The North Star for forthcoming HREDD legislation? Complementing civil liability for harms with administrative supervision that is centred on outcomes for people and planet

Week of 25 October 2021

The North Star for forthcoming HREDD legislation? Complementing civil liability for harms with administrative supervision that is centred on outcomes for people and planet

Our key takeaway: As conducting human rights and environmental due diligence (HREDD) becomes a new corporate duty, the question arises as to how to enforce accountability for this duty. Administrative supervision is a necessary complement to civil liability for harms – provided certain design features are considered by States.

Shift and the Office of the UN High Commissioner for Human Rights (OHCHR) have published a policy paper examining avenues for “effective accountability for new mandatory HREDD regimes”:

    • “Administrative supervision as a complement to civil liability for harms”: There will be two approaches in upcoming EU law to enforce accountability for a new corporate duty to do HREDD: (1) civil liability for harms and (2) administrative supervision. These two approaches are already present in a number of existing laws (e.g. both the German Supply Chain Due Diligence Law and the Norwegian Transparency Law allocate powers to an existing administrative agency to enforce the law; the French Government is considering adding administrative enforcement to the Duty of Vigilance Law and the Dutch March 2021 due diligence proposal features administrative supervision). The paper emphasizes that administrative supervision and civil liability should not be seen as mutually exclusive nor as a hierarchy within HREDD legislation, but instead as two different tools towards the same end. “Civil liability for harms has a specific role to play in ensuring corporate accountability for existing duties of care, as well as new due diligence duties, by defining the precise legal relationship between two private parties (ie, a company and an affected stakeholder) and enabling remedy for victims of harm in certain cases.” Administrative supervision complements civil liability: there is a role for administrative supervision “in ensuring accountability where a company has failed to meet the due diligence duty, whether or not harm has occurred” and by regulating “situations where a company’s operations, products or services are linked to risks or actual impacts through its business relationships.”
    • Four regulatory objectives for administrative supervision: Shift and OHCHR underscore the crucial importance of driving clear regulatory objectives to “manage the tension between the need for regulators to have appropriate flexibility in carrying out their work (given the diversity of companies and issues that will be involved) and the common desire expressed by business and civil society stakeholders alike for certainty about how administrative supervision will operate.” The paper puts forward four regulatory objectives: (1) “Driving better human rights and environmental outcomes through greater prevention of risks and remediation of actual harms by companies”; (2) “Demonstrating that non-compliance with due diligence duties is not a viable position for companies”; (3) “Promoting the adoption of better quality due diligence processes by companies over time”; and (4) “Ensuring stakeholder trust in the relevant authority among both business and civil society stakeholders.” These regulatory objectives in turn help inform the “powers, resources and capacities that will need particular attention when States are designing administrative supervision.”
    • Six design features of administrative authorities for effective accountability: The paper provides six “critical design features” for States to consider when crafting appropriate roles and powers for administrative authorities: (1) “Ensuring [that administrative authorities are] credible and accountable,” including by remaining independent and creating a separation between “sanctioning and educational functions”; (2) “Driving up corporate understanding of better quality due diligence processes over time” to leave tick-box approaches to due diligence in the past and focus efforts on actual outcomes for people; (3) “Aligning the authority’s use of ‘carrots and sticks’ with the goal of HREDD”—this can be a complex balance to strike; (4) “Ensuring the authority’s decisions take appropriate account of stakeholder perspectives,” and especially those who are closest to and most vulnerable to human rights impacts; (5) “Considering complaints and the relevance of remedy in the authority’s activities,” including by creating channels to receive information about corporate activities from any interested party and protecting the safety of complainants from potential retaliation”; (6) and “Encouraging domestic and cross-border cooperation between relevant authorities” to ensure policy coherence and level the global playing field for companies.

For more, see Shift and Office of the UN High Commissioner for Human Rights, Enforcement of Mandatory Due Diligence: Key Design Considerations For Administrative Supervision (October 2021)