At the 2018 UN Forum on Business and Human Rights, the theme of the conference, “human rights due diligence”, was buzzing. As momentum gathers to push the business and human rights debate from the realm of soft guidelines and recommendations into legally binding standards, recent advances, including a new French law on the corporate duty of vigilance, illustrate how due diligence laws are a promising development.
The 2011 United Nations Guiding Principles on Business and Human Rights (UNGP) call on businesses to establish policy commitments to respect human rights, engage in meaningful due diligence to identify potential risks, and remedy any adverse human rights impacts they cause or to which they contribute.1 The UNGP furthermore call on States to take all appropriate steps to ensure that victims have access to an effective remedy for business-related human rights abuses.2 One of the most effective ways for a State to support the UNGP is through a human rights due diligence law, which creates dual benefits: on the one hand, it motivates companies to consider human rights as a matter of course before liability even arises, and on the other hand, it clarifies for victims the scope of duties owed to them by companies when violations occur.
Legally Mandated Human Rights Due Diligence
In March 2017, France enacted a corporate duty of vigilance law that establishes legally binding obligations on the largest French companies to identify and address potential human rights impacts occurring within their own businesses, as well as within subsidiary businesses and along their supply chains.3 Failure to conduct human rights due diligence, which includes establishing a vigilance plan for monitoring potential human rights impacts, reporting on the implementation of the plan, and mitigating or preventing potential risks, results in liability. Furthermore, the law creates an avenue by which affected people and communities can hold companies accountable, in particular through civil action in which compensation can be sought for damages caused by the failure to conduct comprehensive human rights due diligence. Although the law has certain limitations, including that it only applies to large companies, it is lauded as an important step forward for legal accountability when business and human rights intersect, and has inspired others to consider embedding human rights due diligence in law.
As the French corporate duty of vigilance law illustrates, human rights due diligence laws must strike a balance between flexibility—so that they are reasonably applicable to a variety of businesses operating in different industries and geographical locations—and specificity—so that failure to comply is identifiable and provable. In order to find this balance, the French law focuses on procedural rather than substantive measures, by requiring companies create context specific vigilance plans to identify and prevent potential human rights risks. By focusing on procedure rather than substance, the law grants companies the freedom to determine what steps are necessary within their specific context in order to ensure that human rights violations do not occur.
Invoking Human Rights Due Diligence as a Defense
The proliferation of human rights due diligence laws such as the French corporate duty of vigilance law will contribute significantly to shifting the human rights and business conversation from a mere ideal to a legally binding framework. When companies are legally mandated to conduct human rights due diligence, they can no longer feign ignorance of human rights abuses occurring as a result of their business activities, including those occurring along their supply chains or by their subsidiaries. Beyond that, as human rights cases against large companies become more frequent, human rights due diligence is also an important way that companies may protect themselves from liability by proving that the harm was unforeseeable and unavoidable even after a reasonable and good faith human rights due diligence process was undertaken.
In light of the flexible standards allowed under human right due diligence laws such as the French corporate duty of vigilance law, the ability to invoke it as a defense to liability raises a number of concerns. First, when there is a procedural focus, how is compliance measured? Moreover, does conducting due diligence create a rebuttable presumption of no liability?
The procedural standard means that different companies will come up with different ways to conduct human rights due diligence, resulting in challenges when courts are asked to evaluate them. In the face of many diverse due diligence plans, compliance should be evaluated based on whether the company acted in good faith in designing human rights due diligence procedures that would reasonably identify and remedy potential violations. If the court determines that a company acted in good faith with the interest of rights-holders in mind, and created a monitoring and evaluation system that would reasonably detect and remedy any potential human rights violations, then violations that occur nonetheless would fairly fall outside the scope of liability.4 By focusing on the adequacy of the procedure adopted by the company, courts are able to determine whether the goals of the law were achieved while still allowing for flexible approaches to due diligence. Although under this approach some unforeseeable human rights abuses would unfortunately fall outside the scope of liability, if a company conducts a good faith analysis of the potential risks and undertakes reasonable steps to remedy them, they will not be unduly burdened by certain unavoidable consequences of engaging in business.
By treating human rights due diligence as creating a rebuttable presumption against liability, courts would place the burden on the plaintiff to show that human rights due diligence was conducted in bad faith or was inadequate in light of a particular context. Although the plaintiff generally bears the burden of proof in civil lawsuits, in the context of human rights due diligence, the imbalance in access to information about a business’ internal procedures creates a strong argument in favor of tipping the balance toward the plaintiff, and requiring the company to prove that its human rights due diligence procedure was adequate given the circumstances. Conversely, a company that engaged in due diligence should be able to rely on its due diligence process for protection, and thus the argument that the plaintiff must demonstrate a defect in the due diligence plan is also persuasive. Ultimately, States must decide which approach to take based on which policy objectives they deem most important.
As international economic actors increasingly expand their scope and power globally, the institutional underpinnings necessary to monitor and regulate their human rights impact have not kept pace, but human rights due diligence laws hold the promise of turning ideals into legal requirements. As the French corporate duty of vigilance law shows, an effective human rights due diligence law must strike the balance between flexibility and specificity. Legally mandated human rights due diligence not only imposes binding obligation on companies, it also allows them to invoke due diligence as a defense to liability. Because of the highly subjective nature of due diligence laws focusing on procedural rather than substantive aspects, courts must take care evaluate the good faith behavior of the company in light of the specific context of their business.
- 2011 United Nations Guiding Principles on Business and Human Rights, Principle 15.
- 2011 United Nations Guiding Principles on Business and Human Rights, Principle 25.
- LOI n° 2017-399 du 27 mars 2017 relative au devoir de vigilance des sociétés mères et des entreprises donneuses d'ordre.
- Unless the State decided to pursue a strict liability regime, a proposition that is highly unlikely given the scope of the reach of human rights due diligence, which should extend to the subsidiaries and along the supply chain.