"The concept of a “safe harbour” and mandatory human rights due diligence" Dec 2020

Recent developments across Europe on national as well as European level propose the introduction of corporate liability for mandatory human rights and environmental due diligence (“mHREDD”) regulations. As part of these discussions, the concept of a “safe harbour” against liability has surfaced in various contexts...

There is accordingly a need to consider what is meant by a “safe harbour” in this context, and how this concept interacts with the concept of mHREDD.

In certain areas of law, the phrase “safe harbour” is used to describe specific conditions which, if met, protects an entity against liability...

This Cel-Tech Comms description of the two “types” of safe harbour is important for our purposes:

• In the first, the law expressly provides that certain conduct is permitted, or that certain conduct would exempt the actor from liability.
• In the second, the law does not require the specific conduct, despite requiring other detailed actions. It is assumed that the conduct which is not required was deliberately omitted, and a failure to undertake such conduct would therefore not result in legal liability.

An example of the first type of safe harbour [...] occurred in a European context.

The European Court of Justice in Schrems v Data Protection Commissioner found that the European Commission’s decision to create a “safe harbour” exemption was invalid, as it did not adequately protect the fundamental rights and freedoms...

The judgment, which predated the General Data Protection Regulation (GDPR), is interesting for our purposes insofar as it is an example of an express “safe harbour” provision which was declared invalid for failing to adequately protect human rights. In particular, it has some similarities with the safe harbour clause considered for introduction in the German Draft Key Points...

It is possible that a “safe harbour” provision which precludes or limits rights-holders from bringing civil claims against a company may similarly be understood to interfere with the right to an effective remedy...

[S]ome companies which have expressed support for mHREDD at the EU level, have also expressed concerns in relation to the increased legal risks that it might pose for them. It is in this context that the concept of “safe harbour” has started to be used in relation to HRDD, and more specifically to refer to the idea of a “safe space” in which companies can avoid liability.

It is important to clarify that due diligence as a standard of care would not be aimed at creating a strict liability without a defence [...] Instead, the due diligence standard of care question would focus on how the company has exercised care: whether the company has taken steps to “identify, prevent, mitigate and account for” their actual and potential human rights abuses (“Bemühungspflicht” i.e. an obligation requiring effort).30 Any duty that is defined with reference to a standard of care would by implication allow any defendant company to show, when challenged in court, that it has in fact met the legally required standard of care. It is the level and quality of the company’s efforts that would determine whether it has met the legal requirement...

[I]t is important to distinguish between the civil procedural definition of a defence which any defendant can rely on in court, and a “safe harbour” exemption which entirely rules out the ability to take action against the company in the first place...

There is accordingly a crucial difference between “due diligence as a defence” and a “safe harbour” exemption. Nevertheless, these two concepts are often used in the same sentence, or even as synonyms, by commentators in ongoing discussions...

A “tick-box” is understood to refer to a list of criteria that can be “ticked off” superficially, without further or ongoing consideration of the company’s real risks and whether they are being addressed. A “tick-box” approach implies that having undertaken this process is the end of the matter, and there is no substantive enquiry into the quality or appropriateness of the process.

In this way, a “tick-box” approach is similar to a “safe harbour” as defined in Cel-Tech where the legislator has “considered a situation and concluded that no action should lie.” ...

[A] “safe harbour” provision which relies exclusively on industry standards poses some contradictions to the concept of HRDD, particularly if it leads to a blanket exemption rather than a context-specific standard of care...

Stakeholder engagement is a core part of the HRDD in that it allows companies to identify their particular risks and monitor whether actions taken to address them are effective... The stakeholder component of a multi-stakeholder initiative cannot replace the individual company’s engagement with its own stakeholders.

An important argument against a “safe harbour” exemption which relies on external or MSI standards, is that involvement in a MSI standard does not guarantee an adequate HRDD process...

[T]he opposite is also true: the absence of participation in an industry standard does not imply that the company did not undertake adequate due diligence...

Industry standards often focus exclusively on specific human rights or on specific sectors, commodities or countries...

When understood as a “safe space” in which to “know and show” the steps that the company is taking towards HRDD, it could potentially be understood as compatible with the UNGPs. However, there are also concerning similarities between “safe harbour” exemptions and the “tick-box” approach which was rejected by the wide range of stakeholders in the EC study. The interchangeable use of “safe harbour” as synonymous with a due diligence defence is also potentially misleading. Some manifestations of the former exclude access to court remedies, whereas the latter refers to the defence that the company would have to mount in court. The language of “safe harbour” calls up a variety of meanings, often contradictory, amongst stakeholders. In order to feed coherently into the design of legislation, the terminology of “safe harbour” may need to be carefully considered, in light of alternative phrases which more clearly communicate the envisioned legal implications.