Introduction
Due diligence is becoming an essential tool in improving corporations’ transparency and accountability for their business practices. The French duty of vigilance in 2017 was the first of its kind to create far-reaching mandatory corporate human rights and sustainability due diligence obligations and marked a shift in corporate responsibility and ethics. However, the extent of this reach has been limited through judicial interpretation. Following a long and at times arduous negotiation process, the EU now has its own due diligence framework with the Corporate Sustainability Due Diligence Directive (CSDDD) having entered into force this year. Following a discussion of the meaning and history of due diligence, this article lays out the French duty of vigilance and the new EU CSDDD and then explores how the Directive is likely to strengthen and fill some gaps in the actual French duty of vigilance.
What is due diligence?
Due diligence can have various, potentially incompatible, definitions. The term emerged in the corporate context meaning a “process to manage business risks” and approaches potential legal liabilities as “simply another commercial consideration to be identified and managed in the context of a particular transaction”.[1] Outside of the corporate sphere, however, the concept developed in relation to human rights obligations, before expanding to sustainability more generally. In human rights, due diligence is a “standard of conduct to discharge an obligation” similar to what one can find in civil responsibility regimes in the form of acting reasonably or not negligently. These two definitions have come together in securities and anti-corruption law, as well as consumer protection, despite arguably having different aims, with the first to prevent harms to businesses and their interests, and the second to prevent harms posed by business practices to non-business stakeholders.
Notwithstanding these definitional difficulties, corporate human rights and sustainability due diligence has flourished in the past decade and has become a focal point in the ongoing construction and expansion of what it means for a corporation to be ‘ethical’ when their main objective is to generate profits for their shareholders.[2] The first legislated examples, focusing on specific issues such as forced labor or conflict minerals, adopted the corporate risk-management approach to due diligence, allowing companies to discharge their obligations by implementing disclosure processes, even if ensuing harms did occur.[3] Bonnitcha and McCorquodale argue that limiting corporate responsibility to such procedural obligations encourages ‘box-ticking’ without a meaningful integration of human rights and sustainability concerns in day-to-day business practices.[4] In 2011, the UN Human Rights Council endorsed the UN Guiding Principles on Business and Human Rights (UNGPs), establishing a non-binding global standard in horizontal corporate human rights due diligence.[5] The UNGPs combine the different forms of due diligence. While businesses still have procedural obligations, they are responsible – regardless of having met those obligations – to provide or participate in remediation for harms that occur (Principle 22). It is in this context that the French duty of vigilance came to be.
The French duty of vigilance
The 2017 French law creating an obligation of vigilance for parent companies (“LdV”) is the first major horizontal mandatory human rights and sustainability due diligence law[6]. The LdV applies to French companies which employ, along with their subsidiaries, at least 5,000 people or foreign companies which similarly employ at least 10,000 people and have a French subsidiary (Article L. 225-102-1 Commercial Code)[7]. This means approximately 280 companies are subject to the LdV, although the lack of transparency in employment information makes the exact number difficult to discern.[8] These companies are held to create and implement ‘vigilance plans’ that identify risks and prevent significant violations of human rights or harms to human health and security and to the environment caused by the activities of the corporate group and of the company’s suppliers, subject to the latter’s activities being connected to their commercial relationship. As of January 2024, corporations which are involved in agriculture and forestry must also include measures seeking to identify and prevent deforestation[9]. While not a part of the LdV, it is relevant to mention that corporations must also assess their greenhouse gas emissions and publish a transition plan every four years, indicating an overall evolution towards corporate responsibility in the French legal system (Article L. 229-25 Environment Code).
In the LdV, the vigilance plan itself must be designed with community stakeholders and include the following measures: a risk assessment to identify, analyze, and prioritize risks; procedures to evaluate these risks in subsidiaries and suppliers; active reduction and prevention of significant violations or harms; a risk alert mechanism; and a way to monitor and assess the effectiveness of these measures. The measures must be reasonable and their implementation must be effective, and the Conseil d’État is empowered to establish additional complementary rules for the plan’s design and implementation. The plan and the results of its implementation must be publicly accessible and are integrated in the corporation’s annual management report for its shareholders.
If a corporation lacks a vigilance plan or has an inadequate one, it can be given a formal notice to satisfy its obligations within three months. If it fails to do so within the allocated period, the claimant can request the Paris Judicial Tribunal for an injunction against the corporation, which may include a penalty payment[10]. In line with general civil liability rules, if a corporation’s failure to properly institute a vigilance plan causes harm to another, the corporation must repair the harm that would have been avoided had it satisfied its obligations (Article L. 225-102-2 Commercial Code; Articles 1240–1241 Civil Code). It is essential for there to be a causal link between the insufficient vigilance plan and the harm, but this presumably opens the possibility for victims of a foreign subsidiary’s harmful action to bring a claim against the parent company[11]. Bonnitcha and McCorquodale criticize this type of reliance on faulty due diligence for victims to access a remedy, but in the LdV this is to ensure a direct link between the parent company and the victim, as the law does not intend to make parent companies liable for harms caused by their subsidiaries to third parties[12].
It is notable that the original law included an additional fine, without the need for a related harm, of up to ten million euros for failure to satisfy the necessary obligations, but this was struck down as unconstitutional by the Conseil constitutionnel. This determination of unconstitutionality, along with the absence of civil liability claims, has led to criticisms of the LdV’s effectiveness, as the law has in practice been reduced to formal notices and injunctions to create or revise a corporation’s vigilance plan. Even in this limited scope, so far only one decision on the merits of the application of the LdV has been rendered[13]. This modest jurisprudence is partially due to the strict judicial interpretation of the LdV, which will be assessed below.
The EU Corporate Sustainability Due Diligence Directive
The EU Corporate Sustainability Due Diligence Directive (CSDDD) entered into force in July 2024. The CSDDD provides a horizontal framework for corporate human rights and environmental due diligence, adding to other issue-based EU due diligence legislation that was already in place to address, for example, deforestation and forced labor. The Directive also complements the 2023 Corporate Sustainability Reporting Directive (CSRD) which focuses on corporate transparency. The CSDDD will gradually apply to companies starting in 2027, but once fully in effect in July 2029, it will apply to EU companies with at least 1,000 employees and a net global annual turnover of at least 450 million euros, non-EU companies with a net annual turnover of at least 450 million within the EU, and companies with “common identity” franchise or licensing agreements earning at least 22.5 million in royalties and having a net global annual turnover of at least 80 million euros (Article 2). This translates to from approximately 5,400 to 6,900 companies in total, which is only a small fraction of the approximately 32 million companies operating in the EU[14].
The CSDDD follows the UNGP framework much more closely than the French LdV in requiring companies within its scope to provide a remedy for harms caused by its business activities even when they satisfied their procedural due diligence obligations (Article 12) and allowing for the termination of the business relationship related to the harm in question if the harm cannot reasonably be addressed (Articles 10–11). These latter articles also provide more precisions in how to both prevent harms (Article 10) and bring actual harms to an end (Article 11), defining what measures will be considered appropriate for addressing these challenges. The Directive furthermore integrates climate concerns into the due diligence framework, requiring companies to create and implement climate transition plans in line with the goals of the Paris Agreement (Article 22). The CSDDD is also more ambitious in its penalties, with a baseline maximum fine of 5% of net global annual turnover, but allowing Member States to opt for a higher maximum if they so choose (Article 27).
The potential impact of the CSDDD on the French duty of vigilance jurisprudence
Since the enactment of the LdV, only a handful of cases have been brought before the courts, mostly initiated by non-governmental organizations (NGOs) and labor unions. These cases have largely been injunction requests, but have been caught at the procedural phase on issues of standing and admissibility. In fact, only one decision, La Poste, has been rendered on the merits regarding whether the defendant respected its vigilance obligations[15]. Many have criticized the narrow and literal judicial interpretation of the LdV[16] and the refusal to interpret the content of its legal obligations[17]. In La Poste (Labour Union SUD PTT v. La Poste S.A), the judge, while recognizing the imprecision of the risk assessment, refrained from imposing specific and detailed measures on the company as he considered that the vague formulation of the law only imposes a judicial control of integrating actions to mitigate risks, without allowing the judge to make a determination on what particular concrete measures ought to be implemented in practice.
The CSDDD will bring many changes to the French duty of vigilance litigation scene. First, since it expands the scope of concerned enterprises, increased litigation might be reasonably anticipated. However, Article 24 of the Directive provides for an independent supervisory authority to oversee compliance. That authority, pursuant to Article 25, has the power to investigate a potential breach, inspect the compliance of a company under its authority, identify a failure to comply and even impose significant penalties. The creation of a supervisory authority in France would make procedures faster for NGOs and concerned parties to seek compliance with the law (eg. publishing a detailed plan) and alleviate the number of cases brought to court. Yet, some argue that the creation of national authorities will just add another ‘layer in the litigation process’[18], since the Directive provides for a judicial remedy in case of disagreement with the decision of a national authority (Article 26.6). Moreover, a decision by a supervisory authority “shall be without prejudice to the company’s civil liability” (Article 29). Even though a company has yet to be found responsible under civil liability in the context of the LdV, this creates the possibility of such actions with parallel proceedings in front of the supervisory authority concerning publication.
The French judiciary has already recognized the rising importance of LdV litigation by creating, in January 2024, a special ‘emerging litigation’ chamber within the Paris Court of Appeals (specialized in hearing LdV and environmental liability claims)[19]. The French supervisory authority for the CSDDD has yet to be designed, but French judges may prove central in the interpretation and implementation of the obligations under the Directive in view of their experience in this area. While judges refrained from extensive interpretation under the LdV, they may take a more proactive approach with the precisions brought by the CSDDD. Indeed, the Directive and the FAQ published by the EU Commission in July 2024 bring more precisions on the identification and assessment of adverse human rights and environmental impacts. The EU Commission also announced it would publish sector-specific guidelines on how to conduct due diligence in accordance with the CSDDD, such as for the identification process and the prioritization of impacts. National judges faced with civil liability claims for failure to sufficiently mitigate risks would therefore have more material for their analysis. The supervisory authority is likely to enjoin specific measures, but judges such as the one in La Poste may also be more willing to assess measures’ content under the CSDDD, as the Directive, along with the Commission’s future guidelines, would give them more material to interpret obligations and therefore order specific measures to be taken.
Another change in the current duty of vigilance litigation in France will concern environmental claims. Article 22 (“combating climate change”) of the CSDDD requires companies within the defined scope to establish a transition plan to contribute to limiting global temperatures to 1.5 °C. The Directive gives precisions about the design and content of this plan. While the specific reporting requirements fill some gaps in the French law, some regret the narrow definition given to environmental damages and impact by the CSDDD[20]. Article 3 defines ‘adverse environmental impact’ as the breach of the prohibitions and obligations set out in international legal instruments laid out in the Annex. The French LdV has a broader scope as it encompasses any ‘serious environmental damage’, which allows many environmental damage claims to be introduced (even if dismissed) by NGOs. In short, a referral to international conventions to define environmental damage would make the interpretation more complicated and restrained, creating a risk of protracted debates concerning the scope and definition of environmental damage in civil liability claims. Would the judge allow a broader interpretation beyond the prohibitions listed in the annex if France does not adopt its current broader definition of ‘environmental damage’? A broader interpretation allows for the inclusion of environmental harms for which there is no international consensus, but limiting such harms to those listed in the Directive would provide better legal certainty for companies in regards to the definition of environmental damage under the CSDDD.
[1] Bonnitcha, J., & McCorquodale, R. (2017). The Concept of ‘Due Diligence’ in the UN Guiding Principles on Business and Human Rights. European Journal of International Law, 28(3), pp. 899–919.
[2] Camy, J. (2021). L’éthique environnementale et la vigilance de l’entreprise : Le devoir de vigilance, entre responsabilité éthique et juridique de l’entreprise en matière environnementale. Revue internationale de droit économique, 35(3), pp. 45–54.
[3] UK Public General Acts. (2015). UK Modern Slavery Act. https://www.legislation.gov.uk/ukpga/2015/30/contents ; Office of the Federal Register, National Archives and Records Administration. (2010, July 21). Public Law 111 - 203 - Dodd-Frank Wall Street Reform and Consumer Protection Act. [Government]. U.S. Government Printing Office. https://www.govinfo.gov/app/details/PLAW-111publ203/
[4] Bonnitcha & McCorquodale. p. 910.
[5] Ruggie, J.G., & Sherman, J.F. (2017). The Concept of ‘Due Diligence’ in the UN Guiding Principles on Business and Human Rights: A Reply to Jonathan Bonnitcha and Robert McCorquodale. European Journal of International Law, 28(3), p. 921.
[6] Law n° 2017-399 du 27 mars 2017 (J.O. 28 mars 2017).
[7] As of January 2025.
[8] Fournier, C. (2024). McDonald’s, Picard, Disney… 57 entreprises françaises hors la loi sur le devoir de vigilance. Novethic. Available at: https://www.novethic.fr/economie-et-social/droits-humains/entreprises-manquements-devoir-vigilance-france.
[9] Law n° 2021-1104 du 22 août 2021 portant lutte contre le dérèglement climatique et renforcement de la résilience face à ses effets, (J.O. 24 août 2021), Article 273.
[10] The Judicial Tribunal of Paris has sole jurisdiction over claims related to a corporation's vigilance plan under Law n° 2021-1729 du 22 décembre 2021 (J.O. 23 décembre 2021), creating a new Article L. 211-21 of the Judicial Organization Code.
[11] Conseil constitutionnel, 23 March 2017, n° DC 2017-750.
[12] Bonnitcha & McCorquodale. pp. 918.
[13] Michon, C., & Stevignon, A. (2023). Devoir de vigilance : mise à l’honneur des parties prenantes dans la première décision de condamnation d’une entreprise. Dalloz. Available at: https://www.dalloz-actualite.fr/flash/devoir-de-vigilance-mise-l-honneur-des-parties-prenantes-dans-premiere-decision-de-condamnatio.
[14] Brunetti, A. (2024). Devoir de vigilance des entreprises : le champ d’application des futures règles considérablement réduit. Euractiv. Available at: https://www.euractiv.fr/section/economie/news/devoir-de-vigilance-des-entreprises-le-champ-dapplication-des-futures-regles-considerablement-reduit/; European Commission. Directive on Corporate Sustainability Due Diligence: Frequently asked questions. pp. 6–7; Eurostat. (2024). Business demography statistics. Available at: https://ec.europa.eu/eurostat/statistics-explained/index.php?title=Business_demography_statistics.
[15] Tribunal judiciaire de Paris, pôle social, 1ère chambre, 4ème section, 5 décembre 2023, n° RG 21/15827, La Poste.
[16] Savourey, E., & Brabant, S. (2021). The French Law on the Duty of Vigilance: Theoretical and Practical Challenges Since its Adoption. Business and Human Rights Journal, 6(1), 141–152.
[17] Duchesnes, T., & De Pinieux, M. (2023). Libres propos sur l'avenir du devoir de vigilance. Droit & Affaires - Business & Law Review, 20(20), pp. 249.
[18] Massiera, C., Melo, J., & Rouhette, T. (2024, 30 juin). Quel avenir pour le contentieux français de la vigilance sous l’ère de la directive européenne ? La base Lextenso. https://www.labase-lextenso.fr/petites-affiches/LPA203d6
[19] Création d’une chambre des contentieux émergents – devoir de vigilance et responsabilité écologique à la CA de Paris. (2024, 18 janvier). Cour D’appel de Paris Paris. https://www.cours-appel.justice.fr/paris/creation-dune-chambre-des-contentieux-emergents-devoir-de-vigilance-et-responsabilite
[20] Bounfour, T. (2022). Les atteintes à l’environnement dans la proposition de directive sur le devoir de vigilance des entreprises. Dalloz. Available at: https://www.dalloz-actualite.fr/node/atteintes-l-environnement-dans-proposition-de-directive-sur-devoir-de-vigilance-des-entreprises.
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