“SAFE HARBOUR” IN THE PROPOSAL FOR CORPORATE SUSTAINABILITY DUE DILIGENCE DIRECTIVE

Section Law: Economic and Legal Problems of Sustainable Development

Abstract

Over the last decade, the mandatory legislation that requires large companies to conduct due diligence for the social, environmental, and ethical risks within their economic activities and to manage those risks efficiently has been rapidly expanding across Europe. On 23 February 2022 the European Commission unveiled a proposal for a Directive on corporate sustainability due diligence. Following numerous amendments adopted by the European Parliament on 1 June 2023, the proposal now enters negotiations with the EU Council and member states for further refinement. The proposal introduces mandatory human rights and environmental due diligence (mHREDD) which establishes provisions for corporate liability when companies meeting the employee number and turnover criteria specified in the proposal fail to adhere to due diligence obligations, causing otherwise avoidable harm. The adoption of mHREDD transforms the prevention of harmful impacts on human rights and the environment from a voluntary practice of companies into a normative standard of their conduct. Therefore, compliance with the Directive's requirements will become part of a company's compliance as an internal process aimed at ensuring adherence to existing norms and rules. A large proportion of companies targeted by the proposal, while appearing cooperative, seek to weaken the future rules through the corporate lobbying. Among the tactics used to undermine the law is lobbying the so-called “safe harbour” exemption. With a “safe harbour” exemption, the legislature sets out criteria that, if met, could exclude liability and the corresponding ability of claimants to bring action. In the context of the proposal of the Directive “safe harbour” means that a company shall be released from all legal actions upon proof that it had carried out a legally valid due diligence assessment. Safe harbour exemption is contrasted with the use of due diligence as a procedural defence, which the defendant company can plead and seek to prove in court. The proposal’s implications are important for Ukraine considering its status as a candidate country for EU membership. Ukrainian companies, unlike those in the EU countries, lack experience of operating within the framework of corporate social responsibility and non-financial reporting to build upon, and the culture of corporate sustainability is in its nascence. A “safe harbour” approach, under which when the company has seemingly complied with the due diligence process (which might be a mere “tick-box exercise”), it will not be held liable for the harmful effects of its activities, will have devastating impact for the development of corporate sustainability tradition in Ukraine.

Keywords

economic activity, sustainable development, responsible business conduct, business and human rights, due diligence, compliance, corporate legal relations, internal economic relations

Downloads

Download data is not yet available.

References

1. Smit L., Bright C., McCorquodale R., Matthias Bauer et al. for the European Commission DG Justice and Consumers. Study on due diligence requirements through the supply chain: Final Report. 24 February 2020. URL: https://op.europa.eu/en/publication-detail/-/publication/8ba0a8fd-4c83-11ea-b8b7- 01aa75ed71a1/language-en (дата звернення: 06.10.2023).

2. ECCJ publishes updated map & comparative analysis of mHREDD laws & legislative proposals in Europe. Business and Human Rights Resource Centre. 21.03.2022. URL: https://www.business-humanrights.org/en/latest-news/eccj-updates-map-comparative-analysis-of-mhredd-laws-legislative-proposals-in-europe/ (дата звернення: 06.10.2023).

3. Proposal for a Directive of the European Parliament and of the Council on Corporate Sustainability Due Diligence and amending Directive (EU) 2019/1937 COM/2022/71 final. URL: https://ec.europa.eu/info/publications/proposal-directive-corporate-sustainable-due-diligence-and-annex_en (дата звернення: 06.10.2023).

4. Dyllick T., Muff K. Clarifying the meaning of sustainable business: Introducing a typology from business-as-usual to true business sustainability. Organization & Environment. 2015. Vol. 4. P. 1–19. https://doi.org/10.1177/1086026615575176

5. Ashrafi M., Adams M., Walker T. R., Magnan G. How corporate social responsibility can be integrated into corporate sustainability: a theoretical review of their relationships. International Journal of Sustainable Development & World Ecology. 2018. Vol. 25. Iss. 8. P. 1–11. https://doi.org/10.1080/13504509.2018.1471628

6. Smit L. The importance of civil liability for a corporate human rights duty. BIICL Blog. 16 March 2021. URL: https://www.biicl.org/blog/21/the-importance-of-civil-liability-for-a-corporate-human-rights-duty?cookiesset=1&ts=1693345462 (дата звернення: 06.10.2023).

7. Responsible Business Conduct Working Group. Shadow EU Action Plan on the Implementation of the UN Guiding Principles on Business and Human Rights within the EU. March 2019. URL: https://responsiblebusinessconduct.eu/wp/wp- content/uploads/2019/03/SHADOW-EU-Action-Plan-on-Business-and-Human-Rights.pdf (дата звернення: 06.10.2023).

8. European Coalition for Corporate Justice. Civil Society Calls for Human Rights and Environmental Due Diligence Legislation. 3 October 2019. URL: http://corporatejustice.org/news/16785-civil-society-calls-for-human-rights-and-environmental-due-diligence-legislation (дата звернення: 06.10.2023).

9. Trilogue. An official website of the European Union. URL: https://eur-lex.europa.eu/EN/legal-content/glossary/trilogue.html (дата звернення: 06.10.2023).

10. Bonnitcha J., McCorquodale. The Concept of “Due Diligence” in the UN Guiding Principles on Business and Human Rights. European Journal of International Law. 2017. Vol. 28. Iss. 3. P. 899–919. https://doi.org/10.1093/ejil/chx042

11. Friends of the Earth Europe, European Coalition for Corporate Justice and Corporate Europe Observatory. Off the hook? How Business Lobbies against Liability for Human Rights and Environmental Abuses. Corporate Europe Observatory (CEO). June 2021. URL: https://corporateeurope.org/sites/default/ files/2021-06/OffThe %20Hook_0.pdf (дата звернення: 06.10.2023).

12. Euractiv. Upping the Ante on Human Rights Due Diligence: Event Report. Euractiv. March 2019. URL: https://en.euractiv.eu/wp-content/uploads/sites/2/special-report/EURACTIV-Event-Report-Upping-the-ante-on-human-rights-duediligence.pdf (дата звернення: 06.10.2023).

13. Smit L., Bright C. The concept of a “safe harbour” and mandatory human rights due diligence. CEDIS. 2020. URL: https://cedis.novalaw.unl.pt/wp-content/uploads/2021/12/CEDIS_working-paper_the-concept-of-safe-harbour-1.pdf (дата звернення: 06.10.2023).

14. Case No. C-362/14 Schrems v Data Protection Commissioner. Judgment of the Court (Grand Chamber) (E.C.J. 6 Oct 2015). EUR-Lex. Access to European Union law. URL: https://eur-lex.europa.eu/legal-content/EN/TXT/?uri=CELEX%3A62014CJ0362 (дата звернення: 06.10.2023).

15. Texts adopted – Corporate Sustainability Due Diligence. European Parliament. 01.06.2023. URL: https://www.europarl.europa.eu/doceo/document/TA-9-2023-0209_EN.html (дата звернення: 06.10.2023).

16. Muchlinski P. Advanced Introduction to Business and Human Rights. Edward Elgar Publishing, Cheltenham, UK Northampton, MA, USA, 2022. 224 p.

17. Milieudefensie et al. v. Royal Dutch Shell plc. Climate Change Litigation Databases. URL: https://climatecasechart.com/non-us-case/milieudefensie-et-al-v-royal-dutch-shell-plc/ (дата звернення: 06.10.2023).

18. Kovalenko I. Voraussetzungen für die Einführung einer Berichterstattung über Informationen nichtfinanzieller Art in der Ukraine am Beispiel Österreichs. Zeitschrift für Europarecht, Int. Privatrecht & Rechtsvergleichung. 2022. H. 4. S. 180-186.

19. State Statistics Office of Ukraine. The number of registered legal entities by organizational forms of economic activity with a distribution based on the gender of the CEO as of 1 January 2023. URL: https://csrv2.ukrstat.gov.ua/edrpoy/ukr/EDRPU_2023/ks_opfg/arh_ks_opfg_23.htm (дата звернення: 06.10.2023).

20. Business and Human Rights. Diia: Business. URL: https://business.diia.gov.ua/en/business-and-human-rights (дата звернення: 06.10.2023).

Abstract views: 84
PDF Downloads: 43
Published
2023-12-12