A French Revolution in the World of Human Rights Law
Over the last several years, several countries have taken steps to encourage and, to a lesser degree, compel businesses to deal with human rights and environmental issues within their own organizations and in their supply chains. The UK’s Modern Slavery Act 2015 is a good example, requiring companies to report their efforts to prevent slavery and human rights trafficking in their supply chains. What started out as non-binding guidance from the United Nations has been made into directly effective “hard law” in an increasing number of countries. The most recent example comes from France, which has imposed on large French companies a new “duty of vigilance” with significant fines for noncompliance. While the law will not go into effect until after review by the country’s Constitutional Council, the new measure signals that the movement toward codification of principles derived from non-binding international guidance is not stopping anytime soon and that enforcement provisions are beginning to get serious.
France’s “duty of vigilance” essentially adopts the principles of the UN Guidance Principles on Business and Human Rights that advises companies to implement due diligence plans that track, report, and take affirmative steps to mitigate and prevent human rights and environmental violations. But the French law is not limited to describing or recommending best practices. It has some real teeth. Companies can be fined up to 10 million Euros if they fail to publish and implement a vigilance plan. And if the company is sued for damages resulting from a failure to establish or follow a vigilance plan, the aggrieved party can seek compensation, and judges are empowered to levy a 30 million Euro fine on top of any such compensation. To maintain compliance, companies covered by the new law will be required to: (i) identify and analyze risks; (ii) establish procedures, including with respect to the company’s subsidiaries and suppliers with whom the company has an established relationship; (iii) take action to mitigate and prevent human rights and environmental violations identified in the plan; (iv) develop a way to collect information about new or developing risks; and (v) set up a mechanism by which the company can monitor progress on planned actions. The law applies only to the largest companies operating in France (those headquartered in France with 5,000 or more employees and those with headquarters outside of France with 10,000 or more employees).
The fact that this law has serious financial penalties reflects a marked departure from other legislative efforts in this area. While other countries have previously enacted laws focused on transparency and reporting obligations—such as the UK’s Modern Slavery Act—this new French law reflects a wholesale adoption of a portion of UN guidance, signaling that the trend of making “soft” law “harder” is only just beginning. Other countries are considering similar measures. For example, Switzerland is considering adopting similar requirements to the French vigilance obligation, and that measure could see a popular vote if approved by the Swiss government. We may continue to see similar legislation in other countries. Accordingly, companies should continue to evaluate their potential coverage under the French law. But even companies that are not directly subject to this new law should consider what impact it may have on their supply chains and should remember that this is unlikely to be the last word on the issue.
This information is provided by Vinson & Elkins LLP for educational and informational purposes only and is not intended, nor should it be construed, as legal advice.