In Europe, human rights litigation is on the rise

0

Human rights have recently gained more attention with important legislation enacted across the European Union, and large companies have increasingly been targeted by complex litigation for alleged human rights violations. . Here are some of the top ESG developments that companies operating in the EU should know about.

In France, Duty of Vigilance and human rights litigation.

Duty of vigilance

Adopted in 2017, the law on the duty of vigilance requires companies to develop, publish and implement a “vigilance plan” to identify human rights and environmental risks resulting from their activities and to put in place measures to prevent them. It applies to companies employing more than 5,000 employees in France or more than 10,000 worldwide. Failure to comply may give rise to a judicial injunction to adopt said plan under penalty of sanction. Although not yet in force, the sanctions have recently been tightened: failing companies can be excluded from public procurement.

This unique duty of vigilance is a blatant example of France’s desire to include corporate social responsibility in positive law and to strengthen corporate responsibility on a global scale.

The first case submitted to it, which received wide media coverage, targets the French oil company Total for its activities in Uganda. According to the French NGO Sherpa, at least 44 French and international companies from all industrial sectors are on their radar for non-compliance with the law on the duty of vigilance.

Lafarge procedures

NGOs are increasingly targeting companies for their alleged involvement in serious criminal offenses.

The most publicized case is the criminal investigation against the French cement manufacturer Lafarge concerning its activities in Syria. The allegations concern the payment of 13 million euros ($ 15.3 million) to terrorist groups (including ISIS) and other intermediaries through Lafarge Cement Syria (LCS), its Syrian subsidiary . Consequently, Lafarge was initially indicted for complicity in crimes against humanity, financing of terrorism and endangering the lives of its employees.

These procedures are still ongoing and have recently hit the headlines following major procedural reversals. The latest is the Supreme Court ruling of September 7, 2021, which ruled that “knowingly paying several billion dollars to an organization whose purely criminal purpose is sufficient to establish aiding and abetting and encouragement ”.

The Supreme Court further upheld the company’s indictment on charges of terrorist financing but quashed Lafarge’s indictment of endangering the lives of its employees. Finally, the Court established that the NGO European Center for Constitutional and Human Rights (ECCHR) had standing to join the proceedings as a victim.

This decision sets a strong precedent for assessing corporate liability, including for the most serious crimes.

In Germany, human rights due diligence and first ESG surveys.

Supply Chain Due Diligence Act

Perhaps the most publicized action against ESG risks to date is that taken by Germany, which passed the Supply Chain Due Diligence Act on June 11, 2021. The law will come into force in 2023 and will cover German companies. employing at least 3,000 (1,000 employees in 2024).

The law requires companies to identify, assess and prevent supply chain risks of forced labor, child labor, discrimination, violations of freedom of association, poor employment and working conditions and environmental damage. Failure to comply with the law can result in fines of up to 2% of turnover. The sanctions also include exclusion from public procurement for up to three years.

The Act will certainly increase the exposure of businesses to litigation, financial and reputational risks associated with their business activities. However, the scope of the law means that it only applies to large German companies meeting the high labor thresholds. In addition, the obligations only apply to a company and its immediate suppliers, while indirect suppliers are only included in the case of “substantial knowledgeOf a potential violation. Considering that Germany is known for its strong Mittelstand – with most companies likely not falling within the scope – it is questionable whether the law will, in fact, lead to a significant change in company practices. .

First ESG probes

On August 26, 2021, the United States Securities and Exchange Commissions and the German financial market regulator (BaFin) opened an investigation into DWS, the asset management arm of Deutsche Bank. The polls focus on claims made by the group’s former sustainability chief, who says DWS has exaggerated the environmental or social credentials of some of its ESG-labeled investment products.

On September 5, 2021, ECCHR filed a lawsuit against major German retail brands, including Aldi, Lidl, Hugo Boss and C&A, for allegedly benefiting from forced labor by Uyghurs in China. According to ECCHR, the complaint raises whether doing business with suppliers located in the Chinese region where Uyghurs are subjected to forced labor could qualify as complicity in these international crimes.

As stated by ECCHR, “this complaint is the first in a series of complaints filed against European companies for alleged complicity in crimes against humanity”. It extends the case started in France when the ECCHR supported a similar complaint lodged by Sherpa against large distribution brands such as Uniqlo or Zara.

The EU’s steps towards greater protection of human rights.

Directive on Due Diligence and Corporate Responsibility

The trend observed in Germany and France to promote responsible (and accountable) business conduct is part of a larger initiative. The current discussions on the European directive on due diligence and corporate responsibility confirm this dynamic.

If introduced, the directive would oblige companies to exercise due diligence regarding the negative impact of their activities on human rights, the environment and good governance.

The intended scope of the directive – covering a company’s supply chain, including suppliers, customers and end users – would have a significant impact on companies doing business in the EU.

The EU’s global human rights sanctions regime

The EU’s advance in the protection of human rights does not rest solely on improving its legislative framework.

On December 7, 2020, the European Union adopted a global sanctions regime against human rights violations committed around the world. This new sanctions regime, directly inspired by the American Global Magnitsky Act, imposes international financial sanctions and travel bans on perpetrators of human rights violations. It further underlines that the protection of human rights is a cornerstone of the EU’s external action and reflects the EU’s determination to strengthen its role in the fight against human rights violations. in the world.

In conclusion, cBusinesses should be aware that human rights protection and ESG due diligence are gaining ground in the EU. The result is a rapidly evolving regulatory framework that strengthens civil society oversight and increases the risk of litigation. This can be an opportunity to review existing policies and procedures, implement an effective due diligence strategy and map the impact of companies on human rights and ESG factors, especially for exposed sectors. .

Share.

About Author

Comments are closed.