🧮La vigilance, nouveau champ de contentieux systémique (Vigilance, new field of Systemic Litigation), in cycle of conference-debates "Contentieux Systémique Émergent" (Emerging Systemic Litigation)

Second conference-debate

LA VIGILANCE, NOUVEAU CHAMP DE CONTENTIEUX SYSTÉMIQUE

(VIGILANCE, NEW FIELD OF SYSTEMIC LITIGATION)

under the scientific supervision of Marie-Anne Frison-Roche

Friday 26 April 2024

Paris Court of Appeal, Massé courtroom

General presentation of the topic and moderation by 🕴️François Ancel, Judge at the Première Chambre civile de la Cour de cassation (First Civil Chamber of the French Court of cassation)

François Ancel showed that Compliance Law is not just soft law but also hard law, as the "duty of vigilance / corporate sustainability due diligence" demonstrates. The French law of 27 March 2017, so-called "Vigilance law", which imposes this duty of vigilance constituting the cutting edge of Compliance, introduced an obligation for firms of a certain size to identify and prevent risks in terms of human rights, environment, and social rights.
He recalled the means provided for by Law: mapping the risks of serious human rights and environmental abuses; regular assessment procedures for subsidiaries, subcontractors and suppliers; appropriate risk mitigation measures; alert and reporting mechanisms; system for monitoring measures.
In order to ensure that the plan is monitored, enforced and, where appropriate, sanctioned, the Law provides for a judicial review system, with a 2-stage procedure: firstly, a preventive procedure, with a formal notice, followed by a judicial procedure, either on the merits or in summary proceedings.
The speaker felt that the law had now reached "the age of reason" and that it had indeed given rise to litigation, which could even be said to have "emerged", since judgements handed down by the Tribunal judiciaire de Paris (Paris First Instance Civil Court) were currently being referred to the Cour d'appel de Paris. He emphasised that the number of such cases was still relatively small, but that this did not mean that they would not "flourish in the future", as "the stakes are enormous for firms and civil society".
In order to avoid an expansion of this litigation, the speaker believes that the courts must rapidly define a "case law policy", which will make it possible to draw up fairly clear guidelines, "enabling firms to know what is expected by the Law and what may be asked of the judge". In the French legal system and in the absence of a decree, it will be up to the judge to write the policy.
François Ancel argues that this whole cycle on 'Emerging Systemic Litigation' is there to help them, the judges, build this jurisprudential policy. As such, there is nothing better than hearing from those knowledgeable.
The vigilance / corporate sustainability due diligence plan will give rise to systemic litigation that will affect all areas of Law. The specific subject of this conference-debate is to try to see the impact of the Vigilance legal rules on two branches of law. Firstly, Contract Law, which can be used by firms to implement the duty of vigilance. However, a traditional application of Contract Law can be disrupted when this law is part of a Compliance context, as Jean-Christophe Roda will show.
The second branch of Law we are focusing on here is Employment Law, which is affected by the duty of vigilance, because it concerns respect for human rights and respect for workers. This will involve collaboration between firms, employers and decision-makers, in order to help firms introduce benchmark-type standards, as Cyril Cosme will show.

🕰️11am.-11.20am. 🎤Le contentieux émergent de la Vigilance dans les rapports contractuels (Emerging Vigilance Litigation in Contractual Relationships), by 🕴️Jean-Christophe Roda, Full Professor at Jean-Moulin Lyon 3 University

The speaker explained that the Vigilance duty /corporate sustainability due diligence Litigation in contractual relationships is still in its infancy, but he believes that this litigation, which is systemic in nature, will be flourish. He stresses that the issues it raises and will raise are at the crossroads of classical Law and Economic Law. Indeed, these Compliance Obligations mean that firms are obliged to be vigilant and are forced to look at what is happening on their offices, to monitor their employees, to collect geolocation data, etc. This raises issues of Labour Law, privacy Law and articulation with the RGPD (which is another part of Compliance Law...).
These "crucial copagnies"📎!footnote-3627 covered by the duty of vigilance are by definition in a dominant position or may be. They will be driven by the national, European and international texts to be obsessed with increased control. By obligation, they will include vigilance (corporate sustainability due diligence) clauses in their distribution contracts.
Thus, in the previous version of the European directive on Corporate Sustainability Due Diligence (CS3D), it was provided that competitors could come into contact with each other, which shows that Competition Law is not only what increases the efficacy of competition but also what can thwart it. Vigilance litigation will therefore exacerbate issues of cartel behaviour, but also abuse of a dominant position, since the firm, in order to obey the law, must increase its control over its partners.
The laws themselves make references, sometimes direct, sometimes indirect, to the contract. The French "Vigilance law" of 2017 refers to the contract. The Duty of Vigilance Directive of 2024 is more transparent, since it stipulates, for example, that crucial enterprises must be vigilant regarding their subcontractors with whom they have a commercial relationship, paying particular attention. We are therefore referring to the notion of an established commercial relationship, which is not strictly speaking a contractual notion, but which transcends the contract. But in fact, we are very often talking about a chain of contracts.
What is more, in order to carry out and fulfil their vigilance missions, the preferred link, the technique used, will be the contract and the insertion of clauses. For example, the American Sarbanes-Oxley Act, a decisive point in the spread of Compliance Law, has already required firms to delve into the affairs of their subcontractors and contractual partners, i.e. to be vigilant, using contractual techniques to do so.
In the first cases, for example in the Tribunal judiciaire de Paris (Paris First Instance Civil Court) judgment of 5 December 2023, Sud v. La Poste📎!footnote-3630, contractual issues have arisen and will continue to do so.
The key question is therefore the role of the judge.
The speaker referred to Marie-Anne Frison-Roche's recent presentation of the topic: "as soon as there is a contract, there is a judge". The judge will therefore have to look at these specific clauses. He will be concerned first and foremost with the proper application of the plan, but also with all these contractual relationships. We will be looking at the implications of the transposition of the European directive (Corporate Sustainability Due Diligence - CS3D) now approved by the European Parliament in April 2024, which also provides for the appointment or creation of an independent administrative supervisory authority in every member State of the European Union.
The roles of this authority and the courts should be divided and articulated. In France, if we look at the French Competition Authority, its role is to control and monitor the market, but the contractual aspects do not fall within its remit; it is the courts that retain competent for that: we can therefore assume that the judge's role will not necessarily be affected.
The speaker then continued his analysis, highlighting 6 key issues that need to be addressed in greater detail in this huge subject.
- He began by posing a preliminary question: won't this vigilance/corporate sustainability due diligence litigation escape the jurisdiction of the courts through the insertion of arbitration clauses? Indeed, when mass retailers insert arbitration clauses, the dispute escapes the jurisdiction of the state courts, and the major firms can follow them. Of course, this raises the question of arbitrability. The arbitrator cannot, of course, rule on the Vigilance plan itself, but vigilance is not just about the plan. This relates to the evolving relationship between compliance clauses and arbitration, between public policy and arbitration.
- The first question raised by the speaker concerns the changing function of the contract itself. The contract will necessarily change, no longer being used as an instrument for doing business, but as a "regulatory contract". As can be seen in American litigation, it is being transformed into an instrument of control with regular audit clauses. Firms, faced with such high stakes, will not want to take any risks. In the United States, the red flag technique is used, meaning that there is not even a breach, and the American judge considers that this is sufficient reason to breach the contract. En European, in instance in France, will a judge rule in the same way, notably in consideration of the new fonction of surveillance?
- The second issue raised by the speaker is that of evidence. As we saw in the judgment of the Tribunal judiciaire de Paris (Paris First Instance Civil Court) of 28 February 2023 in the so-called "Total Uganda" case📎!footnote-3628, the judge is constrained by the territoriality of his powers of investigation; in many situations the elements needed to interpret the good or deficient performance of the contract will be abroad. Of course, there are always letters rogatory and the provisions of the 1970 Hague Convention, but these remain difficult to implement, particularly in certain countries. It is therefore in the firm's interest to establish in advance the due diligence that it is carrying out under the obligation of vigilance, as this may help to fuel the debate before the courts in the enterprise's favour.
- The third question is that of the balance of contracts, or rather their possible imbalance. When it comes to vigilance / corporate sustainability due diligence, contractual relations are usually and by their very nature unbalanced because the law requires them to be: it is the law which, by subjecting powerful groups, "crucial operators"📎!footnote-3627, to their contractual relations with subcontractors who are usually small but can also be equally powerful groups, or even more so, and who avail themselves of legal systems which protect them more. Contractual relations can therefore be unbalanced, and it is in order to obey the law that the group will insert clauses that increase this imbalance to fulfil its legal obligation: audit clause, termination clause, etc. Not to do so would be to be reproached. Failure to do so would be considered a breach of the law. How will the courts deal with this?
  This is the core of the matter. It is Compliance Law, in this case through Vigilance, which requires firms to behave in a contractually intrusive manner. On the other hand and to take the French example, provisions of the Code de commerce (French Commercial Code) state that a balance must be ensured within the contract. A dispute may therefore arise in this respect, in particular by invoking article L.442-1 of this Code de commerce (French Commercial Code). The burden of proof is heavy, since it will be necessary to prove submission or attempted submission, while the Cour de cassation (French Court of cassation) points out that article 1171 of the Code civil (French Civil Code) is suppletive, and we are undoubtedly not dealing here with contracts of adhesion. The instruments will not be easy to implement, but lawyers will evocate them before the courts.
  This growing litigation at the crossroads of Compliance Law and Contract Law may also lead to the dusting off provisions of the Code civil (French Civil Code). Such is the case with article 1170 of the Code civil, which states that "Toute clause qui prive de sa substance l'obligation essentielle du débiteur est réputée non écrite" (free translation: "Any clause which deprives the essential obligation of the debtor of its substance shall be deemed unwritten"). Judges will have to deal with contracts that contain clauses that dominate to provide better protection. It is also conceivable that the principle of estoppel could be invoked, the Cour de cassation now using this more British general principle. The question then is whether this General Procedural Law principle can have such a substantive aspect.
  The courts will also have to deal with the question of 'undertakings' and "commitments", the scope of which is unclear, with some people seeing the possibility of them being classified as unilateral legal acts, or even conjunctive legal acts. Commitments, whose legal nature is uncertain, will be at the heart of future Vigilance Systemic Litigation.
- The fourth question concerns the office and power of the judge. These contractual techniques will become widespread in all areas relating to vigilance, but the speaker pointed out that the judge cannot force a firm to orient its contracts in a particular direction, or to orient its contractual organisation with its service providers through a particular clause, because Contract Law remains anchored in the principle of contractual freedom. Moreover, based on the practice of Competition Authorities, for example the Autorité de la Concurrence regarding commitments, there are discussions about the possibility of an administrative authority admitting changes to contracts, these commitments becoming binding through the Authority's unilateral decisions. In addition, the aforementioned La Poste decision states that it is not up to the judge to deal with the contract in the following terms: "ne saurait conduire le juge à se substituer à la société et aux parties prenantes pour exiger d’elles l’instauration de mesures précises et détaillées" (free translation: "cannot lead the judge to take the place of the company and the stakeholders in requiring them to introduce precise and detailed measures")📎!footnote-3630.
  This raises the more general question of the judge's role in the plan's effectiveness. The judge must ask himself whether it would not be better to obtain a change in contracts and/or behaviour, rather than to impose sanctions. Of course, the obligation of vigilance / corporate sustainability due diligence is an obligation of means. It is also an obligation of result when it is about following the process, for example the consultation procedures used to draw up the plan. The judge will assess the contours of this mix of obligations, sometimes involving means with Monumental Goals and sometimes involving obligations of result in relation to the process, which ensures the effectiveness of the whole to respect the spirit of the laws and which gives meaning to Vigilance / corporate sustainability due diligence. To do this, the judge must be able to assess what results from the action planned and carried out by the firm, i.e. what the firm has produced and reasonably projects
  This reference to the "results" produced by the action of the] firm can create a linguistic confusion, since it is by examining the "results" obtained or foreseeable that we measure whether the obligation of means has been satisfied, whereas certain more mechanical processes constitute an obligation of result. These questions, which are essentially evidentiary ones, are central to the Monumental Goals (in this case, the systemic preservation of the environment and human rights), i.e. the Vigilance objectives towards which the firm must strive and for which there must be tangible proof that it is actually doing so.
  The fifth issue is procedural in nature and specific to the French legal system, namely the exclusive jurisdiction of the Tribunal judiciaire de Paris (Paris First Instance Civil Court). However, some vigilance/corporate sustainability due diligence disputes will be brought before other courts, such as the Tribunal de commerce (French Commercial Court) in the event of a dispute based on article L.442-1 of the French Commercial Code. If the dispute raises issues relating to the duty of vigilance, the case will have to be stayed if the performance of the duty of vigilance is challenged or if the clauses activated must be interpreted in the light of the plan or this duty of vigilance. Judges will have to ensure that litigation is not unduly slowed down, and perhaps the French legislator should rework the issue so that this procedural difficulty, which had not been anticipated to any great extent, is resolved.
- The sixth question relates to international topics. These are fundamental. If a French firm contracts with foreign partners, questions of Private International Law arise. If the ] firm is reasonably vigilant, the clauses will rarely bring it before the French courts. For example, if it concerns a Pakistani firm, it will be outside the scope of the European Union Regulation. There are, however, jurisdictional options. The question of the applicable Law will also arise, and it is not certain that French Law will always apply, unless the matter is dealt with by means of the "lois de police", but the speaker emphasised that we are far from having resolved these questions, which are agitating internationalists, especially as the concept of "value chains" is itself unclear.
Even more reason, he concludes, to pay attention to these successive conferences on Emerging Systemic Litigation, in which vigilance / corporate sustainability due diligence techniques are always involved.

🕰️11.20am.-11.40am. 🎤Le contentieux émergent de la Vigilance dans les relations de travail (Emerging Vigilance Litigation in Employment Relationships), by 🕴️Cyril Cosme, Director of the French Office of the International Labour Organization (ILO)

The speaker explained how major French firms are now turning to the International Labour Organization and the various resources it can offer to help them meet their new obligations under hard law in terms of Vigilance, which they have been doing for many years, particularly on the basis of the soft law they themselves have helped to build through their human rights and CSR policies.
He pointed out that these normative resources were not initially conceived with this in mind. He points out that the ILO, which is the oldest of the United Nations Organisation, draws up standards that promote social justice and are addressed to States. Here, the normative stakes involved in the duty of vigilance have been considered by the major international] firms that are now the users of these standards, something that was not initially envisaged but which works.
The firm as such remained an unknown entity in this system, seen as an 'employer' and not as that which makes effective norms that are not labour relations norms.
The situation changed when the ILO itself included CSR in its mandate, which enabled the ILO to help multinational enterprises to take on these new responsibilities, new demands not only on workers but also on shareholders, consumers and customers, which consist not only in compensating through Labour Law for an asymmetrical legal labour relationship but also in modifying the economic and social conception of their operations.
This concept has made the firm a key player in the drive to control globalisation, at the same time as this perspective has itself become part of the ILO's mandate.
As a result, the traditional model of International Public Law conventions drawn up by States is now showing its limitations, particularly because States do not control the value and production chains, with firms being the players in the reconfiguration, particularly where technical innovations are developing, such as freight and digital technology.
The result is another new phenomenon: for the last fifteen years or so, firms have been using the resources of the ILO to draw up and implement their obligations, in particular their obligations of Vigilance. This was not originally envisaged in the classic scheme of Public International Law. This has taken the form of soft law.
There is thus a strong link between the OECD's guiding principles and the IOT's declaration on the "voluntary declaration" of enterprises firms in their international activities.
This interweaving of hard and soft law standards multiplies the channels of normative influence, one result of which is the Global Compact, and French firms are particularly active in defending human rights, for example in the clothing sector.
Compliance Law obviously makes the whole thing more effective, notably through the French law of 1987 so-called "Vigilance law", in response to the Rana Plaza tragedy. But it is difficult to create international laws and conventions. Contracts are an effective relay, but care must be taken to ensure that certifiers are in place to play this role.