Analysis
14 July 2017

Duty of care of parent and contracting companies law

Bastille Day Newsletter 2017 - Legislative Updates

 

The idea for this text stems from the necessity to adapt “the legal framework to the new reality of globalization” after the Rana Plaza disaster on April 24, 2013.

According to the authors of the bill filed at the National Assembly on February 11, 2015, the aim of this text is to give more responsibilities to “transnational companies in order to prevent the occurrence of disasters in France and abroad and to obtain reparation for the victims in case of violations of human rights and environmental damage”.

Obligation for parent and contracting companies to implement a monitoring program

Companies which have their registered office in France and which, at the end of two fiscal years employ at least 5000 people within the company and their French subsidiaries or employ at least 10 000 people within the company and their French and foreign subsidiaries, have the obligation to implement a monitoring program.

The law also aims at subsidiaries or controlled companies which exceed the thresholds mentioned as soon as the company which controls them implements and executes a monitoring program on the activities of the company and the activities of all of its subsidiaries or controlled companies.

This program includes reasonable monitoring measures allowing the identification of risks and the prevention of severe violations of human rights and fundamental freedoms, damage to the health and security of individuals or to the environment resulting from the activities of the company, the activities of the companies it controls as well as subcontractors and suppliers with whom these companies have an established commercial relationship.

Among these monitoring measures, the following are cited:

  • Risk mapping aimed at identification, analysis and prioritization of risks
  • Regular evaluation procedure of the situation of subsidiaries, subcontractors or suppliers with whom an established commercial relationship is maintained
  • Actions for risk mitigation or prevention of several violations
  • A mechanism for warning and collection of reports relating to the existence or the realization of risks established in coordination with the company’s representative labor organizations.
  • A mechanism allowing the monitoring of measures implemented and the evaluation of their efficiency

This program is now part of the business report mentioned in Article L225-102-1 of the Commercial Code.

Removal of the fine provision by the Constitutional Council

Initially, the text provided that a company which would violate this obligation could be ordered to respect them after a formal notice and that it could be sentenced to pay a civil fine of 10 million euros.

This possibility of issuing a fine was rejected by the Constitutional Council in its decision dated March 23, 2017 since the terms of the obligation imposed to the company was not defined in sufficiently clear and precise terms.

Henceforth, in case of non-compliance with the duty of care, the company may be receiving formal notice to comply with the obligations set forth in this law. If the company does not comply with its obligations within three months from the receipt of the notice, the competent court may, at the request of a person having a legitimate interest in this regard, order the company to respect its obligations under financial compulsion.

The law also provides that any person who can establish a legitimate interest in this regard may take action against the company in order to obtain compensation of the damage that compliance with its obligations could have helped to avoid.

Commentators have regarded this new possibility as a new type of vicarious liability. However, it should be noted that the existence of a direct causal link between the infringements and the damage remains a condition to hold the parent company liable. Still, under this new law, a parent or a contracting company may be held liable for a damage which first originated in the acts of one of its subsidiaries as soon as its failure to implement a monitoring program is a direct cause of the damage.

Related content

Analysis
Proposition Loi Gauvain
20 October 2021
Analysis of the bill to reinforce the fight against corruption by Deputy Gauvain
Navacelle team has examined the “Bill to reinforce the fight against corruption” which has just been submitted by the Deputy Raphaël Gauvain at the National Assembly...
Julie Zorrilla
Partner Navacelle
Alexandre Coudreau
Student Sciences Po
Salomé Garnier
Associate Navacelle
News
19 October 2021
New decision in the jurisprudential saga in the field of arbitration and corruption
Navacelle team would like to inform you of a new decision in the jurisprudential saga in the field of arbitration and corruption.
Salomé Garnier
Associate Navacelle
Events
14 October 2021
The French criminal procedural law
Thomas Lapierre, associate at Navacelle presents the main elements of the French criminal procedural law for #LAWYEREX by European Lawyers Foundation.
Thomas Lapierre
Associate Navacelle
News
5 October 2021
Report of the Independent Commission on Sexual Abuse in the French Church
After two and a half years of work, the CIASE has submitted its report with the aim of understanding and analysing situations of sexual abuse of minors in the Catholic Fr...
Events
29 September 2021
Paris Legal Makers 2021
The first Paris Legal Makers conference dedicated to economic development through law will take place on 6 December 2021 at the Palais Brongniart.
News
27 September 2021
Update of French Financial Market Regulator (AMF) of its control charters (in French)
This update specifies the procedures for carrying out control missions, the principles of good conduct followed by those in charge of a control as well as the behavior ex...
News
27 September 2021
Update of French Financial Market Regulator (AMF) of its investigation charters (in French)
This update specifies the procedures for carrying out investigation missions, the principles of good conduct followed by those in charge of an investigation as well as th...
News
16 September 2021
The French DPA (“Convention judiciaire d’intérêt public”) on the way to simplification
On 4 August 2021, a new Decree was promulgated aiming to simplify formalities required for the conclusion of the CJIP between Public Prosecutors Office and the legal pers...
Julie Zorrilla
Partner Navacelle
Louis Beltaire
Trainee lawyer
Alexandre Desevedavy
Trainee lawyer
Salomé Garnier
Associate Navacelle
Publication
3 September 2021
The European Parliament Lays the Foundations of a Corporate Due Diligence and Corporate Accountability
Julie Zorrilla, Thomas Lapierre and Stéphane de Navacelle, highlight for the International Bar Association anticorrpution news, the adoption on 10 March 2021 by the Memb...
Stéphane de Navacelle
Managing partner Navacelle
Julie Zorrilla
Partner Navacelle
Thomas Lapierre
Associate Navacelle
Publication
20 August 2021
It’s not an “ego fight”: The do’s and don’ts of monitorships
Experts from around the world discuss what authorities, companies and monitors should do to ensure that a period of compliance oversight ends successfully. “the quality...
Julie Zorrilla
Partner Navacelle
Adam Dobrik
Journalist
Analysis
14 July 2021
The in-house attorney status in France: a bygone idea or an emerging one?
Bastille Day Newsletter 2021 - Legislative, Regulatory & Policy Updates
Publication
14 July 2021
Bastille Day Newsletter 2021
Happy 2021 Bastille Day! Lawyers at Navacelle thought you might be interested in reviewing a selection we made of noticeable events which occurred in France in the fiel...
Stéphane de Navacelle
Managing partner Navacelle
Julie Zorrilla
Partner Navacelle
Clémentine Duverne
Partner Navacelle