In the article, Giuliana Himont, a postgraduate student at Nottingham University’s School of Law, explores the UK’s proposed Commercial Organisations and Public Authorities Duty (Human Rights and Environment) Bill, introduced in the House of Lords. Himont places this Bill within a global context of advancing responsible business practices, comparing it to similar European laws and evaluating the upcoming procedural steps for its enactment.
The Commercial Organisations and Public Authorities Duty (Human Rights and Environment) Bill was introduced by Baroness Young of Hornsey in the United Kingdom (UK) House of Lords on 28 November 2023. This Bill imposes a duty on two main actors, commercial organisations and public authorities, to avoid environmental and human rights harms. They are required to conduct human rights and environmental due diligence. The Bill plans civil liability and penalties in case of non-compliance with this duty. Legal obligations that mandate respect for the environment are not a new legal issue in the UK. The Environment Act from 2021 originated in the House of Commons and focuses on the protection of the environment to improve water and air quality. Some of its other measures include the management of waste and the fight against species extinction.
Thus, the Commercial Organisations and Public Authorities Duty (Human Rights and Environment) Bill seems to be aligned with the Environment Act. This is also an opportunity to legislate in the area of human rights and environmental due diligence for commercial organisations and public authorities, as some European countries did previously.
For instance, the Rana Plaza collapse in Bangladesh has increased the desire to fight against environmental and human rights harms in France. The French Corporate Duty of Vigilance Law from 2017 imposed due diligence duties on French parent companies in the article L. 225-102-4 I of the Code of Commerce, now article L. 225-102-1 I. They especially need to issue a vigilance plan that permits the identification of risks linked to human rights and the environment. Similarly in Germany, the Act on Corporate Due Diligence Obligations in Supply Chains aims to bolster respect for human rights and environmental goals on the part of German companies.
Moreover, the UK Bill is influenced by international soft law instruments. UK is part of the Organisation for Economic Co-operation and Development (OECD) which proposed an update of the OECD Guidelines for Multinational Enterprises on Responsible Business Conduct in 2023. Concerning human rights, businesses should not, with regard to their activities, cause harm to human rights and are encouraged to deal with these issues when they arise.
Chapter IV of the OECD Guidelines for Multinational Enterprises on Responsible Business Conduct promotes the respect of human rights by companies while chapter VI focuses of their major role for the protection of the environment, especially the fight against climate change. In the commentaries on the implementation procedures, it is indicated that the governments should contribute to an effective implementation of these guidelines.
This is consequently the focus of the UK with its new Bill that is being examined. The Bill might allow the UK to comply with international soft law and especially with the OECD Guidelines for Multinational Enterprises on Responsible Business Conduct. This explainer aims to study the content of the Bill and examining the next steps before its final adoption.
- What is the content of the Bill?
The House of Lords is currently examining the Bill for the second time. This instrument focuses on two main elements: the duty imposed on commercial organisations and public authorities concerning human rights and environmental due diligence and the sanctions in case of non-compliance with this obligation.
On the one hand, this Bill imposes a due diligence obligation related to the protection of the environment and human rights.
Subsection 2(1) of the Bill indicates that public authorities and commercial organisations must prevent environmental and human rights harms. This leads to the conduct of human rights and environmental due diligence, according to subsection 2(2) of the Bill.
The Bill encompasses public and private actors to protect the environment and human rights effectively. Baroness Young of Hornsey in her explanatory notes indicates that public authorities can play a major role, especially through the financial support to businesses and through public procurement.
Subsection 3(1)(b) of the Bill then plans assessments to identify human rights and environmental due diligence issues.
For instance, in the financial sector, these issues are particularly important concerning loans. Lenders are attentive to environmental risks. They should assess the level of due diligence in the borrowers’ operations, including the purpose of the loan, because lenders could be held liable.
Moreover, reporting requirements may be imposed on commercial organisations according to subsection 5(1) of the Bill. A plan for the environmental and human rights due diligence shall be created within a period of six months after the end of the financial year. This plan allows commercial organisations to examine the effectiveness of the actions realised the previous financial year.
This provision of the Bill seems similar to the article of the Code of Commerce from France mentioned previously, except that parent companies are not specifically targeted in subsection 5 of the UK Bill.
On the other hand, this new Bill also addresses the question of its effective implementation. The sections 8 to 11 respectively deal with the civil liability, the liability of the directors, penalties and notices as well as criminal offenses.
For instance, according to subsection 8(1) of the Bill, if a commercial organisation fails to prevent environmental and human rights harms in its own products, operations, and services and those of the subsidiaries and in the value chains, it may be held liable for damages.
This Bill introduced in the House of Lords is part of a wider movement taking place in the international and European stages. Not only public bodies, but also companies are encouraged to respect human rights and environmental rules.
This Bill tries to focus on a variety of due diligence issues, which permits improvement in the quality of the work of the companies which are encouraged to adopt a responsible business conduct.
- What are the next steps?
After the second reading in the House of Lords, the Bill proceeds to the Committee and Report stages before reaching the third reading. Subsequently, the Bill will be examined by the House of Commons. Following the consideration of amendments and receipt of royal assent, the Bill could be officially adopted. However, Private Members’ bills often encounter challenges during the adoption process. Currently, the Bill has not yet come into force, and there is no clear perspective on it. Additionally, there is ongoing debate regarding the penalties outlined in the Bill. The broad scope of civil liability for commercial organisations that fail to adhere to human rights and environmental regulations raises questions about the effectiveness of the Bill’s enforcement mechanisms.
Even though the Bill has not yet been adopted, it represents a major step which could permit to raise awareness of the crossover between overlapping issues that are raised between environmental harm and issues pertaining to the protection of human rights in the UK.
