The clinic received a request for legal advice from the European Coalition for Corporate Justice (ECCJ) on the options for introducing mandatory human rights due diligence requirements at the EU level.
The clinic’s study assesses the legal feasibility of a EU instrument that would impose mandatory human rights due diligence (“HRDD”) requirements on companies in the garment and textile sector (the “Garment Proposal”). The Garment Proposal serves as an example of a sector-specific approach to HRDD requirements, and could be modified to develop similar proposals in other sectors. The study also illustrates the differences between a sector-specific and a cross-sectoral approach by highlighting the implications of each in the following areas:
1. Legal Bases
The most promising candidate for the legal basis of the Garment Proposal is the Common Commercial Policy, Article 207 of the Treaty on the Functioning of the European Union (“TFEU). Article 207 authorizes the EU to manage its trade and investment relationships with third countries, and therefore to ensure that garment and textile products imported into the EU do not contribute to human rights abuses in global supply chains. Article 207 could also potentially serve as a legal basis for HRDD or other similar requirements in other import-intensive industries.
Additionally, the EU could legislate on the basis of its competence to ensure the freedom of establishment and functioning of the internal market (Articles 50 and 114 TFEU, respectively). This legal basis is typically employed when laws in different Member States require companies to comply with divergent requirements in overlapping areas, which result in fragmentation of the common market. Given the recent and anticipated legislation in multiple Member States relating to HRDD, the EU is competent to enact legislation that would harmonize and replace their requirements.
2. Personal Scope
Laws that take a cross-sectoral approach can apply to any company that meets a designated size threshold, such as one based on revenue or assets. However, while such an approach is wide reaching, it can be difficult to draft meaningful requirements for companies in every sector. On the other hand, a sector-specific approach allows a law to target market actors who perform specific activities within the EU market, such as those who import garment or textile products, and address the risks that are posed by such activities.
3. Requirements and Enforcement
A sector-specific approach allows the drafters of legislation to develop substantive requirements that are specifically tailored to mitigate the risks posed by that sector. By way of contrast, the drafters of cross-sectoral legislation must develop more general requirements that seek to mitigate more broadly defined risks, which tend to grant more discretion to other institutional actors or to the companies themselves. Finally, while the areas of disclosure and enforcement each present their own legal challenges, the difference between the sector-specific and cross-sectoral approaches in these areas is much less severe.