Are you accountable for any human rights violations in your value chain?

Are you accountable for any human rights violations in your value chain?
July 26, 2022

Even though Belgium is lagging behind when it comes to enacting specific legislation, companies doing business in Belgium should be aware of the risk of being held accountable for human rights violations or environmental pollution up or down their value chain.

Human rights violations are a ‘hot’ topic and businesses are confronted with ethical challenges in this respect. Even if businesses do not directly contribute to human trafficking, child labour or environmental pollution in faraway jurisdictions, could they be held responsible for somehow tolerating such abuses?

Legislative initiatives in EU Member States

Some EU Member States have taken the initiative to impose due diligence obligations on businesses and hold them accountable. For example: starting pre-Brexit, the 2015 UK Modern Slavery Act is something that UK businesses have to take into account; there is the 2017 French Loi de vigilance; the Dutch legislator intervened with the 2019 Wet Zorgplicht Kinderarbeid; and Germany enacted the 2021 Lieferkettensorgfaltspflichtengesetz

While each Act’s content is jurisdiction-specific, all are mainly based on supranational human rights principles and the work of the International Labour Organization and the United Nations Working group on Business and Human Rights.

These Acts generally aim to enhance corporate accountability and introduce mandatory due diligence frameworks. 

Belgium is lagging behind

Belgium has not (yet) enacted any such specific legislation. 

The closest so far has been the (EU harmonised) corporate legislation providing for the publication, as part of each large undertaking’s annual report, of certain non-financial information relating to the impact of their activities on social, employment and environmental matters, respect for human rights and combatting corruption.

However, a draft value chain due diligence Act is pending before Parliament. This draft Act is largely inspired by the French Loi de vigilance. It will introduce a duty to carry out due diligence over a company’s value chain and to compensate affected persons for the loss resulting from the lack of sufficient precautionary measures. It will require any large undertaking located or active in Belgium to draw up a due diligence plan including a risk-assessment, a procedure for evaluating affiliates, suppliers and subcontractors, and a warning mechanism for risk reporting.

The draft Act provides for supervision by the Belgian authorities, criminal liability as well as civil liability, including collective redress actions. The draft Act also defines private international law principles for bringing violations committed abroad within the Belgian courts’ jurisdiction. The claimant could opt to apply Belgian law to violations abroad.

At this stage the draft text remains rather vague. The Council of State has advised Parliament to elaborate on a number of aspects, such as the precise environmental standards and the human rights guidelines to be complied with. In any event, the draft Act provides for the authorities to issue practical guidelines for the correct implementation of companies’ relevant obligations.

Consequences for companies active in Belgium

The fact that Belgium is not a frontrunner, does not necessarily imply that, today, businesses operating from and in Belgium are ‘off the hook’. Depending on the specific value chain and the destination of goods and services, a business could already be liable under (i) Belgian contract law, (ii) Belgian tort law, or (iii) through the relevant principles of private international law, under foreign law.

Contractual liability

At present, many contracts contain express provisions for complying with internationally recognized principles concerning human rights, e.g. prohibiting child labour. Through other clauses, businesses certify that their products and services comply with local or international laws and standards. While these clauses might come across as ethical boilerplates (i.e. standard legal contractual text), they may eventually ‘bite’.

Tort liability

A company can be held accountable for the breach of a specific Belgian or foreign law, as well as for the violation of the general duty of care that applies to anybody. Even without the express enactment of any supply chain due diligence legislation, Belgian law provides for some general principles allowing victims to hold companies liable.

Foreign law

To the extent that Belgian companies are part of the value or supply chain of a foreign undertaking, foreign law may apply to them. For example, it is not inconceivable that the German Act has consequences for a Belgian company supplying to a German company or distributing goods into the German market.

EU initiative

As the disparate national initiatives risk jeopardising the ‘level playing field’ for undertakings operating in the EU, the European Parliament has adopted a Resolution with recommendations for the European Commission to draw up a harmonising directive. Meanwhile, the European Commission has published a draft directive. This directive should provide for a value chain due diligence obligation for large companies and for midcap companies in high-impact sectors, whith related civil liability.

If the present situation has not triggered companies to adapt, then such a prospect at the EU level will certainly force them to.

No matter where a targeted company’s headquarters are located, selling goods or providing services in the EU’s internal market will be sufficient to fall within the scope of such a directive.

Conclusion

The pressure on undertakings to carefully assess their value chains in the light of their impact on human rights and the environment is mounting. Companies active in the EU should be proactive and not wait for further legal initiatives. The current legal framework already contains bases for contractual and tort liability in this respect.

Written by

  • Alexander Hansebout

    Partner

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