On 22 June 2020 the Human Rights Subcommittee of the European Parliament (EP) discussed and published two related policy briefings on the options for an EU-wide human rights due diligence law. The papers deal with key legal elements of such a law and the mechanisms for monitoring, enforcement and remedies. The briefings will form the basis for the EP’s position during the upcoming legislative process on a new EU human rights due diligence law.

Against the backdrop of the legislative debate on an EU-wide mandatory human rights due diligence law – which was recently pushed forward by the European Commission based on a study of human rights due diligence through the supply chain – the EP’s Subcommittee on Human Rights commissioned two policy briefings looking at the legal options for the legislation. The briefings will support the EP’s position during the legislative process, which is expected to begin in early 2021. The briefing papers set out a comparative law review of domestic and supranational legislation, as well as looking at specific legislative proposals for the EU-wide law.

Recommendations for the substantive elements of the law (Briefing paper no.1)

The paper notes that mere reporting and transparency obligations would have only a limited effect in incentivising companies to protect human rights. Consequently, a substantive due diligence model would be required.

With respect to the applicable scope, the authors of the first briefing paper recommend that the due diligence law should cover all companies irrespective of their size and sector, as already laid down in Principle 14 of the UNGP. The authors justify this approach on the basis that, in their view, any size threshold might be open to being creatively circumvented by companies and that salient adverse human rights impacts can be caused by any company, even small ones. But they note that the proportionality principle should be considered to prevent placing any undue burden on SMEs. One option put forward is to take a phased approach and to delay the implementation phase for smaller companies.

The paper suggests that the law should apply not only to companies incorporated in an EU member state, but also to any company, regardless of where incorporated, that accesses the EU’s internal market by providing products and services to it.

It is further stated that companies should be obliged to undergo human rights due diligence in their whole supply and value chain. The paper’s authors do not believe limiting due diligence to first-tier suppliers or business partners would adequately address human rights risks; rather, they note, many business activities with potentially crucial human rights impact would be excluded.

The authors also elaborate on the need for effective enforcement mechanisms. Given differences across member states, the authors suggest leaving this issue to the member states, but ensuring that they choose enforcement mechanisms that provide an adequate deterrent. This may include different mechanisms, such as administrative, civil and even criminal liability, in case of non-compliance with the law.

Recommendations for procedural aspects – monitoring, enforcement and remedies (Briefing paper no. 2)

This briefing paper proposes that monitoring plays a vital part of the law. It suggests that companies themselves should be obliged to conduct regular monitoring and establish whistle-blower and complaint mechanisms that are open to employees and third-parties. Additionally, the paper notes the potential role of government oversight. Interestingly, the models of black-listing and white-listing are jointly recommended at the national and EU level—the paper recommends that member states and the EU establish publicly available lists that comprise of information on which companies comply with the law and which do not, thereby establishing a new type of “reporting” alongside the transparency duties companies bear themselves pursuant to the EU’s Non-Financial Reporting Directive (NFRD). Companies’ non-financial reports are, according to the paper, currently unreliable.

The paper recommends that enforcement ideally be carried out by competent national bodies that enforce (at least) procedural aspects of the due diligence law and impose administrative sanctions. Prescribing criminal sanctions is presented as the better way for levelling the playing field in the EU, but is not really feasible due to the limited EU competences in this regard. Yet the paper recommends that the EU provide guidelines for effective enforcement at member state level, to promote coherent enforcement across the EU.

As regards remedies, it is (inter alia) suggested that member states establish authorities to investigate allegations of human rights abuses and support right-holders with legal advice. In turn, the paper suggests that the EU provide official guidance on remedies through civil and criminal law where harm is caused by non-compliance with the human rights due diligence law.

 We are still some way off an EU-wide human rights due diligence law, but with Germany currently holding the EU presidency, there may be a greater impetus to move forward, and these papers represent one of the early stages in framing the law. As they indicate, there are a range of issues to consider and drafting an effective law will be challenging. In the meantime, the German government is moving ahead with plans at the national level. It is working on a domestic human rights due diligence law and recently presented its key points for the expected legislation. It will be interesting to see how closely the two legislative projects track one another—certainly cohesion between the requirements would, no doubt, be welcomed by those companies that are likely to be subject to both.