Where is the European Commission going on due diligence and access to remedy in 2020?

03/02/20 - Chris Patz & Claudia Saller, European Coalition for Corporate Justice (ECCJ)

European flag_Rock Cohen_via_flickr_licensed under CC-BY-2.0

ECCJ's Chris Patz and Claudia Saller look back on what three (now) EU Commissioners had to say on mandatory due diligence and remedy

This blog is part of a series 'Towards Mandatory Human Rights Due Diligence'.

Much has happened since October when the European Parliament exercised its prerogative to examine the incoming Commissioner-designates. During the parliamentary hearings, three (now) commissioners were questioned on their commitment to bringing forth human rights and environmental due diligence legislation with improved access to judicial remedy for victims of corporate malpractice. Heading into 2020, will they deliver?

Didier Reynders, Jutta Urpilainen and Paul Hogan were all pressed for commitments, given their respective portfolios of Justice, International Partnerships, and Trade as perhaps the most relevant portfolios to the task of ensuring EU companies do no harm at home and abroad

“Voluntary measures are good for good companies” is a common saying in the business and human rights field. We know that voluntary business take-up of human rights and environmental due diligence remains chronically low and slow.

Forced labour continues to generate $150 billion in illicit profits in the private economy per year, while rates of illegal deforestation continue to rise, as do the numbers of human rights defenders killed protecting land and the environment from corporate exploitation.

Reynders and Urpilainen were therefore being reasonable when they said that voluntary due diligence measures for companies are insufficient, and that reforms for legal obligations for business are needed. For his part, Hogan committed to work constructively with the Parliament should it decide to prioritise the issue.

The now Commissioner for Justice showed a clear willingness for reform to EU company law. He stressed the need to overcome the business modus operandi of short-term shareholder profit maximization, by introducing new obligations around climate change and human rights in the interests of other stakeholders, such as workers and affected communities.

A commitment to assess the need to adopt a legislative proposal on “Sustainable corporate governance” has since found its way into the Commission’s flagship Green New Deal, and not a moment too soon. This represents a definitive step in the right direction. However, the question has become whether this will be a simple reform to directors’ duties, or also include a legal obligation on companies to fulfill human rights and environmental due diligence, and enhance access to judicial remedy for victims.

Simple company law reforms to directors’ duties changing the purpose of the corporation are already old news in jurisdictions such as the UK (2006), India (2016) and France (2018). On their own, they come with a strong cautionary note. Such reforms typically end up paying lip service to non-shareholder constituencies (such as workers and communities affected by the company’s business operations) without providing them with any real or assertible legal rights or redress.

The theory of change behind such corporate governance reforms does not cast a real role for those most affected or harmed by corporate misconduct; a clear limitation at odds with fairness and justice which must, and can, be remedied.

Where is the remedy?

Enhancing the right to effective remedy for victims harmed by corporate misconduct is a duty the EU and all its member states signed up to in 2011 when they endorsed the United Nations Guiding Principles on Business and Human Rights.

The problem, documented by the European Parliament’s Human Rights Sub-committee in a study of 35 attempted judicial cases against EU companies, is that foreign victims of European corporate human rights violations still struggle to obtain remedy for serious bodily, proprietary and environmental harm occurring abroad.

The necessary approach - taken in the French law on the Duty of Vigilance, the Swiss Responsible Business Initiative and the German Supply Chain campaign - is to update the rules on corporate liability relating to victims at the same time as embedding international standards for corporate conduct, namely the UNGPs and OCED due diligence standards, into law. Without such measures, victims will continue to face decades-old barriers to justice.

When pressed on his commitment to improving access to judicial remedy for non-shareholder stakeholders, Reynders cited the current EU proposal for consumer collective redress. Given that victims of the most serious human rights and environmental violations by EU companies, ranging from oil spills, to factory fires, toxic waste dumping, land-grabbing, and dam breakages, are not in fact EU consumers but communities and workers in countries where production takes place, the limitations of this initiative are obvious.

Reynders’s commitment to renew efforts on the recognition of foreign judgments in civil claims, while undoubtedly positive, is similarly not one which addresses the key issue facing victims of serious corporate violations by European companies: Namely that host-state litigation in such jurisdictions can take so long and be so unreliable that it is rendered obsolete. Remedy in EU courts for harm caused by EU companies abroad must be improved.

For her part, Urplilainen acknowledged that Europe must above all else ensure that it does not cause more harm for the world’s most vulnerable when seeking to do good. Private development projects by European companies linked to human rights abuses show exactly why enhanced access to judicial remedy is needed: they leave local communities meant to be the beneficiaries of poorly planned/implemented development projects not only harmed but left to pay for the damage inflicted upon them.

With the massive increase of EU corporate development in Africa foreseen by the Commission, it becomes even more important that the right to effective remedy for foreign victims of corporate abuse by European companies is improved in tandem with overall corporate conduct.

From above and from below: Improving access to judicial remedy

“From above”, enhancing access to remedy for victims in global supply chains has long been the subject of the UN treaty negotiations. While October 2019 the EU once again attended the negotiations without a mandate, this year the EU negotiator made clear to the international forum that the EU’s incoming Commissioner for Justice had effectively committed to human rights due diligence legislation. States, victims and advocates were left wondering whether this meant with regard to enhancing the right to judicial remedy, (as the draft treaty seeks to do, by linking it to a failure to undertake human rights due diligence), and whether 2020 would see the EU constructively engage in the negotiations to do exactly that.    

“From below”, Mr Reynders’s stated commitment to better coordinate with national parliaments will hopefully take stock of the 2016 corporate accountability “green card initiative” from eight national parliaments calling for a due diligence “duty of care” for EU companies, and leading to improved access to judicial remedy. Like similar Council Conclusions from the same year, it has since been left to gather dust. Hopefully it will be dusted off soon.  

A December 2019 Finnish Presidency event, Business & Human Rights: Towards a Common Agenda also made clear that legislation on human rights and environmental due diligence with enhanced access to judicial remedy is a clear expectation of the current Commission, echoed by over 100 civil society organisations.

Whether such commitments and calls will once again be forgotten and ignored, or whether they will be heeded, is ultimately a decision about who pays for irresponsible business conduct, and with what. Here’s hoping for justice.