01 Sep 2021

The legal framework on business and human rights in Europe has evolved significantly in recent years. The region leads the way in terms of existing and emerging legislation on human rights due diligence, as well as reporting obligations which extend to the full range of internationally respected human rights. Further key legal developments are expected in 2021. We set out below a summary of notable consultations and legislative reviews at the EU level and in a number of countries, before addressing in more detail developments in four jurisdictions: France, Germany, the Netherlands and the UK.

2021 is likely to see the EU take decisive steps towards significant reform in terms of corporate human rights obligations. Most notably, as we have previously reported (see our previous article), the European Commission (Commission) is expected to promulgate legislation mandating human rights and environmental due diligence in 2021. This follows announcements by the European Commissioner for Justice, Didier Reynders, first in April 2020 and then again in October, that such legislation will be developed by early next year. Following a public consultation which is due to close on 8 February, this new legislation should be presented during the second semester of 2021. Based on Commissioner Reynders’ comments to date, the law is likely to be cross-sectoral and could provide for both civil and criminal liability.

In the meantime, in September 2020, the Committee on Legal Affairs of the European Parliament (JURI) published a draft report recommending that the Commission develop legislation on corporate due diligence and corporate accountability “without undue delay”. The draft report includes a comprehensive proposal of a directive which would require businesses to conduct human rights and environmental due diligence in their operations and value chains. The proposal, which will be voted on in January and tabled to the plenary of the European Parliament, may serve as a blue print for the legislation to be put forward by the Commission. Interestingly, the JURI proposal anticipates that the law would apply to businesses established outside the EU which sell goods or services in the internal market.

In addition, in December 2020, the Council asked the Commission to launch an EU Action Plan focusing on shaping global supply chains sustainably, promoting human rights, social and environmental due diligence standards and transparency by 2021. The Council also called on Member States to step up their efforts to effectively implement the UN Guiding Principles on Business and Human Rights, including through new or updated National Action Plans containing a mix of voluntary and mandatory measures.

As for reporting obligations, the Commission is in the process of revising directive 2014/95/EU of 22 October 2014 on non-financial reporting by large companies. This directive currently requires companies to publish a non-financial statement addressing the impact of their activities with respect to environmental, social, human rights and anti-corruption issues. In doing so, the Commission aims to increase access to information for civil society and investors while encouraging companies to develop a more responsible approach to business. The Commission is responsible for adopting delegated acts which establish the list of environmentally sustainable activities by defining technical screening criteria for each of the six environmental objectives: climate change mitigation, climate change adaptation, water, circular economy, pollution control and biodiversity.

Finally, as part of the EU objective to become the first climate-neutral continent by 2050, the EU has adopted the Taxonomy Regulation 2020/852 of 18 June 2020 that will allow for an EU-wide classification system for environmentally sustainable economic activities. The EU Taxonomy is one of the most significant developments in sustainable finance and will have wide ranging implications for Member States, companies, investors and issuers working in the EU and beyond. Relevant market actors would have to start complying with these requirements from December 2021, and the first set of so-called delegated acts will be released by the end of December 2020. Perhaps of most interest from a human rights perspective is the clarification in the Taxonomy Regulation that, in order to qualify as “environmentally sustainable”, economic activities need to comply with the minimum standards of the OECD Guidelines for Multinational Enterprises and the UN Guiding Principles on Business and Human Rights, including the principles and rights set out in the eight fundamental conventions identified in the Declaration of the International Labour Organisation on Fundamental Principles and Rights at Work and the International Bill of Human Rights (See Article 3 point (c) and Article 18 paragraph 1).

On the national level, in addition to the country developments detailed below, there is a clear trend towards business and human rights related legislative proposals. In Norway, the Business Minister recently announced that the government is working on a law against modern slavery using the UK Modern Slavery Act as a model. The Finnish government committed to a mandatory human rights due diligence law in 2019, while in 2020 a draft bill was submitted to the Austrian parliament regarding corporate social responsibility in the garment industry. In November 2020, a referendum in Switzerland resulted in the rejection of a popular initiative to introduce a binding human rights duty of care for all Swiss companies, though a majority of voters supported the law. (A majority of Switzerland's 26 cantons rejected the initiative, though 50.7% of voters were in favour). A counter-project will nonetheless be implemented, providing for reporting obligations for certain companies in regard to human rights, environment, social issues and corruption (similar to the EU non-financial reporting directive referenced above) as well as a special duty of care with regard to minerals from conflict zones and child labour

Legislation and cases

Significant developments occurred in France this year with regard to business and human rights regulation.

Indeed, three years after its adoption, the French Minister of Economic and Financial Affairs published in January 2020 the first study on the implementation of the French Law n° 2017-399, 27 March 2017, related to the duty of vigilance for parent and instructing companies (Duty of Vigilance Law). As a reminder, according to this law, parent and instructing companies must identify and prevent severe impacts on human rights and fundamental freedoms, health, safety and on the environment resulting from their activities as well as those of their controlled companies, subcontractors and suppliers. In addition, companies are required to publish their vigilance plan and to report how they effectively implement it in their management report. The vigilance plan must feature five measures:

  1. a risk mapping intended for the identification, analysis and prioritization of the risks;
  2. processes for the regular assessment of the situation of subsidiaries, subcontractors or suppliers with whom there is an established commercial relationship as identified by the risk mapping;
  3. tailored actions to mitigate risks or prevent severe impacts;
  4. an alert mechanism on the existence or materialization of these risks, established in cooperation with trade unions and;
  5. a system monitoring implementation measures and evaluating their effectiveness.

In case of failure to comply with the law, any interested person may give formal notice to the company to adopt and publish a vigilance plan and may file an injunction before the competent court for this purpose. In addition, in the event of fault resulting from failure to comply with these provisions, the company may be held liable under tort law.

We observed meaningful case law developments regarding the implementation of this Duty of Vigilance Law and the first decisions have been delivered earlier in 2020. The Nanterre Judicial Court (Tribunal judiciaire) first declared itself incompetent in favor of the Commercial Court (Tribunal de commerce)[1], in a ruling confirmed by the Versailles Court of Appeal (December 10th, 2020 RG n°20/01692). However, the Nanterre Judicial Court delivered a contrary decision in February 2021, declaring itself competent to hear the duty of vigilance case as the claimants benefit from on option between the judicial and the commercial courts (February 11th, 2021, RG n° 20/00915). If these decisions do not appreciate the company’s effective implementation of the Duty of Vigilance Law, they still are decisive as it will determine which court ultimately has jurisdiction to judge the quality and effectiveness of a vigilance plan.

Furthermore, the Duty of Vigilance Law continues to be actively leveraged by different stakeholders, such as NGOs, labor unions and local authorities. To date, seven formal notices have been addressed to companies urging them to comply with the Duty of Vigilance Law. Two of these formal notices were issued in 2020 : (i) Suez received a formal notice in July 2020 from several Chilean and French NGOs alleging that the company did not take the appropriate measures to prevent risks and failures resulting to violations to the right to live in a healthy environment in regard to water supply in Chile; and (ii) Casino received a formal notice to comply with the Duty of Vigilance Law in September 2020 in which several US, Brazilian and French NGOs urged the company to adopt a new vigilance plan to appropriately address the risks of deforestation generated by Brazilian and Colombian farms supplying the company with meat products.

In total, five of the seven formal notices raised legal challenges before the courts. For instance, several foreign NGOs seized the Judicial Court in October 2020 against EDF (Electricité de France) in relation to the inadequacy of the company’s vigilance plan regarding the rights of indigenous populations to a free, prior and informed consent in connection with a wind farm construction project in Mexico. In March 2021, representatives of the indigenous peoples of the Brazilian and Colombian Amazon, as well as French and American non-governmental organizations (NGOs) also seized the Judicial Court against Casino following the above-mentioned formal notice.

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Business practices

The obligations imposed by the Duty of Vigilance Law have generally led to an improvement in human rights reporting by companies, that mostly strengthened their human rights policies. The published vigilance plans demonstrate a better understanding of the requirements of the Duty of Vigilance Law and companies are starting to develop specific indicators for their vigilance plans. However, four years after the adoption of the Duty of Vigilance Law, several NGOs point out companies’ failure in properly identifying and assessing their human rights risks in a specific risk mapping as well as implementing precise and operational measures. In addition, stakeholders’ involvement in the design of vigilance plans seems to still be lacking. At a time when the French Duty of Vigilance Law might inspire the future European legislation, voices are being raised to improve its effectiveness by broadening its scope of application or creating a public administration responsible for its effective implementation.

What do you predict for 2021?

We anticipate further clarity relating to the scope and the effective implementation of vigilance plans due to the numerous court decisions expected on the Duty of Vigilance Law, as legal safety is much expected by companies and their stakeholders. In addition, we also expect greater involvement from companies and investors due to the awaited evolutions of the European legal framework.

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Christian Dargham
+33 1 56 59 52 92

Solene Sfoggia
+33 1 56 59 52 89