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27 Mar 2023

Diana Sanabria, NOVA BHRE

Commentary: Access to remedy under the German Act on Corporate Due Diligence in Supply Chains

The German Act on Corporate Due Diligence in Supply Chains (GSCDDA) is intended to implement the UN Guiding Principles on Business and Human Rights (UNGPs) in Germany (purpose of the GSCDDA: BT-Drs. 19/28649, p. 1). This article aims to analyse to what extent the GSCDDA responds to the third pillar of the UNGPs, namely the access to remedy for those affected by business-related human rights impacts. Since even with the best due diligence efforts, negative human rights impacts may still result from business operations, affected people should be able to seek redress. The article addresses the question of what the GSCDDA offers in these cases, including when damages occur...

The GSCDDA established three ways that have the potential to lead to remedies in the sense of the UNGPs: the obligation of taking remedial action as part of the due diligence process, the complaints procedures implemented by the enterprise, and the administrative action of the Federal Office for Economic Affairs and Export Control (BAFA), the authority that is competent for GSCDDA-issues (sec. 14 ff. GSCDDA)...

However, it is unclear if these mechanisms require remediation in line with the UNGPs – to lead to substantive outcomes to counteract or make good an adverse impact, especially when it comes to reparation.

The text of sec. 7 GSCDDA refers to the obligation of taking remedial action and it does not mention explicitly the concept of “reparation” (Wiedergutmachung)... Nevertheless, this norm could be object of different interpretations.

The systematic interpretation of the GSCDDA could offer an argument against covering reparation of damages with the concept of ending a human rights violation. The concept of reparation is explicitly mentioned in the GSCDDA as an incentive for enterprises: The intentional or negligent regulatory offence of due diligence obligations will be punished with an administrative fine of up to 8 million euros – or 2 % of the average annual turnover of the enterprise, in the case of an average annual turnover of more than 400 million euros (sec. 24 para. 2 and 3 GSCDDA). The efforts taken to detect the offence and to repair the damage are to be taken into consideration by the BAFA for the assessment of the administrative fine (sec. 24 para. 4 No. 7 GSCDDA) – the fine can be lower if the enterprise repairs the damages. This could be a potential argument against the reparation of damages as part of the obligation of taking remedial action from sec. 7 GSCDDA because the legislator clearly thought about reparation and mentioned it, so if he wanted to include it in sec. 7, he could have mentioned it explicitly there.

Since the systematic interpretation of the GSCDDA does not clarify if “reparation” is part of the obligation to take appropriate remedial action, it is necessary to consider the purpose of the provision. An interpretation based on the meaning and purpose of sec. 7 GSCDDA and its origin in international law[1] considers that effective remedies should be able to redress, insofar as possible, the harm caused by business activities...

In sum, these strong arguments in favour of “reparation” being part of the obligation to take appropriate remedial action will play an important role for affected persons and in the administrative actions taken by the BAFA. For some, the discussion may remain open...