Essay: The Duty of Vigilance for Parent and Instructing Companies

‘Le Devoir de Vigilance des sociétés mères et des entreprises donneuses d’ordre’ (The Law) ; a comprehensive title well suited to the comprehensive nature of this piece of legislation. Implemented in 2017, the Law marks 4 long years of lobbying and collaboration as it was the 2013 Rana Plaza incident – a devastating event in which a damaged eight story building housing a number of garment factories in Bangladesh collapsed, killing over 1000 people- that triggered the adoption of ‘Le Devoir de Vigilance’.
Translated in English as ‘The Duty of Vigilance for Parent and Instructing Companies’, The Law establishes a direct duty of care owed by Parent Companies for the activities of its subcontractors and suppliers and the impact this has on Human Rights and the Environment. This applies to companies incorporated or registered in France during two consecutive fiscal years that have either at least 5,000 employees themselves and through French subsidiaries or have at least 10,000 employees themselves and through subsidiaries located in France or abroad. Companies that meet these criteria are required to develop and enforce annual ‘Vigilance Plans’ outlining the ‘reasonable vigilance measures’ they will take to ‘adequately identify risks and prevent severe impacts of human rights and fundamental freedoms, risks and serious harms to health and safety and the environment’. Finally, companies are expected to make public their Vigilance Plan and report on how the plan is effectively implemented in the company’s annual management report. These have been coined ‘The Vigilance Obligations’.
What makes this law so remarkable is that this responsibility is not limited to the companies’ activities but also the activities of subsidiaries, subcontractors and suppliers. Although the essence of the Law has been said ‘to improve supply chain risk management’, it is clear upon reading the parliamentary debates and proposals it aims to do much more than that. The goal behind and driving the legislation is the hope to create ‘a Corporate World in which globalisation works for all’. The fact that this Law goes against the current widespread political approach of auto regulation and the collaborative effort of politicians, unions and NGOs to bring it into effect is what makes it truly ‘historical’. Here the French government have gone further than previous vague attempts creating clear, tangible obligations and providing those harmed by the opportunity to bring a civil/tort action and claim a remedy.
However, recent legislative developments in this sphere such as the UK Modern Slavery Act (United Kingdom) and California Transparency in Supply Chains (United States) highlight an evident trend towards reporting of efforts to respect Human Rights. Le Devoir de Vigilance is no different in that sense and for good reason. Reporting enables companies to communicate to regulators, governments and it’s ‘New Judges’ the steps they have taken to respect Human Rights and promote Corporate Responsibility. The public nature of ‘The Vigilance Obligations’ creates a true sense of accountability, forcing companies to go beyond vague statements and promises, but assuring their effective implementation. It also sets a standard of conduct for companies to be held against.
With regard to remedies, non-compliance will result in the order of an injunction to comply with the Law by the Tribunal de Grande Instance. This is likely to be accompanied by a time limit based on the number of days of non-compliance. It should be noted that ‘any party with a legitimate interest can bring forward these enforcement proceedings’. Originally, the draft Law provided civil fines of up to €10 million in the instance of non-compliance. However, due to vagueness of terms such as ‘fundamental freedoms, reasonable vigilance measures and adapted risk mitigation actions. This vagueness created a subsequent non-conformity of the Law to the principle of ‘légalité des peines’ (Article 8 DDHC), thus invalidating the civil fine.
Company liability under Le Devoir de Vigilance falls under the civil liability regime in tort which requires company to make good any loss arising from infringement of legislation. The burden of proof consequently lies on injured parties to prove they have suffered a loss, the parent company was in breach of its obligations under The Law and that the breach caused the loss. The publication of the Vigilance Plan may help claimants in proving such a breach as measures taken by the company be clearly outlined and made public, allowing them to assess whether or not measures were correctly implemented.
Hence, it is clear this Law goes further than its predecessors in striving to create a world in which ‘globalisation works for all’, seeking to ensure companies are held accountable for their actions across borders. However, the real question is whether the implications of the Law and obligations required by it are strong enough to realise this ambition.
B) A Watered Down Attempt
Despite being hailed by some as ‘a historic step forward in the corporate accountability movement’, others are less optimistic, believing it to be a ‘watered down attempt’. This is largely due to the fact that during the four-year long process of implementation, the initial proposal of a new liability regime, civil fine and reverse burden of proof became diluted due to the intense lobbying from companies. However, the ambiguities and outstanding questions The Law leaves us with cannot be so easily dismissed and require further examination.
‘Identify Risks and Severe Impacts’
Article 1 of the Law states that the vigilance plan must ‘adequately identify risks and severe impacts of Human Rights and fundamental freedoms’. How does one determine whether an impact is ‘severe’ or not? The law does not specify how and on what scale the notion of severity should be assessed. Furthermore, transcripts of parliamentary debates of the draft law do not offer further clarification. This lack of clarity has invoked a great deal of criticism. Mr Dominique Tian noted that: ‘[l]egally, this legislation opens serious breaches in legal stability, a stability which is so necessary to companies: uncertainty regarding the norms of reference on the basis of which the vigilance plan should be drafted […]”. However, in later parliamentary works, , it was considered that it was not necessary for the Conseil d’Etat to clarify the “norms of reference against which it would be possible to assess the concept of impact on human rights and fundamental freedoms, severe physical or environmental harms or health risks” due to the “sufficiently precise and comprehensive” nature of the international commitments undertaken by France.
If ‘international commitments’ are sufficient to guide us in the interpretation of this Law, The UN Guiding Principles on Human Rights and Responsible Business may offer a potential interpretation. According to these, a ‘severe impact’ is measured in accordance ‘with its scale, its scope and its irredeemable character”. “This means that its gravity and the number of individuals that are or will be affected [… ] will both be relevant considerations”, whilst irredeemability means “any limits on the ability to restore those affected to a situation at least the same as, or equivalent to, their situation before the adverse impact”.
Moreover, the absence of strict guidelines or a ‘Severe Impacts Reference List’ can be advantageous. It ensures that The Law is not limited or constrained to a set number of risks/impacts and can react to the evolving nature of these notions. The specific groups and populations requiring particular attention in terms of responsible business are continually changing in line with industry practices and market trends. Consequently, the risks and impacts surrounding such populations are also in a constant state of flux. This room for adaptation is essential in guaranteeing the long term success and relevance of The Law.
The Question of ‘Reasonable Vigilance’
Continuing with the lexical analysis of The Law, there is also the question of the meaning of ‘reasonable vigilance measures’ [vigilance raisonnable], the criteria which defines the Vigilance Plan and are used to prevent and remedy severe impacts on Human Rights and the Environment. The concept of “vigilance raisonnable” is fairly new to French Law and is not clearly defined. However, this ambiguity was discussed in Parliamentary Debates and concerns rebutted as “the word: “reasonable” [raisonnable] already allows for a limitation”. This ‘limitation’ is “the means and power [of the company targeted by The Law] to take actions”. Thus, any action that is in reasonable to take in the scope of the companies’ activity would be a ‘reasonable vigilance measure’. Thus the company’s assessment ability is key: ‘the vigilance measures must allow identification and prevention of risks and severe impacts in respect of which companies have the means and ability to act, which they must therefore act upon in priority’.
An ‘Established Commercial Relationship’
The Law also states the ambit of the Vigilance Plan must also cover the activities of the ‘companies it controls… including the activities of subcontractors or suppliers with whom they have an established commercial relationship when these activities are related to the relationship’. The complex wording of this article creates two causes for concern: the meaning of subcontractors and suppliers and what constitutes an ‘established commercial relationship’.
With regard to subcontracting and suppliers, questions have arisen concerning whether this section of The Law should be interpreted in a ‘wide economic view’ or a more ‘restricted legal view’. The rare mentions of ‘subcontracting’ in French legal literature indicate the restrictive definition given by the 1975 Law on Subcontracting. Contrary to this precise reference point, there is no such prescriptive definition in terms of ‘suppliers’. The 2004 European Directive defined ‘suppliers, entrepreneurs and service providers’ in the same way: ‘any natural or legal person…which offers on the market, respectively, the execution of works and/or work, products or services”. If this is the interpretation to be used, then The Law clearly achieves its surface aim of providing transparency across the entire supply chain. However surely it is not possible to require Parent companies to be responsible for the activities of each ‘legal person’ it obtains services from? The Constitutional Court confirmed such a broad approach, stating that “the ambit of the economic partners of the company subject to the obligation to establish a plan [..] includes all of the subcontractors and suppliers… irrespective of the nature of the activities of these companies, their workforce, their economic weight or the place of establishment of their activities”. The imposition of such an onerous duty on Parent Companies illustrates the ambitious objective of the legislation, making it far from a ‘watered down attempt’ in terms of ensuring companies are accountable for Human Rights and the Environment across all levels of its supply chain.
The article does provide some guidance in explicitly limiting the Vigilance Plan to only cover activities related to the ‘established commercial relationship’ however it does not offer any further information as to what constitutes such a ‘relationship’. Discussions concerning The Law believed previous Case Law as sufficient to guide the courts in determining whether a commercial relationship is ‘established’ or not. The 2009 Cour de Cassation case gives the definition of a ‘partnership which each party can expect to continue in the future’. However, the question in this case was clearly the future protection and obligations of the involved parties, not the protection of third parties and the environment. Reygrobellet argues that Courts and legislators should not ‘transpose existing case law solutions…formulated in different contexts’. Such a course of action could prove highly detrimental, with Companies choosing to distance themselves from subcontractors and suppliers to circumvent the law, switching between providers to ensure that no party can truly expect a relationship to continue in the future.
Preventative rather than punitive
As aforementioned, the key criticism of The Law has been its failure to reverse the burden of proof and the rejection of the civil fine. The difficulties faced by victims wishing to bring an action before the court offers companies a layer of protection, thus denoting The Law’s failure to ‘lift the corporate veil’; the goal expressed in preparatory parliament works. However, it is argued that ‘the very existence of such a possibility [that a case could be brought]… could lead companies to fear both legal and financial risks”. Although it is true that the civil liability mechanism poses a great deal of reputational risk, a risk that is becoming increasingly important and difficult to quantify in the age of social media, this does purely highlight the preventative rather than punitive potential of The Law. It is feared that without any serious financial consequences, the effectiveness of The Law could mimic that of the UK’s Modern Slavery Act (2015), with only and many companies foregoing compliance entirely. A recent 2017 study found that a mere 14% of company statements fully comply with the UK Act’s minimum requirements.
In summary, only time will tell as to the effectiveness of The Law and the extent to which it can be classed a ‘watered down attempt’ to protect Human Rights and the environment as well as create a world in which globalisation works for all. However, one thing is for certain, due to the uncertainty surrounding certain terms and definitions in The Law, courts and companies must rely on existing legislation and jurisprudence for guidance, such as the Organisation for Economic Cooperation and Development’s (OECD’s) and UN Guiding Principles. Bearing this in mind, it be unsurprising for Parliament to issue further decrees to develop The Law and fill these gaps to ultimately create a more comprehensive and effective piece of legislation.