Background
The French Duty of Vigilance Law, which entered into force on 27 March 2017, requires parent companies which meet certain criteria to set up, publish and implement a "vigilance plan". The objective of such plan is to identify human rights and environmental risks and to adopt measures to prevent or mitigate those risks.
Four years later, the French "Climate and Resilience Bill" (the "Bill") was used as an opportunity to bring some clarifications and additions to the regime applicable to the duty of vigilance.
This Bill was adopted following an accelerated parliamentary procedure. On 4 May 2021, the Bill was adopted in first reading by the French National Assembly. On 29 June 2021, it was passed by the French Senate. The Bill was then submitted to the review of the joint committee for the provisions still under debate. On 20 July 2020, the Bill was eventually adopted by the French Parliament. In its decision of 13 August 2021, the French Constitutional Council ruled on the Bill which over sixty MPs had submitted to it for review on 27 July 2021.
Scope of the French Duty of Vigilance Law
Currently, the Duty of Vigilance Law applies to French corporations with over 5,000 employees in France and/or over 10,000 employees worldwide, including affiliates' employees.
French Senator Marta de Cidrac suggested that a provision should be introduced to clarify the scope of the Duty of Vigilance Law, i.e. refer to the notion of "large corporations" as defined in Article 51 of the French Law for the modernisation of the economy of 4 August 2008.
Pursuant to Article 3 of Decree no. 2008-1354 of 18 December 2008 implementing the 2008 Law, the concept of "large corporations" covers corporations that do not fall within one of the following categories:
- microenterprises: less than 10 employees; turnover not exceeding 2 million Euros;
- small and medium-sized companies: less than 250 employees; turnover not exceeding 50 million Euros or a total balance sheet not exceeding 43 million Euros; and
- intermediate-sized companies: should not be considered as small and medium-sized enterprises; less than 5,000 employees; annual turnover not exceeding 1.5 billion Euros or a total balance sheet not exceeding 2 billion euros.
However, the joint committee did not follow such suggestion. Thus, the scope of the Duty of Vigilance Law will not change in the near future.
Jurisdiction rules for duty of vigilance disputes
As discussed in our previous article "New jurisdiction rules for Duty of Vigilance disputes", the Duty of Vigilance Law does not provide for any special jurisdictional rules for disputes related to vigilance plans.
This question gave rise to conflicting interpretations in case law: while the Versailles Court of Appeal considered that commercial courts had jurisdiction on 10 December 2020, the Nanterre Judicial Court declared it had jurisdiction on 11 February 2021.
The French Senate and the French National Assembly agreed on a provision under which a few designated civil courts will have jurisdiction with respect to matters related to the duty of vigilance.
The joint committee decided to delete this provision, considering that another bill pending before the French Parliament (the French bill for building confidence in the Justice system) also included a provision conferring jurisdiction on such designated civil courts. This bill, which aims more generally at reforming some aspects of the French system of justice, will be reviewed by the French Senate in September 2021 Therefore, we will have to wait for the final version of this bill to have confirmation of the new jurisdictional rule.
New sanctions for infringing the duty of vigilance
In public law contract matters, two provisions have been introduced to sanction companies that fall within the scope of the Duty of Vigilance Law and fail to implement an effective vigilance plan. Article 35 of the Bill provided for exclusions from public procurement processes of companies which have not implemented a vigilance plan (if applicable) the year before the project.
On 27 July 2021, over sixty MPs referred the entire Bill as a whole to the French Constitutional Council on the grounds that many of its provisions were "part of the spiral of inaction that has led to France's failure to meet its greenhouse gas reduction target". The MPs argued that the Bill did not sufficiently protect the right to live in a safe environment, as enshrined in Article 1 of the French Charter of the Environment, and requested the French Constitutional Council to enjoin the Parliament to "take adequate measures to remedy this".
In its decision, the French Constitutional Council ruled that MPs could only raise arguments against specific provisions and not against an entire Bill. The French Constitutional Council also recalled in its decision that it did not have a general power to impose an injunction against the Parliament. As in this case the MPs were only formulating general criticisms against the lawmakers’ agenda and alleged inadequacy of the Bill as a whole, the French Constitutional Council concluded that their constitutional challenge had to be dismissed.
As a result, the new sanctions for infringing the duty of vigilance in the public procurement space will enter into force on a future date which will be determined by decree, but in any event no later than five years after the enactment of the Bill.
Hogan Lovells’ Business and Human Rights group stands ready to assist companies from all industry sectors to assess how to adjust their processes and operations in this evolving regulatory context.
Authored by Christelle Coslin and Margaux Renard.
