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27 November 2017
In implementing Law 2017-399 of March 27 2017 on the duty of vigilance for parent companies and principal contractors, the legislature aims to:
To achieve these aims, the law:
The law applies to companies which, for two consecutive years, employ:
A company which meets these conditions will be deemed to comply with the requirement to prepare an awareness plan if its controlling company drafts and implements an awareness plan for itself and its subsidiaries.(1)
Only public limited companies (sociétés anonymes) and partnerships limited by shares (sociétés en commandite par actions) are affected by the new law. Joint stock companies (sociétés par actions simplifiées) appear to have been excluded from its scope.(2)
Article L225-102-4 of the Commercial Code sets out the measures to be included in an awareness plan. Such plans seek to identify risks and prevent serious human rights and civil liberties violations, as well as breaches relating to health and safety or the environment, which result from the activities of:
As such, Law 2017-399 does not apply to companies' casual business partners or contractors.
An awareness plan must include:
Companies must monitor and report on the implementation of their awareness plan in their management report.
Injunction to act and fines
If a company fails to comply with Article L225-102-4, it may be ordered to comply with the law by the relevant court, which will likely be the Tribunal de Grande Instance. Such an order may be accompanied by a time penalty. Any party with a legitimate interest – such as a trade union, non-government organisation or association – can bring such enforcement proceedings.(3)
The new law also provides for civil fines of up to €10 million. However, as the Constitutional Court has held this provision to be invalid, no fines can be imposed on companies that fail to comply with the law at present.
Civil liability in tort
Company liability under the new law falls under the regime of civil liability in tort that applies to legal entities under Articles 1240 and 1241 of the Civil Code. This regime requires a company to make good any loss arising from its infringement of legislation.(4)
To establish a liability in tort, a claimant must prove that:
The fact that an awareness plan and its implementation must be made public could be helpful for claimants, as they will have access to information on measures taken by a company and will be able to assess whether such measures have been properly implemented.
Any interested party with locus standi (ie, the right to bring an action in court) may also apply to the court to enforce a company's obligation to prepare and effectively implement an awareness plan.
The court may order its judgment to be published as it sees fit.
The requirement for companies to draft an awareness plan applies as of the 2017 financial year. However, the requirements to prepare a report on the implementation of such plans and publish the awareness plan and report, as well as the applicable penalties, will apply only from the date of the management report regarding the first financial year after the law's publication. Therefore, companies whose next financial year starts on January 1 2018 will be subject to these provisions as from their management report for the 2018 financial year.(5)
The legislature has left it up to companies to determine which measures to take. Although the law does not impose pre-established measures, it does:
Due to the law's shortcomings, companies must rely on existing benchmarks, such as the Organisation for Economic Cooperation and Development's (OECD's) principles and guidelines (eg, the OECD Guidelines for Multinational Enterprises). Companies should also bear in mind that decrees will likely be issued to fill the gaps in the law and further develop the framework that has been established.
For further information on this topic please contact Rhidian David or Agnes Braka-Calas at Cabinet Hughes Hubbard & Reed by telephone (+33 1 44 05 80 00) or email (firstname.lastname@example.org or email@example.com). The Cabinet Hughes Hubbard & Reed website can be accessed at www.hugheshubbard.com).
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