Corporate accountability under the French Duty of vigilance law, just an illusion?

On June 1, 2023, Paris civil court dismissed NGOs’ claim brough on the ground of the Duty of vigilance law against Suez regarding its activities in Chile. Once again, the judge considered that claimants did not give proper formal notice. The rationale used and its outcome raises the question of effective corporate accountability five years after the adoption of the law and at the time of EU negotiations on a Directive on human rights and environmental due diligence.

The law 

Under the 2017 Duty of vigilance law, French companies that employ at least 5 000 employees within their company and branches in France or at least 10 000 employees within their company and branches both in France and abroad must establish and implement an effective vigilance plan containing reasonable vigilance measures adequate to identify risks and to prevent severe impacts on human rights and fundamental freedoms, on the health and safety of individuals and on the environment.  

When a company does not meet its obligations in a three-month period after receiving formal notice to comply with them, the judge can, following the request of any person with legitimate interest in this regard, urge said company, under financial compulsion if appropriate, to comply with its obligations.  

Judges’ interpretation of the law  

The dismissal of the claim against Suez occurred few months after the dismissal of a complaint against TotalEnergies, where the judge also ruled on the issue of sending appropriate formal notice. This article will analyse the Suez case in light of the TotalEnergies case.  

1. TotalEnergies case

Alleged human rights violations: Failure to respect local communities’ rights in the implementation of EACOP and Tilenga projects in Uganda and negative environmental impacts.  

Proceedings and ruling  

In two rulings (1 and 2) issued on February 28, 2023, the judge dismissed NGOs’ claims.  

The judge started analysing the law, listing its gaps. In fact, the law does not refer to any guiding principles or other international standard, and does not contain classification of due diligence obligations binding on companies. The law does not make any reference to a typology of the rights concerned or measures to be taken or monitoring indicators. There is no independent monitoring authority, the only control provided for is devolved to judges “who have to rely on the imprecise, vague and flexible notion ‘reasonableness’ of due diligence measures”. The notion of stakeholders is not defined nor the process to identify them.  

The judge noted that, however, the legislator explicitly expressed its intention that the vigilance plan should be drawn up as part of a process of co-construction and dialogue between companies and their stakeholders. According to the judge, the formal notice mechanism is the expression of such collaborative process, the only purpose of a formal notice being to allow companies to comply with their obligations within a framework of dialogue. Additionally, the formal notice must be sufficiently precise in order to identify breaches in the vigilance plan and allow the out-of-court negotiation phase prior to referral to a court. Therefore, sending a formal notice is a necessary precondition for the issuing of an injunction by a court.

The judge then recalled the powers of an interim relief judge. While it is within its power to issue an injunction when companies have not established a vigilance plan or when the brief nature of the headings amounts to the non-existence of the plan or when the plan is obviously unlawful, the assessment of the reasonableness of due diligence measures falls outside of his powers.     

Lastly, the judge ruled that the grievances and claims alleged in the 2019 formal notice were substantially different from those raised at the hearing, so that there were grounds for considering that the grievances relating to the 2021 vigilance plan had not been notified by the formal notice prior to referral to the court. The claim was therefore dismissed.

2. Suez case

Alleged human rights violation: In July 2019, the inhabitants of Osorno Chile were deprived of water for 10 days and a health alert was issued due to contamination of drinking water following an incident at Essal, a company controlled by Suez SA.

Proceedings and ruling

• [Suez SA, parent company of Suez group companies.]
• July 9, 2020: Formal notice sent to Suez group’s CEO regarding the 2019 vigilance plan. 
• June 11, 2021: Suez Groupe SAS sued in court by NGOs. Claimants demand the company to be compelled to publish within six months a new vigilance plan containing a mapping of all companies controlled by Suez, a mapping of risks relating to Suez’s activities in Chile, a prioritisation of these risks as well as the methodology used to do so and details mitigation and prevention measures.   
• [July 29, 2022: Suez Groupe SAS becomes Vigie Groupe.]
• April 11, 2023: Vigie Groupe argues (1) its does not have standing to defend, as it is not the author of the vigilance plan, (2) the lack of formal notice regarding the 2021 vigilance plan, (3) the lack of claimants standing.
• April 12, 2023: Hearing

In a ruling issued on June 1, 2023, the judge dismissed NGOs’ claims.  

On whether Vigie Groupe had standing to defend, the judge found that (1) the vigilance plan did not mention which company of the Suez group was its author – was it Suez Groupe SAS or Suez SA? – and (2) the fact that someone from Suez Groupe SAS responded to the formal notice did not mean that Suez Groupe SAS was the author of the vigilance plan. Therefore, Vigie Groupe, as successor in title to Suez Groupe SAS did not have standing to defend.

Then, regarding the lack of formal notice, the judge’s interpretation was similar to that in the TotalEnergies case. Indeed, the judge found that any legal action brought against a company must be preceded by a formal notice in order to allow a dialogue between the parties on the establishment of the vigilance plan. Although the judge noted that the law does not explicitly state that the formal notice and the subpoena must referred to the same vigilance plan, the judge considered that it must be the case, as the content of a plan may evolve depending on company’s activities, facts on the ground and consultations with affected stakeholders. Moreover, if the formal notice does not relate to the vigilance plan that is subject of the subpoena, the latter is issued without any prior discussion between the parties.

In this case, the formal notice related to the 2019 vigilance plan while the subpoena to the 2021 one. Even if allegations of non-compliance made in the formal notice also applied to the 2021 plan, a new formal notice relating to the 2021 plan was required. The claim was therefore dismissed.

A flawed interpretation of the legislator’s intention

In both cases, judges referred to the legislator’s intention to establish consultation between the company responsible for drawing up the vigilance plan and stakeholders who may be affected by its activities to consider that the aim of the formal notice mechanism is to allow dialogue between parties and that the absence of dialogue prevents legal action.

While judges rightly noted that the vigilance plan should be drawn up in association with stakeholders, their overall interpretation of the law is flawed.  

When defining the notion of vigilance plan, the legislator referred to the UN Guiding Principles on Business and Human Rights (UNGPs) and notably Principle 17 on human rights due diligence to explain the concept of due diligence measures contained in a plan (see preliminary work report on the first draft of the law). Under the UNGPs stakeholder engagement is a core element of each step of human rights due diligence. This is reflected in the law which states that “the plan is intended to be drawn up in association with the stakeholders of the company”.  

While companies should collaborate with stakeholders to determine and implement due diligence measures, it cannot be said that the formal notice mechanism is a mean to allow dialogue between companies and their stakeholders nor that it introduces a compulsory phase of dialogue and discussion between parties prior to an injunction.

Formalising a delay in the fulfilment of an obligation, a formal notice is a legal act designed to incentivise a debtor to comply with its obligations within a specific timeframe by threatening a penalty in case of non-compliance. It does not appear from legislative debates that the legislator intended to give a new objective to the formal notice than the traditional one, i.e., put pressure on companies. The first draft of the law stated that any person with an interest may ask the court to order the company, to comply with its obligations, if necessary under a fine. The formal notice mechanism was introduced in the draft at a late stage (3^rd reading) and was not the subject of any specific debate on a potentially different purpose.

What was undeniably the intention of the legislator was to improve corporate accountability and remediation for victims (see the explanatory statement of the first draft of the law). By requiring a formal notice per vigilance plan on the pretext of guaranteeing dialogue between parties, judges are undermining the impact of the law. In fact, considering the average time it takes courts to reach a decision, it is without a doubt that courts won’t be able to rule on claims before a new vigilance plan is published.

Furthermore, it is regrettable to consider the absence of indication on the author of the vigilance plan (which company among a group company) is a reason for concluding that the defendant does not have standing to defend. Instead of being considered as a breach of the company’s obligation, such omission constitutes an additional obstacle to claimants’ access to justice.  

Conclusion

One could argue that French judges are in a way reversing the burden of ensuring dialogue.

As pointed out by a 2022 legislative report assessing the law, too often companies do not engage with their stakeholders when drawing up their vigilance plan (and when they do interact with stakeholders, it is only to inform them rather than to collaborate), but according to judges claimants should send a formal notice per plan to ensure dialogue. A rather ludicrous situation.  

Disclaimer: The author worked one year in one of the companies mentioned but was not involved in any way in the handling of the case.