Recent developments in European Business and Human Rights (BHR) Litigation
21 April 2022
Key takeaways from our latest cross-border BHR litigation webinar
Our European BHR litigation specialists recently hosted a cross-border webinar on the emerging BHR legal frameworks across Europe, with a particular focus on the associated enforcement and liability regimes and recent BHR case law. Below are a few key takeaways from the webinar:
- As evidenced by the French Duty of Vigilance Law, the German Supply Chain Act and the European Commission’s proposal for a Corporate Sustainability Due Diligence Directive (the CSDD), European countries are currently experiencing a rapid development in legislation establishing corporate due diligence obligations and corporate accountability mechanisms for human rights violations.
- The enforcement and liability regimes underpinning these legal frameworks vary. Some legislators have chosen purely public enforcement regimes, allowing for injunctions and administrative or criminal fines in the case of non-compliance, some legislators have chosen private enforcement mechanisms, and other legislators have chosen hybrid regimes.
- The French Duty of Vigilance Law establishes a purely private enforcement regime. The French Duty of Vigilance Law does not provide for any administrative or criminal sanctions in the case of non-compliance, but allows for the possibility of taking preventive recourse against a company as well as civil liability claims.
- As of 1 January 2023, the German Supply Chain Act will require companies with more than 3,000 employees to have implemented a comprehensive supply chain compliance management system. The German Supply Chain Act will enable the competent authority to impose very significant administrative fines (of up to 2% of a company’s annual worldwide turnover). It also provides for the possibility of representative actions (prozessstandschaft) by German trade unions and NGOs. Therefore, it is crucial that in-scope companies in Germany make the necessary arrangements to ensure that they comply with these new legal obligations.
- Preventing adverse human rights and environmental impacts across corporate value chains is also high on the European Commission’s agenda. This is reflected in the proposed CSDD, which requires that the EU Member States ensure that the civil liability principles set out in the CSDD are considered as overriding mandatory provisions. In addition, the CSDD also provides for a broad range of public enforcement mechanisms. The Member States’ supervisory authorities will have extensive powers under the CSDD, including the power to carry out investigations, order remedial action and impose administrative fines based on a company’s annual turnover.
- In April 2021, Belgian legislators introduced a proposal for a Duty of Vigilance law that provides for a hybrid enforcement regime. The Belgian legislative proposal envisages an extensive liability regime for breaching the duty of vigilance, which ranges from special civil liability actions to collective redress actions, and from injunctions to exclusion from participation in public procurement procedures.
- There has been a noticeable increase in BHR-related tort claims over the past five years. Recent developments show that banks and corporations with activities abroad are also increasingly subject to BHR-related criminal investigations, including for alleged terrorism financing, complicity in crimes against humanity and war crimes.
- This may indicate a change of paradigm in the classification of corporate accountability: the Belgian legislators’ proposal to classify the non-compliance of a companies’ duty of vigilance as a criminal act exemplifies this change. This shift towards the criminal treatment of companies that commit human rights violations has serious consequences.
- The ongoing war in Ukraine may reinforce this pattern and lead to further legal proceedings against companies with ties to Russia across various European jurisdictions.
- In light of these developments, it is essential that companies carry out continuous and effective human rights due diligence across their entire value chain, particularly where the company in question has business partners operating in high-risk areas or war zones, as this will help to mitigate exposure to liability risks and reputational damage.
For more information on the webinar or if you would like to know how these legal frameworks establishing corporate accountability for human rights violations apply and might affect your company, please contact: