The French Senate has rejected a bill requiring international companies to implement compliance programmes for being too far reaching and too vague.
The French Senate rejected the anti-corruption bill on 18 November 2015, considering that it would risk making France’s economy uncompetitive. It rejected it also on grounds that it was too vague and unclear.
The bill had been initiated following the Rana Plaza factory collapse in 2013, widely blamed on the corruption of Bangladeshi officials who should have monitored its safety, and other environmental or human disasters such as Erika or Bhopal, involving multinational companies, their local subsidiaries and providers.
The bill aims to impose on companies a requirement to implement mandatory compliance plans (article 1 of the bill) and creates civil liability (article 2) for companies which fail to take steps to prevent violations of human rights, fundamental freedoms, harm such as physical or environmental damages, sanitary risks, and corruption through such compliance plans. The civil fine can be up to €10m.
The targeted companies are those with more than 5000 employees in France or more than 10,000 globally, which represent up to 20% of the biggest European companies, 80% of the international French companies and those involved in two thirds of trade exchanges with Organisation for Economic Co-operation and Development (OECD) countries.
The bill was approved by the National Assembly on 30 March 2015
The reasons behind the Senate’s vote
Why did the French senate reject such a bill? Social and environmental responsibility is of great concern for western countries and companies nowadays and legislation elsewhere (such as the UK Bribery Act) has made compliance programmes essential for many international companies. Moreover the OECD and other international organisations strongly support this kind of initiative.
Yet there are many legal, economic, political and international reasons why the Senators rejected this bill.
During the hearing on 21 October 2015 the Senators criticized the lack of precision of the bill, which is planned to be implemented through a ministerial decree. For example, the applicable standards that companies have to meet are not expressed: should it be those of the United Nations, the OECD, French law or local law?
The bill also lacks clarity concerning its extraterritoriality: could French law claim to extend its territorial competence beyond the French borders? International law does not provide provisions for such extraterritoriality, though both the US and UK have established very wide international reach in areas such as bribery and corruption. Nonetheless, clarity in this area is essential for any new law to be workable.
The procedure for establishing civil liability under the bill is not detailed either, creating further uncertainty.
The majority political group of the Senate also highlighted that this bill would introduce a contractual liability for someone else’s failing, which under French law is currently a possibility only for torts.
A further fear of the Senators is that this bill would introduce a new kind of class action because, according to the bill, associations would be able to bring actions based on a company’s liability.
For all of these reasons, and because France (according to the Senators) would be the first country to impose such a wide scope of duties and liabilities, thereby losing its attractiveness to businesses in a competitive environment, the French Senate rejected the bill.
Mr Christophe-André Frassa, the Senate’s Rapporteur on this bill, insisted that urgent action is needed to help foreign countries achieve their legal, sanitary and economic development and in order to prevent catastrophes such as that in Rana Plaza, from happening again.
The bill now has to return to the National Assembly again for further consideration.
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