📧The European directive on duty of vigilance has been passed. Rightly so, contracts and the courts have a major role to play

On April 24, 2024, the European Parliament passed the Duty of Vigilance Directive, often referred to by the acronym CS3D (Corporate Sustainability Due Diligence Directive).

Duty of Vigilance now applies to all European companies with over a thousand employees worldwide and sales of at least €450 million. Non-European companies achieving this sales threshold within the European Union will also be concerned.

Indifference to borders is on the rise. The climate challenge demands it. European humanism justifies it. It will make it possible to hold to account non-European companies that profit from the European consumer market. It is through contracts that companies express this indifference to borders, also known by the old term “extraterritoriality”.

This duty of Vigilance extends to all players in the value chain. Companies must therefore be vigilant with regard to their supply, production and distribution partners.

As part of the transposition of the European Directive on duty of Vigilance, each Member State will have to designate or create an independent administrative authority responsible for monitoring and supervision.

____

For companies already subject to the 2017 French “Vigilance” law, i.e. mainly large French companies, this is not such a big shock. This is because the new European rules differ little from the French Vigilance Act of 2017. The novelty will be more for foreign companies, from whom accounts may be demanded by stakeholders, ultimately before judges.

Things could have been different. In fact, the original proposal for a European directive, as enriched by various discussions, seemed more concerned with punishing companies in advance than with relying on their position to preserve the environment and promote human rights according to Europe's humanist model. And in that it targeted not only large companies, which are in a position to act, but also medium-sized ones, despite the heavy burden of due diligence obligations. But this was withdrawn.

It was also aimed at strongly correlating ecological transition plans with heavy penalties in the event of non-compliance, linking compliance with executive remuneration, a sign of great mistrust. But this too was withdrawn.

It also aimed to subject the entire banking and financial sector, which is already subject to specific European rules. All that remains is the obligation to submit a report to Parliament, which will eventually be able to assess whether this sector should also be made subject to the directive.

What remains in the voted directive is what was at the very origin of the European text, i.e. French law: the obligation for large companies to detect and prevent human rights and environmental abuses throughout the value chain, which they control de jure, notably through contracts, or de facto.

What's new is that Member States are required to adopt a supervisory authority as part of the transposition of the directive.

This is logical, since the technique of Vigilance is the cutting edge of Compliance Law, which develops Regulatory Law across sectors. We thus find the concretization of regulation through the institution of an Administrative Authority. But it's only a matter of “supervising”, because it's the company that builds the value chain, not the State. And it is the judge who will ultimately be able to qualify behaviour.

To find out more➡️🧱🏛️French Council of State et 🏛️French Court of cassation, 📗De la régulation à la compliance : quel rôle pour le juge ? (From regulation to compliance: what role for the judge?), 2024 (see in particular the contribution by François Ancel)

The system relies above all on big business, and this is a sign of confidence in them. Compliance, when conceived in correlation with the “raison d'être”, entrusts companies with the task of achieving the “monumental goals” (protecting the environment, protecting human beings) that states alone do not have the concrete means to protect. Companies don't have the power to set these goals, but they do have the means to achieve them. This is why contracts will take on an increasingly central role, and why judges will become more and more important, since where there is a contract, there is a judge. This is why the directive gives pride of place to both contracts and judges.

With the adoption of this balanced text, the European Union is right in demonstrating its humanism, maintaining its ambition and not exhausting European companies, which are not subject to excessive constraints and controls - shared, moreover, with non-European companies as soon as they want to reach European consumers - and are free to choose the means to achieve their goals: indeed, Vigilance, like Compliance of which it is a part, and Regulation which it extends, is a legal technique of a teleological nature. Everything is applied and interpreted through goals.

To find out more➡️🧱M.-A. Frison-Roche, 🚧Compliance contracts, compliances clauses, 2022