Picking up the most recent developments in France, Germany and the Netherlands, this blog post discusses the emergence of International Criminal Law (ICL) in the context of business and human rights. Though, a hot topic among legal scholars for the past 10 years, ICL now is becoming a new significant legal risk for businesses, both financially and reputationally. NGOs in France, Germany and the Netherlands have recently filed criminal complaints based on elements of ICL against textile corporations as regards their business operations. The key crimes in focus of these allegations are forced labor and enslavement as a crime against humanity. In France, the affected corporations are accused of knowingly benefitting from the proceeds of such crimes. The French National Antiterrorist Prosecution Service commenced its preliminary investigations into these cases in June 2021. In Germany, complaints referring to the aiding and abetting such crimes by management have been filed in September 2021 with the Federal Public Prosecutor General – the competent authority in Germany as regards ICL. In the same context, criminal complaints were filed in the Netherlands in December 2021 against the management of Dutch and US textile companies. These complaints also include allegations of money laundering and receiving stolen goods due to the use of goods potentially linked to forced labor.
ICL in a nutshell
The coming into existence of ICL dates back to the Nuremberg Trials (1945-1946). It was essentially codified in 1998 with the founding of the International Criminal Court (ICC) and ratification of the Rome Statute, which sets out the ICC’s criminal code as well as its criminal procedure. Regarding the core crimes under the Rome Statute (war crimes, crimes against humanity, genocide and the crime of aggression), three important facts need to be highlighted: First, the Rome Statue does not provide for corporate criminal liability. Only individuals can be tried at the ICC. Second, statutes of limitations do not apply. Third, the concept of universal jurisdiction will apply, i.e., no territorial or personnel links need to be present for prosecuting those crimes. Many Member States to the ICC have incorporated the ICC crimes into their national legal systems making them capable of prosecuting such crimes independently from the ICC. Most states also implemented a bar to statutes of limitations (as happened in France – except for war crimes – and Germany for example) and integrated a provision of universal jurisdiction – although mostly combined with wide prosecutorial discretion on initiating investigations.
Why should corporations be aware of the risks arising from ICL?
Management may not easily draw the potential links between global business and the most serious crimes under international law. However, conducting business in certain regions might heighten the potential risk of contributing to or rather (in legal terms) aiding and abetting certain international crimes. Additionally, the existence of longer, multiple-steps supply chains and lack of transparency throughout those chains is increasing such risks. This holds true in particular for forced labor risks in supply chains or the use of sub-contractors for private security firms protecting the realization of business projects abroad.
Though not much is publicly revealed yet, in the recent French, German and Dutch cases the sub-crime of enslavement as a crime against humanity is used inter alia to attribute criminal liability to corporations for alleged links to state-orchestrated forced labor. Other international crimes – apart from forced and child labor – that might become relevant in the business sphere include serious environmental destruction as well as land-grabbing.
Hence, apart from international developments on supply chain laws – which undoubtedly pose challenges for international corporations – and corresponding (civil/administrative law) enforcement, there is a growing criminal law risk arising from ICL. The obligation to cease risky business relations might thus not be triggered by regulatory frameworks, such as the growing number of supply chain due diligence acts, but rather by the risk of criminal liability.
It is not entirely surprising that NGOs chose France as the first jurisdiction to test such complaints. The French legal system may be well suited for such kind of criminal filings: In 2010, France fully implemented the regulations of the Rome Statute and additionally disposes of the concept of corporate criminal liability. Other jurisdictions that also implemented the provisions of the Rome Statute into domestic law, such as Germany, are not able to hold corporations themselves criminally liable due to a lack of legislation in this regard. Therefore, the recently reported complaints in Germany can by themselves only be directed against a company’s management. Yet, generally corporations can be subsequently fined in relation to specific crimes committed by its management pursuant to the German Regulatory Offences Act.
At the national level, we currently see a regulatory trend towards compliance with supply chain due diligence duties and continuing discussions on the establishment of civil liability regimes in this regard. In parallel, corporate liability for international crimes might already pose a legal risk in certain domestic jurisdictions, including with respect to money laundering allegations. It also must be noted that several NGOs announced that the recent criminal filings are only the beginning of their intention to file more criminal complaints for crimes against humanity against corporations who may be linked to forced labor practices abroad.
Therefore, it is critical that corporations with international footprints implement a holistic compliance approach which includes (but is not limited to):
- the company’s organizational set-up with clear responsibilities for various compliance topics, in particular for human rights in supply chains and business partner compliance;
- foster regular knowledge and data exchange amongst different compliance experts in the company;
- enable direct reporting to management at the group holding level;
- revise the corporate contract management to ensure greatest transparency and directly link it to due diligence processes;
- establish an effective group wide internal control system as well as risk and compliance management system that includes business partner compliance; and
- take these factors into account in M&A investments and the set-up of joint ventures.