Government’s Role

Towards Mandatory Corporate Human Rights Due Diligence at the EU Level?

15 July 2015

By Arnaud Poitevin

The Assemblée Nationale is the lower house of the French Parliament. Photo: Mathieu Delmestre

How a French Bill could make European business and human rights hard law

The French parliament is currently discussing a Bill that could considerably affect the global business and human rights regulatory landscape. The French Bill aims to make corporate due diligence as set out in the UN Guiding Principles on Business and Human Rights (UNGPs) mandatory by introducing sanctions and civil liability for those companies failing to take such actions.

The UNGPs establish the responsibility of all businesses to undertake human rights due diligence in their entire supply chain, including subsidiaries, subcontractors and suppliers. The French initiative would apply to parent companies, to subsidiaries over which they hold “exclusive control”, and to subcontractors and suppliers with whom they have an “established business relationship.” It is not clear yet if it includes suppliers beyond the first-tier. Reports suggest the French measures could inspire similar moves by the European Union and Swiss civil society recently launched its own popular initiative along related lines.

The French Bill‘s due diligence plan aims to prevent human rights harms, including when they occur in other countries. The proposal also covers personal injury, environmental damage, health risks and corruption but its scope is limited to around 100 to 200 of the largest companies incorporated under French law. The court could require the company to establish, publish, or account for the implementation of the plan, including through interim relief. Courts would be able to assess the implementation of the company plan, which encompasses foreign entities. If the plan is not established and enforced effectively, the company’s civil liability can be triggered. Victims could in theory be eligible to obtain reparations and courts could levy a fine of up to 10 million Euros on the grounds of a failure to enforce a company plan effectively. The burden of proof lies however solely on the claimant, which renders access to remedy more difficult. The Bill follows well known anticorruption regulations, such as the US Foreign Corrupt Practice Act or the UK Bribery Act which provide that if due diligence is performed effectively, the company can avoid or mitigate liability.

The French Bill is unique in that it is the first such legislative move in the world. Civil society has long called for such steps, but despite many attempts to seek remedies for human rights harms through national or transnational litigation, administrative, legal of civil liability, has thus far been unsuccessful. France’s lower house of Parliament, adopted the Bill last March that appears to be a quiet but genuine legal revolution. Senate approval could happen later this year, likely after summer. In the meantime, French MPs are engaging senators and Members of the European Parliament (MEPs) in support of the Bill with help from civil society organizations.

In 2012, French president Francois Hollande made a campaign promise to introduce a law to create a liability for parent companies. But it is MPs and NGOs such as Sherpa who tabled a first version of the Bill in November 2013. Ever since the project has faced many setbacks, from both the government and some business circles. The government finally supported a new draft of the Bill, which vigorously restrained its scope to companies with 5,000 employees or more. Reports claim the government is a proponent of the new draft text and plans to advocate for it at the European Union level[1] to make sure French businesses won’t be the only ones to have to bear the burden of responsible conduct.

The move could take the form of a European Parliament proposal expected in the coming months. Members of the European Parliament (MEPs) adopted in late April a motion for resolution calling for ‘a legal obligation of due diligence for EU companies outsourcing production to third countries’. A French parliament motion for European resolution for a similar reform was tabled on 13 May. On 20 May, contrary to expectations, MEPs again sent a clear signal by adopting tough provisions in the draft law addressing the issue of conflict minerals due diligence. The pressure is mounting, partly helped by advocacy work of civil society organizations and the June G7 leaders statement urging corporations to ensure sustainable supply chains, without however mentioning binding regulations. All eyes are now on developments in France.

For some, the French Bill is a direct and concrete enforcement of the UNGPs, which recommend a smart mix of compulsory and voluntary measures. Indeed, in some ways, the initiative is the first real attempt to enforce the UNGPs through hard law provisions. To be sure, some argue the Bill has not been drafted properly: France has not developed a national action plan on business and human rights, no baseline or impact assessment has been conducted and the text is criticized for being too imprecise and for not mainstreaming sufficient multistakeholder consultations. Any further developments on the adoption process of the Bill should address these concerns seriously.

Over the coming months, French officials, along with business, civil society and other actors, will continue to discuss the merits of mandatory corporate human rights due diligence. Corporations will likely remind global and public actors, including state owned entities, of their own human rights responsibilities, be it in the areas of trade, investment, development and export finance, public procurement, public private partnerships or tax. An important indicator of progress will be the extent of follow up to the G7 action plan on responsible supply chains and efforts to engage G20 nations on these issues scheduled for mid-October. The months ahead will show just how much governments see such issues as future priorities both at the European Union level and for the broader international community.

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