STUDY LABOUR AND SOCIAL JUSTICE COMPANIES AND HUMAN RIGHTS A Global Comparison of Legal Due Diligence Obligations Robert Grabosch April 2020 This study illustrates many countries have unilaterally de­ veloped varying theories in sup­ port of their efforts to regulate corporate due diligence in hu­ man rights. Most of those the­ ories have been limited to the­ matic or regional approaches. Many of the laws have ex­ traterritorial effects. These laws apply to foreign compa­ nies doing business in their country, own a branch or sub­ sidiary in their country or are listed on their country’s do­ mestic stock exchange. Civil society and labor unions exert influence on the devel­ opment of regulatory require­ ments. Whenever legislation was passed without consider­ ing the interests of these par­ ties, doubts have arisen and many questions remain.

LABOUR AND SOCIAL JUSTICE COMPANIES AND HUMAN RIGHTS A Global Comparison of Legal Due Diligence Obligations

Contents INTRODUCTION................................................................ 3 SUMMARY 4 I COUNTRY COMPARISON 6 II COUNTRY REPORTS 12 1. USA: Dodd-Frank Act and Conflict Minerals ............................................... 12 2. California Transparency in Supply Chains Act .............................................. 18 3. EU: European Timber Regulation ............................................................... 22 4. UK Modern Slavery Act 2015 ................................................................... 24 5. France: Loi De Vigilance(Corporate Duty of Vigilance Law) ............................ 30 6. EU CSR Reporting Directive ...................................................................... 38 7. Australia: Modern Slavery Act 2018 ........................................................... 41 8. Netherlands: Wet Zorgplicht Kinderarbeid(Child Labor Regulation) ................ 43  Konzernverantwortungsinitiative (Responsibility Initiative For Corporate Groups) ............................................ 47  ustria: Entwurf eines Sozialverantwortungsgesetzes für die Textilbranche (Draft Bill For A Social Responsibility Law For The Textile Industry) .................. 52 11. EU Conflict Minerals Regulation ................................................................. 55 Abbreviations ............................................................................................. 58

Introduction INTRODUCTION The German government passed the National Action Plan on Business and Human Rights(NAP) on December 21, 2016. The NAP addresses the government’s expectations for all companies to implement human rights due diligence in their business operations by the year 2020. The purpose of the plan is to work towards sustainable supply chains and for Germany to live up to its global human rights responsi­ bility. The German government established a timeline and monitoring activity to determine whether 50 percent of companies with over 500 employees have established and implemented human rights due diligence processes by the year 2020. If this target is missed, the Federal government will consider further action, which may include legislative measures. In 2020, an encompassing report will assess over­ all NAP implementation by all stakeholders, including the government. Therefore, 2020 holds significant importance not only for Germany, but also for the whole of the Europe­ an Union(EU). Germany will hold the EU Council Presidency in the second half of 2020 and will add the subject of sus­ tainable supply chains to the political agenda. The question how to make supply chains more sustainable, both socially and ecologically, has been discussed more pub­ licly in the past few years. This discussion has centered on avoiding corporate human rights violations and if they do happen, how to provide affected individuals with a mecha­ nism to effectuate their rights. The OECD has published var­ ious corporate guidelines for specific industries trying to give concrete answers to the question of how to develop practical steps out of the technical term due diligence(ex. OECD General Due Diligence Guidance 2018). For example, the initiative ACT(Action, Collaboration, Transformation) was founded with the goal of implementing collecting bar­ gaining in the textile industry in order to enforce living wag­ es in producing countries. There are many other examples for similar actions that focus on sustainable supply chains. The question whether voluntary or mandatory regulations are effective tools to prevent human rights violations in global production networks has been the subject of conten­ tious debates. Human rights regulation of the economy is nothing fundamentally new. Already in 2002, a regulatory certification system for blood diamonds was established in Europe, taking into account the Kimberley Treaty. When the United Nations passed the UN Guidelines for Economy and Human Rights in 2011, the trend towards passing laws to define and enforce due diligence noticeably gained momen­ tum. Legislatures are not afraid to pursue extraterritorial ap­ plication of their laws. These laws do not concern only for­ eign fact situations. They also concern domestic and foreign companies. The author also includes his observations about the efficacy of regulations. A survey of regulatory efficacy will be the subject of a future comparative study which will explore this issue in greater depth. This study serves as an introduction to(inter)national regula­ tory approaches which focus on sustainable supply chains. There is a range of different regulatory approaches. One ap­ proach may consist of exploring various forms of human rights violations(prohibition of child labor, prohibition of modern slavery, etc.), another approach may attempt to ad­ dress particular activities in a particular region(see DoddFrank Act, USA) to prevent human rights violations at least in a defined location. The author, Robert Grabosch of Schweiz­ er Legal, introduces eleven government approaches and pro­ vides a helpful summary in the first part of his study, outlin­ ing trends and tips relating to the current development. The study shall to be continued over the next few years so that it also takes into account current developments and other regulatory measures. Frederike Boll 3

FRIEDRICH-EBERT-STIFTUNG – COMPANIES AND HUMAN RIGHTS SUMMARY This survey concludes that countries have followed individu­ al paths when regulating human rights due diligence obliga­ tions. Countries often have limited themselves to special themes or particular regions of application. Even though due diligence obligations are essentially identical, countries have framed and defined due diligence obligations in differ­ ent ways. Considering this patchwork law practitioners face the challenge to understand and comply with requirements of foreign legal systems. A transnational legal harmoniza­ tion, especially of the core elements of due diligence, would bring relief to all participants. Framers are advised to pay at­ tention to a wise combination of voluntary initiatives and mandatory requirements, both at national and transnation­ al levels. Highlights of important findings are: › due diligence obligations combined with enforcement/liability provisions seem to be most ef­ fective. › EU government approach consisting of authori­ zation decisions and monetary penalties is also effec­ tive. In cases of purely environmental damage, fines issued by public authorities are indispensable. › imposing reporting duties to protect consum­ ers, investors and shareholders has proved a weak measure. › effectiveness of CSR rules has resulted from combining CSR duties with corresponding CSR rules in procurement law. –– Many of these laws provide for extraterritorial applica­ tion. They apply to foreign companies who do busi­ ness in the country, maintain a branch office, own a subsidiary or are listed on a domestic stock exchange. Typically, due diligence requirements extend beyond national borders. Legislative developments in the area of human rights continue to demand extraterritorial application of human rights laws just as laws to pre­ vent corruption and money laundering have demand­ ed extraterritorial application. 1 –– The specifications for due diligence requirements in the different laws are similar in content. They are also similar to the requirements contained in the UN Guide­ lines for Economy and Human Rights which were unanimously passed by the Human Rights Council of the United Nations in 2011. The UN guidelines offer a good starting point for legislatures in many countries. They should serve to fill gaps without imposing any­ thing new on companies. –– The regulatory approach employed by legislatures var­ ies: 2 1 USA: Foreign Corrupt Practices Act of 1977, 15 U.S.C.§§ 78dd-1 et seq; U.K: Bribery Act 2010, Sec. 23. 2 See de Schutter(2012): Human Rights Due Diligence: The Role of States, also references due diligence in public procurement law and foreign trade promotion, issues which were not examined here. –– Civil societies and labor unions play a decisive role in many regulatory systems. Whenever legislation was passed without consideration for the interests of these parties, doubts have arisen and open questions re­ mained whether these laws are even feasible(UK Mod­ ern Slavery Act, MSA). Specifications of legal terms are sometimes left to multi stakeholder initiatives and their industry-specific interests. Companies and interest groups have the opportunity to participate in the de­ velopment of legal certainty(Wet Zorgplicht Kinderarbeid). Sometimes legislatures demand that corpora­ tions collaborate with unions and other interest groups when developing specific due diligence plans. Prelimi­ nary legal suggestions serve to encourage the parties to find specific solutions which satisfy diverse perspec­ tives(Loi de Vigilance). Sometimes legislatures burden non-governmental organizations(NGOs) with the duty not only to collect, but also to evaluate, compare and publicize sustainability reports from companies(UK MSA, Corporate Social Responsibility(CSR) EU Guide­ line). Regarding issues that are particularly complex, statutory regulations can only be one component of a multi-faceted approach that should also involve initia­ tives from the business community, government, un­ ions and non-governmental organizations. For instance the EU Conflict Minerals Regulation taps into the great potential that rests in civil society. Legislators should generally consider a potential interplay between regu­ lation and voluntary initiatives. 4

Summary –– The interest of human beings who need to be protect­ ed should be at the center of all solutions. Ascertaining actual events in foreign countries and international liti­ gation are difficult and expensive. If victims who carry the burden of proof cannot access corporate docu­ ments, they are not protected. –– The question whether a multi-level legal approach(for ex. on a national and transnational EU level) is hinder­ ing the development of laws at the higher level has been posed. The experience of Australia indicates that this is not the case. Development of the MSA 2018 in New South Wales furthered the development of the Modern Slavery Act 2018 for the Commonwealth of Australia. –– Typically, legislatures face certain trade-offs. A law is supposed to define all expectations clearly, be opera­ tional and provide legal certainty. Overly bureaucratic drafting of rules is wasteful. The law must be carefully worded to address various fact situations and to allow for future development. Ambiguous clauses which can be interpreted one way or another are to be avoided. The recommendations for German and European leg­ islatures, in light of the laws reviewed, are as follows: › scope of application, purpose and enforcement must be clearly defined. › use of general legal terms, such as»reasonable measures«(Loi de Vigilance) is prudent because it al­ lows law practitioners to reflect on the meaning and purpose of the law and then to develop suitable solu­ tions. It is generally known that parties more willing­ ly accept solutions that they have a stake in. › texts that contain presumptive examples(Regelbeispiele) provide clear ideas of what companies are expected to do while also maintaining flexibility: under normal circumstances it is sufficient to follow presumptive examples whereas in atypical cases com­ panies must apply other measures. › law may provide specifications by referencing ex­ isting guidelines or demanding that the legislature collaborate with interest groups when drafting a due diligence plan, regularly reviewing the plan and fur­ ther reworking the plan. › should not only relate to the operation­ al level, but also refer to corporate culture, the tone from the top and the organizational structure(per­ sonal and task assignment). –– Laws need to be reassessed regularly. A purpose/strate­ gy section which defines the intended short-term out­ comes and long-term effects of the legislation is help­ ful. It must be clear whether a legislature desired an impact(ex.: to reduce the severity or frequency of hu­ man rights violations), an improvement of actual due 5 diligence or an improvement of a particular output(ex.: to receive better reports). Legislators have often failed when they left the framing of these issues to private organizations, avoiding discussion and research.

I COUNTRY COMPARISON start FRIEDRICH-EBERT-STIFTUNG – COMPANIES AND HUMAN RIGHTS CALIFORNIA Transparency in Supply Chains Act 2012 Slavery and human trafficking in supply chains worldwide subject start USA Dodd-Frank Act, Section 1502 2013(first reporting period) Financing of violent conflicts in the DRC or adjoining countries, Great Lakes Region, Africa by trading in tin, tungsten, coltan and gold subject start subject AUSTRALIA Modern Slavery Act 2018 2019 • Slavery, acts similar to slavery and human trafficking as well as • child labor worldwide 6

start subject Country Comparison NETHERLANDS Child Labor Due Diligence Act January 1, 2020 at the earliest Child labor in supply chains worldwide subject start SWITZERLAND Responsible Business Initiative 2020 at the earliest Success of initiative still uncertain • Internationally recognized human rights and • international environmental standards world wide AUSTRIA Social Responsibility Act uncertain(bill not passed yet) start start subject subject start UK Modern Slavery Act 2015 Business years ending after March 31, 2016 Slavery, human trafficking, servitude, forced and compulsory labor world wide FRANCE Corporate Duty of Vigilance Law Duty of vigilance: March 28, 2017; duty to report: following the first busi ness year thereafter • human rights and basic rights; • health and safety of workers and • environment worldwide EU Conflict Minerals Regulation subject start subject subject start Forced and child labor in the production and supply chains of footwear and textiles worldwide EU Timber Regulation 2013 Timber from illegal logging worldwide(which often destroys livelihoods, often in violent conflicts) EU CSR Reporting Directive 2017 • Environmental concerns; • social issues; • workers‘ concerns; • human rights; • corruption and bribery start 2021 subject Financing violent conflicts by pur chasing tin, tungsten, coltan and gold(conflict minerals) worldwide. 7

FRIEDRICH-EBERT-STIFTUNG – COMPANIES AND HUMAN RIGHTS Table 1 Country Comparison USA 🇲 CALIFORNIA EU 🇺 UK 🇧 FRANCE 🇷 Dodd-Frank Act and Conflict Minerals Transparency in Supply Chains Act Timber Regulation Modern Slavery Act 2015 Loi de Vigilance: Monitoring/Reporting Effective since 2010 January 1, 2012 March 3, 2013 Accounting year which ends after March 31, 2016 For Monitoring duty: March 28, 2017 For Reporting duty: At the end of the first accounting year Theme Financing of violent conflict in DRC, Great Lakes region, Africa, through mining of tin, tungsten, tantalum and gold(conflict minerals) Slavery and human trafficking in supply chains worldwide Avoidance of illegal timber harvesting worldwide. Preservation of living conditions, avoidance of violent conflicts. Slavery, servitude, forced labor, human trafficking worldwide Human rights and basic rights, health, safety, the environment worldwide All companies listed on a US stock exchange must in­ vestigate whether tin, tung­ sten, tantalum or gold are used in the supply chain. If so, they are subject to ad­ ditional duties(see below) Companies with annual gross receipts in excess of $ 100 million, if their main business is retail or manu­ facturing and they do busi­ ness in California, i. e. either have substantial earnings or own assets in California. Residency is irrelevant. Companies who im­ port timber or timber products into the EU, and other down-stream merchants. Size of company and presence in the EU are irrelevant. Domestic and foreign companies doing business in the U.K. who have total annual gross receipts of over£ 36 million. French stock corporation (SA) with over 5,000 employees, including controlled subsidiaries, in France, or over 10,000 employees worldwide. Possibly applies to other corporate structures. Scope of Application Duties Careful investigation and reporting: Do the minerals stem from recycled mate­ rials or at least not from the DRC or neighboring countries? If so, reporting is only required as to the investigation into origin and the resulting findings. If suspicions exist as to the origin, a more stringent investigation is neces­ sary and the report must disclose whether the minerals were acquired from violent groups. The SEC is authorized to determine that certain due diligence measures are deficient. Reports which are based on insufficient measures will be rated as deficient. Publication on company website. The following 5 aspects must be addressed: 1. erification of supply chain 2. Supplier audits 3. Certifications 4. and how employees and contract partners are held liable if they do not observe company guidelines 5. Training of employees No mandatory min­ imum requirements as to due diligence Whoever places timber on the market must observe due diligence: 1. about the timber, suppliers and proof of legality must be available 2. assessment process 3. Measures to reduce risk Due diligence may be outsourced to 3 rd party monitoring entities, if these are recognized by the EU Commission. Merchants must be able to name all market participants and dealers and immediate custom­ ers in the total supply chain. Information must be kept for 5 years. Companies must provide the public with annual re­ ports about their measures. The Act names 6 aspects to be referenced: (a) structure, business and supply chains (b) ompany guidelines (c) due diligence procedure (d) of business, supply chains and risks and measures (e) of measures (f) of employees No mandatory mini­ mum requirement as to due diligence Monitoring plan for risks related to com­ pany activity and controlled subsidiaries, also contractors and suppliers in long-term business relationships. 1. isk registry, incl. identification, ana­lysis and prioriti­ zation of risks 2. of subsidiaries, contrac­ tors and suppliers 3. Prevention 4. blower provisions 5. ontrolling and Monitoring Develop monitoring plan together with interest groups, possibly via multi-­ stakeholder initiatives. Implement monitoring plan effectively and pub­ lish in annual reports. 8

Country Comparison EU 🇺 CSR Reporting Duties 2017 AUSTRALIA 🇺 NETHERLANDS 🇱 SWITZERLAND 🇭 AUSTRIA 🇹 EU 🇺 Modern Slavery Act 2018 Wet Zorgplicht Kinderarbeid (Child Labor) Swiss Corporate Initiative Social Responsibility Law Conflict ­Minerals Regulation January 1, 2019 Reporting duty prob­ ably will be effective on July 1, 2019 Pending, earliest date is 2020 Decree is pending Pending, earliest date is 2020 Success of initiative is questionable Pending, was planned for Jan. 1, 2019, not passed yet 1.1.2021 Environment, social concerns, workers’ concerns, corruption and bribery worldwide Slavery, slavery-like action, human trafficking(Ref. to Australian criminal law), child labor under ILO-182 worldwide Consumer protection, information about due diligence against child labor(ILO 138 AND 182) worldwide Internationally recognized human rights and interna­ tional environmental standards worldwide Forced labor and child labor in production / supply chains for shoes and textiles worldwide Financing violent conflicts through tin, tungsten, tantalum and gold(conflict minerals) worldwide Capital market orient­ ed companies with over 500 employees and balance sheet total over€ 20 million or over€ 40 million sales revenue Out of est. 11,200 large German compa­ nies about 536 com­ panies are affected. Companies and organ­ izations with over 100 million Australian Dol­ lar in sales and head­ quarters or branch in Australia. Probably also applies to other com­ panies doing business in Australia(especially if active in financial markets) and the Aus­ tralian government. All domestic and for­ eign companies who sell goods or services to Dutch consumers. Exempt are transporta­ tion companies. Also, exceptions possibly for certain categories of companies(likely depending on size) Companies headquar­ tered or having main branch office in Swit­ zerland, SMEs with low risks may be exempt. Additional limitations are possible, see counter proposal of National Council All mid-size and large companies(under Austrian law) with its seat, main adminis­ tration, main branch or branch office in Austria, if they import or sell shoes or textiles Any company world­ wide who declares for import into the EU, or causes another com­ pany to declare for im­ port, a certain amount of conflict minerals (between 100 kg and several tons per year) Yearly reports a) busi­ ness model b) oncepts, incl. due diligence processes(»comply or explain«) c) Concept results d) ssential risks related to company business activity which are expected to have negative consequences, and measures to reduce risk e) indicators Report about modern forms of slavery a) name b) ompany structure, business processes and supply chains c) of modern slavery in busi­ ness processes, supply chains and controlled entities d) isk assessment and risk manage­ ment, due diligence and restitution e) valuation of effi­ cacy of measures f) onsultation process within the company g) information deemed relevant Companies must pub­ licly report within ­ six months from effective date that they apply suitable due diligence against child labor. Further details are not required. Requirements for suitable due diligence: Examination if there is a reasonable suspicion of child labor, poss. development of action plan for total supply chain(ILO-IOE Child Labor Guidance tool), reference to government initiated industry-specific MSI Due diligence duty, risk identification, prevention and reme­ dies, public reporting Affects economically controlled companies and total supply chain National Council coun­ ter proposal contains provisions relating to appropriateness, prior­ itization, limitations as to potential influence and reference to international due diligence frame work Due diligence duty: importers must perform risk assess­ ment, potentially take counter-measures and keep documentation for 5 years. Suitability of risk assessment depends on: – and sector specific risks; – and prob­ ability of poten­ tial violations; – of production and supply chain; – of import company; – and direct­ ness of measure; – for influence; – indications of violations, then deeper analysis; – must only name the importer Due diligence duties under OECD Due Diligence Guidance Mineral Sourcing. – publish management system, supply chain policy and insert in contract. Assure compliance by assigning compliance officer. Complaint mechanism and early warning system and traceability system; – management: explore risk, assess and minimize risk; – Audits; – of audits to agencies and annual; reports about strategy and processes 9

Enforcement FRIEDRICH-EBERT-STIFTUNG – COMPANIES AND HUMAN RIGHTS USA 🇲 CALIFORNIA EU 🇺 UK 🇧 FRANCE 🇷 Section 1502 Dodd-Frank Act Transparency in Supply Chains Act Timber Regulation Modern Slavery Act 2015 Loi de Vigilance: Monitoring / Reporting SEC: monetary penalties Shareholders’ litigation for damages, if incorrect information is published Maryland and California: exclusion from public procurement bids Public: Damage to reputation, lower company stock values California Attorney General(AG) receives from tax office annual list of companies sub­ ject to reporting duty AG may file a court action for injunctive relief to obtain correct­ ed report, enforceable with monetary penalty Damage to Reputation Potential liability under consumer protection laws EU member states must equip their agencies with effective sanction measures: in Germa­ ny sanctions consist of fines, prison sentences or monetary penalties. Governmental controls, guided by risk prob­ abilities, may collect samples on location. Companies must cooperate. Secretary of State may apply to High Court for an order forcing company to issue a declaration. Order is enforced via fines (unlimited amount). Damage to Reputation Liability of German management personnel (§93 AktG,§43 GmbHG) for damages, if viola­ tion of reporting duty Civil liability for damages Each organization and person with a legitimate interest may apply to the courts for an order to have monitoring duties enforced. Courts may order fines, including recurrent fines for future violations. Damage to Reputation US Secretary of State: strategy, recommendations for Congress and for com­ panies; also cartographical images related to conflict minerals issues on website US Government(GAO): annual report about violent conflicts and efficacy of reporting duties US Department of Com­ merce: Annual recommen­ dations for reliability of audits and other due dili­ gence measures, publica­ tion of list of processors of conflict minerals worldwide California Attorney General: Guidelines California has already included prevention of slavery and human trafficking as themes in criminal statutes and other laws pertaining to victims EU Commission, dated Feb. 12, 2016: Guide­ lines for recognition of monitoring organizations and revocation of mon­ itoring organizations. UK Secretary of State: Guidelines Extensive, additional provisions addressing criminal acts, judicial preventative measures, Anti-Slavery Commis­ sioner, victim protection, especially assistance with court expenses and cost of legal representation Council of State: may demand via decree that additional due diligence requirements are to be fulfilled (currently not planned) The Council of Economy (Conseil Général de l’Êconomie) composes, commissioned by the Minister of Economy and the Minister of Finance, a list of all companies which are covered by the law. Additional Sovereign Measures Assessment of the Law GAO: annual reports about violent conflicts and efficacy of reporting duty EU member states and EU Commission assess the implementation of the regulation every two years. The EU-Commission was tasked to perform an especially rigorous assessment In 2015 and every six years thereafter. Independent assessment of implementation, recom­ mendations for improve­ ment of the law and sup­plemental measures on be­ half of the Home Secretary (Report in May 2019) French Minister for Economy and Finance authorized the Council of Economy to perform an assessment of the first monitoring plans and reports via random sampling. The report is due in 2019. Assessment by the French Parliament in 2020 10

Country Comparison EU 🇺 AUSTRALIA 🇺 NETHERLANDS 🇱 SWITZERLAND 🇭 AUSTRIA 🇹 EU 🇺 CSR Reporting Duties Modern Slavery Act 2018 Wet Zorgplicht Kinderarbeid (Child Labor) Swiss Corporate Initiative Social Responsibility Law Conflict Minerals Regulation Supervisory Board must examine the report. Mostly they retain exter­ nal examiners. National govern­ment departments may impose fine, not over€ 10 million or less than 5 % of annual sales Reputation Reputation, public report registries, Home Secretary may publish reporting violations separately Regulatory authority: publishes declara­ tions in a registry (reputation); Follows up on tips about potential due diligence violations; Imposes fines of up to€ 820,000 or 10 % of annual sales; prison sentence for repeated violations Liability for subsidiaries and economically con­ trolled companies. Re­ lease from liability/no liability, if proof of due diligence by company The National Council counter proposal provides for limita­ tion of liability. Reputation Consumer protec­ tion organizations may demand: Submission of due diligence documents; File court action to de­ sist sales of products; File court action for disgorgement of company profits Government agencies examine documents and audit reports and conduct controls after the fact, on location. Effective implementa­ tion must be assured by all member states via sanctions. Agencies have to collaborate and share information. EU Commission guidelines for reporting(2017) Home Secretary published company guidelines in the summer of 2019. Home Secretary formed a department for business relation­ ships which supports companies dealing with modern slavery. Home Secretary issues annual report about implemen­ tation of MSA. Legislature of New South Wales passed their own MSA which also includes small companies; Anti-Slavery Commis­ sioner of New South Wales; Fines up to 1,1 million AUD Dutch government ini­ tiated 13 industry-spe­ cific round tables. Government funds to financially support company measures against child labor. Purpose clause of proposed Constitu­ tional Amendment contains demand that the government take measures to strength­ en respect for human rights and the environ­ ment by companies. Government creates a»fund for social responsibility of companies« to collect disgorgement profits from companies. Handbook of EU Com­ mission to determine risk and high-risk are­ as, includes list to be prepared by experts. List of responsi­ ble refineries and smelters worldwide Initiatives which assist companies with due diligence compliance may be recognized by EU Commission, following an applica­ tion by companies or interested persons. Respective application criteria were specified via regulation in 2019. EU Commission had to present to Parliament and Council a report about implementation and efficacy of the guideline in mem­ ber states prior to December 6, 2018. Review of reporting requirements and efficacy after 3 years. Possible supplemen­ tation of law with provisions for criminal action and fines. Minister for trade and development will report to Parliament within 5 years of the law’s effective date about efficacy and effects of the law in practice. EU Commission will examine 2 years after effective date of reg­ ulation how effective the regulation is and whether it needs to be improved, especially in regards to raw mate­ rials and whether due diligence for down­ stream companies also should be mandatory. 11

FRIEDRICH-EBERT-STIFTUNG – COMPANIES AND HUMAN RIGHTS II COUNTRY REPORTS 1. USA: DODD-FRANK ACT AND CONFLICT MINERALS U.S. Congress enacted the Dodd-Frank Wall Street Reform and Consumer Protection Act in 2010. 3 In response to the financial crisis of 2008, Congress members Chris Dodd and Barney Frank had introduced a comprehensive bill to re­ store financial markets. Dodd-Frank’s transparency duties were meant to stabilize the markets. 4 The legislature add­ ed certain Security Exchange Commission(SEC) rules in Dodd-Frank Section 1502 requiring the SEC to hold com­ panies responsible for disclosures about the origin of con­ flict minerals. Dodd-Frank became effective in 2010. In 2012, after a public consultation campaign, the SEC pub­ lished in a Final Rule, specifications of the due diligence re­ porting duty. 5 The first due diligence reports for calendar year 2013 were due to be filed not later than May 2014. 6 The purpose of the reporting duty is to lower the use of con­ flict minerals which stem from violent groups in the Democratic Republic of Congo(DRC) and adjoining countries in the Great Lakes region, Africa. 7 Dodd-Frank minerals are tin, tungsten, tantalum and gold. 8 They are especially valuable raw materials in the central region of Africa. When these min­ erals are mined in the DRC, it is likely that the revenue from the sale of the minerals is used to finance violent conflicts and to increase humanitarian suffering in the East of the country. Congress delegated additional tasks to prevent trade with conflict minerals to other government entities. The U.S. State Department prepared strategy recommendations for Congress and companies and maintains cartographic up­ dates on conflict minerals at their website. The General Accountability Office(GAO) issues annual reports about the development of violent conflicts and the efficacy of report­ 3 Eickenjäger 2017: p. 24. 4 Preamble of Dodd-Frank Wall Street Reform and Consumer Protec­ tion Acts(U.S. Act. H.R. 4173). 5 SEC Final Rule, p. 2, effective since November 13, 2012; contains SEC summary of stakeholder consultation. 6 Id. 7 Sec. 1502(e)(4)(A) Dodd-Frank Act; Sarfaty 2015: p. 422. Additional raw materials may be added as conflict materials by the Secretary of State under Sec. 1502(e)(4)(B). 8 Englisch: tin, tungsten, tantal and gold, often abbreviated as»3TG«. ing. The U.S. Department of Commerce issues annual rec­ ommendations concerning the reliability of audits and oth­ er due diligence duties, together with a list of all known processors of conflict minerals world-wide. Section 1502 is considered to represent part of a broader development from purely voluntary transnational corporate governance to a national supply chain legislation. 9 The re­ porting and due diligence duties have increased awareness of the problems related to conflict minerals and have caused companies to address solutions jointly and transparently in regional initiatives. 10 Still, it became noticeable that some companies did not substantially report their due diligence measures and were more likely to withdraw from conflict re­ gions instead of seeking to contract with conflict-free local partners. 11 Dodd-Frank has caused various U.S. government entities to develop strategies and competencies. Numerous initiatives address conflict minerals. The governments of twelve states in the Great Lakes region have founded an or­ ganization to establish peace in the region and to strength­ en governance structures in their region( International Conference on the Great Lakes Region, ICGLR). A regional initi­ ative offers companies practical support against illegal ex­ ploitation of national resources and for sustainable mining ( Regional Initiative against the illegal Exploitation of Natural Resources, RINR). The OECD published guidelines for mining in conflict regions. 12 Still, there have been repeated com­ plaints that necessary additional regulatory and political ini­ tiatives have not been implemented and that the actual con­ flicts in the Great Lakes region have not been conquered. 13 9 Sarfaty 2015: p. 420, lists as additional examples the Foreign Corrupt Practices Act, the Lacey Act and the California Transparency in Sup­ ply Chains Act. 10 Global Witness: 2017; Giller / Tost refer to blockchain-technology as a promising solution, Giller / Tost 2019: p. 240. 11 Giller / Tost speaks of a»de-facto trade embargo«, Giller / Tost 2019: p. 238; Lowe 2014: 1; Sarfaty 2015: p. 440, criticizes the law. 12 Küblböck / Pinter 2016. The Regional Initiative against the Illegal Exploitation of Natural Resources has been active since 2006. The Sec­ retary of the International Conference on the Great Lakes Region started work in 2007 in Burundi. The OECD published»Due Dili­ gence Guidance for Responsible Supply Chains of Minerals from Conflict-Affected and High-Risk Areas« in 2016, third edition. 13 70 Scientists in an open letter of September 9, 2014: https://suluhu. org/2014/09/09/conflict-minerals-an-open-letter/; s. also EurAc, a network of 38 organizations in the Great Lakes Region, EurAc: 2017; Sarfaty 2015: p. 423 and p. 440 w. addtl. references. 12

Country Reports The SEC estimated in 2012 that the costs of adjustment caused by new corporate business requirements would amount to three to four billion U.S. Dollar. 14 Management consultants issued a position statement in 2017 and found that this estimate was vastly exaggerated. They further not­ ed that companies saved money because of new initiatives and improved risk and compliance management. 15 SCOPE OF APPLICATION All companies world-wide who are listed on an U.S. stock exchange must comply with SEC reporting duties, includ­ ing the 343 German companies 16 who are listed in the U.S. These reporting duties now include the new Section 13(p) (2) of the Security Exchange Act(SEA) addressing conflict minerals. 17 All companies who use»conflict minerals which are necessary for the functionality or production of the products« must report the origin of the conflict minerals. This excludes minerals which are merely ancillary to the production process. 18 The company size does not matter. Products which are not produced by the company, but by business partners, are included. 19 Every company listed on a U.S. stock exchange, including German companies, must investigate whether they use tin, tungsten, tantalum or gold in their production. It is expected that companies de­ mand respective information from their suppliers to be able to comply with their reporting obligation. That means that suppliers are indirectly encouraged to observe the same due diligence in the mining of conflict minerals. 20 Companies are subject to additional special reporting re­ quirements when the minerals do not stem from recycling, but from new mining and if the mining location most like­ ly lies in a conflict region. When a company determines that conflict minerals do not matter in their supply chain they do not have to file reports. The SEC originally expected to receive 6,000 conflict min­ erals reports in 2014 and 2015. Actually only 1,300 reports were filed. 21 DUTIES Companies subject to reporting duties must report the or­ igin of conflict minerals used in production and must dis­ close which due diligence measures were taken when de­ termining the place of origin. The law imposes concrete re­ quirements in terms of what kind of due diligence meas­ ures are expected. The SEC and the U.S. Department of Commerce fill out these requirements by issuing regula­ tions and issuing guidelines on their websites. Dodd-Frank minerals are tin, tungsten, tantalum and gold: The U.S. Secretary of State 22 has the authority to add addi­ tional minerals which serve to finance DRC conflicts to the current list. 23 When examining their supply chains, companies must fol­ low these three steps: 24 1. They must determine whether the minerals are»nec­ essary for the functionality or production of the prod­ ucts«. 25 If not, no reporting is necessary(see above). The quantity of minerals is irrelevant. 2. They must determine the reasonable country of origin (RCO). The RCO inquiry(RCOI) has to be accomplished in a good faith manner and must provide for the abil­ ity to recognize conflict minerals from the region ver­ sus minerals from recycled materials. The SEC inten­ tionally did not explicitly define which specific meas­ ures a company must use when determining the ori­ gin, stating that the particular circumstances needed to be considered in this context. 26 When it can be as­ sumed that the minerals stem from recycled materials or are not from the conflict region, companies only need to report the products, the origin of the conflict minerals and their RCOI procedure on a reporting form. 3. If there are reasons to believe that conflict minerals do no stem from recycling, but are from the conflict re­ gion, companies must intensify the investigation. They must examine whether violent groups are financed by the earnings from conflict minerals. 27 Companies must choose a due diligence framework which is accepted either nationally or internationally when dealing with conflict minerals. Companies must file a conflict min­ erals report outlining the due diligence procedure, countries of origin, mines and smelting plants. This re­ port is to be attached to the reporting form(see# 2 above). If a company is unable to determine that a product is free of conflict minerals from the conflict re­ gion, it must list the product on the form. 28 14 SEC Final Rule, August 22, 2012, p.246. 15 ELM Sustainability Partners LLC 2017. 16 Sec. 13(p) Securities Exchange Act. 17 Data bank at www.sec.gov/cgi-bin/browse-edgar, visited on April 20, 2019. 18 SEC Final Rule 2012: p. 20. 19 Products are not included, if a company simply purchases a product and affixes its trade mark to the product, without having any influ­ ence on the production process. 20 Sarfaty 2015: p. 439. 21 Küblböck / Pinter 2017: p.10. 22 The function of the Secretary of State, currently Mike Pompeo, corre­ sponds with the function of a Minister for Foreign Affairs in Europe. 23 Sec. 1502(e)(4) Dodd-Frank Act. 24 SEC Final Rule, August 22, 2012: Step one p.40 et seq., Step two p.140 et seq., Step three p.166 et seq. 25 The SEC states that a mineral is not necessary for production if it no longer exists in the final product, SEC 2012: p. 22. 26 SEC Final Rule, August 22, 2012: p. 24. 27 Sarfaty 2015: p. 422. 28 SEC Final Rule, see above, p. 29. 13

FRIEDRICH-EBERT-STIFTUNG – COMPANIES AND HUMAN RIGHTS By referring to national and international conflict mineral frameworks for thorough due diligence, the SEC seeks to contribute to a qualitatively better due diligence, assure the comparability of reports, facilitate auditors’ reviews and reduce costs to companies. 29 The SEC has the authori­ ty to declare due diligence as insufficient and to evaluate those conflict minerals reports as deficient. 30 Companies must publish on their websites all SEC forms and reports which they file with the SEC. 31 violations of financial reporting duties. 38 Additionally, share­ holders can sue companies for damages, especially if shares have lost value when it is disclosed that reports contained incorrect information. 39 Insufficient reporting may impair the reputation of companies. California and Maryland have combined their public procurement law with reporting du­ ties under Dodd-Frank. Companies are excluded from bid­ ding for public contracts as long as they do not comply with reporting duties. 40 Initially the SEC required in the Final Rule of 2012 that com­ panies had to affirmatively report in step 3 that mining products were not used to finance violent groups(»DRC conflict free«) or that the products were not determined to be DRC conflict free. The SEC also initially required compa­ nies to contract with an auditing entity in order to obtain approval of their due diligence procedure and a verification that the due diligence report truthfully reflects the actual due diligence measures applied. 32 Any independent com­ pany was qualified to serve as auditor, if they committed to adhering to the quality standards of the U.S. Government Accountability Office(GAO) for audit reports. 33 In the first 2 to 4 years of the transition period the SEC was willing to tolerate that companies evaluated products as»DRC con­ flict undeterminable«. 34 A federal court of appeals ruled on April 14, 2014, prompt­ ed by the complaint of a trade organization, that the re­ quirement to classify products was unconstitutional, 35 that the First Amendment of the Constitution(»free speech«) preempted provisions which would force companies to classify their own products as required by the conflict min­ erals regulation. The SEC no longer requires explicit classi­ fication and audits. 36 On April 7, 2017 the SEC announced that they would no longer impose sanctions if a company does not implement measures under step 3. 37 ENFORCEMENT PROVISIONS If a company does not fulfill its reporting duties, the SEC is authorized to impose the same sanctions they impose for 29 SEC Final Rule, see above, p. 27. 30 Sec. 13(p)(1)(C) Securities Exchange Act, inserted via Sec. 1502(b) Dodd-Frank Act. 31 Dodd-Frank Act(2010) Sec. 1502(E); Sarfaty 2015: p. 438. 32 Sec. 13(p)(1)(A)(i) Securities Exchange Act. 33 SEC Final Rule, August 22, 2012: p. 28, referring to Government ­Auditing Standards(»the Yellow Book«) of the US Government Ac­ countability Office; Sarfaty 2015: p. 439. 34 The general transition period was 4 years and 2 years for small com­ panies; SEC 2012: p. 29. 35 National Association of Manufacturers, et al. v. SEC, et al., No. ­13-5252(D.C. Cir. April 14, 2014); see Sarfaty 2015: p. 441; Woody 2012: p. 1334 w. addtl. references. 36 SEC Statement on Effect of recent Court of Appeals Decision, April 29, 2014. 37 SEC Updated Statement, April 7, 2017. 38 Woody 2012: p. 1338 with additional references. 39 Sec. 18 Securities Exchange Act; see 15 U.S.C§ 78m(p)(1)(A)(i) and (ii), also Rule 10b-5; see discussion at Woody 2012: p.1337 et seq. 40 S.B. 861, 2011-12 Reg. Sess.(Cal. 2011); H.B. 425(Md. 2012); cited by Sarfaty 2015: p. 439. 14

Country Reports Text: Section 1502 Dodd-Frank Act (www.congress.gov/bill/111th-congress/house-bill/4173/text) (a) SENSE OF CONGRESS ON EXPLOITATION AND TRADE OF CONFLICT MINERALS ORIGINATING IN THE DEMOCRATIC REPUBLIC OF THE CONGO.—It is the sense of Congress that the exploitation and trade of conflict minerals originating in the Democratic Republic of the Congo is helping to finance conflict characterized by extreme levels of violence in the eastern Democratic Republic of the Congo, particularly sexual and gender based violence, and contributing to an emergency humanitarian situation therein, warranting the provisions of section 13(p) of the Securities Exchange Act of 1934, as added by subsection(b). (b) DISCLOSURE RELATING TO CONFLICT MINERALS ORIGINATING IN THE DEMOCRATIC REPUBLIC OF THE CONGO.—Section 13 of the Securities Exchange Act of 1934(15 U.S.C. 78m), as amended by this Act, is amended by adding at the end the following new subsection: (p) DISCLOSURES RELATING TO CONFLICT MINERALS ORIGINATING IN THE DEMOCRATIC REPUBLIC OF THE CONGO.— (1) REGULATIONS.— (2) PERSON DESCRIBED.—A person is described in this para­ graph if— (A) the person is required to file reports with the Commission pur­ suant to paragraph(1)(A); and (B) conflict minerals are necessary to the functionality or produc­ tion of a product manufactured by such person. (3) REVISIONS AND WAIVERS.—The Commission shall revise or temporarily waive the requirements described in paragraph(1) if the President transmits to the Commission a determination that— (A) such revision or waiver is in the national security interest of the United States and the President includes the reasons therefor; and (B) establishes a date, not later than 2 years after the initial publi­ cation of such exemption, on which such exemption shall expire. (A) IN GENERAL.—Not later than 270 days after the date of the en­ actment of this subsection, the Commission shall promulgate regu­ lations requiring any person described in paragraph(2) to disclose annually, beginning with the person’s first full fiscal year that be­ gins after the date of promulgation of such regulations, whether conflict minerals that are necessary as described in paragraph(2) (B), in the year for which such reporting is required, did originate in the Democratic Republic of the Congo or an adjoining country and, in cases in which such conflict minerals did originate in any such country, submit to the Commission a report that includes, with re­ spect to the period covered by the report— (i) a description of the measures taken by the person to exercise due diligence on the source and chain of custody of such minerals, which measures shall include an independent private sector audit of such report submitted through the Commission that is conducted in accordance with standards established by the Comptroller Gen­ eral of the United States, in accordance with rules promulgated by the Commission, in consultation with the Secretary of State; and (4) TERMINATION OF DISCLOSURE REQUIREMENTS.—The re­ quirements of paragraph(1) shall terminate on the date on which the President determines and certifies to the appropriate congres­ sional committees, but in no case earlier than the date that is one day after the end of the 5-year period beginning on the date of the enactment of this subsection, that no armed groups continue to be directly involved and benefitting from commercial activity involving conflict minerals. (5) DEFINITIONS.—For purposes of this subsection, the terms‘ad­ joining country’,‘appropriate congressional committees’,‘armed group’, and‘conflict mineral’ have the meaning given those terms under section 1502 of the Dodd-Frank Wall Street Reform and Con­ sumer Protection Act. (c) STRATEGY AND MAP TO ADDRESS LINKAGES BETWEEN CONFLICT MINERALS AND ARMED GROUPS.— (1) STRATEGY.— (ii) a description of the products manufactured or contracted to be manufactured that are not DRC conflict free(‘DRC conflict free’ is defined to mean the products that do not contain miner­ als that directly or indirectly finance or benefit armed groups in the Democratic Republic of the Congo or an adjoining country), the entity that conducted the independent private sector audit in accordance with clause(i), the facilities used to process the con­ flict minerals, the country of origin of the conflict minerals, and the efforts to determine the mine or location of origin with the greatest possible specificity. (B) CERTIFICATION.—The person submitting a report under subpar­ agraph(A) shall certify the audit described in clause(i) of such sub­ paragraph that is included in such report. Such a certified audit shall constitute a critical component of due diligence in establishing the source and chain of custody of such minerals. (A) IN GENERAL.—Not later than 180 days after the date of the enact­ ment of this Act, the Secretary of State, in consultation with the Ad­ ministrator of the United States Agency for International Development, shall submit to the appropriate congressional committees a strategy to address the linkages between human rights abuses, armed groups, mining of conflict minerals, and commercial products. (B) CONTENTS.—The strategy required by subparagraph(A) shall in­ clude the following— (i) A plan to promote peace and security in the Democratic Republic of the Congo by supporting efforts of the Government of the Dem­ ocratic Republic of the Congo, including the Ministry of Mines and other relevant agencies, adjoining countries, and the international community, in particular the United Nations Group of Experts on the Democratic Republic of Congo, to— (C) UNRELIABLE DETERMINATION.—If a report required to be sub­ mitted by a person under subparagraph(A) relies on a determination of an independent private sector audit, as described under subpara­ graph(A)(i), or other due diligence processes previously determined by the Commission to be unreliable, the report shall not satisfy the re­ quirements of the regulations promulgated under subparagraph(A)(i). (D) DRC CONFLICT FREE.—For purposes of this paragraph, a prod­ uct may be labeled as‘DRC conflict free’ if the product does not contain conflict minerals that directly or indirectly finance or ben­ efit armed groups in the Democratic Republic of the Congo or an adjoining country. (E) INFORMATION AVAILABLE TO THE PUBLIC.—Each person de­ scribed under paragraph(2) shall make available to the public on the Internet website of such person the information disclosed by such person under subparagraph(A). (I) monitor and stop commercial activities involving the natural re­ sources of the Democratic Republic of the Congo that contribute to the activities of armed groups and human rights violations in the Democratic Republic of the Congo; and (II) develop stronger governance and economic institutions that can facilitate and improve transparency in the cross-border trade involving the natural resources of the Democratic Republic of the Congo to reduce exploitation by armed groups and promote lo­ cal and regional development. (ii) A plan to provide guidance to commercial entities seeking to ex­ ercise due diligence on and formalize the origin and chain of custody of conflict minerals used in their products and on their suppliers to ensure that conflict minerals used in the products of such suppliers do not directly or indirectly finance armed conflict or result in labor or human rights violations. 15

FRIEDRICH-EBERT-STIFTUNG – COMPANIES AND HUMAN RIGHTS Text: Section 1502 Dodd-Frank Act (continuation) (iii) A description of punitive measures that could be taken against individuals or entities whose commercial activities are supporting armed groups and human rights violations in the Democratic Re­ public of the Congo. (II) whether such conflict minerals originate from the Democratic Republic of the Congo or an adjoining country. (ii) A person is described in this clause if— (2) MAP.— (A) IN GENERAL.—Not later than 180 days after the date of the en­ actment of this Act, the Secretary of State shall, in accordance with the recommendation of the United Nations Group of Experts on the Democratic Republic of the Congo in their December 2008 report— (I) the person is not required to file reports with the Securities and Exchange Commission pursuant to section 13(p)(1)(A) of the Se­ curities Exchange Act of 1934, as added by subsection(b); and (II) conflict minerals are necessary to the functionality or produc­ tion of a product manufactured by such person. (i) produce a map of mineral-rich zones, trade routes, and areas under the control of armed groups in the Democratic Republic of the Congo and adjoining countries based on data from multiple sources, including— (3) REPORT ON PRIVATE SECTOR AUDITING.—Not later than 30 months after the date of the enactment of this Act, and annually thereafter, the Secretary of Commerce shall submit to the appropriate congressional committees a report that includes the following: (I) the United Nations Group of Experts on the Democratic Re­ public of the Congo; (II) the Government of the Democratic Republic of the Congo, the governments of adjoining countries, and the governments of other Member States of the United Nations; and (A) An assessment of the accuracy of the independent private sector audits and other due diligence processes described under section 13(p) of the Securities Exchange Act of 1934. (B) Recommendations for the processes used to carry out such audits, including ways to— (III) local and international nongovernmental organizations; (i) improve the accuracy of such audits; and (ii) make such map available to the public; and (ii) establish standards of best practices. (iii) provide to the appropriate congressional committees an explan­ atory note describing the sources of information from which such map is based and the identification, where possible, of the armed groups or other forces in control of the mines depicted. (B) DESIGNATION.—The map required under subparagraph(A) shall be known as the‘‘Conflict Minerals Map’’, and mines located in areas under the control of armed groups in the Democratic Republic of the Congo and adjoining countries, as depicted on such Conflict Minerals Map, shall be known as‘‘Conflict Zone Mines’’. (C) UPDATES.—The Secretary of State shall update the map required under subparagraph(A) not less frequently than once every 180 days until the date on which the disclosure requirements under paragraph (1) of section 13(p) of the Securities Exchange Act of 1934, as added by subsection(b), terminate in accordance with the provisions of par­ agraph(4) of such section 13(p). (D) PUBLICATION IN FEDERAL REGISTER.—The Secretary of State shall add minerals to the list of minerals in the definition of conflict minerals under section 1502, as appropriate. The Secretary shall publish in the Federal Register notice of intent to declare a mineral as a conflict mineral included in such definition not later than one year before such declaration. (d) REPORTS.— (1) BASELINE REPORT.—Not later than 1 year after the date of the en­ actment of this Act and annually thereafter until the termination of the disclosure requirements under section 13(p) of the Securities Exchange Act of 1934, the Comptroller General of the United States shall submit to appropriate congressional committees a report that includes an as­ sessment of the rate of sexual- and gender-based violence in war-torn areas of the Democratic Republic of the Congo and adjoining countries. (2) REGULAR REPORT ON EFFECTIVENESS.—Not later than 2 years af­ ter the date of the enactment of this Act and annually thereafter, the Comptroller General of the United States shall submit to the appro­ priate congressional committees a report that includes the following: (A) An assessment of the effectiveness of section 13(p) of the Se­ curities Exchange Act of 1934, as added by sub- section(b), in pro­ moting peace and security in the Democratic Republic of the Congo and adjoining countries. (B) A description of issues encountered by the Securities and Exchange Commission in carrying out the provisions of such section 13(p). (C)(i) A general review of persons described in clause(ii) and whether information is publicly available about— (I) the use of conflict minerals by such persons; and (C) A listing of all known conflict mineral processing facilities worldwide. (e) DEFINITIONS.—For purposes of this section: (1) ADJOINING COUNTRY.—The term‘‘adjoining country’’, with re­ spect to the Democratic Republic of the Congo, means a country that shares an internationally recognized border with the Democratic Re­ public of the Congo. (2) APPROPRIATE CONGRESSIONAL COMMITTEES.—The term‘‘appro­ priate congressional committees’’ means— (A) the Committee on Appropriations, the Committee on Foreign Affairs, the Committee on Ways and Means, and the Committee on Financial Services of the House of Representatives; and (B) the Committee on Appropriations, the Committee on Foreign Relations, the Committee on Finance, and the Committee on Bank­ ing, Housing, and Urban Affairs of the Senate. (3) ARMED GROUP.—The term‘‘armed group’’ means an armed group that is identified as perpetrators of serious human rights abuses in the annual Country Reports on Human Rights Practices under sections 116(d) and 502B(b) of the Foreign Assistance Act of 1961(22 U.S.C. 2151n(d) and 2304(b)) relating to the Democratic Republic of the Congo or an adjoining country. (4) CONFLICT MINERAL.—The term‘‘conflict mineral’’ means: (A) columbite-tantalite(coltan), cassiterite, gold, wolframite, or their derivatives; or (B) any other mineral or its derivatives determined by the Secretary of State to be financing conflict in the Democratic Republic of the Congo or an adjoining country. (5) UNDER THE CONTROL OF ARMED GROUPS.—The term‘‘under the control of armed groups’’ means areas within the Democratic Re­ public of the Congo or adjoining countries in which armed groups— (A) physically control mines or force labor of civilians to mine, trans­ port, or sell conflict minerals; (B) tax, extort, or control any part of trade routes for conflict min­ erals, including the entire trade route from a Conflict Zone Mine to the point of export from the Democratic Republic of the Congo or an adjoining country; or (C) tax, extort, or control trading facilities, in whole or in part, includ­ ing the point of export from the Democratic Republic of the Congo or an adjoining country. 16

LITERATURE Eickenjäger, Sebastian(2017): Menschenrechtsberichterstattung durch Unternehmen. European Network for Central Africa(EurAc, 2017): Accompany­ing Measures to the EU Regulation on Responsible Mineral Sourcing: Towards an Improved Governance of the Artisanal Mining Sector in the DRC; http://www.eurac-network.org/sites/default/files/position_paper_-_ eng_accompanying_measures_to_the_eu_regulation_on_responsible_ mineral_sourcing_-_march_2017.pdf(visited on April 23, 2019). ELM Sustainability Partners LLC(2017): Comments on Reconsidera­ tion of Conflict Mineral Rule Implementation Statement of February 6, 2017 to the SEC, available from the author. Giller, Felix Gerald/Tost, Michael(2019): Konfliktminerale und Liefer­ kettenmanagement mineralischer Rohstoffe, Berg- und Hüttenmännische Monatshefte, pp. 237–240. Global Witness(2017): Time to Dig Deeper: Companies exporting and trading minerals from the African Great Lakes have made some progress on responsible sourcing, but must do more; www.globalwitness.org/ documents/19232/Time_to_Dig_Deeper_vb7AX58.pdf(visited on June 20, 2019). Küblböck, Karin/Pinter, Silke(2016): Konfliktmineralien: Möglichkeiten und Grenzen aktueller Regulierungsinitiativen, Briefing Paper 13 der ­Österreichischen Forschungsstiftung für Internationale Entwicklung; https://www.oefse.at/fileadmin/content/Downloads/Publikationen/Brief­ ingpaper/BP13_Konfliktmineralien.pdf(visited on June 6,.2019). Lowe, Rebecca(2013): 67 No. 6, 32, International Bar Association Global Insight(IBA GI). Sarfaty, Galit A.(2015): Shining Light on Global Supply Chains, Harvard Law Review, Volume 56. Securities and Exchange Commission(SEC, 2012): Final Rule, DoddFrank, Section 1502, Release No. 34-67716; File No. S7-40-10 of August 22,2012; www.sec.gov/rules/final/2012/34-67716.pdf(visited on August 19, 2019). Securities and Exchange Commission(SEC, 2014): Statement on the Effect of the Recent Court of Appeals Decision on the Conflict Minerals Rule, April 29, 2014; www.sec.gov/news/public-statement/2014-spch042914kfh(visited on April 23, 2019). Securities and Exchange Commission(SEC, 2017): Updated State­ ment on the Effect of the Court of Appeals Decision on the Conflict Min­ erals Rule, April 7, 2017; www.sec.gov/news/public-statement/corpfin-­ updated-statement-court-decision-conflict-minerals-rule(visited on April 23, 2019). U.S. Congress(1934): Securities Exchange Act 1934, Public, No. 291 (U.S. Act H.R. 9323) June 6, 1934; www.legisworks.org/congress/73/ publaw-291.pdf(visited on August 19, 2019). U.S. Congress(2010): Dodd-Frank Wall Street Reform and Con­ sumer Protection Act 2010, Public No. 111–203, 124 Stat. 1376, 21 July 2010; www.govinfo.gov/content/pkg/PLAW-111publ203/pdf/PLAW111publ203.pdf(visited on August 19, 2019). Woody, Karen E.(2012): Conflict Minerals Legislation: The SEC’s New Role as Diplomatic and Humanitarian Watchdog, Fordham Law Re­ view, Vol. 81, 2012; https://ssrn.com/abstract=2182025 or http://dx.doi. org/10.2139/ssrn.2182025(visited on August 19, 2019). 17 Country Reports

FRIEDRICH-EBERT-STIFTUNG – COMPANIES AND HUMAN RIGHTS 2. CALIFORNIA TRANSPARENCY IN SUPPLY CHAINS ACT (ANTI-SLAVERY MEASURES) The California Transparency in Supply Chains Act of 2010 compels companies since the beginning of 2012 to disclose measures aimed at preventing slavery and human trafficking in their supply chains. 41 The legislators defined the purpose of the law in the first section. They acknowledge that crim­ inal statutes and the protection of potential victims have im­ proved but that slavery and human trafficking are still hap­ pening in each country and is difficult to detect. They state that markets lack the proper incentives to address products tainted by slavery and human trafficking. Without publicly available disclosures consumers are unable to distinguish whether or not companies make efforts to supply products free from the threat of slavery and human trafficking in their supply chains. That is why California wanted to ensure that large manufacturers and retailers disclose their measures against slavery and human trafficking. To accomplish this purpose California inserted a reporting duty(Section 1714.43) into the tort section of the California Civil Code. SCOPE OF APPLICATION The reporting duty applies to any companies doing business in California who have annual worldwide gross receipts in excess of$ 100 million, if their main business is retail or manufacturing.»Doing business« is defined as: actively pur­ suing a business with the goal of making a profit, and hav­ ing a branch office or owning considerable assets in Califor­ nia, or generating considerable revenue or tax obligations in California. 42 It is not necessary that a person resides in Cali­ fornia. It is irrelevant where in the world the main office or subsidiaries are located. The reporting duty even applies to German companies who sell products in California via inter­ net transactions, if they are generating more than$ 500,000 in revenue. Since April 24, 2019 foreign companies must register with the California Department of Tax and Fee Administration(CDTFA) and pay sales and use taxes, if they generate over$ 500,000. The registration assures that for­ eign companies are known to the tax authority. 43 The California Franchise Tax Board(tax authority) has estimat­ ed that 3.2 % of all retailers and manufacturers in California, i. e. about 3,500 companies, are directly required to report. 44 41 Sec. 1714.43(e) Civil Code. 42 Sec. 1714.43(a) Civil Code and Sec. 23101 California Revenue and Taxation Code: It suffices if a company(alternatively) has its head­ quarters or administrative office in California, generates revenue over $ 500,000 or 25 % of their sales in California, owns assets in Califor­ nia valued over$ 50,000 or maintains 25 % of their assets in Califor­ nia or pays more than$ 50,000 or 25 % of their taxes in California. 43 Sec. 6203 California Revenue and Taxation Code. See also Newslet­ ter L-632 and L-684 of the California Department of Tax and Fee Ad­ ministration(CDTFA) at www.cdtfa.ca.gov/formspubs/ l632.pdf and www.cdtfa.ca.gov/formspubs/l684.pdf. 44 Franchise Tax Board: 2010, 97 and Cal. State Assembly Committee on Judiciary, Analysis of SB 657(28.6.2010), p. 9 et seq. DUTIES Companies must prominently publish on their website how they deal with the risk of slavery and human trafficking in their supply chains. The terms slavery and human trafficking are not defined. The question has arisen whether also modern forms of slavery are included. 45 In this context Section(c) poses five(5) questions that call for comprehensive answers. The Attorney General(AG) of the California Department of Justice has jurisdiction over the enforcement of the law and has published guidelines for companies. Companies have the following duty to report: (1) Whether and to which extent they verify supply chains in order to evaluate and address risks of slavery and human trafficking. The AG has expressed the expectation that companies explicitly disclose whether they have their measurers evaluated by external third parties. 46 They must disclose whether they use recruiters and whether the recruiters perform an evaluation and prioritization of potential risks. 47 Recruiting is considered to be especially relevant, since usually there is an increased risk of human rights violations in supply chains, if recruiters are involved. 48 (2) Whether and to which extent they audit suppliers in order to evaluate the suppliers’ adherence to their own company guidelines for human trafficking and slavery in supply chains. If the audit was not independent and not unannounced, companies have to disclose this fact. The AG states that companies are free to report how they organize audits, i. e. which method they use to select auditors and how often external supply chain audits are performed. 49 (3) Whether and to which extent they compel their direct suppliers to certify that the production materials com­ ply with laws against slavery and human trafficking of those countries in which they are doing business. The AG encourages companies to ask direct suppliers for proof that they observe protective employment laws and other related laws of the countries in which the suppliers are doing business. 50 45 Determann: 2012, p. 117, suggesting that modern slavery can be considered when there is pressure due to unemployment or poverty to take a job for low wages. 46 Sec. 1714.43(c) 1 Civil Code. 47 California Department of Justice Resource Guide, 2015: pp. 11, 12. 48 California Department of Justice Resource Guide, 2015: p. 12. 49 California Department of Justice 2015: pp. 11, 12. 50 California Department of Justice 2015: p. 17. 18

Country Reports (4) Whether and to which extent they implement internal guide lines and procedures designed to hold employ­ ees and contract partners accountable, if they do not comply with company guidelines related to slavery and human trafficking. Companies may disclose whether they have established accountability standards and procedures for employees or contract partners that address non-compliance of the company standards related to slavery and human trafficking. 51 (5) Whether and to which extent companies offer training programs related to slavery and human trafficking to employees and management who are responsible for supply chain management, with special consideration for risk reduction in the supply chain. The AG recommends to identify those levels of management who deal with issues of slavery and human trafficking and to list training sessions, including the title of the event. 52 Companies may also consider to report duration and frequency of training sessions. 53 The report must address all five subjects. A short answer such as»We are not involved with measures under the »California Transparency in Supply Chains Act« is not suffi­ cient. The AG expects definitive answers. 54 Consumers should be able to make a fully informed decision whether to purchase a particular product or whether to accept em­ ployment by a particular company. 55 There are no minimum requirements for due diligence against slavery and human trafficking. Even if a company reports in all five categories that it does not apply any meas­ ures, they have complied with reporting requirements. The report must be prominently displayed on the company website, i. e. it should be easy to find the report when vis­ iting the website. 56 Companies who do not have a website must respond to all inquiries and mail reports via postal service to the person who requested information. 57 The AG can file a court action for injunctive relief against a company, if a deficient report was filed, and demand a cor­ rect report. 59 The AG has called on consumers to report vi­ olations online. 60 The AG has sent an informative newslet­ ter to companies. 61 Additional measures have not been re­ ported. 62 The legislators have clarified that while the California AG has jurisdiction over the enforcement of public reporting in connection with the Act against slavery and human trafficking, other remedies are available for violations of any other state or federal law. 63 If companies exaggerate their efforts of prevention, they can be sued by consumers and competitors under unfair competition laws. 64 In the fall of 2015 six class actions were filed in California courts against food retailers, alleging that the true conditions in supply chains contradicted the information contained in the company reports. 65 Until now plaintiffs have not been successful with complaints of this kind. Courts have held that consumers understand that the content of reports is merely an expression of a company effort, and not a(false) assurance of certain production conditions. 66 So far con­ sumer groups have been unable to convince courts to find that companies must disclose on their packaging that products were derived from a supply chain tainted by slav­ ery, human trafficking and other human rights viola­ tions. 67 Apparently court decisions in similar cases have al­ ready motivated companies to describe their due diligence in CSR reports measures realistically, avoiding exaggera­ tion. 68 It is not advisable to publicly disclose that few or no efforts were made. This is dangerous in two respects: 1. Compa­ nies could allege breach of contract, if their contract part­ ner had obligated himself/herself to adhere to a high duty of diligence. 2. Companies could potentially document their own negligence and become liable for damages, if slavery or human trafficking occurred in the supply chain. 69 Doubts about the efficacy of the California Transparency in Supply Chains Act have arisen due to a lack of enforce­ ability. 70 ENFORCEMENT PROVISIONS The California AG receives from the California tax office a list of all companies who are subject to the reporting duty. 58 51 California Department of Justice 2015: pp. 30, 31. 52 California Department of Justice 2015: p. 21. 53 Id. 54 California Department of Justice 2015: p. 22. 55 Determann 2012: p. 119. 56 Sec. 1714.43(b) Civil Code. The Attorney General advises to place the link to the required information on the website’s homepage, Cal­ ifornia Department of Justice 2015: p. 5. 57 Sec. 1714.43(b) Civil Code. 58 Sec. 19547.5 Cal. Revenue and Taxation Code, inserted via Sec. 4 of the California Transparency in Supply Chains Act. 59 Sec. 1714.43(d) Civil Code. 60 Press release of April 13, 2015; https://oag.ca.gov/sites/all/files/­ agweb/pdfs/sb657/consumer-alert.pdf. 61 Newsletter of April 1, 2015; https://oag.ca.gov/sites/all/files/agweb/ pdfs/sb657/letter.pdf. 62 Greer believes that the reason for this lack of measures is that injunctive relief is only granted in obvious, unique cases, Greer 2017: p. 41 et seq. 63 Sec. 1714.43(d) Civil Code. 64 Cusumano / Ryerson 2013; Determann 2012: p. 119. 65 Hagey / Cross 2015. 66 Tulumello / Ising / Meltzer 2017. 67 Tulumello / Ising / Meltzer 2017. 68 Tulumello / Ising / Meltzer 2017. 69 Determann 2012: p. 119. 70 Cusumano 2017. 19

FRIEDRICH-EBERT-STIFTUNG – COMPANIES AND HUMAN RIGHTS LITERATURE California Government: Link to relevant government information: https://oag.ca.gov/sb657/related-code(visited on June 25, 2019). California Department of Justice(2015): Attorney General Kamila D. Harris, The California Transparency in Supply Chains Act – A Resource Guide; https://oag.ca.gov/sites/all/files/agweb/pdfs/sb657/­resourceguide.pdf(visited on June 25, 2019). Cusumano, Emma/ Ryerson, Charity(2017): Is the California Transparancy Act in Supply Chain Acts Doing More Harm than Good? Blogpost of July 25,2017; https://legaldesign.org/calblog/2017/7/25/ is-the-california-transparency-in-supply-chains-act-doing-more-harmthangood(visited on June 25, 2019). Determann, Lothar(2012): Unternehmen müssen publizieren, ob sie Menschenrechtsverletzungen durch Lieferanten bekämpfen: California Transparency in Supply Chains Act – auf europäische Konzerne mit kali­ fornischer Präsenz anwendbar, CCZ 2012, pp. 117–223. Franchise Tax Board(2010): Annual Report; www.ftb.ca.gov/about FTB/Tax Statistics/Reports/2010_Combined_Statistics.pdf(visited on April 24, 2019). Greer, Benjamin Thomas(2017): Opaque Transparency: Why Califor­ nia’s Supply Chain Transparency Act Is Unenforceable, Oñati Socio-legal Series, pp. 32–49. Hagey, J. Noah / Cross, Rebecca(2015): A New Class of Calif. Sup­ ply Chain Disclosure Suits, October 27,2015; www.law360.com/arti­ cles/718673(visited on April 25, 2019). Tulumello, Andrew / Ising, Elizabeth / Meltzer, Jason(2019): ­Avoiding Pitfalls of Corp. Social Responsibility Statements, March 17, 2019; www.law360.com/articles/902728(visited on April 25, 2019) 20

Country Reports Text: California Transparency in Supply Chains Act of 2010 § 1. Title § 2. The Legislature finds and declares the following:  and human trafficking are crimes under state, federal, and international law. (b) Slavery and human trafficking exist in every country, including the United States, and the State of California. (c) As a result of the criminal natures of slavery and human traffick­ ing, these crimes are often hidden from view and are difficult to uncover and track. (d) In recent years, significant legislative efforts have been made to capture and punish the perpetrators of these crimes. (e) Significant legislative efforts have also been made to ensure that victims are provided with necessary protections and rights. (f) Legislative efforts to address the market for goods and products tainted by slavery and trafficking have been lacking, the market being a key impetus for these crimes. (g) In September 2009, the United States Department of Labor released a report required by the Trafficking Victims Protection Reauthor­ ization Acts of 2005 and 2008 which named 122 goods from 58 countries that are believed to be produced by forced labor or child labor in violation of international standards. (b) The disclosure described in subdivision(a) shall be posted on the retail seller’s or manufacturer’s internet website with a conspicu­ ous and easily understood link to the required information placed on the business’ homepage. In the event the retail seller or man­ ufacturer does not have an internet website, consumers shall be provided the written disclosure within 30 days of receiving a writ­ ten request for the disclosure from a consumer. (c) The disclosure described in subdivision(a) shall, at a minimum, dis­ close to what extent, if any, that the retail seller or manufacturer does each of the following: (1) Engages in verification of product supply chains to evaluate and address risks of human trafficking and slavery. The disclosure shall specify if the verification was not conducted by a third party. (2) Conducts audits of suppliers to evaluate supplier compliance with company standards for trafficking and slavery in supply chains. The disclosure shall specify if the verification was not an independ­ ent, unannounced audit. (3) Requires direct suppliers to certify that materials incorporated into the product comply with the laws regarding slavery and hu­ man trafficking of the country or countries in which they are do­ ing business. (4) Maintains internal accountability standards and procedures for employees or contractors failing to meet company standards re­ garding slavery and trafficking. (h) Consumers and businesses are inadvertently promoting and sanc­ tioning these crimes through the purchase of goods and products that have been tainted in the supply chain. (i) Absent publicly available disclosures, consumers are at a disadvan­ tage in being able to distinguish companies on the merits of their efforts to supply products free from the taint of slavery and traf­ ficking. Consumers are at a disadvantage in being able to force the eradication of slavery and trafficking by way of their purchas­ ing decisions. (j) It is the policy of this state to ensure large retailers and manufac­ turers provide consumers with information regarding their efforts to eradicate slavery and human trafficking from their supply chains, to educate consumers on how to purchase goods produced by com­ panies that responsibly manage their supply chains, and, thereby, to improve the lives of victims of slavery and human trafficking. § 3. Inserted in the Civil Code as§ 1714.43 (a) 	 (1) Every retail seller and manufacturer doing business in this state and having annual worldwide gross receipts that exceed one hun­ dred million dollars($100,000,000) shall disclose, as set forth in subdivision(c), its efforts to eradicate slavery and human traffick­ ing from its direct supply chain for tangible goods offered for sale. (2) For the purposes of this section, the following definitions shall apply: (A)»Doing business in this state« shall have the same meaning as set forth in Section 23101 of the Revenue and Taxation Code. (5) Provides company employees and management, who have di­ rect responsibility for supply chain management, training on hu­ man trafficking and slavery, particularly with respect to mitigating risks within the supply chains of products. (d) The exclusive remedy for a violation of this section shall be an ac­ tion brought by the Attorney General for injunctive relief. Nothing in this section shall limit remedies available for a violation of any other state or federal law. (e) The provisions of this section shall take effect on January 1, 2012. § 4. Inserted as§ 19547.5 (a)(1) Notwithstanding any provision of law, the Franchise Tax Board shall make available to the Attorney General a list of retail sellers and manufacturers required to disclose efforts to eradicate slav­ ery and human trafficking pursuant to Section 1714.43 of the Civil Code. The list shall be based on tax returns filed for taxable years beginning on or after January 1, 2011. (2) Each list required by this section shall be submitted annually to the Attorney General by November 30, 2012, and each November 30 thereafter. The list shall be derived from original tax returns re­ ceived by the Franchise Tax Board on or before December 31, 2011, and each December 31 thereafter. (b) Each annual list required by this section shall include the following information for each retail seller or manufacturer: (1) Entity name. (B)»Gross receipts« shall have the same meaning as set forth in Section 25120 of the Revenue and Taxation Code. (2) California identification number. (C)»Manufacturer« means a business entity with manufacturing as its principal business activity code, as reported on the en­ tity’s tax return filed under Part 10.2(commencing with Sec­ tion 18401) of Division 2 of the Revenue and Taxation Code. (D)»Retail seller« means a business entity with retail trade as its principal business activity code on the entity’s tax return filed under Part 10.2(commencing with Section 18401) of Division 2 of the Revenue and Taxation Code. 21

FRIEDRICH-EBERT-STIFTUNG – COMPANIES AND HUMAN RIGHTS 3. EU: EUROPEAN TIMBER REGULATION DUTIES EU Regulation 995/2010 of October 20, 2010(Regulation) regulates the duties of market participants who place tim­ ber and timber products on the market. The Regulation ad­ dresses company due diligence to prevent illegal timber harvesting, the duties of monitoring organizations and na­ tional agencies. 71 Forests provide many ecological, commercial and social benefits. They present a basis of existence to local inhabit­ ants who are dependent on forests. As the worldwide de­ mand for timber and timber products grows, the forest in­ dustry has proven to be weak in terms of institutional and regulatory oversight. 72 Consequentially, many population groups have lost their basis of existence due to illegal tim­ ber logging and violent conflicts. The Regulation applies to companies who bring timber or timber products on the EU market or trade with timber on the EU market. The import ban for illegal timber allows reg­ ulatory and criminal action against companies for the first time. 73 It also outlines due diligence duties and traceability. The Regulation prohibits placing illegally harvested timber or timber products on the market(Art. 4(1)). Whether tim­ ber was logged without infringement on regulations is to be determined according to the local laws. This is about local fees, environmental and forest related rules, land use rights, property rights and trade and customs regulations(Art. 2 (h)). Taking only local laws of a logging location into consid­ eration has been determined insufficient. 77 Timber for which an export permit under the CITES-Treaty 78 or under one of the voluntary EU timber trade partnership agreements 79 has been obtained is already considered legal timber(Art. 3). Due diligence duties vary for market participants, depend­ ing on whether they place the timber on the market for the first time or whether they are traders. Timber products un­ dergo various processing procedures before and after they are placed on the domestic market. Unnecessary bureau­ cracy is to be prevented(recital 15). Art. 6 addresses the due diligence procedure for market participants: The Regulation appears to be compatible with world trade rules. 74 Political and climate organizations welcomed it, even though in practice the operators that are subject to the Regulation have contended with difficulties due to un­ clear data. 75 –– Making information available: Description of product type and the name of the tree species, country(some­ times also the region and logging concession), amount of shipment, name and address of supplier and proof of lawfulness/legality Due diligence duties have been effective since March 3, 2013(Art. 21). SCOPE OF APPLICATION The Regulation applies to companies who place timber or timber products on the EU market for the first time(market participants under Art. 2(c)) and to companies who pur­ chase the timber after it has been imported or to compa­ nies who sell the timber(Art. 2(d)). Placing on the market can be done through import into the EU or after the timber has been harvested within the EU territory. The size of the company, how much business they gener­ ate with timber, and whether they have their headquar­ ters, a subsidiary or branch office or personnel present in the EU, is irrelevant. The Regulation also applies to compa­ nies outside of the EU. Customs agencies generally are told that the company who receives the timber in the EU is the importer. 76 71 eur-lex.europa.eu/legal-content/DE/TXT/HTML/­ ?uri=CELEX:32010R0995. 72 Jakel 2015: p. 28 w. addtl. references. 73 Sieveking 2014: p. 548. 74 Jakel makes this conclusion following a rough evaluation, Jakel 2015: p. 31. 75 Jakel 2015: p. 31. 76 EU Commission 2016: No. 1. –– Risk assessment and evaluation: Consideration of cer­ tifications and complex supply chains as well as knowl­ edge related to the frequency of illegal logging of cer­ tain free species in the particular country –– Measures to reduce risk, if the risk assessment results in a finding of a more than negligible risk: Deployment of appropriate and reasonable measures; market par­ ticipants may demand further information and docu­ ments or monitoring by third parties The EU Commission is authorized by Art. 6(3) of the Reg­ ulation to regulate additional details. The EU issued an im­ plementation regulation in 2010 80 and published guide­ lines in 2016. 81 Market participants may comply with due diligence obliga­ tions by tasking monitoring organizations with the due dili­ 77 Sieveking 2014: p. 546. 78 The Convention of International Trade in Endangered Species of Wild Fauna and Flora(CITES). 79 Forest Law Enforcement, Governance and Trade Voluntary Partner­ ship Agreements – FLEGT-VPA. 80 Implementation Regulation(EU) No. 995/2010 regulates details of due diligence and frequency and type of controls by monitoring or­ ganizations. It contains Information about requirements for scientific names of tree species, regions and concessions for logging. 81 EU Commission 2016. 22

Country Reports gence process(Art. 4(3) and 8). The monitoring organiza­ tion has to be recognized by the EU Commission. The pro­ cess for recognition and revocation of recognition of moni­ toring organizations is regulated in an additional regulation (EU Regulation 363/2012). This regulation contains require­ ments for technical know-how, capacity of the organiza­ tion, conflicts of interest and subsequent changes related to these circumstances. Traders have to be able to name all market participants in the supply chain, from whom they received and to whom they delivered products(traceability). This is different from the requirements for market participants. They have to keep this information for five(5) years(Art. 5). ENFORCEMENT PROVISIONS All member states are required to name at least one agen­ cy who is responsible for the administration of the Regula­ tion(Art. 7). If timber is or was imported into Germany from abroad, the Ministry of Agriculture and Food has ju­ risdiction. The Ministry is supported by the German cus­ toms authority when monitoring imports. 82 If timber has been logged in Germany the respective state authority has jurisdiction. Mostly the local agency responsible for forest­ ry has jurisdiction. 83, 84 a monetary penalty for non-compliance. 86 The German tim­ ber protection law of 2011(Holzhandels-Sicherungs-Gesetz) already specified fines, prison sentences and monetary pen­ alties as sanctions. LITERATURE European Commission(2016): Leitfaden zur EU-Holzverordnung, 12.2.2016, www.ble.de/SharedDocs/Downloads/DE/Wald-Holz/­ Leitlinien_de.pdf. Jakel, Dominik(2015): Wiedervorlage: European Timber Regulation, ­Natur und Recht, pp. 27–31. Ludwig, Grit / Köck, Wolfgang / Tronicke, Cornelius / Gawel, Erik (2015): Der Rechtsrahmen für die Bioökonomie in Deutschland, DÖV, pp. 41–53. Sieveking, Annelie(2014): Die EU-Holzhandelsverordnung, Natur und Recht, pp. 542–548. All agencies are expected to collaborate with each other, with agencies in third countries and the EU Commission (Art. 12). The relevant agencies are required to conduct an assess­ ment of market participants according to a risk-based plan that must be regularly monitored. Agencies must examine the procedures and documents and take samples on loca­ tion. Market participants must assist agencies as much as is necessary. Agencies may mandate remedial measures, confiscation of timber(products) and disallow marketing of the product(Art. 10). Regret has been voiced that the Regulation does not require market actors to report former trade partners to the agencies when those partners had been suspected of illegal practices. 85 The EU Commission monitors the reliability of monitoring organizations via EU Regulation 995/2010. Member states specify sanctions provisions for violations of the Regulations. Sanctions are required to be effective and reasonable and should have a deterrent effect. In straight­ forward cases in Germany, the relevant agency prohibits timber being placed on the market and threatens to impose 82§1(2) Sentence 1 and§ 3 HolzSiG. 83§1(2) Sentence 2 HolzSiG. 84 Art. 3 of the Administrative Rule for the Timber Protection Law and Elimination of Administrative Rules Regarding Forest Reproductive Materials of November 25, 2013. 85 Sieveking 2014: p. 546. 86 Landgericht(Superior Court) Frankfurt(Oder) of Feb. 14, 2019, VG 5K 1620/17. 23

FRIEDRICH-EBERT-STIFTUNG – COMPANIES AND HUMAN RIGHTS 4. UK MODERN SLAVERY ACT 2015 The UK Modern Slavery Act 2015(MSA) obliges companies to report their measures fighting slavery and human traf­ ficking. 87 The law implements new criminal offences related to slavery, servitude and forced and compulsory labor. 88 Ad­ ditionally, the law contains protective provisions for persons affected by slavery and human trafficking and provides for an independent Anti-Slavery Commissioner and other measures. 89 The Anti-Slavery Commissioner’s duty consists of working towards the prevention, exposure and criminal prosecution of slavery and human trafficking and to identi­ fy victims of these acts. The Commissioner is tasked with developing a strategic plan and to reconcile the plan with the Home Secretary. He/she is supported by law enforce­ ment agencies(§§ 40–44). Companies are obligated in Sec­ tion 6(§ 54) to publish an annual report(slavery and human trafficking statement). Companies must report measures which they have taken to fight slavery and human traffick­ ing in their supply chain or company units. The reports are to be published promptly, not later than six months after the end of the fiscal year, for fiscal years ending after March 31, 2016. 90 British Parliament intended the MSA to create a level play­ ing field for large companies and provided for extraterrito­ rial application of duties to foreign companies. At the same time the Government has expressed hope that companies develop joint strategies and measures against modern forms of slavery and human trafficking, in competition with each other, but also jointly, and»to do more, not just because they are legally obliged to, but also because they recognize it is the right thing to do,« thus envisioning a race to the top. 91 Some authors have explained certain weaknesses in the MSA, especially the lack of requirements related to com­ plex business relationships and supply chains, by pointing to the lack of consultation with interest groups prior to passing the MSA, calling it a top-down legislation. 92 left companies not really a choice, considering liability risks for making unfair advertising claims and violating trade and business secrets, all in light of not being forced to pro­ vide more information because of the lack of specific re­ porting duties. It is remarkable that the Government, in respect to an ef­ fective implementation of the law, put their trust in civil or­ ganizations to critically examine company reports, to de­ nounce them publicly and not in any way to facilitate their efforts. The Government leaves it up to companies to com­ pose statements in regards to structure, content, format and potential references to other documents. There is no list of companies who are subject to reporting and there is no public registry for reports, thus making it difficult for the public to access the reports. 95 However, the MSA has encouraged development of simi­ lar, but more effective laws in other countries(see Austral­ ia report in this study). In the meantime, the British Govern­ ment has established an Evaluation Commission develop­ ing improvement recommendations for the British MSA based on the information about these new laws in other countries. 96 SCOPE OF APPLICATION British legislature already had passed the UK Bribery Act to fight bribery in 2010, providing for extraterritorial applica­ tion in an unusually wide-reaching manner. 97 The MSA al­ so provides for extraterritorial application to numerous for­ eign persons. The newly created criminal offences for human trafficking also apply to persons without British citizenship and with­ out a residence in the UK. Whoever conducts human traf­ ficking destined for delivery in the UK or whoever is aiding and abetting such an act will be held criminally liable, no matter where they reside or live(§ 2(7)(b)). In consideration of the fact that the UK Government counts modern forms of slavery and human trafficking among the worst crimes, legal scholars have assessed the MSA as rather weak. 93 Evaluations of the first declarations paint a sobering picture. In 2018 most companies only submitted statements of intention, especially statements about the efficacy of measures taken were weak. 94 The legislature 87 See www.legislation.gov.uk/uk-pga/2015/30/contents/enacted. 88 Sec. 1–12 UK Modern Slavery Act 2015, Chapter 30, Part 1. 89 Preamble of MSA;§ 40–44: The Independent Anti-slavery Commis­ sioner;§ 45–53: Protection of Victims. 90§ 61(1) MSA in conjunction with no. 3 of the Commencement and Transitional Provision Regulation for Modern Slavery Act 2015, Secre­ tary of State. 91 UK Home Secretary: 2017, 1.4. 92 Broad / Turnbull 2018: p. 12. 93 Mantouvalou 2018: p. 1045. 94 BHRRC 2019. The reporting duty outlined in§ 54 applies to companies who do business or part of a business in the UK and who have worldwide turnover of£ 36,000,000 or more, wheth­ er the revenue is derived by the parent company or its sub­ sidiaries. 98 The British Government estimates that 9,000 companies are affected by the reporting duty. 99 Numerous German companies are affected by the law, since the UK is the third-largest export partner of Germa­ 95 Independent Review of the Modern Slavery Act 2015. 96 Field / Miller / Butler-Sloss 2019: p. 44, no. 2.6.3, commenting on ­ reporting duty in public procurement. 97 Deister / Geier 2011. 98§ 54(2)(a)(12) MSA and nos. 2 und 3 of the Modern Slavery Act 2015, Transparency in Supply Chains Regulation 2015, Secretary of State. 99 UK Government 2017: Impact Assessment Modern Slavery Act, Transparency in Supply Chains, p. 2. 24

Country Reports ny. 100 About 2,500 German companies maintain a branch office in the UK where they employ more than 37,000 em­ ployees. 101 A company may be active in a country in various ways. It is open to question whether one-time or occasion­ al deliveries of goods and services or the purchase of com­ pany shares are already sufficient to trigger application of the law. The MSA addresses business activity by referring to»carries on business, or part of a business, in any part of the UK«. German companies were»alarmed« by this vague language. They prefer to understand the law to mean that a»single delivery would not be sufficient«. 102 § 54(9) MSA states that the Secretary of State is authorized to publish MSA best practice guidelines. Even the second edition of the guidelines does not clearly define the scope of application. But the sole purchase of a British subsidiary does not fall under»carrying on business«. The Home Sec­ retary reserved all other questions to be answered by using »common sense«. 103 Large foreign companies with minor business relationships in the UK should expect that reporting duties apply to them. 104 The British Government estimates that a total of 9,000 companies are directly affected by the reporting duties and that consequentially they will incur a total cost of £ 12,500,000 over the next ten years. 105 It is presumed that on average each company would incur costs of£ 1,389 per year. There was no disclosure as to which expenses were considered in this calculation. DUTIES The law prohibits in§ 1 slavery, servitude and forced or compulsory labor, terms that are used in the EU Human Rights Convention(EMRK). 106 Whether there is prohibited conduct is a case-by-case decision and depends on the cir­ cumstances. Consent of the victim is, by itself, not disposi­ tive. 107 § 2 defines human trafficking as arranging or facili­ tating the travel of another person with a view of the victim being exploited.§ 3 lists six contexts in which exploitation may occur: slavery, servitude, forced or compulsory labor, sexual exploitation, removal of organs, violence, threats or deception as well as minority(under the age of legal con­ sent) or particular vulnerability. For an intentional commis­ sion of these crimes courts may impose a life sentence(§ 5), order victim restitution and confiscate vehicles and vessels which were used for human trafficking(§ 8 and 11). Crimi­ nal liability also attaches to a person who in the course of his/her employment with a company instigates another person to commit the offence or to aid and abet its com­ mission. Reporting duties are regulated in§ 54. Companies have to publish on their website for each of their fiscal years actual measures taken to assure that modern forms of slavery and human trafficking are prevented in all supply chains and business units. 108 The reports have to be easy to find, i. e. easily accessible. The MSA does not oblige companies to take such measures, but explicitly allows companies to re­ port that no measures were taken. § 54(5) contains six optional aspects which may be ad­ dressed by a declaration: (a) The organization’s structure, its business and supply chains (b) Company policies for slavery and human trafficking (c) Its due diligence processes related to slavery and hu­ man trafficking in the company and supply chains (d) The business units and supply chains which carry a risk of slavery or human trafficking and the steps it has tak­ en to assess and manage that risk (e) The effectiveness in ensuring that slavery and human trafficking is not taking place in its business or supply chains; measured against such performance indicators as it considers appropriate 100 Including goods and services. 101 Mayer 2016: pp. 115 and 116. 102 Comment by Oliver Baumbach, deputy managing director, Chamber of Industry& Commerce, Legal / Tax Dep., Nürnberg, cited by Meves 2016: p. 49. 103 UK Home Secretary: 2017, 3.6–3.8. The guidelines do not specify when a franchise cooperation qualifies as»carrying on business« under the MSA. See also no. 3.9. It is recommended to interpret this term in accordance with the language of the UK Bribery Act of 2010: Doris/Zimmer 2016: p. 183. 104 This results from Sec. 54(2) und(12). 105 UK Government, Impact Assessment Modern Slavery Act, Transpa­ rency in Supply Chains, 2017, p. 2. 106§1(1)(b)(2) refers to Art.4 EMRK, which does not clearly define these terms; EGMR court decisions may be applied for further definition. See also ILO Forced Labor Convention of 1930. Forced labor is labor that is performed under threat of punishment or other precarious evil against the free will of the victim. Treating a person as property is paramount in issues of slavery and servitude. 107§1(3) and(5) MSA. (f) Training about slavery and human trafficking the com­ pany offered to its staff Reporting duties as to slavery and human trafficking apply worldwide; they do not end at the border or at any particu­ lar level of the supply chain(§ 54(12)). The above-refer­ enced six aspects are only suggestions of the legislature (»may include«). 109 Since the law does not provide for man­ datory minimum reporting requirements, companies are advised to refrain from disclosing potential business or company secrets. 110 108 Sec. 54(1) and(7) MSA. If a company does not have a website, they have to mail reports to all persons who request it, Sec. 54(8). 109 Government guidelines recommend that companies attempt to ad­ dress all six aspects. 110 Doris / Zimmer 2016: p. 182. 25

FRIEDRICH-EBERT-STIFTUNG – COMPANIES AND HUMAN RIGHTS The statement must be approved by executive company or­ gans(Board of Directors, CEO) and must be signed by one of its members(§ 54(6)). The MSA does not contain any additional requirements to define the reporting duty.§ 54(9) contains an authoriza­ tion for the Secretary of State to issue a best-practice guideline. The practical guidelines address restitution, due diligence and refer to the UN Guiding Principles on Busi­ ness and Human Rights by the UN Human Rights Council which were unanimously approved in 2011. The guidelines also address guidelines from the OECD and other organiza­ tions and present practical examples. 111 Child labor is de­ fined by the ILO Convention Number 138(Minimum Age Convention) and Number 182(Convention about Worst Forms of Child Labor). The British government has rated worst forms of child labor as»most likely« one of the mod­ ern criminal forms of slavery under the MSA. 112 Even after the practical guidelines were published in 2017 legal practitioners have complained that the terms»supply chains« and»business activity« are ill-defined. 113 The practi­ cal guide addressed specific inquiries as to the meaning of those terms by issuing only one sentence: The term supply chain has its»customary meaning«. 114 An independent Commission tasked with assessing the MSA advised Parlia­ ment in 2019 that companies must examine the whole sup­ ply chain. 115 Companies who have already taken measures against mod­ ern slavery are able to issue statements»quickly and simply« according to the Home Secretary assessment: Companies will need to build on what they are doing year on year. Their first statements may show how they are starting to act on the issue and their planned actions to investigate or collab­ orate with others to effect change. 116 sess and compare them, and publicly denounce weak statements. 117 There is no liability for companies who become known for slavery in their supply chain. The government has stated that violation of reporting duties does not imply such lia­ bility. 118 However, a statement that no measures against slavery and human trafficking were taken is permitted, but should be the exception in light of expected reputation damag­ es. 119 A statement that is weak or does not show any meas­ ures may increase the risk of liability for companies. For companies finding slavery occurring in their sphere of influ­ ence, a lack of human rights due diligence measures has been suggested. Additionally, managing company organs who have to ex­ amine and sign statements are liable under German law for damages that are incurred to the company because of careless examinations of statements.(§ 93(2) AktG,§43 (3) GmbHG). It is conceivable that a competitor successful­ ly sues a company for unfair competition based on report­ ing errors. The government had hoped that competing companies would engage in a»race to the top« and develop further effective measures against slavery and human traffick­ ing. 120 The Commission tasked with an assessment of the MSA did not comment on this expectation in their interim report, but concludes that when the MSA was introduced in 2015, it was innovative, and further states that the cur­ rent provisions are not sufficient and it is time for the gov­ ernment to take tougher action. 121 ENFORCEMENT PROVISIONS If a company does not publish the statement, the Secre­ tary of State may bring civil proceedings in the High Court for an injunction or, in Scotland, for specific performance of a statutory duty under section 45 of the Court of Ses­ sion Act 1988. Unlimited Fines may be imposed against non-compliant companies. The government will consider court action if a company has not issued any statement or the statement does not address any measures taken. The government does not examine whether the statement is accurate regarding its content or whether it is written in a clearly understandable manner. Instead it relies on con­ sumers and civic organizations to find the statements, as­ 111 UK Home Secretary 2017: pp. 15 and 32. 112 UK Home Secretary 2017: p. 18. 113 Hudson / Elgie 2017. 114 Hudson / Elgie 2017. 115 Field / Miller / Butler-Sloss 2019: p. 41, no. 2.2.5. 116 UK Home Secretary 2017: 1.5 117 UK Home Secretary: 2017, 2.6 to 2.8. 118 UK Home Secretary 2017: 2.3. 119 Mayer 2016: p. 116. 120 UK Home Secretary: 2017, 2.5. 121 Field / Miller / Butler-Sloss 2019: p. 39 no. 1.5. 26

LITERATURE Broad, Rose / Turnbull, Nick(2018): From Human Trafficking to Modern Slavery: The Development of Anti-Trafficking Policy in the UK, European Journal on Criminal Policy and Research 2018, pp. 1–15. Business& Human Rights Resource Centre(2019): FTSE 100& the UK Modern Slavery Act: From Disclosure to Action; www.business-­ humanrights.org/sites/default /files/FTSE%20100%20Briefing%202018. pdf(visited on August 19, 2019). Deister, Jochen / Geier, Anton(2012): Der UK Bribery Act 2010 und seine Auswirkungen auf deutsche Unternehmen, CCZ 2011, p. 12. Doris, Patrick / Zimmer, Mark(2016): Ausbeutung in der Lieferkette – Der Modern Slavery Act und seine Anwendung auf deutsche Unterneh­ men, Betriebs-Berater 2016, pp. 181–183. Field, Frank / Miller, Maria / Butler-Sloss, Baroness(2019): Independ­ ent Review of the Modern Slavery Act 2015: Final Report. Hudson, Daniel / Elgie, Oliver(Herbert Smith Freehills, 2017): UK ­Government Issues Updated Guidance on Modern Slavery Act Reporting, Legal Briefing(6.10.2017); https://www.herbertsmithfreehills.com/­latestthinking/uk-government-issues-updated-guidance-on-modern-slavery-­ act-reporting(visited on March 14, 2019). Mantouvalou, Virginia(2018): The UK Modern Slavery Act 2015 Three Years On, The Modern Law Review 2018, pp. 1017–1045. Mayer, Eric(2016): Compliance-Berater 2016, pp. 115–118. Meves, Anne-Kathrin(2016): Modern Slavery Act: Die gesamte Liefer­ kette soll transparent sein, Unternehmensjurist, 5/2016, pp. 48–50. UK Government(2015): Impact Assessment Modern Slavery – Transpar­ ency in Supply Chains; https://www.legislation.gov.uk/uksi/2015/1833/ impacts(visited on August 19, 2019). UK Home Secretary(2017): Transparency in Supply Chains etc. – A practical guide(October 4, 2017); https://www.gov.uk/government/­ publications/transparency-in-supply-chains-a-practical-guide. UK Parliament(2015): Gesetzestext; http://www.legislation.gov.uk/­ukpga/2015/30/contents/enacted(visited on August 19, 2019). Country Reports 27

FRIEDRICH-EBERT-STIFTUNG – COMPANIES AND HUMAN RIGHTS Text: Modern Slavery Act 2015 Part 1 (Slavery, servitude, forced labor, human trafficking, rules of criminal procedure) Part 2 (Preliminary court orders) Part 3 (Enforcement on High Seas) Part 4 (Anti-Slavery Commissioner) Part 5 (Protection of victims, assistance with court costs and support for under-age victims) Part 6 TRANSPARENCY IN SUPPLY CHAINS ETC 54 Transparency in supply chains etc (1) A commercial organisation within subsection(2) must prepare a slavery and human trafficking statement for each financial year of the organisation. (2) A commercial organisation is within this subsection if it— (a) supplies goods or services, and (b) if the organisation is a limited liability partnership, must be ap­ proved by the members and signed by a designated member; (c) if the organisation is a limited partnership registered under the Limited Partnerships Act 1907, must be signed by a gen­ eral partner; (d) if the organisation is any other kind of partnership, must be signed by a partner. (b) has a total turnover of not less than an amount prescribed by regulations made by the Secretary of State. (3) For the purposes of subsection(2)(b), an organisation’s total turn­ over is to be determined in accordance with regulations made by the Secretary of State. (4) A slavery and human trafficking statement for a financial year is— (a) a statement of the steps the organisation has taken during the financial year to ensure that slavery and human traffick­ ing is not taking place— (i) in any of its supply chains, and (ii) in any part of its own business, or (b) a statement that the organisation has taken no such steps. (7) If the organisation has a website, it must— (a) publish the slavery and human trafficking statement on that website, and (b) include a link to the slavery and human trafficking statement in a prominent place on that website’s homepage. (8) If the organisation does not have a website, it must provide a copy of the slavery and human trafficking statement to anyone who makes a written request for one, and must do so before the end of the period of 30 days beginning with the day on which the re­ quest is received. (9) The Secretary of State— (a) may issue guidance about the duties imposed on commercial organisations by this section; (5) An organisation’s slavery and human trafficking statement may include information about— (b) must publish any such guidance in a way the Secretary of State considers appropriate. (a) the organisation’s structure, its business and its supply chains; (b) its policies in relation to slavery and human trafficking; (10) The guidance may in particular include further provision about the kind of information which may be included in a slavery and human trafficking statement. (c) its due diligence processes in relation to slavery and human trafficking in its business and supply chains; (d) the parts of its business and supply chains where there is a risk of slavery and human trafficking taking place, and the steps it has taken to assess and manage that risk; (e) its effectiveness in ensuring that slavery and human trafficking is not taking place in its business or supply chains, measured against such performance indicators as it considers appropriate; (f) the training about slavery and human trafficking available to its staff. (6) A slavery and human trafficking statement— (11) The duties imposed on commercial organisations by this section are enforceable by the Secretary of State bringing civil proceed­ ings in the High Court for an injunction or, in Scotland, for specific performance of a statutory duty under section 45 of the Court of Session Act 1988. (12) For the purposes of this section— »commercial organisation« means— (a) a body corporate(wherever incorporated) which carries on a business, or part of a business, in any part of the United King­ dom, or (b) a partnership(wherever formed) which carries on a business, or part of a business, in any part of the United Kingdom, (a) if the organisation is a body corporate other than a limited li­ ability partnership, must be approved by the board of direc­ tors(or equivalent management body) and signed by a direc­ tor(or equivalent); and for this purpose»business« includes a trade or profession; »partnership« means— (a) a partnership within the Partnership Act 1890, 28

Country Reports Text: Modern Slavery Act 2015 (continuation) (b) a limited partnership registered under the Limited Partnerships Act 1907, or (c) a firm, or an entity of a similar character, formed under the law of a country outside the United Kingdom; »slavery and human trafficking« means— (a) conduct which constitutes an offence under any of the follow­ ing— (i)  section 1, 2 or 4 of this Act, (ii) ection 1, 2 or 4 of the Human Trafficking and Exploitation (Criminal Justice and Support for Victims) Act(Northern Ireland) 2015(c. 2(N.I.))(equivalent offences in Northern Ireland), (iii) ection 22 of the Criminal Justice(Scotland) Act 2003(asp 7)(traffic in prostitution etc.), (iv) 4 of the Asylum and Immigration(Treatment of Claimants, etc.) Act 2004(trafficking for exploitation), (v) ection 47 of the Criminal Justice and Licensing(Scotland) Act 2010(asp 13)(slavery, servitude and forced or com­ pulsory labour), or (b) conduct which would constitute an offence in a part of the United Kingdom under any of those provisions if the conduct took place in that part of the United Kingdom. Part 7 (Regulation for the implementation of the Act) 29

FRIEDRICH-EBERT-STIFTUNG – COMPANIES AND HUMAN RIGHTS 5. FRANCE: LOI DE VIGILANCE(CORPORATE DUTY OF VIGILANCE LAW): ­MONITORING AND REPORTING DUTIES Two years after the collapse of the factory building Rana Plaza in Bangladesh France introduced a bill in the National Assembly to establish a corporate vigilance duty for par­ ent companies and contract-awarding companies. 122 The legislators reasoned that eleven of the fifty largest Europe­ an companies(including Switzerland) were French and that therefore France had a special responsibility. 123 This new law established a new provision in the Code de Commerce to provide for reporting duties subject to liabil­ ity and sanctions. Large companies in all industry sectors are required to monitor controlled companies and certain business partners in an appropriate manner in order to avoid risks of human rights and environmental violations. The bill incorporated the essence of the UN Guiding Principles on Business and Human Rights, corporate due dili­ gence, and expanded the application of due diligence to environmental and corruption risks. Due diligence is to be enforced with monetary penalties, civil tort damages, ex­ pedited court orders and reporting duties. Corruption pre­ vention measures were dropped from the bill during legis­ lative discussions, 124 but requirements for measures of due diligence and the development of due diligence plans were added. 125 After numerous controversial discussions in the National Assembly and Senate, 120 representatives de­ manded a declaration to find the bill unconstitutional. The Constitutional Council(Conseil Constitutionnel) affirmed constitutionality, excepting the section on monetary penal­ ties due to a lack of clear preconditions. On March 28, 2017, the Loi de Vigilance(Loi) was published in the Journal of Laws and the corporate due diligence duty has been in effect since then. The reporting duty applies to the first fiscal year after the enactment of the law(Art. 4). The Loi exceeds other corporate due diligence laws in terms of subject matter and enforcement. The French legislature continues its progressive trend of recent years. 126 It is difficult to assess how effective the law is. 127 Once the Economic Council(Conseil Général de l’Économie) publishes its list of companies that are subject to the law in 2019, civ­ 122 Loi n°2017-399 du 27 mars 2017 relative au devoir de vigilance des sociétés mères et des entreprises donneuses d’ordre; www.­ legifrance.gouv.fr/eli/loi/2017/3/27/2017-399/jo/texte. 123 Assemblée Nationale, No. 2578 of February 11, 2015, p. 10, s. Fn. 124. 124 Corruption prevention is regulated in the Loi Sapin 2 of Dec. 9, 2016. 125 For legislative process see: www.senat.fr/dossier-legislatif/ppl14376.html. 126 See Fleischer / Danninger 2017: pp. 2849 et seq. for environmental and social reporting duties, corporate liability for the environment and compliance. 127 Cautiously optimistic: Brabant/Savourey 2017[2]. il society will learn which companies are covered by the law. The French organization Sherpa, founded in 2001, advo­ cates protection of persons who have suffered injuries as a result of corporate global business activities. Sherpa has fol­ lowed the legislative process of the Loi from the beginning and now advocates the effective implementation of the Loi. By the beginning of 2019, Sherpa had only ascertained 80 monitoring plans and company reports and reported that they had gained little insightful data. 128 Most reports did not reveal which risks companies had identified and failed to in­ dicate how companies dealt with these risks. 129 The require­ ments for reporting do not go quite so far as to invalidate company non-disclosure agreements. It is not expected that many complaints will be filed, since victims do not have ac­ cess to much internal company data, and are unable to car­ ry their burden of proof. The law cedes many, including fundamental, questions to law practitioners for clarification. 130 The French legislators intended to prevent thoughtless»tick-boxing« by company employees and wanted to encourage them to reflect on the concrete requirements. They pursued a definitive strategy when using general terms like»human rights and basic free­ doms«,»appropriate measures« and»severe violations« which need to be filled with specific meaning. SCOPE OF APPLICATION The new provision in the Code de Commerce applies to all companies and all industries with 5,000 or more employ­ ees in the parent company and French subsidiaries and sub-subsidiaries. The law also applies to companies with 10,000 or more employees worldwide, including subsidiar­ ies and sub-subsidiaries. The number of employees at the end of two consecutive fiscal years is dispositive. It does seem to matter which corporate structure the compa­ ny has chosen, whether it is a stock company, capital compa­ ny or a partnership. The new Art. 1 L. 225-102-4(1) Code de Commerce seemingly addresses all companies with a large number of employees. However, there remains some doubt about the assumption, since the new provision was inserted as part of reporting duties for stock companies. The French economy is, in global comparison, a country of large compa­ nies, especially stock companies. Originally the law, themati­ cally comprehensive and with strong enforcement mecha­ nisms, was intended to apply only to large companies who are responsible for the majority of exports, typically stock companies. Thus, the new law was inserted in the commer­ cial code section on reporting duties of French stock compa­ nies(L. 25-102). Some authors have concluded that the term »every company«(toute société) only applies to every»Société Anonyme«. 131 However, it seems arbitrary to limit the 128 Sherpa 2019: p. 27, n. 28. 129 Sherpa 2019: p. 10. 130 See details at: Nasse 2019, pp. 788–800. 131 So Mansel 2018: p. 444. 30

Country Reports scope of application via the company structure. Whether on­ ly stock companies were to be obligated has been discussed in the legislature without reaching a final consensus. 132 The French government commented on the decision of the Con­ stitutional Court from March 23, 2017, stating explicitly that the new provision applies to the French simplified stock com­ pany(SAS) and the French partnership by shares(SCA). 133 The discussion about the scope of application has not been finalized. 134 It is expected that the courts will clarify the scope of application. 135 Considering the literal meaning of»every company«, the question arises whether the law applies to foreign parent companies without a seat in France. 136 It is thinkable that a German stock company would be required to monitor their French subsidiaries according to the Loi. The majority view has been to deny extraterritoriality of the Loi. 137 However, this issue was not seriously discussed during the legislative process and may need to be clarified by the courts. It is clear that French companies have to apply due diligence duties to their foreign subsidiaries. It is assumed that only 136 large French stock companies fall under the new law due to the high threshold of 5,000 to 10,000 employees. Estimates run from 100 to 250 com­ panies. 138 The Economy and Finance Minister tasked the Economic Council(Conseil Général de l’Économie) with compiling a list of companies subject to the law. 139 Since corporate due diligence extends to controlled com­ panies and established business relationships it is likely that a lot more French and foreign companies will be obliged by large companies to observe due diligence. This provision addresses various topics:»human rights and basic freedoms, health and safety of persons and the envi­ ronment«. The subject of corruption was dropped after Senate debates. The law does not closely define these public protected rights. The legislators and the government decided against a catalogue of international or national standards, since they are in constant development. 140 They decided that it was sufficient if the law only named the kinds of risks that companies had to address in the monitoring plan. The list­ ing of general protected rights without further specifica­ tion is similar to the wording used by the UN Guiding Principles for Business and Human Rights. This approach puts emphasis on the circumstances of a specific business activ­ ity and then concludes which human rights beyond the UN Human Rights Conventions and beyond ILO Core Labor Standards are required to be observed. Some monitoring plans will have to address public international law on hu­ man rights and the rights of special groups(such as chil­ dren, women, ethnic minorities, indigenous populations and migrant workers). 141 The law does not address which environmental provisions have to be observed and wheth­ er»human rights« means human rights under treaties which France has ratified or whether local foreign law is authoritative. 142 Companies are advised to take a holistic approach when drafting the monitoring plan. The environment, health and safety are to be taken together as a group, indivisible and intricately connected to human rights. 143 It is assumed that it is more effective to combine these subject matters than to separate them. 144 SUBJECT OF THE MONITORING PLAN The law defines due diligence as a duty to draft and imple­ ment a monitoring plan(plan de vigilance) for all controlled companies and established business relationships(Art. L.225-102-4(1) Code de Commerce). Thus, the relationship of these protected rights and their definitions remain blurry. It has been proposed to consult the French environmental code(Art. L. 162-1 Code de l’Environnement) when dealing with due diligence directed at the environment. 145 It is not clear whether French stand­ ards are supposed to extend worldwide. Courts may to have to provide clarification. 132 Sherpa 2019: p. 28, n.30. 133 Gouvernement 2017: 1. A. The government points to references in the Code de Commerce. 134 Brabant / Savourey opine that the Societas Europaea(SE) is affected, but doubt application to the SAS, Brabant/Savourey 2017[1]: p. 3 et seq. 135 Sherpa 2019: p. 28. 136 Different from the 1st alternative of Art. L.225-102-4(1) Code de Commerce, the 2nd alternative does not require a seat in France, or at the most requires only one of the company seats to be in France. 137 Brabant / Savourey 2017[1]: p. 2 refers to the decision of the French Constitutional Court of March 23, 2017. Also see Bourgeois/Nataf 2017: p. 42; Action Aid 2019: p. 7. 138 Sherpa 2019: p. 27, n. 27; Bourgeois / Nataf 2017: p. 43. Fleischer / Danninger 2017: p. 1850(150 companies); Bougois / Nataf 2017: p. 44(200 companies). It is estimated that companies subject to the law are responsible for 2/3 of the French international trade. 139 Letter of the Minister to the deputy chairman of the Economic Council of May 6, 2019, is in the hands of the author. The Economic Council report is supposed to be available 2019. 140 Brabant / Michon / Savourey 2017: p. 6 with further references. 141 Official Commentary for UN-Guiding Principle 12 and UN OHCHR 2012: 11, answer to question p. 4; Brabant / Michon / Savourey 2017: p. 6. 142 The law refers to human rights and basic freedoms under the Euro­ pean Human Rights Conventions according to Fleischer / Danninger 2017: p. 2850 with further references. 143 Sherpa 2019: p. 37. 144 Sherpa 2019: p. 37. 145 Art.L.162-1 Code de l’environnement:»Sont prévenu sou réparés selon les modalités définies par le présent titre: 1° Les dommages causés à l’environnement par les activités professionnelles dont la liste est fixée par le décret prévu à l’article L. 165-2, y compris en l’absence de faute ou de négligence de l’exploitant; 2° Les dom­ mages causés aux espèces et habitats visés au 3° du I de l’article L. 161-1 par une autre activité professionnelle que celles mentionnées au 1° du présent article, en cas de faute ou de négligence de l’ex­ ploitant. Le lien de causalité entre l’activité et le dommage est établi par l’autorité visée au 2° de l’article L. 165-2 qui peut demander à l’exploitant les évaluations et informations nécessaires. 31

FRIEDRICH-EBERT-STIFTUNG – COMPANIES AND HUMAN RIGHTS EXTENT OF RISK IDENTIFICATION: ­RELATIONSHIPS IN COMPANIES AND WITH SUBSIDIARIES AND SUPPLIERS The monitoring plan must contain appropriate measures to identify risk. The risks to be identified are from the follow­ ing three areas of activity: –– Activities of the company –– Activities of controlled subsidiaries and sub-subsidaries 146 –– Activities of subsidiaries and suppliers in established business relationships, if these activities are connected to the business relationship of the company who has to observe due diligence Which business partners are to be included in the risk as­ sessment depends on with whom the»established business relationship«(relation commerciale etablié) exists. This technical legal term was taken from a different section of the French Civil Code. 147 Any company that wants to sud­ denly end an»established business relationship«, without providing the business partner with a suitable phase-out period, may be liable for damages, even if the business re­ lationship was not documented in writing. 148 French courts have issued many rulings on»established business relation­ ships«, asserting that the specific circumstances are rele­ vant, emphasizing the intention to protect trust between business partners, if a business relationship is suddenly ter­ minated. Deciding factors generally were: a certain stability, continuity and regularity of the relationship. 149 Some law practitioners consider the term»relation établié« and its re­ liance on trust also relevant under the Loi. 150 Business relationships that are temporary or project-based are considered to be sufficiently established when the con­ tract-awarding company has reserved the right to actively contribute to the partner’s planning, development, manu­ facturing or delivery decisions. Even business relationships where the contractor partner derives the majority of their revenue from the contract-awarding company, should be considered established. This view is supported by the fact that the contractor partner retains significant influence or that it is at least possible to work towards greater influence. Whether the term»relation établié« will be modified re­ mains to be resolved by civil courts. An established business relationship under the Loi may al­ so exist with companies further down the supply chain and not only with immediate business partners. 154 The origina­ tors of the Loi desired a clarification that the due diligence duty would apply to the total supply chain. They were not successful. A clarification of the extent of due diligence will have to be provided by civil courts. The French government and the French constitutional court have expressed their understanding that the Loi re­ quires companies to demand due diligence from immedi­ ate business partners and indirectly and directly controlled companies. 155 This interpretation conforms to the stipula­ tions of the UN Guiding Principles for Business and Human Rights. 156 Since due diligence specifications of the Loi are limited to the upstream of the supply chain and do not ad­ dress the use of products and services by end-users down­ stream, the Loi falls short of the UN Guiding Principles. 157 CONTENT OF MONITORING PLAN However, the term»established business relationship« does have a special function in the Loi. The focus of the Loi is on the rights of third parties and the protection of the environ­ ment. To limit the due diligence duty of the Loi to business relationships where the parties have trusted each other over a long time-period does not seem to be particularly ex­ pedient. 151 French law practitioners, civil organizations and labor unions advocate a modified understanding of the word»established«. They promote that the duration of the relationship is less important than the significance of con­ tract performance. 152 Business relationships where the com­ pany who was awarded a contract receives instructions or is economically dependent seem to be just as relevant. 153 The monitoring plan must include appropriate prevention measures against severe infringements on the protected rights. The law lists five aspects: 1. A geographic systematization of risks(risk registry) to identify, analyze and prioritize risks 2. Procedures to regularly assess conditions present at subsidiaries, sub-contractors and suppliers with an es­ tablished business relationship, in relation to the risk registry 3. Appropriate measures to reduce risk or prevent severe violations 146 Control can be derived by law or by contract. See Brabant / Michon / Savourey 2017: p. 2. 147 Cossart / Chaplier / de Lomenie 2017: p. 320. 148 Art. 442-6-I-5° Code de Commerce(rupture brutale). 149 Hübner / Pika 2018: p. 38 with further references. 150 Bourgois / Nataf 2017: p. 44. 151 Brabant / Michon / Savourey 2017: p. 4. 152 Hannoun 2017: p. 810, cited in Brabant / Michon / Savourey 2017: p. 4. 153 The organization Sherpa considers»instructing companies« and »economic dependence« relevant characteristics, Sherpa 2019: p. 33. 4. A warning and whistleblower mechanism for existing and materializing risks which is to be jointly specified together with company unions 154 Cossart / Chaplier / de Lomenie 2017: p. 320. 155 Gouvernement 2017: 1. B; Conseil Constitutionnel 2017: No. 21. 156 Compare UN-Guiding Principles 13 and 19; same at Brabant / Mi­ chon / Savourey 2017: pp. 4 and 5. 157 Brabant / Michon / Savourey 2017: p. 5. 32

Country Reports 5. A mechanism to monitor implemented measures and to assess their efficacy Different from traditional financial risk management sys­ tems, is a risk under the Loi not only relevant when the course of or the financial success of the business is jeopard­ ized. Relevant are potential effects on sustainability con­ cerns. 158 The law authorizes the State Council(Conseil d’État) to im­ pose by decree any additional measures that should be in­ cluded in the monitoring plan and to specify requirements for plan development. Such a decree has not been devel­ oped yet. When performing risk assessment of subsidiaries and sup­ pliers, companies are required to exchange information about business partners. This is set out as an important measure but has been used by too few companies so far. 159 Competitive disadvantages and non-disclosure agreements prevent many companies from sharing risk-relevant infor­ mation. 160 PROCEDURE FOR THE DEVELOPMENT OF MONITORING PLANS The plan should be developed in cooperation with interest groups relevant to the company, if necessary in industry-spe­ cific or regional multilateral initiatives(Art. L. 225-102-4(1) 4th paragraph). This aspect concerns groups who are poten­ tially affected by the business activity, both within the com­ pany and supply chain and third parties outside of the com­ pany. This is about the workforce and workers employed in the supply chain and neighbors and communities in the sur­ rounding area of manufacturing facilities who may be affect­ ed by company waste or soil erosion. Companies are advised to use their own definition of these interest groups, to name and describe them and to explain how they design the con­ sulting process with these interest groups. 161 The requirement has special importance, since cooperation with stake holders, such as unions and population groups affected by large projects, has had a positive impact on the design and quality of due diligence plans. The UN Guiding Principles have purported that collaboration with interest groups is important for the development and implementa­ tion of due diligence plans. 162 The vagueness of the Loi de Vigilance regarding the content development of due dili­ gence can thus be overcome. 158 Brabant / Michon / Savourey 2017: 10; compare UN Working Group 2018: Nos. 15, 19 and 90. 159 Sherpa 2019: p. 34 et seq.; see for example initiatives»Know the Chain«; http://knowthechain.org/benchmarks/ and»Transparency Pledge«; http://cleanclothes.org/transparency. 160 Sherpa 2019: p. 34 et seq. 161 Presentation of French attorney Elsa Savourey in Paris in September 2018; the protocol is available from the author. 162 UN-Guiding Principle, 18(b). Some views in the literature have held that procedures to assess the efficacy of measures(No. 5) demand the em­ ployment of external auditors and quality inspectors. 163 ENFORCEMENT THROUGH PUBLICITY The Loi de Vigilance encourages careful implementation of the law through a combination of publicity and society’s interest in reputation. Art. L. 225-102 Code de Commerce has required since 2001 that French stock companies address in their reports how they deal with social and environmental consequences of their activities(environmental and social governance). The amended law Grenelle II of 2010 expanded this duty and added a duty of independent auditing. The Loi de Vigilance added environmental governance to the requirements for a monitoring plan(Art. L 225-102-4 and 5). The due diligence plan and the report about its ef­ fective implementation must be contained in the environ­ mental report and must be presented at the annual share­ holder meeting(Art. L. 225-102-4 paragraph 1, sentence 6). The monitoring plan and the implementation report must be published separately(Art. L. 225-102-4 paragraph 1, sentence 6). Civil organizations have examined the first available monitoring plans and have pointed out that im­ provement is possible. So far, assessments have concluded that companies have neither fulfilled the expectations ex­ pressed in the UN Guiding Principles for Business and Human Rights nor the Loi de Vigilance. The majority of pub­ lished plans were judged incomplete and vague, not indi­ cating whether or how certain themes were prioritized. 164 The Econonic Council is authorized by the Economic and Finance Minister to conduct in 2019 a comprehensive assess­ ment of all monitoring plans and reports that have been published. Parliament is expected to conduct an assess­ ment of the efficacy of the Loi in 2020. Hopefully clearer re­ quirements will lead to a better quality of plans and reports. When a court issues a judgment for damages it may also order the publication of its decision or an excerpt of its de­ cision and may order the execution of its judgment. 165 JUDICIAL ORDERS FOR FULFILLMENT OF DUTIES If a company does not fulfill their duties(set out above) within three months of being requested to do so, the ap­ propriate court may, upon the request of any person who has a justified interest, order the fulfillment of duties(Art. L. 225-102-4 paragraph 2, sentence 1). Initially, the court 163 Fleischer / Danninger 2017: p. 2850 with further references. 164 Shift Project, 2019: p. 8; Action Aid 2019. 165 Art. L. 225-102-5(4) and(5). 33

FRIEDRICH-EBERT-STIFTUNG – COMPANIES AND HUMAN RIGHTS may threaten to impose a fine(astreinte), and then order payment of a fine. The fine will be recurrent if the violation continues. In urgent cases the court president may issue a preliminary ruling(Art. 2, sentence 2). Not only aggrieved parties, but also any person or organi­ zation who has a justified interest in the procedure is enti­ tled to apply to the court. Thus, NGOs or unions are enti­ tled to file an application with the courts. 166 In June 2019 six French and Ugandan NGOs formally re­ quested the company»Total« to fulfill their duties. Total is required to improve its monitoring plan related to oil drill­ ing in the vicinity of a Ugandan nature reserve. If Total does not comply within the three-month period, these organiza­ tions will ask a court to issue a respective order. 167 The parent company is expected to use their influence in the corporate group to minimize risks which are directly at­ tributable to controlled subsidiaries and sub-subsidiaries, no matter in which business unit these risks are present. The parent company may instruct the management of the controlled company to provide information towards risk identification and to develop and implement measures re­ quired by the Loi de Vigilance. When the controlled com­ pany complies and controls the execution of the parent company’s instruction in an appropriate manner, they will have satisfied their monitoring duty. If the subsidiary still causes damage, the parent company is not liable. The same rule applies to the monitoring of established business rela­ tionships. Since the company is only liable for their own fault, this does not represent an unlawful liability for the action of a third party or a breach of the corporate veil. 173 CIVIL LIABILITY The main enforcement mechanism of the Loi lies in the risk that companies be held liable for damages. The legislators have successfully closed this loop hole that had existed in French tort law. 168 The basis for civil liability can be found immediately follow­ ing the monitoring section of the Loi(Art. L. 225-102-5 Commercial Code). Whoever does not develop and imple­ ment a monitoring plan, is liable for damages under gener­ al French tort law, if the damage could have been prevent­ ed otherwise. A company does not have to pay all damag­ es, only the ones which were caused by the action of the company, its controlled companies or business partners in a type of no-fault guarantee or risk liability scheme. Only those damages are payable which could have been pre­ vented by fulfillment of the due diligence duties. This is not an obligation based on reaching a particular result, but an obligation based on making an effort. 169 Aggrieved parties must prove that the parent company could have avoided the damages if they had applied the re­ quired due diligence. The draft version of the Loi originally provided for a reversal of the burden of proof: If damages arose out of the action of a subsidiary or established busi­ ness relationship, then it would have been inferred that the application of due diligence would have prevented this particular damage. 170 The proponents of this version were not successful. 171 Whoever files a court action for damages must prove a violation of the monitoring duty and causa­ tion between the violation and the damage. 172 166 Brabant / Savourey 2017 p. 2; Nordhues 2019: p. 317. 167 www.totalautribunal.org. 168 For a comparison of the Loi de Vigilance with prior French provisi­ ons: See Nasse 2019, pp. 777–801. 169 Cossart / Chaplier / de Lomenie 2017: p. 321. 170 Proposition de loi N° 1519. 171 Cossart / Chaplier / de Lomenie 2017: p. 317. 172 Sherpa 2019: p. 10. It has not been clear whether French civil courts will apply the new liability scheme in cross-border matters. European provisions in the Rome-II-Regulation provide for civil courts to apply in cross-border matters the law of the forum where the damage occurred, i. e. foreign law. 174 Civil courts must qualify the Loi de Vigilance as a»for public-order especially important law« in order to be able to apply it. A respective clarification was proposed, but defeated. 175 State obliga­ tions under International law, legislative materials and ac­ companying public discussions should offer sufficient crite­ ria for a conclusion that the Loi is a»for public-order espe­ cially important law« and applies in cross-border matters. French attorneys do not expect a wave of complaints to be filed. Proof of non-performance of the(rather vague) due diligence requirements and proof of causation constitute tremendous challenges for plaintiffs. Still, the combination of the risk of having to pay damages and the possibility of a court ordered fine should motivate companies sufficient­ ly to comply with the law’s requirements. 176 NO MONETARY PENALTIES Originally the law provided for a monetary penalty of up to € 10 million for a violation of the duty to develop and im­ plement a monitoring plan. The penalty was supposed to be even higher if actual damages were caused. However, the French Constitutional Council, in response to the application of several members of Parliament invalidated these provisions only a short while after the law was passed. The court held that due diligence duties focus on vague le­ gal terms such as»human rights and basic freedoms« and »appropriate monitoring measures«, and even apply to»es­ 173 A different view at Nordhues 2019: p. 296 et seq. 174 An exception can be found in Art. 7 Rom II-Regulation: The law of the forum which gave rise to the loss applies to environmental damages. France might be considered the forum where the loss was caused. 175 For example see Carpentier et al. 2015. 176 For a description& evaluation of sanctions in the Loi: Brabant /  Savourey 2017, p. 2. 34

Country Reports tablished business relationships«, including those of subsid­ iaries with third parties. The court further held that the lan­ guage of the law was not clear in regards to monetary pen­ alties. They opined that the law was not clear on whether judges could order several penalties of each up to€ 10 mil­ lion for separate violations or whether a maximum of€ 10 million meant that this was the maximum penalty for all vi­ olations of a company. The court summarized that the Loi was unduly burdened by vagueness and therefore preclud­ ed the imposition of sanctions of a punitive character. 177 Otherwise, the Constitutional Council affirmed the consti­ tutionality of the law, finding that the law was specific enough to impose civil liability for damages. 178 LITERATURE ActionAid France/Les Amis de la Terre et al.(2019): Law on duty of vigilance of parent and outsourcing companies – Year 1: Companies must do better; www.amisdelaterre.org/IMG/pdf/2019_collective_report_-_ duty_of_vigilance_year_1.pdf(visited on June 18, 2019). Bourgeois, Valentin / Nataf, Jérémie(2017): Introducing the French Corporate Duty of Due Diligence Law, The Business and Human Rights Review, Issue 5, Autumn 2017, pp. 42–45. Brabant, Stéphane / Savourey, Elsa(2017[1]): Scope of the Law on
the Corporate Duty of Vigilance, Revue Internationale de la Compliance et de l’Éthique des Affaires, Dossier Thématique 93 for Issue No. 50/2017, pp. 1–8. Brabant, Stéphane / Savourey, Elsa(2017[2]), A Closer Look at the Penalties Faced by Companies, Revue Internationale de la Compliance et de l’Éthique des Affaires, Supplement for Issue No. 50/2017, pp. 1–5. Brabant, Stéphane / Michon, Charlotte / Savourey, Elsa(2017): The Vigilance Plan: Cornerstone of the Law on the Corporate Duty of Vigilance, Revue Internationale de la Compliance et de l’Éthique des ­Affaires, Dossier Thématique 93 for Issue No. 50/2017, pp. 1–15. Carpentier, M. et al.(2015): Amendement of March 26, 2015, for the French Parliament; www.assemblee-nationale.fr/14/amendements/2628/ AN/71.pdf(visited on August 19, 2019). Conseil Constitutionnel(2017): Entscheidung des Conseil Constitutionnel of March 23, 2017; www.legifrance.gouv.fr/jo_pdf. do?id=JORF-TEXT000034290632(visited on June 19, 2019). Cossart, Sandra / Chaplier, Jérôme / de Lomenie, Tiphaine Beau (2017): The French Law on Duty of Care: A Historic Step Towards Making Globalization Work for All, Business and Human Rights Journal, 2(2017), pp. 317–323. Fleischer, Holger / Danninger, Nadja(2017): Der Betrieb 2017, pp. 2849–2857. Französisches Parlament(2017): Final Text of the Loi du Vigilance, www.legifrance.gouv.fr/eli/ loi/2017/3/27/2017-399/jo/texte —(2015): Gesetzesentwurf No. 1777, February 11, 2014; www.assemblee-nationale.fr/14/propositions/pion1777.asp. —(2014): Gesetzesentwurf No. 2578, February 11, 2014; www.assemblee-nationale.fr/14/propositions/pion2578.asp. Gouvernement, Décision n° 2017-750 DC du 23 mars 2017 – ­Observations du Gouvernement; www.conseil-constitutionnel.fr/­ decision/2017/2017750DC.htm(visited on June 15, 2019). Hannoun, Charley(2017): Le devoir de vigilance des sociétés mères et entreprises donneuses d’ordre après la loi du 27 mars 2017, Dalloz soc. 2017, p. 806. Hübner, Leonhard / Pika, Maximilian(2018): Vertrauensschutz im Ver­ triebsrecht, ZEuP 2018, pp. 32–64. Mansel, Peter(2018): Internationales Privatrecht de lege lata wie de lege ferenda und Menschenrechtsverantwortlichkeit deutscher Unternehmen, ZGR, pp. 439–478. Nasse, Laura(2019): Devoir de vigilance: Die neue Sorgfaltspflicht zur Menschenrechtsverantwortung für Großunternehmen in Frankreich, EuZW – Europäische Zeitschrift für Wirtschaftsrecht, 2019, pp. 774–802. Nordhues, Sophie(2019): Die Haftung der Muttergesellschaft und ihres Vorstandes für Menschenrechtsverletzungen im Konzern, Baden-Baden. Potier, Dominique M.(2015): Bericht zum Gesetzesentwurf Nr. 2628, rapport au nom de la commission des lois, n° 2628; www.assemblee-­ nationale.fr/14/rapports/r2628.asp. Sherpa(2019): Vigilance Plan Reference Guidance. Shift Project(2019): Human Rights Reporting in France: A Baseline for Assessing the Impact of the Duty of Vigilance Law, 2018; www.shift­ project.org/resources/publications/loi-vigilance/(visited on June 18, 2019). UN Office of the High Commissioner of Human Rights(2012): The Corporate Responsibility to Respect Human Rights: An Interpretive Guide; www.ohchr.org/Documents/Publications/HR.PUB.12.2_En.pdf(visited on June 17, 2019). UN Working Group on the issue of human rights and transnational corporations and other business enterprises(2018):»Promo­ tion and protection of human rights: human rights questions, including alternative approaches for improving the effective enjoyment of human rights and fundamental freedoms«, July 16, 2018, A/73/163. 177 Conseil Constitutionnel 2017: Nos. 9, 10, 12 and 13. 178 Conseil Constitutionnel 2017: Nos. 15 to 23. 35

FRIEDRICH-EBERT-STIFTUNG – COMPANIES AND HUMAN RIGHTS Text: Law n° 2017-399 of March 27th, 2017 relating to the duty of vigilance of parent and contract-awarding companies (Unofficial translation by Robert Grabosch, Schweizer Legal) Article 1 Après l’article L. 225-102-3 du code de commerce, il est inséré un ar­ ticle L. 225-102-4 ainsi rédigé: Article 1 After Article L. 225-102-3 of the Commercial Code, the following ar­ ticle L. 225-102-4 shall be inserted: » Art. L. 225-102-4. – I. – Toute société qui emploie, à la clôture de deux exercices consécutifs, au moins cinq mille salariés en son sein et dans ses filiales directes ou indirectes dont le siège social est fixé sur le territoire français, ou au moins dix mille salariés en son sein et dans ses filiales directes ou indirectes dont le siège social est fixé sur le ter­ ritoire français ou à l’étranger, établit et met en œuvre de manière ef­ fective un plan de vigilance. » Art. L. 225-102-4. – I. – Any company that employs, by the end of two consecutive financial years, at least five thousand employees it­ self and in its direct or indirect subsidiaries whose registered office is located within the French territory, or at least ten thousand employ­ ees itself and in its direct or indirect subsidiaries whose registered of­ fice is located within the French territory or abroad, shall establish and effectively implement a vigilance plan. Les filiales ou sociétés contrôlées qui dépassent les seuils mention­ nés au premier alinéa sont réputées satisfaire aux obligations prévues au présent article dès lors que la société qui les contrôle, au sens de l’article L. 233-3, établit et met en œuvre un plan de vigilance rela­ tif à l’activité de la société et de l’ensemble des filiales ou sociétés qu’elle contrôle. Subsidiaries or controlled companies that exceed the thresholds re­ ferred to in the first paragraph shall be deemed to satisfy the obliga­ tions laid down in this article, if the company that controls them, within the meaning of Article L. 233-3 of the French Commercial Code, es­ tablishes and implements a vigilance plan covering the activities of the company and of all the subsidiaries or companies it controls. Le plan comporte les mesures de vigilance raisonnable propres à identifier les risques et à prévenir les atteintes graves envers les droits humains et les libertés fondamentales, la santé et la sécurité des personnes ainsi que l’environnement, résultant des activités de la société et de celles des sociétés qu’elle contrôle au sens du II de l’ar­ ticle L. 233-16, directement ou indirectement, ainsi que des activi­ tés des sous-traitants ou fournisseurs avec lesquels est entretenue une relation commerciale établie, lorsque ces activités sont ratta­ chées à cette relation. The plan shall include reasonable and appropriate vigilance meas­ ures to identify risks and to prevent serious harms to human rights and fundamental freedoms, to the health and safety of individuals and to the environment, resulting from the activities of the com­ pany and of those companies it controls within the meaning of II of Article L. 233-16, directly or indirectly, as well as the activities of subcontractors or suppliers with whom an established commer­ cial relationship is maintained, when these activities are linked to that relationship. Le plan a vocation à être élaboré en association avec les parties pre­ nantes de la société, le cas échéant dans le cadre d’initiatives pluripar­ tites au sein de filières ou à l’échelle territoriale. Il comprend les me­ sures suivantes: The plan is meant to be drawn up in conjunction with the stakehold­ ers of the company, where appropriate as part of multi-stakeholder initiatives within sectors or at territorial level. It includes the follow­ ing measures: (1) Une cartographie des risques destinée à leur identification, leur analyse et leur hiérarchisation; (1) A mapping of risks meant for their identification, analysis and pri­ oritization; (2) Des procédures d’évaluation régulière de la situation des filiales, des sous-traitants ou fournisseurs avec lesquels est entretenue une relation commerciale établie, au regard de la cartographie des risques; (2) Regular evaluation procedures regarding the situation of subsi­ diaries, subcontractors or suppliers with whom an established commercial relationship is maintained, in line with the risks map­ ping; (3) Des actions adaptées d’atténuation des risques ou de prévention des atteintes graves; (3) Adapted actions to mitigate risks or prevent serious harms; (4) Un mécanisme d’alerte et de recueil des signalements relatifs à l’exis­ tence ou à la réalisation des risques, établi en concertation avec les organisations syndicales représentatives dans ladite société; (4) An alert and complaint mechanism relating to the existence or re­ alization of risks, drawn up in consultation with the representative trade union organizations within the company; (5) Un dispositif de suivi des mesures mises en œuvre et d’évaluation de leur efficacité. (5) A scheme for monitoring the implementation of measures and evaluating their effectiveness. Le plan de vigilance et le compte rendu de sa mise en œuvre effec­ tive sont rendus publics et inclus dans le rapport mentionné à l’ar­ ticle L. 225-102. The vigilance plan and the report concerning its effective implemen­ tation must be published and included in the report mentioned in Ar­ ticle L. 225-102. Un décret en Conseil d’État peut compléter les mesures de vigilance prévues aux 1° à 5° du présent article. Il peut préciser les modalités d’élaboration et de mise en œuvre du plan de vigilance, le cas échéant dans le cadre d’initiatives pluripartites au sein de filières ou à l’échelle territoriale. A decree issued by the Council of State may expand on the vigilance measures provided for in points 1 to 5 of this article. It may detail the methods for drawing up and implementing the vigilance plan, where appropriate in the context of multi-stakeholder initiatives within sec­ tors or at territorial level. II. – Lorsqu’une société mise en demeure de respecter les obligations prévues au I n’y satisfait pas dans un délai de trois mois à compter de la mise en demeure, la juridiction compétente peut, à la demande de toute personne justifiant d’un intérêt à agir, lui enjoindre, le cas échéant sous astreinte, de les respecter. II. – When a company receives a formal notice to comply with the du­ ties laid down in para. It does not satisfy its requirements within three months of the formal notice, the competent court may, at the request of any person with standing, order the company, including under a periodic penalty payment, to respect them. Le président du tribunal, statuant en référé, peut être saisi aux mêmes fins. The president of the court, ruling under summary proceedings, may be seized to the same purpose. 36

Country Reports Text: Law n° 2017-399 of March 27th, 2017 relating to the duty of vigilance of parent and contract-awarding companies (continuation) Article 2 Article 2 Après le même article L. 225-102-3, il est inséré un article L. 225102-5 ainsi rédigé: After the same article L. 225-102-3, it is inserted an article L. 225102-5 and reads as follows: « Art. 225-102-5. – Dans les conditions prévues aux articles 1240 et 1241 du code civil, le manquement aux obligations définies à l’article L. 225-102-4 du présent code engage la responsabilité de son au­ teur et l’oblige à réparer le préjudice que l’exécution de ces obliga­ tions aurait permis d’éviter. » Art. 225-102-5. – Following the conditions laid down in articles 1240 and 1241 of the Civil Code, a breach of the duties defined in Article L. 225-102-4 of this Code, establishes the liability of the of­ fender and requires him to compensate any damage that the perfor­ mance of those duties would have prevented. L’action en responsabilité est introduite devant la juridiction com­ pétente par toute personne justifiant d’un intérêt à agir à cette fin. The claim for tort is brought before the competent court by any per­ son proving standing. La juridiction peut ordonner la publication, la diffusion ou l’affichage de sa décision ou d’un extrait de celle-ci, selon les modalités qu’elle précise. Les frais sont supportés par la personne condamnée. The court may order the publication, dissemination or display of its decision or an extract thereof, according to the terms it specifies. The costs are borne by the convicted person. La juridiction peut ordonner l’exécution de sa décision sous as­ treinte.» The court may order the execution of its decision under a periodic penalty payment.« Article 3 [Dispositions déclarées non conformes à la Constitution par la décision du Conseil constitutionnel n° 2017-750 DC du 23 mars 2017.] Article 3 [Provisions declared not in conformity with the Constitution by the Constitutional Court decision No. 2017-750 DC of 23 March 2017.] Article 4 Article 4 Les articles L. 225-102-4 et L. 225-102-5 du code de commerce s’ap­ pliquent à compter du rapport mentionné à l’article L. 225-102 du même code portant sur le premier exercice ouvert après la publica­ tion de la présente loi. Articles L. 225-102-4 and L. 225-102-5 of the Commercial Code ap­ ply from the report mentioned in Article L. 225-102 of the same code, relating to the first financial year opened after the publica­ tion of this Act. Par dérogation au premier alinéa du présent article, pour l’exercice au cours duquel la présente loi a été publiée, le I de l’article L. 225102-4 dudit code s’applique, à l’exception du compte rendu prévu à son avant-dernier alinéa. By way of derogation from the first paragraph of this article, for the financial year during which this Act was published, paragraph I of Ar­ ticle L. 225-102-4 of the said code applies, with the exception of the report in its penultimate paragraph. La présente loi sera exécutée comme loi de l’État. This law shall be executed as state law. 37

FRIEDRICH-EBERT-STIFTUNG – COMPANIES AND HUMAN RIGHTS 6. EU CSR REPORTING DIRECTIVE European legislators issued the CSR Reporting Directive, 2014/95/EU,(Directive) on October 22, 2014, aimed at trans­ parency in reporting of non-financial and diversity data by certain large companies and groups. The European Commission was motivated by the realization that investors, owners, creditors and customers have a need to evaluate the non-financial performance of large compa­ nies but often lack the necessary information to do so. The Directive 2014/95/EU amended the EU Accounting Di­ rective(2013/34/EU) by establishing requirements for the new reporting duties. The new duties must be implement­ ed by all Member States. In Germany, these new reporting duties were inserted into §§ 289b et seq. of the Commercial Code(Handelsgesetzbuch, HGB) and have been effective since April 19, 2017. The Ger­ man implementation can be judged as reticent in that the scope of application is narrow. German companies need only report sustainability risks that are very probable or grievous and economically relevant, and there is no provision for com­ paring reports between companies. Overall there is doubt whether the CSR reporting duties in Germany will result in the corporate behavior modification intended by EU legislators. 179 tive 2014/95/EU, large companies are required to publish re­ ports on the policies they implement in relation to the fol­ lowing matters: –– environmental protection –– social responsibility –– treatment of employees –– respect for human rights –– anti-corruption and bribery Companies must disclose, relative to the above five mat­ ters, the following information: –– A brief description of the undertaking’s business model; –– Company policies related to non-financial matters, in­ cluding due diligence processes implemented; if it does not have a policy where it is required, it must explain why; –– The outcome of these policies; –– The principal risks related to those matters linked to the undertaking’s operations including, where relevant and proportionate, its business relationships, products or services which are likely to cause adverse impacts in those areas, and how the undertaking manages those risks; SCOPE OF APPLICATION The German legislature implemented the EU Directive by providing a bare minimum scope of application. Under § 289b HGB only those companies with more than 500 em­ ployees and total assets of over€ 20 million or annual sales revenue of over€ 40 million are required to report. The scope of application is further reduced by applying only to companies whose shares are traded on a German stock ex­ change(capital market oriented companies). That means that large companies like Edeka and Rewe are excluded from reporting duties, since they are privately owned. Out of about 11,200 large companies in Germany, 3,500 to 4,000 companies would have fallen under the CSR Guideline. According to a study of the Hans-Böckler-Stiftung(a founda­ tion), by limiting application to capital market oriented com­ panies, only 536 companies are subject to the Directive with over half doing business as a credit institution or insurance company. 180 DUTIES Companies are required to disclose relevant, useful informa­ tion that is necessary to understand their development, per­ formance, position and impact of their activity. Under Direc­ 179 Humbert 2019. 180 Kluge / Sick 2016: p. 5. –– Non-financial key performance indicators relevant to the particular business. The reporting duty related to risks under(d) may apply to the whole supply chain, however, the reporting duty is fur­ ther reduced for German companies in the following two areas: First, only»principal risks« matter. The EU Commission de­ fines principal risks to mean risks which are necessary for gaining understanding of their impacts on sustainability or on the financial condition of a company. 181 German legisla­ ture defines»principal risks« to mean risks which diminish sustainability concerns AND are necessary for an under­ standing of the company’s financial condition. 182 Thus, Ger­ man companies may neglect risks in distant, muti-redun­ dant, easily exchangeable supply chains. Grave sustainability damages may occur or be imminent that may only cause a rerouting of production processes, without customers ever hearing about it. German auditors are of the opinion that the implementation of the EU Directive in German law did not lead to any new reporting contents, since CSR risks had been already reportable if they were relevant to the financial condition of the company. 183 Actually 63% of German com­ 181 EU Commission 2019: p. 4; critical view at Baumüller 2019. 182 Official justification of the Upper House(Bundesrat), Ds.547/16 of September 23, 2018, p. 52: CSR risks also»quite often« constitute economic risks. There was no discussion as to why other CSR risks should not be reported. 183 Schmidt / Strenger 2019: p. 485. 38

Country Reports panies subject to the reporting duty still do not provide any CSR risk data. 184 The German legislature did not recognize that investors and consumers were more interested in ob­ taining greater clarity about sustainability aspects than the company’s financial condition. 185 Second, the German legislature provided for a»double« limitation of the reporting duty when implementing the Di­ rective in the German Commercial Code. Art. 19a(1)(d) of the Directive demands reporting of»likely adverse impacts« while§ 289c(3) No. 4 HGB only demands reporting of»likely grave adverse impacts«. The German government justi­ fied their wording by referring to EU recitals(a preliminary explanation of the reasons for the Directive) of»very likely grave negative impacts«, stating that a restrictive wording was covered by the Directive in a broad sense. The general rule for the application and implementation of EU law is that recitals may only be considered if the wording leaves a mar­ gin for interpretation. The German government consciously did not refer to this principle of legal interpretation. 186 Overall, sustainability reports remain mostly vague and patchy. Non-financial information must be provided in the status re­ port. References to the financial section of the report are re­ quired. The EU Commission published non-binding guide­ lines about the method of reporting. 187 Reporting duties do not include mandatory due diligence. Companies are free to report that they do not observe any policies. It is possible that reporting of sustainability themes may at least gain the attention of company management. ENFORCEMENT PROVISIONS Non-financial information as part of the status report must be presented to the supervisory company organ for assess­ ment. 188 § 171 AktG requires that the supervisory organ examine the reports. Generally corporate supervisory or­ gans employ external third parties, i.e. auditors, to accom­ plish this task. 189 If companies do not comply with the reporting duty or make false declarations, the German Ministry for Justice and Con­ sumer Protection may order a fine of up to€ 10 million or 5 % of annual revenue. 184 IÖW 2019: pp. 16& 28. 185 Discussion of the terms ›risk‹& ›principal risk‹ at Grabosch 2015: ­ p. 15 et seq. See also Rauch/Weigt 2018: p. 122 for a discussion of trade-offs. 186 The Upper House complained that the German draft incorrectly res­ tricted the wording of the Directive, exceeding interpretation limits; the government refused all changes that were suggested. See also Bertram / Brinkmann / Kessler / Müller 2018:§ 289c HGB, margin no. 5. 187 COM 2017/C 215/01. 188§ 170 AktG; See also Haller / Gruber 2018; Financial Experts Associa­ tion e. V. 2017. 189 Velte / Scheid 2018: p. 1681. If declarations are false or unreasonably positive, competi­ tors and consumer organizations may request in court the issuance of a»cease and desist« order against the company under unfair competition laws. The prohibition of mislead­ ing statements under§§ 5 and 5a of the law against unfair competition(»Gesetz gegen unlauteren Wettbewerb«) ap­ plies to sustainability reports as well. 190 The efficacy of the Directive and national implementation is dependent on companies’ interest in preserving a good rep­ utation. Reputation is affected when market participants are easily able to use and compare published information. The implementation of the Directive in Germany does not contain any requirements as to which of the internationally recognized reporting frame works companies should use. There is no guidance on how to structure a report or how and which key performance indicators are to be applied in a quantitative assessment and presentation. This impedes util­ ity and comparability of information for consumers. Even auditors speak of a»confusing variety related to the new CSR reporting«. 191 Art. 3 of the CSR Reporting Directive imposed on the EU Commission the task to report on the national implementa­ tion of the Directive prior to December 6, 2018 and to as­ sess and submit suggestions for improvement. No report has been published yet. LITERATURE Baumüller, Josef(2019): Neues zur Wesentlichkeit in der nichtfinanziel­ len Berichterstattung – Klarstellungen oder(versteckte) Neuregelungen als Ziel der jüngsten Konsultation der EU-Kommission? PiR – Internation­ ale Rechnungslegung, pp. 136–142. Bertram, Klaus / Brinkmann, Ralph / Kessler, Harald / Müller, Stefan (2018): Haufe HGB Bilanz-Kommentar. EU-Kommission(2019): Leitlinien für die Berichterstattung über nicht-­ finanzielle Informationen: Nachtrag zur klimabezogenen Berichterstat­ tung, Amtsblatt der EU of June 20, 2019, C 209. Financial Experts Association e. V.(2017): FEA-Leitlinien zur Prüfung der nichtfinanziellen Berichterstattung(CSR-Bericht) durch den Aufsichts­ rat. Grabosch, Robert(2015): Rechtsgutachten zur Umsetzung der CSR-Ber­ ichtspflichten-Richtlinie(2014/95/EU) über Offenlegungspflichten von Unternehmen im Hinblick auf nichtfinanzielle Angaben, Gutachten of June 22, 2015 im Auftrag von Oxfam Deutschland e.V., available from the author. Haller, Axel / Gruber, Stefan(2018): Aufnahme nichtfinanzieller Infor­ mationen in die Lageberichterstattung – Auswirkungen auf die Überwa­ chungsfunktion des Aufsichtsrats, KoR, pp. 474–485. Humbert, Franziska(2019): A Critical Assessment of the CSR Directive and Its German Implementation, Schmalenbach Business Review, pp. 279–285. Institut für ökologische Wirtschaftsforschung(IÖW 2019): ­Monitoring der nichtfinanziellen Berichterstattung; www.rankingnachhaltigkeitsberichte.de(visited on June 20, 2019). 190 Von Walter 2014. 191 Kolb / Niechcial 2017. 39

FRIEDRICH-EBERT-STIFTUNG – COMPANIES AND HUMAN RIGHTS Kluge, Norbert / Sick, Sebastian(2016): Geheimwirtschaft bei Trans­ parenz zum Gesellschaftlichen Engagement? Hans-Böckler-Stiftung, MBF-Report Nr. 27, 11/2016. Kolb, Susanne / Niechcial, Michaela(2017): Verwirrende Vielfalt der neuen CSR-Berichterstattung: Zu viele Freiheiten für Aufstellung und Prüfung? StuB, pp. 697–709. Rauch, Karsten / Weigt, Serafin G. K.(2018): Risikoangaben im Rahmen der nichtfinanziellen Berichterstattung, KoR, pp. 119–126. Schmidt, Matthias / Strenger, Christian(2019): Die neuen nicht-­ finanziellen Berichtspflichten – Erfahrungen mit der Umsetzung aus Sicht institutioneller Investoren, NZG, pp. 481–487. Velte, Patrick / Scheid, Oliver(2018): Prüfung der nicht-finanziellen (Konzern-)Erklärung nach dem CSR-Richtlinie-Umsetzungsgesetz, DStR, pp. 1681–1685. von Walter, Axel(2014): Corporate Social Responsibility und das Irre-­ führungsverbot nach den§§ 5, 5a UWG, in: Reto M. Hilty / Frauke Hen­ ning-Bodewig(Publ.): Corporate Social Responsibility, 187 MPI Studies on Intellectual Property and Competition Law 21, pp. 187–196. 40

Country Reports 7. AUSTRALIA: MODERN SLAVERY ACT 2018 In the fall of 2018 the Australian legislature passed the Modern Slavery Act 2018(»MSA«) to provide for reporting duties related to modern slavery. The Act requires compa­ nies to take measures to overcome risks of modern slavery in their business and supply chains. 192 The reporting duties are comparable to the duties imposed by California and the U.K. The first year of reporting was expected to start on July 1, 2019. 193 When compared to the U.K. Modern Slavery Act 2015, the Australian Modern Slavery Act is an improvement. The Australian provisions not only require reports from private companies, but also from the Commonwealth for public procurement deliveries. Similar laws in the U.K. and France are often not definitive in terms of which companies must report. Civil society hopes that the annual report by the Minister of Home Affairs about implementation of the MSA will show which companies refuse to abide by it. 194 Smaller Australian companies or companies doing business in Australia may voluntarily file reports with the new pub­ lic report registry. 200 DUTIES The focus of the Act is on reports about risks of modern slavery. Modern slavery includes: 201 –– Slavery, slave-like actions and human trafficking, ex­ tensively defined in§§ 270 to 271 of the Australia crim­ inal code(33 pages), without regard for the location of the action, both inside the country or abroad. –– Human trafficking under Art. 3 of the Protocol to Pre­ vent, Suppress and Punish Trafficking in Persons Espe­ cially Women and Children, supplementing the UN Convention against Transnational Organized Crime of 2000 –– The worst forms of child labor under Art. 3 of the Worst Forms of Child Labor ILO Convention(No. 182) SCOPE OF APPLICATION The Australian reporting duty applies to certain compa­ nies, NGOs, universities and the Australian government (Commonwealth). 195 The MSA applies to business entities who have a consoli­ dated revenue of at least AU$ 100 million(about€ 66 mil­ lion), are an Australian entity or carry on business in Aus­ tralia at any time in the reporting period. 196 A foreign cor­ porate entity carries on business in Australia if they carry on business within the meaning of the Corporations Act 2001, including have a branch office in Australia. 197 Fiscal entities will be aware of those entities in the context of tax­ ation. The government plans for the MSA to apply to for­ eign corporate entities carrying on business in Australia if they must register with the Australian Securities and In­ vestments Commission(ASIC) because of size or indus­ try. 198 That means that foreign companies with an Austral­ ian branch office or business activity without a branch of­ fice are subject to reporting. The Australian Minister for Home Affairs expects that about 3,000 companies are re­ quired to report. 199 192§ 3 MSA. 193§ 2 MSA. The first reports are expected to be filed in early 2021, Sinclair 2019: p. 87. 194 Sinclair 2019: p. 87. 195§§ 5(1)(2) and 6 MSA. 196§ 5(1) MSA. 197§ 5(2) MSA,§ 21(1) Corporations Act 2001. 198 Department of Home Affairs 2019: 17. The government guideline refers to the duty to register with the Australian Securities& Invest­ ments Commission. 199 Fact Sheet of the Department of Home Affairs 2018. Every report must contain the following information: 202 (a) The name of the company (b) A description of the company’s structure, business pro­ cesses and supply chains (c) A description of all modern slavery risks in the business processes and supply chains of the reporting company and all companies that they own or control (d) A description of risk assessment and risk management measures of the reporting company and its owned and controlled companies, including due diligence and resti­ tution measures (e) A description how the company evaluates the efficacy of these measures (f) The consultation processes within the group (g) All other information which the company deems rele­ vant. The report must be approved by management(Executive Board), signed by one of its members and filed within six months of the end of the fiscal year with the Minister of Home Affairs(§ 13(2) MSA). Groups may file a joint report for all group entities(§ 14(1) MSA). The MSA tasks the Minister of Home Affairs with publish­ ing a public report registry which is accessible without cost. The Minister is authorized to disclose to the public those reports which do not comply with the requirements (§§ 18 to 19 MSA). 200§ 6 MSA. 201§ 4 MSA; see Christ / Burritt 2018: p. 104 et seq. 202§ 16 MSA. 41

FRIEDRICH-EBERT-STIFTUNG – COMPANIES AND HUMAN RIGHTS ENFORCEMENT PROVISIONS After reports are received, they are available to the public in an online registry, without cost. The Minister of Home Affairs is authorized to publish the names of reporting companies and the nature of their violations, if they violate the reporting duty(§ 16 A(4)). The Minister of Home Af­ fairs must publish an annual report about the implementa­ tion of the MSA(§ 23 A MSA). The MSA relies on civil or­ ganizations for a critical review of the reports. It is left to them to evaluate and compare reports, to examine their meaningfulness and accuracy and to publicly denounce them. It is expected that companies are motivated to re­ port in meaningful and accurate ways. The MSA does not provide for fines or monetary penal­ ties. 203 The legislature intends to review whether fines or other sanctions should be added after three years. 204 The legislature did not assign an anti-slavery commissioner with wide competencies. The Ministry of Home Affairs formed a department for business relationships to support companies in their dealings with modern forms of slavery. If the Minister of Home Affairs is of the opinion that a re­ port is insufficient under the MSA provisions, he/she may demand from the company, in writing, to provide addition­ al explanations or improvements within 28 days(minimum period) from request(§ 16 A MSA). The Ministry will advise the Company that they will publish the reporting violation and the name of the company. A company has the right to request a review of the Minister’s decision to the Adminis­ trative Appeals Tribunal(§ 16 A(4)(6) MSA). 205 Additionally, the Ministry of Home Affairs will publish an annual report about compliance with the MSA and will identify best-practice examples(§ 23 MSA). The MSA pro­ vides for a»three-year-review« of efficacy and implemen­ tation of it provisions(§ 24 MSA). consolidated revenue of at least AU$ 50 million(about€ 31 million) and employ workers in New South Wales. The sup­ ply chain requirements(§ 24 MSA New South Wales) cor­ respond with federal requirements. The state MSA pro­ vides for the appointment of an anti-slavery commissioner for New South Wales and authorizes him/her to impose fines of up to AU$1.1 million if a company files a false or misleading report or no report at all. Companies that have more than AU$100 million annual revenue and are subject to the federal MSA, are excluded from fines. 207 LITERATURE Australian Parliament(2018): Modern Slavery Act 2018, No. 153 2018; https://www.legislation.gov.au/Details/C2018A00153. Christ, Katherine Leanne / Burritt, Roger Leonard(2018): Current perceptions on the problem of modern slavery in business, Business ­Strategy and Development, pp. 104–113. Department of Home Affairs(2019): Modern Slavery Act 2018: Draft Guidance for Reporting Entities(published for stakeholder consultation prior to May 19, 2019). Department of Home Affairs(2018): Factsheet: Modern Slav­ ery Reporting Requirements; www.business-humanrights.org/en/ australia-­government-introduces-modern-slavery-bill-2018-toparliament#c174050. Marshall, Caroline / Jones, Hayley(2018): Modern slavery regulation in Asia Pacific: Preparing for greater supply chain transparency in Australia, The Business and Human Rights Review, Issue 6, Autumn 2018, ­ pp. 28–31. New South Wales Parliament: www.legislation.nsw.gov.au/#/view/ act/2018/30 Modern Slavery Act, s. 24(2) and(6). Sinclair, Amy(2019): Tackling modern slavery now a matter of legal compliance, Law Society of New South Wales Journal(Australia), March 2019, pp. 86–87. The Ministry of Home Affairs is authorized to issue regula­ tions which are necessary to carry out or giving effect to the Act. Civil and criminal sanctions are explicitly excluded from these regulations(§ 25 MSA). MODERN SLAVERY ACT 2018 OF NEW SOUTH WALES New South Wales was not deterred from passing their own Modern Slavery Act(MSA, NSW) on June 27, 2018 which served the Commonwealth as an ambitious model. 206 The Act applies to companies who conduct business, have a 203 Sinclair 2019: p. 86. 204 Sinclair 2019: p. 87. 205§ 16A(6). 206 Modern Slavery Act 2018, published at rwww.legislation.nsw.gov. au. A short summary in Marshall/Jones 2018: p. 29 et seq. 207 Sinclair 2019: p. 87. 42

Country Reports 8. NETHERLANDS: WET ZORGPLICHT KINDERARBEID (CHILD LABOR REGULATION)* The Dutch Senate voted on May 14, 2019 for a law ad­ dressing due diligence duties to prevent child labor. In Feb­ ruary 2017, this law had already been passed by the Tweede Kamer, the lower house(House of Representatives) of the Dutch Parliament. 208 The»Wet Zorgplicht Kinderarbeid« (abbreviated:»Wet«) has not taken effect yet, pending a royal decree expected to be issued sometime after January 1, 2020. Companies must abide by the law within six months of the law taking effect. The Dutch legislature considers the right of consumers to be protected from misleading information a fundamental right and believes that the vast majority of consumers would not purchase goods or services derived from child labor. Thus, the legislature decided to provide Dutch con­ sumers with the necessary market information to deter­ mine whether companies exert reasonable efforts to pre­ vent child labor in the supply chain of goods and services. The Dutch government has offered financial assistance with measures against child labor to those companies who participate in one of the sector-specific human rights roundtables. 209 SCOPE OF APPLICATION The law applies to all companies who deliver goods or ser­ vices to Dutch consumers, no matter whether the final consumer is a company or an individual consumer(Art. 4 (1)). Foreign companies who sell goods or services to Dutch consumers at least twice a year(Art. 4(1) S. 2) are explicit­ ly included in the law, even if they do not have an office in the Netherlands. The only foreign companies that are ex­ cluded are those who only transport or transship goods (for example through the harbor of Rotterdam), Art. 4(2) S. 2. The law indirectly effects additional companies in the glob­ al supply chain, since companies who are subject to the law must develop and implement measures to reduce risks of child labor in the whole supply chain. The draft bill pro­ vides for»regulatory exemptions for some categories of companies«(Art. 6). The government announced that they would be guided by»proportionality« when defining the requirements for exempt companies. * The author thanks attorney Wouter Timmermans, Stellicher Advo­ caten, Arnheim, for his contribution. 208 Wet Zorgplicht Kinderarbeid, enacted on February 7, 2017, Kamer­ stukken 34506, nos. 1–3. 209 Fonds Bestrijding Kinderarbeid, established by the government on June 12, 2018. DUTIES Companies must submit a onetime declaration that they observe appropriate due diligence under Art. 5 to prevent child labor. The government agency which will be author­ ized to receive these declarations has not been assigned yet. The declaration must be submitted within six months of the law’s effective date. To define the term»child labor« the law refers to ILO Con­ ventions: The Minimum Age Convention(No. 138) of 1973 regulates the minimum age for labor by young persons and children in consideration of the circumstances of the employment conditions, with special provisions for labor that is harmful to the health or development of young per­ sons. The Worst Forms of Child Labor Convention(No. 182) of 1999 regulates worst forms of child labor and its prevention. The Dutch Parliament opined that adopting the ILO definitions made the implementation of the law easier. There are few countries who have not ratified the ILO Con­ ventions. The literal meaning of the draft and its purpose proscribe that due diligence measures are especially rele­ vant for the supply chain in those countries which have not ratified ILO Conventions. Companies must fulfill their duties by taking the following three steps: 1. A due diligence assessment must be performed to de­ termine whether there is a reasonable suspicion(»redelijk vermoeden«) that child labor is used in the sup­ ply chain. The term»redelijk vermoeden« is common­ ly used in Dutch criminal and civil law. Companies must consider information from sources which are »reasonably identifiable and available« and must abide by the requirements of the future regulation. It is ex­ pected that the regulation will adopt the recommen­ dations of the ILO-IOE Child Labor Guidance Tools (Art. 5(2) and(3). Also, the»MVO-Risk-Checker’ de­ veloped by the Dutch government may be a tool in­ cluded. Parliament hearing notes reveal that a reason­ able suspicion is justified if the particular country is known for child labor in the production of comparable goods and services. If there is no reasonable suspicion, then companies must advance straight to step three. 2. If there is a reasonable suspicion, the company must develop and implement an»action plan«, following the recommendations of the ILO-IOE Child Labor Guidance Tools. Further requirements for the action plan are expected to be included in the future regulation and in industry-specific»joint action plans« which are developed by NGOs and trade associations. The Minister of Foreign Trade may authorize these plans, thus ac­ knowledging that the measures in the plan fulfill legal requirements. This is particularly true for the»Covenants« which are currently developed by industry-spe­ cific round-tables of the Dutch government. 43

FRIEDRICH-EBERT-STIFTUNG – COMPANIES AND HUMAN RIGHTS 3. A company submits a»declaration about the applica­ tion of appropriate due diligence«. This declaration must only be filed once and does not need to be re­ newed. The declaration can consist of a boiler-plate statement»that appropriate due diligence to prevent child labor« was performed. The Wet authorizes the government to add requirements for the declaration, however, the government commented on July 17, 2017 that they»did not see the need for supplementa­ ry requirements«. Companies must report their state­ ments to the supervisory authority and all declarations will be published by the supervisory authority in a reg­ istry. It is anticipated that the consumer protection agency»Autoriteit Consument& Markt« will serve as supervisory authority, but maybe a new agency will be established. ENFORCEMENT PROVISIONS Every person and every company whose interest is affect­ ed may file a complaint with the supervisory authority, pointing to a specific violation against the law(Art. 3). It is not sufficient to voice a general suspicion based on hearsay or low prices, which do not constitute»concrete evi­ dence« under the law. The government clarified that con­ crete evidence is required. 210 If the company does not remedy the violation within six months, the supervisory authority may impose a fine of € 820,000, or may order a fine of up to 10 % of annual company revenue in special cases. Managers/CEOs should expect criminal consequences if they are charged with re­ current violations within five years. A prison sentence of up to six months(Art. 6(1)) may be imposed. The legislature decided on substantial sanctions because they deemed it important to prevent child labor. 211 It is presumed that injured children are prevented from su­ ing for damages against a company who violates the duties of the Wet. The Dutch legal system focuses on the primary purpose of a law and, in this context, that is consumer pro­ tection. considered just as important. 212 They apply no matter whether a(truthful) declaration was submitted or not and can be enforced by persons with a legitimate interest in the matter. The due diligence duty is extraterritorial in two aspects: 1. It relates to child labor which takes place in supply chains outside of the Netherlands. 2. It applies to foreign compa­ nies who do not have an office in the Netherlands, but sell to Dutch companies or consumers. It is questionable whether the supervisory authority will be able to uncover violations. The authority would need the necessary expertise and capacities as well as the authority to demand information and production of documents from the respondents to be truly effective. The Wet is mute on these aspects. 213 The frequent references to Conventions and Tools of inter­ national organizations and industry-specific guidelines, au­ thorized by ministers, appear to provide expedient assis­ tance. Critical voices have pointed to»vague requirements for due diligence«. 214 Still, 22 Dutch companies, including Heineken and Nestlé Holland publicly supported the draft and asked the Senate in an open letter to pass the law. 215 LITERATURE International Corporate Accountability Roundtable(ICAR)/ ­Focus On Labour Exploitation(FLEX)(2019): Full Disclosure: Towards Better Modern Slavery Reporting, March 2019. Tony’s Chocolonely und 21 weitere Unternehmen(2017):»Een wet zorgplicht kinderarbeid, pakt kinderarbeid serieus aan«, open letter of October 3, 2017, www.business-humanrights.org/sites/default/ files/doc­ uments/171002%20Joint%20Business%20letter%20in%20support%20 of%20Dutch%20child%20labour%20HRDD%20law_EN.pdf. Vytopil, Louise(2017): Het Wetvoorstel Zorgplicht Kinderarbeid: naar een wettelijke zorgplicht voor maatschappelijk verantwoord onderne­ men?(October 3, 2017), Bb 2017/19, pp. 260–264. The legislature’s objective is that consumers of goods and services review the public registry and consider the infor­ mation when making purchasing decisions. OUTLOOK The declaration to the supervisory authority and its publi­ cation seem to be the foremost concerns of the law. How­ ever, there are no specific requirements as to its content and the declaration must only be submitted on one occa­ sion. The due diligence duties outlined in the law should be 210 Kamerstukken I 2016–2017, 34506, G:4–5. 211 Kamerstukken II 2016–2017, 34506, 6:16(MvT). 212 Opinion of ICAR, FLEX 2019. 213 Critical: Vytopil 2017. 214 Vytopil 2017. 215 Tony’s Chocolonely et al., 2017. 44

Country Reports Wet Zorgplicht Kinderarbeid (Unofficial translation of Dutch Child Labor Act, courtesy of Ropes& Gray, New York) Amended Legislative Proposal February 7, 2017 We, Willem-Alexander, by the grace of God, King of the Netherlands, Prince of Orange-Nassau, etc. etc. etc. etc. Greetings to all who shall see or hear this read! We have taken into consideration the desirabil­ ity of enshrining in law that companies that sell goods and services on the Dutch market should do everything within their power to pre­ vent their products and services from being produced using child la­ bor, so that consumers can buy them with peace of mind; Thus, it is that We, having heard the recommendations of the Advisory Division of the Council of State, and in consultation with the States General, hereby approve and understand the following: Article 3 Supervision (1) The superintendent shall be charged with the supervision of com­ pliance with the provisions of or pursuant to this Act. (2) Any natural person or legal entity whose interests are affected by the actions or omissions of a company relating to compliance with the provisions of or pursuant to this Act may submit a complaint about this to the superintendent. (3) Only a concrete indication of non-compliance with the provisions of or pursuant to this Act by an identifiable party constitutes grounds for submitting a complaint. Article 1 Definitions For the purposes of this Act and the provisions based thereon, the following terms shall have the following meanings (4) A complaint can only be dealt with by the superintendent after it has been dealt with by the company, or six months after the sub­ mission of the complaint to the company without it having been addressed. a. child labor: child labor as referred to in Article 2; Article 4 Declaration b. end-user: the natural person or legal entity using or consuming the good or purchasing the service; c. company: a company within the meaning of Article 5 of the Trade Register Act 2007 or any entity engaged in an economic activity, regardless of its legal form and the way in which it is financed; d. superintendent: the superintendent to be appointed by order in council; e. binding instruction: a standalone order imposed for an offence; f. standalone order: the order, issued as a sole order, to perform cer­ tain acts, as referred to in Article 5:2, second paragraph, of the General Administrative Law Act, in order to promote compliance with statutory regulations; g. Our Minister: Our Minister for Foreign Trade and Development Co­ operation. Article 2 (1) Child labor is understood to mean: a. in any case, any form of work, whether or not under an employ­ ment contract, performed by persons who have not yet reached the age of 18 and which is included among the worst forms of child labor referred to in Article 3 of the Worst Forms of Child La­ bor Convention, 1999; (1) Any company registered in the Netherlands that sells or supplies goods or services to Dutch end users declares that it exercises due diligence as referred to in Article 5 in order to prevent such goods or services from being produced using child labor. The first sentence applies mutatis mutandis to companies not registered in the Netherlands that sell or supply goods or services to Dutch end users. (2) The company shall immediately send the statement, as referred to in the first paragraph, to the superintendent after it has been re­ gistered in the trade register. Companies that are already registe­ red with the trade register shall send the declaration to the supe­ rintendent within six months of the entry into force of this Act. Any company that is not registered in the European part of the Nether­ lands and that is not registered in the trade register shall send the declaration to the superintendent within six months after the com­ pany supplies goods or services to end users in the Netherlands for the second time in a given year. (3) Exceptions may be granted by or pursuant to an order in council before the date on which the declaration is delivered and further rules may be laid down on the content and form of the statement. (4) The supply of goods, as referred to in the first paragraph, does not mean the mere transport of goods. The superintendent shall publish the declarations in a public register on its website. (5) The superintendent shall publish the declarations in a public regis­ ter on its website. b. if the work takes place in the territory of a State Party to the Min­ imum Age Convention, 1973, ›child labor‹ shall further mean any form of work prohibited by the law of that State in implementa­ tion of that Convention; c. if the work takes place in the territory of a State which is not a party to the Minimum Age Convention, 1973, child labor shall further be understood to mean: i. any form of work, whether or not under an employment con­ tract, performed by persons who are subject to compulsory schooling or who have not yet reached the age of 15, and ii. any form of work, whether or not under an employment con­ tract, performed by persons who have not yet reached the age of 18, insofar as such work, by virtue of the nature of the work or the conditions under which it is performed, may endanger the health, safety or morality of young persons. Article 5 Due diligence (1) A company which, with due observance of the provisions of para­ graph 3, investigates whether there is a reasonable suspicion that the goods or services to be supplied have been produced using child labor and which, in the event of a reasonable suspicion, ad­ opts and implements a plan of action, is exercising due diligence. A company which receives goods or services from companies which have issued a declaration as referred to in Article 4 is also exer­ cising due diligence with respect to those goods and services. A company which receives only goods or services from companies which have issued a declaration as referred to in Article 4 is also exercising due diligence and shall not be required to issue a decla­ ration as referred to in Article 4. (2) The investigation referred to in the first paragraph shall be oriented toward sources that are reasonably known and accessible to the com­ pany. (2) By way of derogation from paragraph 1(c), child labor shall not include light work as defined in Article 7(1) of the Minimum Age Convention, 1973, carried out for a maximum of 14 hours a week by persons who have reached the age of 13. (3) With due observance of the ILO-IOE Child Labor Guidance Tool for Business, further requirements shall be set by or pursuant to an order in council for the investigation and the plan of action re­ ferred to in the first paragraph. 45

FRIEDRICH-EBERT-STIFTUNG – COMPANIES AND HUMAN RIGHTS Wet Zorgplicht Kinderarbeid (continuation) (4) Our Minister may approve a joint plan of action that is aimed at ensuring that affiliated companies exercise due diligence to pre­ vent goods or services from being produced using child labor, and that is developed by or among one or more social organizations, employees' organizations or employers' organizations. A company that acts in accordance with a joint action plan approved by Our Minister is exercising due care. Article 6 Exemption By or pursuant to an order in council, categories of companies are ex­ empted from the provisions of this Act. The recommendation for an order in council to be adopted pursuant to the previous sentence shall not be made until four weeks after the draft has been submitted to both Houses of the States-General. jection or appeal has expired or, if an objection has been lodged or an appeal has been lodged, a decision has been taken on the objec­ tion or appeal, as the case may be. Article 9 Criminalization In Article 1, under 2°, of the Economic Offences Act, the following shall be inserted in the alphabetical list: the Child Labor Due Diligence Act, article 4, second paragraph, and Article 5, first and third para­ graphs, if, in the five years preceding the violation, an administrative fine was imposed on the basis of Article 7, first or second paragraph, of that Act for the same violation by the company, committed by or­ der of or under the de facto leadership of the same manager. Article 10 Evaluation Article 7 Administrative fine (1) The superintendent may impose an administrative fine for vio­ lation of Article 4, second paragraph, up to a maximum of the amount of the second category fine of Article 23, fourth para­ graph, of the Dutch Criminal Code. (2) The superintendent may impose an administrative fine of up to the amount of the fine of the sixth category of Article 23, fourth pa­ ragraph, of the Dutch Criminal Code in respect of the following: a. failure to comply with the obligation to carry out investiga­ tions or to draw up a plan of action, as referred to in Article 5, first paragraph, or b. failure to comply with the requirements for the examination or plan of action referred to in Article 5, third paragraph. (3) Article 23, seventh paragraph of the Dutch Criminal Code shall apply mutatis mutandis to paragraphs 1 and 2 of this Article. (4) The superintendent shall not impose an administrative fine for violation of the provisions of or pursuant to Articles 4 and 5 un­ til after they have issued a binding instruction. The superinten­ dent may set the offender a time limit within which the instruc­ tion must be complied with. Article 8 Suspension of the fine The effect of a decision imposing an administrative fine shall be sus­ pended until such time as the period for submitting a notice of obWithin five years of the entry into force of this Act, Our Minister shall send the States-General a report on the effectiveness and practical effects of this Act. Article 11 Transitional provision This Act shall be inapplicable to the supply of goods or services, the obligation for which was entered into prior to the date of issue of the Bulletin of Acts and Decrees in which it is published, until the date on which the obligation expires pursuant to a stipulation agreed prior to the date of issue of the Bulletin of Acts and Decrees in which this Act is published, but no later than until five years after the date of entry into force of this Act. Article 12 Entry into force (1) This Act shall enter into force on a date to be determined by Ro­ yal Decree, but not earlier than January 1, 2020. (2) This Act shall expire at a time to be determined by Royal Decree, which shall not be before the time of dispatch of the report re­ ferred to in Article 10. Article 13 Short title This law shall be cited as: Child Labor Due Diligence Act. Order and command that it be published in the Bulletin of Acts, Orders and De­ crees and that all ministries, authorities, colleges and civil servants concerned shall uphold its accurate execution. Given, the Minister for Foreign Trade and Development Cooperation. 46

Country Reports 9. SWITZERLAND: KONZERN­ VERANTWORTUNGSINITIATIVE (RESPONSIBILITY INITIATIVE FOR CORPORATE GROUPS) A Swiss ballot measure»For responsible companies – to protect people and the environment« seeks to insert a new Art. 101a in the Swiss Constitution. The new article will in­ stitute a legal duty for large Swiss companies to apply due diligence to their actions and to monitor due diligence of subsidiaries and supply chains. Holding companies are ex­ pected to recognize and avoid risks, to provide restitution if appropriate, and to report due diligence measures. Only when companies prove that they have observed appropri­ ate due diligence, are they not liable for any damages that occurred. The ballot measure is known as the»Corporate Group Responsibility Initiative« and is supported by human rights and environmental NGOs, labor unions and shareholder associ­ ations. This ballot measure was prompted by the decision of the Swiss government(»Bundesrat«, Swiss federal council) to not enact mandatory regulations that implement the UN Guiding Principles for Business and Human Rights. 216 LEGISLATIVE PROCESS: BALLOT MEASURE AND COUNTER-PROPOSAL On October 10, 2016, the ballot measure draft(BV-Ent­ wurf) to amend the federal Constitution was submitted to the Federal Chancellery with 120,418 valid signatures, thus obliging the Chancellery to present the constitutional amendment for a vote by Swiss citizens. The vote is expect­ ed to take place in 2020. Prior to the vote, the Federal Chancellery and Parliament(consisting of National Council and Council of States, the upper chamber) have the oppor­ tunity to develop their own counter-proposal, either consti­ tutional or regulatory. The Swiss government recommend­ ed that Parliament reject the ballot measure without devel­ oping a counter-proposal. 217 On June 14, 2018, the Nation­ al Council passed a counter-proposal with 121 to 73 votes. The counter-proposal contains several new provisions for the Swiss Code of Obligations, Civil Code and International Private Law. 218 The purpose of the counter-proposal is meant to implement the ballot measure, while not imple­ menting all of its provisions. The Council of States would re­ quire a vote for implementation of the counter-proposal in order to enact the amendment, however, they found the counter-proposal went too far. In March 2019, after addi­ tional changes to the counter-proposal by their own legal committee, the Council of States voted down the proposal by a 22 to 20 vote. In June 2019, the National Council reaf­ firmed their own counter-proposal with a 109 to 69 vote. 216 Konzernverantwortungsinitiative: Fact Sheet I, 2. 217 Schweizerischer Bundesrat 2017. 218 Komitee»Ja zur Unternehmensverantwortung mit Gegenvorschlag« 2018: 4. Both chambers are attempting to come to an agreement on the counter-proposal. If they are able to agree, the com­ mittee who presented the ballot measure will most likely withdraw their measure. If the counter-proposal remains in limbo, the people of Switzerland will probably vote in 2020 on the corporate group responsibility initiative as a consti­ tutional amendment. According to a study of the Swiss Technical College of Zurich(Eidgenössische Technische Hochschule) the majority of the Swiss population supports strict regulation in this area. 219 SCOPE OF APPLICATION The new constitutional Art. 101a(draft bill) applies to all companies who have either their statutory seat, main ad­ ministration or main branch in Switzerland. This require­ ment models the rules around the jurisdiction of Swiss civ­ il courts. 220 The statutory seat of companies can be ascer­ tained by a review of public trade registries. The»main ad­ ministration« refers to the location where company man­ agement makes decisions and manages the company or corporate group. A»main branch« is the location where actual company business takes place and this business ac­ tivity is obvious to others. 221 A company may have several »main branches«, such as for different product lines. Due diligence duties apply to German and other foreign com­ panies who qualify under one of the three points of refer­ ence. 222 The drafters of the bill wanted to ensure that com­ panies do not try to avoid their due diligence duties by moving their statutory seat abroad. 223 The legal structure of the company(stock company or limited liability compa­ ny) does not matter. Art. 101a(2)(b) tasks the legislature with applying special consideration to small and midsize companies who demon­ strate low risks of modern slavery. It is the intention to ex­ clude small and midsize companies unless they operate in a high-risk industry. General guidance provisions mention mining and processing of raw materials and trade with raw materials as high-risk industries. The government is tasked with regular industry assessments to determine which in­ dustry must be classified as high-risk industry. 224 It is esti­ mated that about 1,500 Swiss companies are to be includ­ ed, with only few small to midsize companies. 225 219 2/3 of the respondents advocated for the government to strengt­ hen monitoring and regulating of corporate activities abroad, ETH Zürich 2019. 220 Art.60 Übereinkommen über die gerichtliche Zuständigkeit und die Anerkennung und Vollstreckung von Entscheidungen in Zivil- und Handelssachen(Lugano-Übereinkommen), October 30, 2007. This »Convention on civil jurisdiction and judgments« complies with EU jurisdiction under Brüssel(Brussels) I-VO of the EU. 221»The location of the main administration is often not easily discern­ able«; see Handschin 2017: pp. 999 and 1001. 222 Schweizerischer Bundesrat 2017: p. 6355. 223 Handschin 2017: p. 999. 224 Konzernverantwortungsinitiative: Fact Sheet V, 2. 225 https://konzern-initiative.ch/initiative-erklaert/(visited on July 23, 2019). 47

FRIEDRICH-EBERT-STIFTUNG – COMPANIES AND HUMAN RIGHTS In its counter-proposal the National Council limits the scope of application to companies who have their seat in Switzer­ land and either have a balance sheet of over CHF 40 million, consolidated revenues over CHF 80 million or 500 full-time employees(annual average) during two consecutive fiscal years. Small and midsize companies are only covered by the legislation if they demonstrate an especially high risk. Large companies who demonstrate especially low risks are also to be excluded. The initiative calls on the government to issue regulations to that effect. 226 The National Council’s coun­ ter-proposal would limit the scope of application to under 1,000 companies. 227 Companies are expected to adhere to the UN Guiding Prin­ ciples for Business and Human Rights and OECD Guidelines for Multinational Entities. 231 The National Council’s counter-proposal lists»monitoring of the measure’s efficacy« as an additional duty. The coun­ ter-proposal expressly limits the duty to take measures in the total supply chain to»influence and control« of the company. Measures must be appropriate. Companies may prioritize risks. 232 Actions of third parties are only relevant if they are directly connected with the company’s business activity, products or services. 233 DUTIES ENFORCEMENT PROVISIONS The initiative intends to oblige companies, including com­ panies abroad, to respect internationally recognized human rights and environmental standards. Initiative guidance pro­ vides insight: Addressed are UN Conventions related to so­ cial and cultural rights and ILO core labor standards. Envi­ ronmental standards are derived from the Montreal Proto­ col of Substances that Deplete the Ozone Layer, emission standards of the World Health Organization(WHO), sus­ tainability standards of the International Finance Corpora­ tion(IFC) and standards of the International Organization for Standardization(ISO). 228 The legislature is tasked with defining which standards are to be included. 229 The Nation­ al Council’s counter-proposal advocates to only include le­ gal provisions which are covered by international law and that have been ratified by Switzerland. 230 Companies must respect the new provisions when active abroad. They are obliged to perform an»appropriate due dil­ igence assessment« related to human rights for all business relationships and for all controlled subsidiaries(Art. 101a(2) (a) and(b) of draft bill). Due diligence must be applied to the total supply chain and to factually or economically controlled subsidiaries, in accordance with UN and OECD standards. The initiators of the constitutional amendment provide for three significant steps to be performed by companies in their due diligence assessment(Art. 101a(2)(b): –– Actual or potential effects on internationally recog­ nized human rights and environmental rights –– Suitable measures to prevent human rights violations and violations of international environmental stand­ ards and to end existing violations –– To be accountable for measures taken 226 Komitee»Ja zur Unternehmensverantwortung mit Gegenvorschlag« 2018: 1, 2. 227 Kommission für Rechtsfragen des Schweizer Nationalrats 2018. 228 Konzerninitiative, Erläuterungen:§§ 3.2.3.1& 3.2.3.3. 229 Grosz 2017: p. 978 et seq. 230 Komitee»Ja zur Unternehmensverantwortung mit Gegenvorschlag« 2018: 2. The initiative seeks to ensure that due diligence is effective and provides for civil liability and damages. The new due dil­ igence requirements step up company liability for a compa­ ny’s fault. Whoever increases production requirements without adjusting delivery times, is liable for all damages that occur in the total supply chain under Swiss obligations law(Art. 41 OR). 234 Art. 101a(2)(c) expands established Swiss law on a principal’s liability for an agent’s act: Compa­ nies will be liable for damages which were caused by an economically controlled company abroad. The practical ef­ fect is to impose liability on subsidiaries. Switzerland is par­ ticularly known for a large number of global corporate headquarters. 235 The rules on the allocation of the burden of proof to favor injured parties is an important principle of legal protection. Civil courts are expected to assume that due diligence was not appropriately observed, if damages were caused by a controlled company. Only if the company proves that due diligence measures were appropriately taken or that dam­ ages would have occurred even if appropriate due dili­ gence measures were taken, can they be released from lia­ bility(Sorgfalts- oder Entlastungsbeweis /  Due Diligence or Exoneration Proof). 236 The National Council’s counter-pro­ posal makes the argument for considering the»influence« of a company and advocates for exoneration, if the parent company claims not to have any influence over the actions of their subsidiary. 237 The counter-proposal places limits on a subsidiary’s liability for damages to body, life or property if the parent compa­ ny’s control was not only economic but also legal, and the 231 Konzernverantwortungsinitiative: Jur. Erläuterungen zum Entwurf der Volksinitiative: p. 32. 232 Art.716a(2) Obligationsrecht; see indirect counter-proposal; Kom­ mission für Rechtsfragen des Schweizer Nationalrats 2018: p. 8. 233 Kommission für Rechtsfragen des Schweizer Nationalrats 2018: p. 7. 234 Geisser 2017: p. 951 et seq. 235 Konzernverantwortungsinitiative, Fact Sheet V:2,»typically, subsi­ diaries«. 236 Art. 101a(c) Konzernverantwortungsinitiative. 237 Art. 55(1) Schweizer Obligationenrecht, see indirect counter-propo­ sal of National Council. 48

Country Reports subsidiary was actually controlled(Leitungsprinzip /  Man­ agement Principle). The ballot measures do not clarify whether natural persons (board members and managers) may be held liable. The coun­ ter-proposal explicitly excludes liability of natural persons. 238 The ballot measure provides that, in Swiss civil courts, Swiss due diligence and liability regulations have priority over foreign law, even if the courts would be otherwise re­ quired to apply foreign law in a particular case. 239 The counter-proposal offers a nuanced version: Damages and causation should(under Swiss International Private Law) be determined according to foreign law; wrongfulness and fault should be determined according to Swiss law, unless the application of foreign law is deemed more appropriate in consideration of the location where damages arose. The term»control« follows current Swiss law. These nuanced provisions were meant to eliminate objections of»Rechts­ imperialismus«(legal imperialism). Kommission für Rechtsfragen des Schweizer Nationalrats(2018): Indirekter Gegenentwurf der Kommission für Rechtsfragen des National­ rats, www.parlament.ch/centers/documents/de/dok-gegenentwurf-­mmrk-n-2018-05-04.pdf. Konzernverantwortungsinitiative(2018): Fact Sheet I, Historischer und politischer Hintergrund der Initiative, https://konzern-initiative.ch/ wp-content/uploads/2018/05/KVI_Factsheet_1_D_Lay_1801.pdf. Konzernverantwortungsinitiative(2018): Jur. Erläuterungen zum En­ twurf der Volksinitiative; https://konzern-initiative.ch/wp-content/up­ loads/2018/05/20170915_Erlaeuterungen-DE.pdf. Konzernverantwortungsinitiative(kein Datum): Erläuterungen zum Gegenvorschlag, https://konzern-initiative.ch/indirekter-gegenvorschlag/. Schweizer Bundesrat(2017): Mitteilung vom September 15, 2017; www.admin. ch/opc/de/federal-gazette/2017/6335.pdf. Schweizer Parlament(2019): Medienmitteilung, February 20, 2019, www.parlament.ch/press-releases/Pages/mm-rk-s-2019-02-20.aspx. Accountability is expected to serve as an enforcement mech­ anism. Companies must publish regular reports that target groups can easily access, understand and compare. 240 LITERATURE Bueno, Nicolas(2018): The Swiss Responsible Business Initiative and its Counter-Proposal: Texts and Current Developments, Business and Human Rights Journal Blog, https://uzh.academia.edu/NicolasBueno. ETH Zürich(2019): Was denkt die Bevölkerung über die Verantwor­ tung der Konzerne? Ergebnisse einer Untersuchung der Eidgenössis­ chen Technischen Hochschule Zürich, May 31, 2019, https://ethz.ch/de/ news-und-veranstaltungen/eth-news/news/2019/05/was-denkt-die-bev­ oelkerung-ueber-die-verantwortung-der-konzerne.html. Fleischer, Holger / Danninger, Nadja(2017): Der Betrieb 2017, pp. 2849–2857. Geisser, Gregor(2017): Die Konzernverantwortungsinitiative: Darstel­ lung, rechtliche Würdigung und mögliche Umsetzung, AJP/PJA 8/2017, pp. 943–966. Grosz, Mirina(2017): Menschenrechte als Vehikel für ökologische Unternehmensverantwortung, Aktuelle Juristische Praxis(AJP), 2017, pp. 978–987. Handschin, Lukas(2017): Konzernverantwortungsinitiative: Gesellschaftsrechtliche Aspekte, Aktuelle Juristische Praxis(AJP), pp. 998–1004. Komitee»Ja zur Unternehmensverantwortung mit Gegenvorschlag«: Gegenvorschlag und Volksinitiative im Vergleich, https://www.kvi-gegenvorschlag.ch/deutsch/gegenvorschlag. Kommission für Rechtsfragen des Schweizer Nationalrats(2018): ­Zusatzbericht der Kommission für Rechtsfragen vom 18. Mai 2018 zu den Anträgen der Kommission für einen indirekten Gegenentwurf zur Volksin­ itiative»Für verantwortungsvolle Unternehmen – zum Schutz von Mensch und Umwelt« im Rahmen der Revision des Aktienrechts, www.parlament. ch/centers/documents/de/bericht-rk-n-16-077-2018-05-18-d.pdf. 238 Art.759a Ca. Schweizer Obligationenrecht, see indirect counter-pro­ posal of National Council. 239 Art. 101a(d) Konzernverantwortungsinitiative. 240 National Council 2017: p. 6363. 49

FRIEDRICH-EBERT-STIFTUNG – COMPANIES AND HUMAN RIGHTS Text: Swiss Coalition for Corporate Justice(SCCJ), Factsheet V, 1 and 2 (English Version of Ballot Measure:»Konzernverantwortungsinitiative«) The Federal Constitution will be amended as follows: Art. 101a Responsibility of business (1) Confederation shall take measures to strengthen respect for human rights and the environment through business. (2) law shall regulate the obligations of companies that have their registered office, central administration, or principal place of busi­ ness in Switzerland according to the following principles: a. Companies must respect internationally recognized human rights and international environmental standards, also abroad; they must ensure that human rights and environmental stand­ ards are also respected by companies under their control. Whether a company controls another is to be determined ac­ cording to the factual circumstances. Control may also result through the exercise of power in a business relationship. b. Companies are required to carry out appropriate due dili­ gence. This means in particular that they must: identify real and potential impacts on internationally recognized human rights and the environment; take appropriate measures to prevent the violation of internationally recognized human rights and international environmental standards, cease exist­ ing violations, and account for the actions taken. These duties apply to controlled companies as well as to all business rela­ tionships. The scope of the due diligence to be carried out de­ pends on the risks to the environment and human rights. In the process of regulating mandatory due diligence, the legislator is to take into account the needs of small and medium-sized companies that have limited risks of this kind. c. Companies are also liable for damage caused by companies under their control where they have, in the course of business, committed violations of internationally recognized human rights or international environmental standards. They are not liable under this provision however if they can prove that they took all due care per paragraph b to avoid the loss or damage, or that the damage would have occurred even if all due care had been taken. d. The provisions based on the principles of paragraphs a–c apply irrespective of the law applicable under private international law.*  For the draft bill, including reasons, and protocol of the first debate: www. parlament.gv.at/PAKT/VHG/XXVI/NRSITZ/NRSITZ_00039> Sitzungsverlauf Text: Unofficial translation of the counter-proposal by the Swiss Parliament to
the citizen initiative ›Responsible Business Initiative‹ (bill published by the Legal Affairs Committee of the National Council on May 4 th 2018 in French and German, explanatory report published by the Committee on May 18 th 2018 in French and German, bill adopted without changes by the National Council on June 14 th 2018(official French text p. 204–213, official German text p. 207–216),
pending in the Council of States) Proposal by the Legal Affairs Committee of the Swiss National a. balance sheet total of 40 million Swiss francs; Council Responsible Business Initiative: indirect counter-proposal b. sales of 80 million Swiss francs; c. 500 full-time positions on an annual average. Art. 716a CO[Code of Obligations] Non-transferable duties 4 This Article furthermore applies to companies whose activities en­ […] tail a particularly high risk of violating the provisions for the pro­ tection of human rights and the environment, also abroad. It is 5. overall supervision of the persons entrusted with managing the not applicable to companies with such a risk that is particularly company, in particular with regard to compliance with the law, ar­ small. The Federal Council issues implementing provisions in this ticles of association, operational regulations and directives as well regard. as the provisions for the protection of human rights and the envi­ ronment also abroad; 5 Where the law refers to the provisions for the protection of human rights and the environment also abroad, this refers to the corre­ 10. For companies, which are required to adopt measures relating to sponding international provisions, which are binding for Switzer­ the compliance with the provisions for the protection of human land. rights and the environment: the compilation of the report in ac­ cordance with Art. 961e CO. 6 Where the law refers to the provisions for the protection of human rights and the environment also abroad, this refers to the corre­ Art. 716a bis CO(new) 2a. Compliance with the provisions for the sponding international provisions, which are binding for Switzer­ protection of human rights and the environment also abroad land. 1 The board of directors takes measures to ensure that the com­ Art. 810 II. CO Duties of managing directors pany complies with the provisions for the protection of human rights and the environment relevant to its areas of activity, includ­[…] ing abroad. It identifies potential and actual impacts of the busi­ ness activities on human rights and the environment and assesses 4 Supervising of the persons who are delegated management re­ these risks. Taking into account the company's ability to exert in­ sponsibilities, in particular with regard to compliance with the law, fluence, it takes effective measures to minimize the identified risks articles of association, regulations and directives as well as the pro­ concerning human rights and the environment as well as to en­ visions for the protection of human rights and the environment sure effective remedy for violations. It monitors the effectiveness also abroad; of the measures adopted and reports on them. Impacts of busi­ ness activities of controlled companies or due to business relation­ Art. 810a CO(new) IIa Compliance with the provisions conships with a third party are also subject to this due diligence. cerning the protection of human rights and the environment also abroad 2 For this due diligence process the board of directors is primarily concerned with the most severe adverse impacts on human rights Article 716a bis shall apply by analogy. and the environment. It respects the principle of appropriateness. Art. 901 CO 5 Compliance with the provisions for the protection 3 This Article applies to companies which, alone or together with one of human rights and the environment also abroad or more domestic or foreign companies controlled by them, exceed two of the following values in two consecutive financial years: Article 716a bis shall apply by analogy. 50

Country Reports Proposal by the Legal Affairs Committee of the Swiss National Council Responsible Business Initiative: indirect counter-proposal (continuation) Art. 69a bis CC[Swiss Civil Code](new) 3. Compliance with the provisions concerning the protection of human rights and the environment also abroad 1. Article 716a bis Code of Obligation shall apply by analogy. Third Section a Report on compliance with the provisions for the protection of human rights and the environment also abroad 961e CO(new) 1 For companies that are obliged by law to comply with the provi­ sions for the protection of human rights and the environment also abroad, a report shall account for the fulfilment of the individual obligations in accordance with Article 716a bis . 2 This report shall be made publicly available. Art. 55 CO C. Liability of employers 1bis(new) In accordance with these principles, companies that are also obliged by law to comply with the provisions for the protection of hu­ man rights and the environment abroad are also liable for the dam­ age caused to life and limb or property abroad by companies actually controlled by them in the performance of their official or business ac­ tivities by violating the provisions for the protection of human rights and the environment. In particular, companies shall not be liable if they can prove that they have taken the measures required by law to protect human rights and the environment in order to prevent such damage or that they have not been able to influence the conduct of the controlled company in connection with the alleged infringements. 1ter(new) A company does not control another company simply because the latter is economically dependent on that company. Art. 759a CO Ca Limitation of Liability The members of the Board of Directors and all natural persons involved in the management of the company shall not be liable to persons who have suffered injury to life and limb or property abroad through a com­ pany controlled by the company due to a violation of the provisions for the protection of human rights and the environment abroad. Art. 918a CO Ca Limitation of Liability Any liability of natural persons involved in the administration or man­ agement of the association towards persons who have suffered dam­ age to life and limb or property abroad due to a violation of the provi­ sions for the protection of human rights and the environment abroad of a company controlled by the association is excluded. Art. 69a bis CC(new) 3. Compliance with the provisions concerning the protection of human rights and the environment also abroad 2 Any liability of the members of the board towards persons who suffered damage to life and limb or property abroad by another association controlled by the association or another controlled company due to a violation of the provisions for the protection of human rights and the environment abroad is ex­ cluded. Art. 139a PILA[Federal Act on Private International Law] g. Violation of the provisions concerning the protection of human rights and the environment also abroad 1 In the case of claims against companies which under Swiss law are obliged to comply with the provisions for the protection of human rights and the environment also abroad, due to damage to life and limb or property abroad as a consequence of a vio­ lation of the aforementioned provisions, the unlawfulness and culpability of conduct shall be assessed in accordance with these provisions. However, they shall be subject to the law applicable under Article 133, if in accordance with the purpose of the pro­ visions of that law and the consequences thereof, this leads to a decision that is appropriate in the Swiss legal opinion, or if the unlawfulness and culpability of the conduct exist only under that law. 2 Whether a company domiciled in Switzerland, which actually con­ trols a company domiciled abroad, is considered liable for claims of the type mentioned and whether it can release itself from lia­ bility is determined by Swiss law. 3 Article 132 is reserved. 51

FRIEDRICH-EBERT-STIFTUNG – COMPANIES AND HUMAN RIGHTS 10. ENTWURF EINES SOZIALVERANTWORTUNGSGESETZES FÜR DIE TEXTILBRANCHE(DRAFT BILL FOR A SOCIAL RESPONSIBILITY LAW FOR THE TEXTILE INDUSTRY) On September 26, 2018, the Austrian National Council( Nationalrat, lower house of Parliament) debated the proposed Social Responsibility Law(abbreviated: SZVG) for the first time. 241 The Austrian Social Democratic Party of Austria (SPÖ) intends to prevent the sale of textiles which were found to be produced with forced labor and child labor in the production and supply chain. The first deliberation session of the National Council showed some representatives doubted Austria’s jurisdiction asserting that jurisdiction lay with the European Union(EU), but that otherwise the representatives supported the draft bill. The draft bill is now in a committee for further debate. –– the complexity of the production and supply chain; the draft bill does not address whether risk assessment of complex supply chains has to be performed in a more thorough, less thorough or different manner; –– the company size of the importer; –– the type and immediacy of the importer’s contribution to the supply chain; and –– actual and economic capabilities to influence the enti­ ty who directly caused the violation. If an importer has indications that child labor or forced la­ bor is taking place, he/she must perform a deeper analysis of the particular circumstances and must include the per­ sons affected. Risk assessment must be performed as it arises out of particular occasions, and must be renewed at least once a year. SCOPE OF APPLICATION The law would apply to midsize and large companies who have their main administration, main or regular branch in Austria(§ 2) and import shoes and textiles into Austria or trade with shoes and textiles. The financial thresholds are those contained in the Austrian accounting law and include foreign companies. 242 DUTIES The duties aim to avoid violations of the»prohibition of forced labor and child labor« in the entire production and supply chain(§ 1). The draft bill does not address which par­ ticular violations are meant or whether foreign or Austrian or international law would apply. The purpose clause of the draft bill simply states that the goal is to prevent child labor and forced labor, two significant ILO core labor standards. Importers must perform a risk assessment, possibly take fol­ low-up action, and fulfill documentation duties(§§ 4 and 5). Risk assessment includes appropriate risk identification and assessment of the entire production and supply chain. Whether the assessment is deemed appropriate or not is depending on: Follow-up measures,»suitable and appropriate measures towards prevention«, must be taken, if a risk cannot be ex­ cluded. Importers must store documentation of risk assessments and follow-up measures for five years and must produce upon demand the documentation to organizations who have the legal capacity to file an action in court(§ 5). Dealers, different from importers, are exempt from per­ forming comprehensive risk assessments and storing docu­ mentation. They only need to name the company who de­ livered the products to them. Dealers must provide this in­ formation to organizations who have the legal capacity to file an action in court(§ 6). ENFORCEABILITY MECHANISM Due diligence duties are supposed to be enforced by con­ sumer protection organizations(§§ 7 and 8). They are au­ thorized: –– to demand due diligence documentation from compa­ nies; –– to file for injunctive relief to prevent the distribution of products; –– to file legal action for the disgorgement of company profits generated by the products. –– country and industry specific risks; –– whether certain typical violations are expected and how serious and probably they are; 241 For the draft bill, including reasons, and protocol of the first debate: www.parlament.gv.at/PAKT/VHG/XXVI/NRSITZ/NRSITZ_00039 ­ > Sitzungsverlauf. 242 Criteria:€ 5 million balance sheet total,€ 10 million in revenue, 50 employees. Disgorged company profits shall be paid into a»Fonds für soziale Verantwortung von Unternehmen«(Fund for Social Responsibility of Companies)(§ 10). This Austrian enforcement mechanism is unusual in interna­ tional comparison. It can be explained by the jurisdiction of the Sozialministerium(Ministry of Labor, Social Affairs, Health and Consumer Protection) who drafted the bill prior to the National Council elections in 2017. The Ministry of So­ cial Affairs is responsible for consumer protection matters. 52

Country Reports Unofficial translation of the Austrian draft bill for a Law to observe Corporate Social Responsibility(Sozialverantwortungsgesetz – SZVG) (by Anna Engelhard-Barfield, Attorney, Lake Ridge, USA) Chapter 1: General Provisions Purpose § 1. The purpose of this federal law is to prevent the placing on the market and distribution of products under§ 3 No. 1, if forced la­ bor and child labor occurred in the production and supply chains. b) Follow-up measures. If a risk cannot be excluded following risk assessment under§ 4(2)(a), suitable and appropriate measures towards prevention must be taken. Excepted are cases where the risk assessment under§ 4(2)(a) resulted in a finding that there are no risks or negligible risks. Suitable and appropriate measures must be taken promptly in order to avoid realization of the risks ascertained. Paragraph(a), sentence 2 applies ac­ cordingly. Scope of Application Documentation Duty § 2.(1) federal law regulates due diligence duties of companies (§ 1 KSchG) who import a product defined under§ 3 No. 1 for the first time onto the Austrian market(importer,§ 3 No. 3) and the responsibility of dealers(§ 3 No. 4) who offer this pro­ duct for sale in Austria, as related to observing the prohibition of forced labor and child labor in the production and supply chain. § 5.(1) ompliance with duties under§ 4(2) must be documented and the documentation is required to be stored for a mini­ mum of five years. (2) The documentation must be produced upon demand to orga­ nizations who have the legal right to file an action in courts under§ 29(1) KSchG. (2) his law applies to all importers and dealers with a statutory seat, main administration, main branch or regular branch in Austria, if they singly or in combination, exceed at least two of the characteristics of company sizes described in§ 221(1) UGB. (3) If an importer is required to disclose under§ 243b or§ 267a UGB, a separate non-financial report must be included and must contain information about measures taken in observa­ nce of the duties under§ 4(2). Definitions § 3. For the purposes of this law the following terms are defined: 1. roduct: Garments, including shoes and textiles. 2. on the market: Every initial delivery of products under No. 1 onto the Austrian market for distribution and trade. 3. Any company who imports a product under No. 1 into Austria to place that product on the Austrian Market. An importer is also the first company in the production and sup­ ply chain if they have their statutory seat, main administration, main branch or any branch in Austria. The delivery of the prod­ uct constitutes placing a product on the market under No. 2. 4. Whoever is not an importer, but sells or buys a product on the Austrian market which was already on the market. Chapter 2: Duties of Importers Due Diligence Duty § 4.(1) n importer of products under§ 3 No. 1, must comply with the due diligence described in(2). (2) ue diligence includes the following elements: a) Risk assessment. The importer must perform a risk assessment and identify and assess in an appropriate manner whether and which risks of forced labor and child labor exist in the production and supply chain. Whether a risk assessment is deemed appropriate depends on whether consideration was given to country and region-specific risks, whether certain typical violations are expected and how serious and prob­ able they are, the complexity of the production and supply chain, the company size of the importer, the type and im­ mediacy of the importer's contribution to the supply chain and actual and economic capabilities to influence the entity who directly caused the violation. If an importer has indi­ cations that child labor or forced labor is taking place, they must perform a deeper analysis of the particular circumstance and must include the persons affected; sentence 2 applies accordingly. A new risk assessment must be performed or the prior one must be updated, if there is reason to do so; sentence 2 applies accordingly. Risk assessment must be performed at least once a year, if no particular occasion de­ mands such. Chapter 3: Duties of Dealers § 6. A dealer in products under§ 3 No. 1 must provide the name of the importer or the supplier who delivered the product(dealer or importer) to the organizations authorized under§ 29(1) KSchG within four weeks of demand. Chapter 4: Collective Actions by Organizations Injunctive Relief § 7.(1) If an importer violates§ 4(2),§ 5(1) or(3) they can be sued for injunctive relief by organizations authorized under§ 29 (1) KSchG. If an importer who violates the duties described in sentence 1 also places a product on the market or distributes a product where the prohibition of forced labor and child la­ bor was violated in the supply chain, they can be sued for an injunction to stop them from placing those products on the market or distributing those products. If a company contends that they did not act as an importer, the burden of proof is on the company.§§ 24 and§§ 25(3) to(7) UWG 1984 apply analogously. (2) If a dealer who violates§ 6 also places on the market a product where the prohibition of forced labor and child labor was vio­ lated in the supply chain, he can be sued for an injunction to stop distribution by the organizations authorized under§ 29 (1) KSchG.§§ 24 and§§ 25(3) to(7) UWG 1984 apply analo­ gously. (3) The risk of violation ceases to exist when the company issues a cease and desist declaration within a reasonable time period after receipt of a written warning by an organization autho­ rized under§ 29(1) KSchG and when the declaration is sup­ ported by a contingency penalty under§ 1336 ABGB. Disgorgement of Profits Claim § 8.(1) company who places a product on the market or distri­ butes a product where the prohibition of forced labor and child labor was violated in the supply chain, can be sued by organizations authorized under§ 29(1) KSchG for the dis­ gorgement of company profits, payable to the Fund for So­ cial Responsibility of Companies, in an amount to be deter­ mined under(2). The amount in controversy under§§ 54 et seq. JN cannot be more than€ 31,000.§ 25(3) to(7) UWG apply analogously. 53

FRIEDRICH-EBERT-STIFTUNG – COMPANIES AND HUMAN RIGHTS Unofficial translation of the Austrian draft bill for a Law to observe Corporate Social Responsibility(Sozialverantwortungsgesetz, SZVG) (continuation) (2) he amount of profits to be paid is determined by the diffe­ rence between the purchase price and the sales price of the sold product. Companies must disclose to the organizations authorized under§ 29(1) data pertaining to the calculation of profits. (3) claim for disgorgement of profits lapses if the company pro­ ves that they complied with due diligence duties under§ 4(2) and disclosure duties under§ 6, or that they were not at fault or only slightly culpable. improving legal enforcement under this law, a fund will be established. The name of the fund is»Fonds für soziale Verantwortung von Unternehmen«(Fund for the Social Res­ ponsibility of Companies). The fund may make contribu­ tions to natural persons and legal entities who further the development or execution of innovative measures, especi­ ally activities or initiatives related to Corporate Social Res­ ponsibility in Austria. (2) Eligible recipients for contributions are: (4) If a company claims that they did not act as importer, the bur­ den of proof is on them. (5) judge may reduce or cancel the liability if the company did not intentionally violate their duties and if the obligation to pay disgorgement profits would constitute an unfair hardship. The company has the burden of proof and must present res­ pective assertions and prove the veracity of these assertions. (6) he statute of limitations is five years from the date the pro­ duct was placed on the market or distributed. § 9.(1) for civil action under§ 7 and§ 8 lies with the com­ mercial courts.§ 51(2) No. 10 and§ 83c JN apply analogously. (2)§ 7(2) sentence 1 and§ 8(2) JN do not apply. § 10.(1) order to give special recognition and to promote engage­ ment in the area of Corporate Social Responsibility, as well as 1. citizens or persons who have their permanent res­ idence in the federal territory, or 2. Domestic legal entities. (3) he fund is located at the Federal Ministry for Labor and So­ cial Affairs, explicitly serves the public good and is a legal en­ tity in its own right. Chapter 5: Final Provisions Administration § 11. Federal Ministry for Labor and Social Affairs is authorized to administer this federal law. Effective Date § 12. This federal law takes effect on January 1, 2019. 54

Country Reports 11. EU CONFLICT MINERALS REGULATION The materials tin, tantalum, tungsten, ore, and gold are in­ dispensable for the production of many functional objects and tangible assets. The transition to a new economy with less carbon dioxide and renewable energies depends on these raw materials. 243 The European Union(EU) recog­ nized the connection between these minerals and the re­ current, severe impairment of human rights. Areas rich in raw materials often experience violent conflicts, but have weak government institutions resulting in pervasive inci­ dents of child labor, sexual violence, forced relocation and destruction of cultural sites. Armed groups finance their activities with illegal mining. The EU Parliament has re­ quested four(4) times that the EU Commission draft a con­ flict minerals regulation comparable to the U.S. DoddFrank Act. 244 The EU enacted Regulation 2017/821 on May 17, 2017 to specify due diligence duties for EU importers in the supply chain from conflict and high-risk areas(regulation/VO). 245 In order to prevent armed groups from trading with con­ flict minerals, the EU wants to establish a so-called»Unionssystem«(union system) which provides transparency and safety in the supply chain originating from companies, smelters and refineries(Art. 1(1) VO. The due diligence duties established for companies by the regulation are considered an important contribution to­ wards the prevention of violent conflicts. 246 Due diligence includes measures which are essential and generally recog­ nized in the area of compliance. In Germany, there is no regulation that lays out CSR compliance for companies as specific and detailed as this EU regulation. Companies are supported by the government in the imple­ mentation of appropriate due diligence. The EU Commission will publish a manual to assist companies with the identification of conflict and high-risk areas and will em­ ploy experts to generate a list of the pertinent areas. The EU Commission will maintain a list of responsible refineries and smelters word-wide. They will authorize methods and criteria for the assessment and recognition of systems to facilitate due diligence compliance, subject to an applica­ tion by companies or other interested parties. The EU Com­ mission issued in 2019 a»delegated regulation«(Delegierte VO 2019/429) to supplement VO 2017/821 and to specify criteria for the assessment and recognition of due diligence systems. 247 The EU and its member states also took foreign and development policy steps to fight corrup­ 243 Church / Crawford 2018. 244 Resolutions of October 7, 2010, March 8, 2011, July 5, 2011 and Fe­ bruary 26, 2014. 245 See recitals 1, 3 and 7. 246 See Heße / Klimke 2017: p. 446. 247 Delegierte Verordnung(EU) 2019/429, EU Commission of January 11, 2019, regarding methods and criteria for the assessment and recognition of due diligence systems in supply chains for tin, tan­ talum, tungsten and gold. tion at the local level, reinforce borders and educate local population groups and their representatives in efforts to encourage reporting of abuse. The due diligence duties will apply to companies as of Jan­ uary 1, 2021. The regulation has been in effect since 2017 (Art. 20 VO). SCOPE OF APPLICATION The regulation applies to companies world-wide, if they either directly or indirectly import via a Unionseinführer (union Importer) under Art. 2 VO, the minerals tin, tanta­ lum or tungsten into the EU. The size of the company is ir­ relevant. The regulation’s appendix specifies quantity thresholds. Due diligence duties apply to those union importers who import a minimum quantity per year. Current thresholds are 100 kg for gold and 250,000 kg(including all ores and concentrates) for tungsten. The EU Commission may adjust the thresholds in order to effectuate that at least 95 % of the imported metals and minerals are covered by due dili­ gence duties(Art. 1(3) –(5) VO). Many companies who deal with or deliver conflict minerals without crossing a EU border will be indirectly affected. Companies who are obliged to perform due diligence will request from these companies disclosure and participation towards fulfilling their own due diligence duties. The regu­ lation will directly apply to 600 to 1,000 union importers. The regulation will indirectly apply to about 500 smelters and refineries who have their company seat either in or outside of the EU. 248 The scope of the regulation’s application has been criti­ cized because it is does not include certain, similar raw materials, such as lithium, cobalt and jade which are con­ nected to violent conflicts. 249 Union importers are general­ ly»upstream companies« who mine raw materials in the mines, then refine and process the minerals in smelters, refineries and metal processing facilities.»Downstream companies« who import metals and generally only oper­ ate in the EU are exempt from a portion of the due dili­ gence duties. They are expected to voluntarily comply. It seems that the regulatory content can be easily circum­ vented. The EU Commission will review the regulation within two years from its effective date(Art. 17(2) VO) to determine whether additional minerals will be included, whether thresholds will be lowered and whether the pro­ cessing industry within the EU will be included in the scope of application. 250 248 See explanatory notes of the EU Commission. 249 Teicke / Rust 2017: p. 450. The import of diamonds has been subject to a certification process for a long time, VO(EG) No. 2368/2002. 250 Supportive: Teicke / Rust 2017: p. 450. 55

FRIEDRICH-EBERT-STIFTUNG – COMPANIES AND HUMAN RIGHTS DUTIES The regulation governs due diligence duties of union im­ porters in the entire supply chain. The due diligence duties correspond with the»Due Diligence Guidance Mineral Sourcing« of the OECD. Companies must apply measures to identify and address actual and potential risks in conflict and high-risk areas worldwide in order to prevent or mitigate harmful effects occurring in the supply chain. Companies are expected to use an EU manual when determining wheth­ er any region worldwide is a»conflict or high-risk area«. A supplemental list from experts is intended to provide com­ panies with additional assistance. Many due diligence duties are defined and due diligence compliance must be documented(Art. 3(1), 4(c) VO): port strategies and processes on an annual basis. If recycled conflict minerals are concerned, the union importer must only disclose how they applied due dili­ gence when making the assumption that the conflict mineral is recycled. Whoever imports only metals and not upstream minerals may conduct a toned-down risk management by merely assessing third party reports about smelters and refineries in the supply chain(Art. 5(4) –(5) VO). Auditing of the company’s own activities, management systems and pro­ cesses is not required if there is»substantial proof« that smelters and refineries comply with regulation require­ ments. The Commission will maintain a list of smelters and refineries who are rated as conforming with the require­ ments(Art. 9 VO). –– A solid management system(Art. 4 VO). The company supply chain policy must correspond with the OECD model 251 and it must be published and incorporated into company agreements. Due diligence compliance must be monitored by a specially commissioned com­ pliance officer. 252 The management system must in­ clude complaint mechanisms to be used as an early warning system to identify risks. It must include sys­ tems that allow custody and supply chain tracking. The regulation imposes different requirements for man­ agement systems of different minerals and metals. –– A risk management system(Art. 5 VO). Supply chain risks in conflict and high-risk areas must be identified and assessed. A strategy for dealing with identified risks must be developed and implemented. The regu­ lation defines conflict and high-risk areas as»areas where armed conflict takes place or where the situa­ tion is fragile as a consequence of conflict. This in­ cludes areas where governance and safety are weak or non-existent, such as failed states and states where wide-spread, systemic violations of international law (including human rights) take place.« 253 The regulation imposes specific requirements for risk mitigation strat­ egies. –– Audit(Art. 6 VO). Independent third parties are tasked with monitoring the activities, processes and systems of union importers to determine which processes com­ ply with the requirements. OECD guiding principles must be observed. –– Disclosure(Art. 7 VO). Union importers must report the audit results to competent national agencies and must share with direct customers(down-stream) rele­ vant information, unless barred by trade secrets or competition concerns. They must publicly(online) re­ Companies may refer and cooperate with commercial or civil initiatives in order to fulfill their due diligence duties. The delegated regulation of the EU, mentioned above, specifies methods and criteria for the assessment and rec­ ognition of due diligence systems which may be recog­ nized by the EU Commission upon application. 254 But sim­ ply because suppliers have adopted such a system does not mean with legal certainty that they have fulfilled their due diligence duty. 255 The EU Commission only assesses con­ cepts and strategies of due diligence systems submitted to them by application and it does not assess how reliably suppliers observe the system. 256 ENFORCEMENT PROVISIONS Member state agencies will examine documents and audit reports(Art. 3 VO) and perform post hoc on-site inspec­ tions(Art. 11 VO) at union importers’ facilities. Each EU member state must ensure effective implementation of the regulation by providing for sanctions such as monetary penalties(Art. 16 VO). 257 The regulation tasks the compe­ tent agencies in member states to cooperate and to share information(Art. 13 VO). The German Bundesministerium für Wirtschaft und Energie(German Federal Ministry for Economic Affairs and Energy, recently renamed) published on June 6, 2019 its draft bill to implement the regulation in Germany. Since companies are required to publicly report, their repu­ tation may be at risk if they fail to comply or poorly comply, with due diligence requirements related to conflict minerals. As far as(partial) voluntary compliance for»downstream companies« is concerned, the legislator relies on peer pres­ sure. The EU Commission will review within two years from the regulation’s effective date whether this provision is suf­ 251 OECD 2016: Annex II. 252 Teicke / Rust 2017: p. 41. 253 Art.2(f) VO. The EU Commission will publish a manual to support legal practitioners. 254 Delegierte Verordnung(EU) 2019/429 of January 11, 2019. 255 Id. recital No. 5. 256 Critical at Germanwatch 2019, compare Sydow / Reichwein 2018. 257 The German law does not yet provide for sanctions. 56

ficient or whether downstream companies should be sub­ ject to mandatory compliance. Currently it is difficult to say whether the conflict minerals regulation will have positive effects or whether it will have the effect of a de facto trade embargo. 258 As it was noted for the Dodd-Frank Act, the situation around conflict min­ erals is exceptionally complicated, especially in the Great Lakes region of Africa, and cannot be controlled merely by legislation. Numerous regional, national and inter-state in­ itiatives have formed in order to improve governance struc­ tures. For example, the German Gesellschaft für Internationale Zusammenarbeit(GIZ)(German Corporation for In­ ternational Cooperation GmbH) and the Bundesanstalt für Geowissenschaften und Rohstoffe(BGR)(Federal Institute for Geosciences and Natural Resources) have joined with the International Conference on the Great Lakes Region (ICGLR) and developed a regional certification mechanism and a data bank to monitor the flow of minerals. Master­ ing the problems related to conflict minerals will substan­ tially depend on the integration and support from similar initiatives. It is possible that the planned review of the reg­ ulation will show that scope of application and quantify thresholds need to be adjusted. LITERATURE Church, Clare / Crawford, Alec(International Institute for Sustaina­ ble Development, IISD)(2018): Green Conflict Minerals: The fuels of con­ flict in the transition to a low-carbon economy; www.iisd.org/story/ green-conflict-minerals/(visited on June 20, 2019). Europäische Kommission: Erläuternde Informationen, ­ http:// ec.europa.eu/trade/policy/in-focus/conflict-minerals-regulation/ regulation-explained/index_de.htm. Europäisches Parlament(2017): Gesetzestext; https://eur-lex.europa. eu/legal-content/DE/TXT/?uri=CELEX%3A32017R0821(visited on June 20, 2019). Germanwatch / Amnesty International / Weed et al.(2019): Ensur­ ing the proper implementation of the EU Regulation on the responsible sourcing of minerals from conflict-affected and high-risk areas, Joint Pol­ icy Note, April 25, 2019; germanwatch.org/de/16453(visited on July 22, 2019). Heße, Dustin / Klinke, Romy(2017): Die EU-Verordnung zu Konflikt­ mineralien: Ein stumpfes Schwert?, EuZW, pp. 446–450. OECD(2016): Due Diligence Guidance for Responsible Supply Chains of Minerals from Conflict-Affected and High-Risk Areas, 3 rd edition. Rieth, Lothar / Zimmer, Melanie(2014): Unternehmen der Rohstoff­ industrie – Möglichkeiten und Grenzen der Konfliktprävention, Die Friedens-Warte 79(2004), pp. 75–101. Sydow, Johanna / Reichwein, Antonia(2018): Governance of Mineral Supply Chains of Electronic Devices: Discussion of Mandatory and Vol­ untary Approaches in Regard to Coverage, Transparency and Credibility, Studie für Germanwatch; germanwatch.org/de/15504-0(visited on July 22, 2019). Teicke, Tobias / Rust, Maximilian(2018): Gesetzliche Vorgaben für Supply Chain Compliance – Die neue Konfliktmineralien-Verordnung, CCZ, pp. 39–43. 258 Teicke  /  Rust 2017: p. 449. 57 Country Reports

FRIEDRICH-EBERT-STIFTUNG – COMPANIES AND HUMAN RIGHTS ABBREVIATIONS AG ASIC CITES CDTFA CFTB CSR DRC EGMR EMRK EU HolzSiG i. d. ICGLR IFC ILO IOE ISO MSA MSI NAP NGO NSW OECD RCOI RINR SAS SCA SEC SZVG UN VO WHO Attorney General Australian Securities and Investments Commission Convention of International Trade in Endangered Species of Wild Fauna and Flora California Department of Tax and Fee Administration California Franchise Tax Board Corporate Social Responsibility Democratic Republic of Congo European Court of Human Rights European Convention on Human Rights European Union Holzhandels-Sicherungs-Gesetz(German Timber Regulation) Refers to a preceding citation in a footnote International Conference of the Great Lakes Region International Finance Corporation International Labor Organization International Organization of Employers International Organization for Standardization Modern Slavery Act(UK and AU) Multi-Stakeholder-Initiative National Action Plan on Business and Human Rights Non-Governmental Organization New South Wales(Australia) Organization for Economic Cooperation and Development Reasonable Country of Origin Inquiry Regional Initiative against the Illegal Exploitation of Natural Resources Simplified Stock Company(France) Partnership by Shares(France) U.S. Securities and Exchange Commission Austrian Draft Bill for a Social Responsibility Law United Nations Regulation(Germany or EU) World Health Organization 58

IMPrint ABOUT THE AUTHOR IMPRINT Robert Grabosch, LL.M.(Cape Town) is a partner with Schweizer Legal. He has practiced law in Berlin since 2011. A significant part of his practice involves counseling and repre­ senting German and foreign mid-cap and large companies and NGOs in the areas of commercial and corporate law, with special focus on compliance and Corporate Social Responsibility. The author thanks the doctoral student Helya Gieseler for her participation in chapters 1–5, 7, 9 and 11. He especially thanks Dutch attorney Wouter Timmermans, Stellicher Ad­ vocaten, Arnheim, for his contribution to the chapter about the Dutch regulation Wet Zorgplicht Kinderarbeid and U.S. attorney Anna Engelhard-Barfield, Washington, D. C. for her contribution to the chapters about the Dodd-Frank Act and the California Transparency in Supply Chains Act. Friedrich-Ebert-Stiftung| Global Policy and Development Hiroshimastr. 28| 10785 Berlin| Germany Responsible: Frederike Boll| Business and Human Rights /  Decent Work worldwide Phone:+49-30-269-35-7469| Fax:+49-30-269-35-9246 http://www.fes.de/GPol/ Orders/Contact: Christiane.Heun@fes.de Commercial use of all media published by the FriedrichEbert-Stiftung(FES) is not permitted without the written consent of the FES. Translated by Anna Engelhard-Barfield, J. D.(WFU) January 2020 GLOBAL POLICIES AND DEVELOPMENT The department Global Policies and Development of the Friedrich-Ebert-Stiftung promotes the dialogue between North and South and takes debates about international is­ sues to the German and European public. We offer a stage for discussion and advice with the intention of strengthen­ing awareness in global context, developing perspectives and formulating political guidance. This publication is pub­ lished within the framework of the globalization project. Frederike Boll is the coordinator and responsible for publica­ tion: Frederike Boll frederike.boll@fes.de. The views expressed in this publication are not necessarily those of the Friedrich-Ebert-Stiftung or of the organization for which the author works. This publication is printed on paper from sustainable forestry. ISBN 978-3-96250-540-0

COMPANIES AND HUMAN RIGHTS A Global Comparison of Legal Due Diligence Obligations This survey reveals national governments and international organizations have fo­ cused on slavery, child labor, financing of violent conflicts or the destruction of the environment in crafting due diligence re­ lated legislation. Recent integrations of social issues, employee protections and environmental protection have levied fur­ ther responsibilities on companies. Some laws provide for the extraterritorial appli­ cation to foreign companies who may not have an office or subsidiary but the company is doing business in the country and/or is listed on a domestic stock ex­ change. In doing so, governing bodies preserve a level playing field by protect­ ing domestic companies from unfair for­ eign competition. Often laws call for either optional or man­ datory measures that include consulting various interest groups, supplier manage­ ment, audits, employee training, whistle­ blower provisions and the use of guidance handbooks. The laws are carried out in various ways. Some governments appeal to a company’s desire to maintain a posi­ tive reputation and only require transpar­ ency through disclosure reporting. Others impose government sanctions and mone­ tary penalties which appear to be the more effective approach. Effective legal protection is more likely when respective laws and regulations afford the right to file an action for restitution in court. Legal due diligence and its elements are suitable for standardization across its thematic areas through legislative action at the international level. Regulation on a national or regional level does not pre­ clude regulation at a higher level but may serve to strengthen the existing regula­ tion in its application. In light of the obvi­ ous trend towards the extension of laws, companies have little choice but to insti­ tute Corporate Social Responsibility(CSR) as an enduring topic for members of cor­ porate and supervisory boards, including strengthening sustainability departments and assuring close collaboration with le­ gal, compliance and purchasing depart­ ments. Further information on the topic can be found here: https://www.fes.de/themenportal-die-welt-gerecht-gestalten/ weltwirtschaft-und-unternehmensverantwortung/