote corporate human rights responsibilities. Taking the textile industry for example, the China National Textile and Apparel Council, under the strong support of the Ministry of Industry and Information Technology and the Ministry of Commerce, has established a social responsibility development and promotion committee to promote and implement the CSC9000T Social Responsibility Management System for Textile and Apparel Industry.⁵⁷ Taking the rubber industry for another example, the promotion of corporate social responsibility is partly untaken by the “China International Rubber Investment and Trade Sustainability Program”⁵⁸ — the sub-program of the “China-UK Collaboration on International Forest Investment and Trade Program” jointly organized by the Ministry of Commerce, the State Forestry Administration and the Department for International Development of the United Kingdom, and undertaken and carried out by the China Chamber of Commerce of Metals, Minerals & Chemicals Importers & Exporters. However, overall, there is a general lack of conscious awareness within the domestic industry to fulfill human rights responsibilities, and many enterprises are unable to clearly recognize the importance of obligations such as human rights due diligence, and lack implementation mechanisms to ensure the fulfillment. The existing practice has shown that positive cooperation between industry organizations and the government is indeed a replicable experience, but industry organizations need to be further self-motivated. The establishment of industry standards and the implementation of human rights compliance standards require various industries to design and promote based on their own characteristics.

 

 

The obligations to respect human rights by business enterprises set out in the Guiding Principles mainly include two aspects: human rights due diligence and remedy. The obligation of human rights due diligence can be regarded as the core component of the human rights responsibilities of business enterprises.⁵⁹ This obligation refers to that business enterprises should follow relevant processes to identify, prevent and mitigate the human rights impacts of their activities or business relationships, and account for how they address these impacts.⁶⁰ This requires enterprises to not only recognize and evaluate human rights risks, but also take appropriate actions according to the results of the assessment, track the effectiveness of the actions and report relevant situations, so as to manage and eliminate adverse human rights impacts. The obligation of human rights remedy refers to that enterprises should provide remedies to the victim in the form of compensation or others. However, in practice, transnational corporations often fail to fulfill the above two obligations in their operations. The main reason is that transnational corporations in China don’t have a sound system in place to fulfill their human rights responsibilities, and most of them lack comprehensive prevention mechanisms to address human rights risks in their risk management. Their understanding and compliance management of human rights risks are far from adequate.

 

The above issues also reflect the lack of social responsibility and human rights awareness among Chinese transnational corporations. In recent years, China has gradually accepted international human rights standards, gradually improved the rule of law, and transformed corporate governance models, which has helped many business enterprises to recognize and undertake their social responsibilities, and start to strengthen their compliance management. However, they still lack a complete understanding of human rights responsibilities. Chinese enterprises are less proactive in participating in the topic of business and human rights. For example, though Chinese enterprises have made world-renowned contributions to the UN’s sustainable development goals by 2030, as of November 2021, only 585 Chinese transnational corporations have joined the UN Global Compact among the 19,000+ companies worldwide.⁶¹ And only 1,080 Chinese companies have joined the Global Compact China network.⁶² This obviously doesn’t match China’s foreign investment flow, and the size and number of Chinese enterprises’ extraterritorial operations, which partially reveals that Chinese enterprises are less involved in international human rights exchanges and cooperation, and may even be ignorant of business and human rights issues. Given the current rules of economic and trade cooperation and the transformation of business management models in the world, the lack of human rights due diligence mechanism and corresponding remedy mechanism, as well as the lack of awareness of respecting human rights, will bring severe challenges to transnational corporations in their extraterritorial operations and prevent them from healthy development. Only by further strengthening compliance management, especially human rights compliance management, and enhancing human rights risk awareness, can Chinese transnational corporations achieve sustainable development.

 

 

The analysis of the human rights risks faced by transnational corporations and the related causes indicates that China still needs to further regulate the human rights responsibilities of transnational corporations through legislative, administrative and judicial measures. In response, China should take its national conditions into consideration and focus on the development trends of human rights responsibility issues of transnational corporations at the international level, and explore the systems and practice of regulating overseas business conduct and human rights responsibilities of transnational corporations by taking appropriate reference to the experience of other countries, in order to address the risks and challenges faced by Chinese transnational corporations in foreign investments, enhance China’s sustainable development capacity, and contribute to world economic development.

 

 

Given that there are already a number of systems and norms in place in China regarding the human rights responsibilities of transnational corporations, current legislative level work should focus on improving the coordination between these systems and filling the legal gaps.

 

Since human rights due diligence is a top priority among the human rights responsibilities of transnational corporations, and some countries and regions have already completed relevant legislative work, China should also start the legislative process, especially the preliminary preparation work, related to human rights due diligence of transnational corporations based on the practical situation. As mentioned earlier, human rights due diligence is not only clearly defined in the Guiding Principles, but also an important part of the Legal Instrument. In response, the European Union and some countries have formulated special laws requiring business enterprises that meet certain standards to fulfill their human rights due diligence, eliminate and prevent domestic and extraterritorial human rights impacts caused by themselves, their subsidiaries and business partners by examining human rights risks in business relationships, information disclosure, and procedures for managing human rights risks. There are the Corporate Duty of Vigilance Act adopted by France in 2017, the California Transparency in Supply Chains Act adopted by the United States in 2010, the Supply Chain Due Diligence Act adopted by Germany in 2021, and the EU’s Draft Corporate Sustainability Due Diligence Directive in 2022. In response, China also needs to promote legislative work on the fulfillment of human rights due diligence by transnational corporations and other business enterprises to prepare for the implementation of various soft or hard laws at the international level, as well as to formulate necessary legal countermeasures to address the impact of other countries’ practices on Chinese enterprises, so as to create a better institutional environment for Chinese enterprises in their overseas investment and operations.

 

Considering the current international and national rules and practices regulating the human rights responsibilities of transnational corporations, as well as the characteristics of Chinese transnational corporations, China’s legislation on human rights due diligence of transnational corporations should focus on the following aspects. (a) The application of human rights due diligence law should carefully distinguish between large companies and small and medium-sized companies, and make reasonable standard division. If the human rights due diligence is too demanding, it will undoubtedly impose a heavy burden on small and medium-sized companies and affect the economic vitality. Therefore, the human rights due diligence law should mainly target large companies. Its scope of application should be studied and determined according to the size of the companies based on the practical situation in China. (b) It should be comprehensively considered whether the application of the human rights due diligence law should be distinguished between state-owned enterprises and privately-owned enterprises. The risks of national responsibility arising from state-owned enterprises and privately-owned enterprises are different. The former may involve direct national human rights responsibility due to state control, and state-owned enterprises obviously have better abilities to fulfill human rights due diligence than privately-owned enterprises. Therefore, higher standards of human rights due diligence which will not affect their competitiveness may be considered for state-owned enterprises to prevent them from higher human rights risks. (c) The application of the human rights due diligence law to the supply chain should be conducted in a step-by-step way. It can be seen from the current legislation in various countries that, given the relatively long supply chain in modern economies, implementing human rights due diligence throughout the entire supply chain will place an excessively heavy burden on enterprises. In addition, having enterprises take responsibility on behalf of all business partners in the supply chain not only conflicts with the principle of independent corporate liability, but also lacks grounding in practice. (d) China may consider the principle of “exemption of liability with due diligence” in the regulation of the legal responsibility of human rights due diligence. Noexemption of liability with due diligence will undoubtedly demotivate enterprises to fulfill their human rights responsibilities and make it difficult to implement human rights due diligence in practice. However, absolute exemption of liability with due diligence will also, to some extent, weaken the protection of human rights. Therefore, when making relevant laws on this issue, it shall be considered before making the corresponding provisions whether the enterprise has fully fulfilled its obligations to determine whether it is partially or completely exempted from corporate liability.

 

 

Although the transnational corporation is the main responsible party for preventing human rights risks and fulfilling human rights responsibilities in business operations, the state should also fulfill corresponding obligations to protect human rights and take appropriate measures to regulate, guide and supervise the business conduct of transnational corporations, and assist them in ensuring legal and compliant operations.

 

(a) Government departments should guide industry associations and social organizations to comprehensively establish corporate social responsibility standards, including human rights responsibilities, and provide support. In today’s international economic and trade cooperation, following the social responsibility standards of industry associations has become the threshold for enterprises to participate in international economic and trade activities. So far, there are over 400 social responsibility standards worldwide.⁶³ These standards, woven into a network of rules, are no longer spontaneous corporate rules for self-discipline, but have escalated to some kind of mandatory obligation. In order to provide better strategic support for enterprises “going out,” government departments should guide industry organizations to formulate social responsibility standards for various industries by reference to internationally accepted industry standards and based on China’s own needs and development characteristics, thereby helping enterprises to improve their business conduct.

 

Specifically, government departments should take the following measures: (1) Innovate the cooperation model between the government and industry associations, guide and assist industry associations to provide practical guidance to enterprises on the obligations and procedures to fulfill their social responsibilities, and establish a third-party evaluation mechanism through industry associations or other institutions to fully leverage the self-discipline within the industry. (2) Guide and support Chinese enterprises to incorporate social responsibility standards into their business model and corporate culture, and hence promote and establish standards for admittance into industries. (3) Attach full importance to the endogenous drive of enterprises, encourage them to carry out human rights education, and enhance their motivation and consciousness to comply with industry social responsibility standards.

 

(b) A specialized government institution responsible for human rights issues of transnational corporations and other business enterprises, together with a sound supervision mechanism, should be established. (1) It is imperative to establish a systematic and specialized government institution to regulate and supervise the business conduct of transnational corporations. As sound results can only be achieved through a coordinated and diverse mechanism in China’s regulation of transnational corporations, establishing a whole-function specialized institution to exercise various functions, or establishing a specialized leading agency to lead other functional departments to create a collaborative management model, is of great benefit. For a good example, Canada established the Office of the Extractive Sector Corporate Social Responsibility Counsellor under the Department of Foreign Affairs and International Trade, as a consulting and dispute resolution institution for the social responsibilities of mining companies.⁶⁴ The newly established Bureau of Social Responsibility by the Stateowned Assets Supervision and Administration Commission of the State Council on March 16, 2022, also released a positive signal that, China has gradually increased its attention to the social responsibilities of business enterprises, and gradually developed the leading and supporting role of administrative departments. (2) Establish an administrative mechanism of remedy. In the face of increasingly complex human rights issues in the business sector, in order to resolve conflicts and disputes, alleviate the heavy burden on the judicial system, and better prevent, reduce and solve issues of human rights abuses, China should explore a new administrative approach of remedy. And the new institution responsible for providing administrative remedy should be able to accept and investigate the allegations of human rights abuses by enterprises, and have the right to impose penalties on the abusing party and provide corresponding compensation, thereby supporting the state in better fulfilling its obligation to protect human rights. (3) Establish a sound supervision and process evaluation mechanism to strengthen the pre and in-process supervision of human rights risks. Specifically, establish and implement a regular reporting system for enterprises to urge them to regularly report their fulfillment of human rights due diligence. Authorize functional departments to review the reports, conduct spot checks on the enterprises and organize dialogues with them, so as to enhance continuous supervision over the enterprises. (4) Establish incentive and penalty mechanisms to urge enterprises to fulfill their human rights responsibilities. Specific measures include: Establish a Red and Black List System for rewards and penalties. Strengthen promotion and policy support such as investment incentives for enterprises with outstanding performance. Interview with and give warnings to enterprises that are unable to submit reports on time or receive spot checks. For enterprises that fail the report check or spot check, incentives for overseas investment may be revoked as appropriate, or even market access qualification be canceled. For enterprises maliciously conniving at human rights risks to cause human rights impacts, certain punitive damages may be imposed on such enterprises. The above functions can be carried out by a specialized institution. In the absence of such an institution, the current administrative institutions such as industry and commerce, finance and labor departments can also share corresponding responsibilities to comprehensively strengthen guidance and supervision of transnational corporations in fulfilling their human rights responsibilities, so as to better play the role of the government and strengthen the internationally leading position of Chinese transnational corporations in certain fields.

 

 

Looking through the three pillars under the framework of business and human rights constructed by the Guiding Principles, namely, the “national protection of human rights,” the “corporate respect for human rights” and the “provision of remedy,” the first two pillars have been greatly consolidated in international and national systems and practices. However, there has been no breakthrough in the fulfillment of the obligation of providing remedy to victims by states and enterprises. Especially at the judicial level, issues such as differences in legal systems among countries, litigation costs and related economic benefits are all hindering effective remedies for victims.

 

Concerning the current practice of countries exercising extraterritorial jurisdiction over human rights abuses of transnational corporations, though most countries have not yet taken positive measures, it is necessary to consider and plan for this issue in view of the progress of the compilation of the Legal Instrument and the possible practical needs in the implementation of the Belt and Road Initiative in China. (a) Regarding the doctrine of forum non conveniens, the Third Revised Draft believes that legal obstacles, including the doctrine of forum non conveniens, should be avoided,⁶⁵ however, requiring a country to give up this doctrine may involve infringement on the country’s judicial sovereignty, and may also lead to the risk of indiscriminate lawsuits through “selection of court.” Given this, for such conflicts, China may consider adjusting the application of this doctrine as appropriate when the victim is unable to obtain any judicial remedy in the host country, and flexibly and reasonably establish the jurisdiction of the domestic court over the case based on the specific situation, so as to balance national interests and the interests of the victim in obtaining remedy. (b) Offer convenience in providing judicial remedy to victims as appropriate. The independent and limited corporate liability system commonly used in most countries has, to varying degrees, hindered victims from holding the parent company of the transnational corporation accountable. Currently, there are no unified standards and practice at the international level for “uncovering the corporate veil.” In order to further enhance China’s ability to provide remedy at the judicial level, judicial authorities can, if necessary, hold the parent company of the transnational corporation accountable by interpreting relevant laws, such as the Company Law, based on specific case situations. However, considering that such breakthroughs in judicial practice may incur significant economic and judicial costs, they need to be applied with extra caution.⁶⁶ (c) Concerning the difficulty of proof, the Third Revised Draft requires that the state parties shall allow judges to reverse the burden of proof in appropriate cases, where consistent with international law and its domestic constitutional law.⁶⁷ In this regard, China’s judicial authorities can also refer to relevant international standards in future practice to make corresponding adjustments to the rule of proof, so as to promote China’s remedy obligation in regulating the human rights responsibilities of transnational corporations.

 

With the increasing scale of Chinese enterprises going out, transnational corporations are also facing more and more human rights risks in their overseas operations. Concerning this issue, China has issued a series of policies and regulations in recent years to guide and regulate business enterprises to comply with host country laws, respect human rights, effectively fulfill social responsibilities, and actively participate in international governance. In practice, due to the inadequate legal system related to the human rights responsibilities of transnational corporations, and the lack of industry rules and limited corporate human rights awareness, Chinese transnational corporations still face human rights risks particularly labor rights and environmental rights in their extraterritorial operations, which may threaten their normal operations and development. In order to create better systems for Chinese enterprises to go out, China should not only follow up on the compilation of the Legal Instrument and actively provide Chinese solutions for the global governance of transnational corporations, but also focus on the development trends at the international level and the practices of other countries, and take into consideration China’s economic development needs and the current situation of Chinese enterprises, to actively take legislative, administrative and judicial measures to effectively promote transnational corporations to fulfill their human rights responsibilities, and fully deliver its commitment to complying with the Guiding Principles as declared in its National Human Rights Action Plan, so as to demonstrate China’s responsibility for world development as a great power, and contribute to the development of a fair and reasonable international economic order and the promotion of global human rights cause.

 

(Translated by JIANG Yu)

 

* SUN Meng ( 孙萌 ), Professor, Institute for Human Rights, China University of Political Science and Law. This paper is a phased result of the Project “China’s Regulation on the Extraterritorial Human Rights Responsibilities of Transnational Corporations” undertaken by China Society for Human Rights Studies (Project No. CSHRS2020-25YB).

 

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66. Wang Zhe, “Legal Regulation of Human Rights Abuses by Transnational Corporations,” Presentday Law Science 1 (2014): 101-102. 

 

67. Legally Binding Instrument to Regulate, in International Human Rights Law, The Activities of Transnational Corporations and Other Business Enterprises, OEIGWG Third Revised Draft, Article 7.5.