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Clifford Chance

Clifford Chance
Regulatory Investigations and Financial Crime Insights<br />

Regulatory Investigations and Financial Crime Insights

First Legal Action Under The 2017 French Vigilance Law

On 10 December 2020, the Court of Appeal confirmed the decision of the juge des référés of the Tribunal of Nanterre ruling that it did not have jurisdiction to hear the complaint filed by NGOs against the oil company under the French Vigilance Law.

The Court of Appeal of Versailles ruled in favour of the company, confirming the judgment of the first instance court which considered that injunction requests under the Vigilance Law fall within the jurisdiction of Commercial Courts. The rationale for this decision is that the vigilance plan relates primarily to the company's internal management, rather than to external considerations of protection of human rights and environment, involving external stakeholders. This interpretation provides useful insight on procedural aspects of these new disputes and clearly sets that vigilance plans are a matter of internal management, which sends a positive signal to companies with regards to the application of this law.

January 2020

On 30 January 2020, the French Tribunal of Nanterre ruled that it did not have jurisdiction to hear the complaint filed, by environmental NGOs, against the oil company under the French Vigilance Law.

This decision is in favour of the company, since its lawyers raised the argument of lack of jurisdiction of the Tribunal of Nanterre during the hearing. As requested by the company, the Tribunal of Nanterre referred the case to the French Commercial Court. Judges of the Commercial Court are elected by the business community and have strong business experience in all sectors (banking, insurance, IT, energy, construction, etc.). This lawsuit marks the first time a French multinational corporation has been taken to court under the French 2017 Vigilance Law.

Read our insights from 2019

On 23 October 2019, six environmental groups filed a case against an oiling company under the French Vigilance Law in connection with an oil drilling project in Uganda. It is the first legal action based on the Vigilance Law.

After a formal notice sent to the company on 24 June 2019, six environmental groups in France and Uganda have now seized the French judge to order the company to disclose how it is addressing the human and environmental impact of its Ugandan oil field.

Obligations imposed on companies under the Vigilance Law

The Vigilance Law of 27 March 2017 is the first law in France imposing due diligence requirements on large French companies regarding their activities, and those of their subsidiaries and entities within their supply chain, that may result in serious violations of human rights, health and safety protections and the environment.

The Law is seen as a potential model for similar legislation at the EU level, or country level, enacting into law the responsibility of businesses to due human rights due diligence, which is currently a matter of "soft law" under the UN Guiding Principles on Business and Human Rights.

Companies subject to this law have to draw up a "vigilance plan", which must be implemented "in an effective manner". The vigilance plan must include:

  • A risk mapping;
  • Assessment procedures;
  • Risk mitigation actions;
  • An alert or reporting mechanism; and
  • A monitoring mechanism to evaluate the effectiveness of measure taken under the plan.

In addition to establishing and implementing their vigilance plan, the Law also requires companies to publish their plan and the report of its effective implementation.

In March 2018, the oiling company published its first vigilance plan in its 2017 registration document. It published this year its second vigilance plan in its 2018 registration document.

Legal actions provided by the Vigilance Law in case of allegations of non-compliance

The Law provides that any interested party can compel a company to comply with the obligations under this Law, within three months after sending a formal demand. Companies failing to do so within that time period can be brought to court and required by the court to comply with the law, where necessary under financial compulsion.

On 30 September 2019, the oiling company responded to a formal demand sent on 24 June 2019, saying, in substance, that it is in compliance with its obligations under the Law and that there was no legal requirement for the company to publish reports on each of its projects. The company also explained that the Group had implemented measures to prevent the risks identified for this project and that the local population had been consulted to assess the impact of the project on their rights.

To date, to our knowledge, three companies, including the oiling company, have received formal notices sent by NGOs to comply with the Law, but the second step of the procedure, which is the action before a French court, has only been taken against this company.

Apart from this "preventive" action, the Law also provides the possibility for victims to bring civil claims against defaulting companies. No such action has yet been brought.

Focus on environmental issues

In their court application, the six groups allege that the company's vigilance plan did not properly address any impact of its activities, and those of subsidiaries and suppliers, on people and the environment in relation to the Project. They alleged that the company had failed to develop adequate environmental safeguards to protect the surrounding national park through which the Nile river flows. The court application also emphasized potential violation of human rights in the context of land expropriations.

This allegation is to be considered alongside another formal notice sent on 19 June 2019 by French local authorities (collectivités territoriales) and associations to the oiling company, asking the company to comply with legal obligations under the Vigilance Law as regards climate risk in all its activities (i.e. not only in Uganda).

This illustrates an increasing focus on the responsibility of businesses to respect human rights and address environmental issues and potentially an increasing role for the French courts in this respect as a consequence of the introduction of the Vigilance Law.

Concluding remarks

Considering the absence of precedents, it is hoped that this case will help to bring some clarity to companies on the application of this Law. However, although the hearing of this case is scheduled to take place on 8 January 2020, the decision issued by the judge is likely to be disappointing because the sitting judge only deals with urgent matters ("juge des référés") and is not competent to rule on the merits of the case. This judge is however competent to undertake urgent measures in order to prevent further human rights violations or environmental damage.

The main interest of this action remains that it will give the opportunity to the French judge to give a signal to companies on the level of detail expected in plans.

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