The duty of vigilance legislation aims to introduce an obligation of vigilance on parent companies in dealings with their subsidiaries, their subcontractors and suppliers with whom they have an existing business relationship, in order to prevent tragedies and to provide reparations for the victims. The law was initiated after the Rana Plaza collapse in Bangladesh in 2013.
Broadly, the scope of the vigilance legislation is as follows:
Which companies are concerned?
Any parent company registered in France and which has employed during the previous 2 years at least:
- 5,000 employees across the parent company and its direct or indirect French registered subsidiaries;
- 10,000 employees across the parent company and its direct or indirect global subsidiaries.
What obligations are imposed?
Affected companies will have to implement and publish a "vigilance plan" in order to identify and prevent:
- Risks of fundamental rights being harmed;
- Risks of physical injuries;
- Risks of environmental damage; and
- Health risks;
that can result from the Company's business.
In the event of non-compliance, the vigilance legislation initially provided for three levels of action:
- A formal notice being sent to the company requiring it to respect its duty of vigilance;
- A Court injunction, where a company fails to take the necessary measures; and
- Lastly, the Company being sentenced to a fine of up to EUR 10 million and being required to pay compensation to redress prejudice caused. The legislation also provided that the level of fine could be increased threefold, depending upon the gravity of any breach, the circumstances of any negligence and the damage caused.
Note, however, that the Constitutional Council, which was asked to consider the new regulation on 23 February 2017, has decided that the provisions related to the applicable fines are not compliant with the French Constitution. The Council decided that the circumstances in which companies could be sentenced to pay a fine were not sufficiently defined and hence not applicable. This decision only impacts on the fine element, however, as the Council decided that all other significant aspects of the vigilance legislation are compliant with the French Constitution.