French Business Seeks to Kill Bill on Liability for Units

  • Law will ask companies to ensure worker safety at subsidiaries
  • AFEP, Medef business lobbies fight Socialist-backed bill

France’s biggest companies are pushing hard to thwart a government-backed bill that would hold them legally responsible for ensuring social and human rights at units in countries where labor is cheap precisely because such restrictions don’t exist.

AFEP, Medef and Croissance Plus are the three business lobbies leading the fight against the proposed law, which will be applied to all companies with more than 5,000 employees in France or operating in France with more than 10,000 employees globally.

Dominique Potier, the lawmaker who authored the 500-word bill, told Bloomberg that companies would be required to have a plan to ensure the safety and security of employees at their direct or indirect subsidiaries worldwide. The bill, which was passed by the lower house of parliament in March, will be debated in the Senate on Wednesday.

“It’s ludicrous!” said Stanislas de Bentzmann, who heads Croissance Plus, the smallest of the three lobbies. “This is just a political move from the Socialist government to show their voters they are still left-wing. The only thing it will do is harm our companies and our competitiveness,” he said in a telephone interview. Bentzmann started his career in 1987 with a company that set up “production units in low-cost countries for large retailers,” according to his official web page.

Rana Plaza

The lobbies are raising their concerns with ministers, in parliament and with President Francois Hollande’s top economic advisers. They represent companies ranging from telecommunications and construction conglomerate Bouygues and cement maker Lafarge Holcim to retailer Carrefour SA and General Electric Co.. In all, such companies employ about a third of France’s workforce.

The bill, titled “due diligence for parent companies,” is better known in the corridors of the French parliament as the “Rana Plaza Bill” for the building in Bangladesh that collapsed in April 2013 causing 1,138 deaths and injuring more than 2,500 people.

The building housed Phantom Apparels Ltd., New Wave Style Ltd and New Wave Brothers Ltd., major suppliers to the garment industry. Mango, H&M, Gap, Wal-Mart and Auchan, one of the largest chains in France, were among global retailers who joined a donor group for the Rana Plaza victims and their families.

Going Further

The legislation, if implemented would go further than any other major country, according to the Clean Clothes Campaign, an alliance of unions and non-governmental organizations for the garment industry. While the U.S.’s Alien Tort Claims Act has been used to sue corporations for human rights abuses, it does not impose due-diligence requirements.
The U.K. introduced legislation this year, called the Modern Slavery Act, which requires companies to do due diligence on their supply chains.

A European Union directive will force companies across the 28-nation bloc to enhance their reporting on environmental risks, due diligence and governance, though it won’t take effect until 2017.

AFEP, the business group that represents most of France’s CAC 40 companies and another 60 very large corporations, is the biggest opponent of the bill and the most active in its campaign. Pierre Pringuet, its president, declined to comment for this article. According to Medef, companies have already stepped up due diligence since the Rana Plaza collapse and continue to improve safety for workers. The lobbies allege that the bill is vague and imprecise and creates legal uncertainty.

“Regulatory constraints and legal risks will only further damp the French economy and create mistrust for foreign investors,” Medef, France’s main business lobby, said in a statement to Bloomberg.

Delicate Situation

Hollande’s administration concedes there are issues with the proposed law.

“We need to find a good balance between the ambitions that we share and the reality of the global economy today,” Stephane Le Foll, the government’s spokesman, said after the weekly cabinet meeting in Paris on Wednesday. “There’s obviously a problem with voting in a law that uniquely affects France and is probably difficult to apply.”

The business opposition puts Hollande in a delicate position. The bill offers him a golden opportunity to burnish his Socialist credentials, even as it puts him at odds with the executives he’s counting on to revive the French economy in the run up to the next presidential election in 2017. All major French labor unions support the bill.

“The risks they should consider are death and damages, because these are the biggest threats to their businesses,” Nayla Ajaltouni, the spokeswoman for the Clean Clothes Campaign in France said in an interview. “BP in the Gulf of Mexico, the Bhopal disaster, the Erika oil spill in France and the Rana Plaza show that due diligence on a voluntary basis is not working.”

The Socialist group in the lower chamber, with support from Hollande and his Economy Minister Emmanuel Macron, is pushing the bill as a signal to voters ahead of the December regional elections.

“This bill is an ambitious and reasonable step forward for French companies on due diligence, without harming their competitiveness,” Macron’s office said in a statement to Bloomberg.  Hollande won’t actively support the bill while “letting it move ahead in parliament,” according to the president’s spokesman Gaspard Gantzer.

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