The rules will form part of the EU’s wider human rights, environment and sustainability strategy (including the European Green Deal) and its response to the COVID-19 emergency. The long-awaited announcement was widely welcomed by stakeholders, and Germany (which will hold the next Presidency of the Council of the European Union) has indicated its approval of the proposals.
The EU Commissioner for Justice, Didier Reynders, outlined the initiative, during a webinar hosted by the European Parliament Working Group on Responsible Business Conduct. Plans for the introduction of mandatory rules have been given impetus by the publication of a January 2020 study commissioned by the European Commission, which found that existing, primarily voluntary, measures have not satisfactorily addressed human rights violations and environmental harm arising in supply chains.
Background
Guidelines for addressing human rights abuses in supply chains were first set out in the United Nations’ Guiding Principles on Business and Human Rights (the UNGPs). Several national governments have since implemented the UNGPs through National Action Plans (NAPs).
The UK was the first to publish a NAP in 2013 and has incorporated human rights due diligence into legislation, such as the Modern Slavery Act 2015, which requires businesses to report annually on the steps they have taken to ensure that slavery and human trafficking are not present in their business and supply chains. In 2017, France introduced the Law on the Corporate Duty of Vigilance, which requires certain businesses to undertake human rights and environmental due diligence.
The Commission’s proposals
The Commission’s announcement indicates an intention to strengthen the EU-level implementation of the UNGPs and harmonise approaches to human rights and environmental due diligence across member states. In particular, Commissioner Reynders made it clear that the new rules will be mandatory and enforceable through sanctions for non-compliance.
It is also possible that the new rules will provide remedies for victims of non-compliance, raising the prospect of private law claims against businesses that breach the rules. This would be a welcome development for claimants: under the existing framework in England and Wales there are challenges in advancing private law claims relating to human rights and environmental considerations, as such claims must be brought under broader statutory rights or the common law, in reference to existing corporate governance legislation, which, together, provide limited scope for remedying breaches of this nature.
The Commission has already begun consultations on the rules, and further detail is expected later in the year, with legislation likely to be adopted in the course of 2021.
Brexit
It is unclear to what extent the new rules will apply in the UK following its exit from the European Union on 31 January 2020. The transition period that currently applies is due to expire at the end of the year, following which the UK will not automatically be bound by new legislation adopted by the EU. However, if the transition period is extended, or if the UK opts to align with EU rules in this area, it is possible that the new rules will apply in the UK.
Comment
Businesses will need to be aware of the changing landscape. Those that are already compliant with the UNGPs and the relevant elements of NAPs may not need to undertake major changes, while others may need to consider more significant revisions to their compliance policies. In any event, businesses will be mindful of rules that potentially allow for public and private law enforcement in relation to human rights and environmental matters, whether at EU or national level, as policy and legislation focused on this area gains momentum.