On 14 May 2019, the Dutch Senate took a historic step by adopting the Child Labour Due Diligence Law (Wet zorgplicht kinderarbeid) and – subject to some of the detail of its implementation, which will be introduced via secondary legislation – it is due to come into force in the near future. This law imposes reporting and due diligence obligations on companies, with the aim of preventing goods and services produced using child labour from being delivered to consumers in the Netherlands. As such, it follows in the footsteps of similar pieces of legislation recently introduced around the world that require companies to report on, and in some cases mitigate, the impact of their operations on human rights. As this blog post discusses, however, there are a number of elements that set the Dutch law apart.
A wide application
The Child Labour Due Diligence Law has a wide reach, applying to any company which sells goods or services to Dutch end-users, including those registered outside the Netherlands. While there has been some talk of certain companies being exempt, by virtue of their size and/or industry, such exemptions have not yet been determined.
Reporting and due diligence obligations
Companies that are covered by the law must carry out due diligence (gepaste zorgvuldigheid) in respect of child labour in their supply chains. This means investigating whether there is a ‘reasonable suspicion’ that goods or services to be supplied have been produced with child labour, with reference to the International Labour Organization and International Organisation of Employers’ Child Labour Guidance Tool for Business. This Guidance Tool helps companies identify and prevent child labour within their value chains, by explaining what a child labour impact might look like and explaining when and how companies must take action, among other things. If, after such due diligence, a reasonable suspicion of child labour does arise, the company must draw up a plan of action to address this, in line with international guidelines.
Similarly to legislation such as the UK Modern Slavery Act and the French ‘duty of vigilance’, the law also requires companies to produce a statement, in this case attesting that they have carried out the above due diligence in their entire supply chains (including enquiries beyond tier 1 suppliers). This statement will be submitted to a regulator tasked specifically with the monitoring and enforcement of the legislation (yet to be decided, but to be appointed imminently by way of secondary legislation) who will in turn make it publicly available in an online registry. Unlike its sister legislation in other European countries, however, the Dutch law only requires companies to submit the statement once, rather than annually.
Civil and criminal penalties
If the company fails to submit a statement attesting that they have carried out the due diligence in their full supply chains, the regulator ultimately appointed to enforce the law can impose a fine of up to €4,100.
If a company fails to comply with the due diligence aspects of the law, the regulatory authority will not have the power to pro-actively sanction companies of its own volition. Penalties will only be considered if, after having first complained directly to the company, a third party submits a complaint to the regulator along with concrete evidence that the company’s products or services were produced with child labour. If the regulatory authority determines that the company has failed to carry out due diligence or draw up a compliant action plan, it will issue legally binding directions. If these directions are not followed, the regulator can impose a fine of up to €820,000 or, if the regulator believes that this does not constitute an appropriate punishment (having regard to the seriousness of the offence, to the benefit obtained by committing the offence and to the financial strength of the offender) up to 10% of the company’s annual turnover.
If a company repeats a violation for which it has been fined in the past five years, and the violation occurred under the direction of the same director, the responsible director may face criminal prosecution and sanctions (including imprisonment).
Current status of the law
The law was originally due to come into force on 1 January 2020, but in reality it is now not expected to become effective until 2022. This is largely to allow for several outstanding aspects of the implementation and interpretation of the law to be determined, including (i) the form and content of the statement to be produced by companies; (ii) the body that will act as the regulator; and (iii) which companies, if any, will be exempt from the law. These aspects will be set out in General Administrative Orders (Algemene Maatregel van Bestuur), and will be crucial in determining the law’s effectiveness.
The law in context
The Dutch law is unique in that it is the first to mandate the appointment of a specific regulator to oversee the law and its enforcement, and to allow victims and stakeholders to file complaints with this regulator. And, of course, it is the first jurisdiction to create criminal sanctions which may be imposed on directors of companies which fail to conduct human rights due diligence.
The law’s focus on child labour alone also sets it apart from its European counterparts. However, those who think the law is limited as a result would be mistaken. The obligations to carry out due diligence and to produce an action plan take the Dutch law a step further than the UK Modern Slavery Act and bring it more in line with the onerous French ‘duty of vigilance’. In light of the significant fines that can be awarded, not to mention the criminal sanctions, the Dutch Child Labour Due Diligence Law should be well on the radar of any company that is likely to supply goods or services to end-users in the Netherlands. Multinational companies would be well advised to assess whether they are likely to fall into this category and, if so, to familiarise themselves with the relevant due diligence and reporting obligations.