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Focus on Regulation

FDA Finalizes Data Integrity Guidance, With Some Noteworthy Changes

Earlier today, FDA published its finalized Data Integrity Guidance.  The Final Guidance is entitled “Data Integrity and Compliance With Drug CGMP: Questions and Answers,” and updates the agency’s April 2016 Draft Guidance covering the design, operation, and monitoring of systems and controls to maintain data integrity to comply with current good manufacturing practice (cGMP) for drugs.  The Final Guidance says that in recent years, FDA has “increasingly observed cGMP violations involving data integrity” during inspections, and in a statement announcing the guidance, FDA Commissioner Scott Gottlieb, M.D. similarly expressed concern over data integrity violations that have been the result of both deceptive practices and inadequate controls and oversight to ensure reliable and accurate data.

Although the Final Guidance largely aligns with the Draft Guidance, there are some notable differences.  In particular: Continue Reading

Four new FDA guidances and proposed rule advance biosimilars policy framework

Today, FDA released a series of guidances that aim to advance the agency’s biosimilars policy framework, along with a proposed rule on the definition of a “biological product,” which incorporates changes made by the Biologics Price Competition and Innovation Act of 2009 (BPCI Act).  The guidances include a final guidance and a draft Q&A on the “Deemed to be a License” provision of the BPCI Act; as well as a new and revised draft Q&A on biosimilar development as it relates to the BPCI Act, which contains finalized guidance in Revision 1, and draft guidance in Revision 2Continue Reading

China Takes Significant Steps to Consolidate Generic Drug Industry and Lower Prices

With the opportunity for global pharmaceutical companies to gain new access to the Chinese market presenting itself like never before (see our previous blog posts here and here), significant news broke on December 7, 2018, regarding a newly implemented pilot centralized drug procurement program (the “program”) that will have significant ramifications for global pharmaceutical companies.  Specifically, China just announced the reduction of prices for certain off-patent generic drugs by up to 96%.  Under the program, the government will award a contract to the lowest bidder, who will be guaranteed a sale volume of 60-70% of the total market for a year.  The move is aimed at reducing drug prices and encouraging consolidation in the generic drug industry.  The program will be a significant change in how generic drugs are priced and procured in China. Continue Reading

Supply chain liability under the law of negligence: What does Jabir and Others v KiK Textilien und Non-Food GmbH mean for European companies with supply chains in the sub-continent and other common law countries?

Last month a court in Dortmund heard arguments in Jabir and others v. KiK Textilien und Non-Food GmbH.  It is a case brought against a German retailer, under English law principles of tort in relation to a fire at the factory of a supplier in Pakistan.  This post explains what the case is about and what it might mean for European companies with suppliers in common law countries like Pakistan and Bangladesh.

Outline of the facts

In 2015 four Pakistani nationals brought claims in Germany against German retailer KiK Textilien und Non-Food GmbH (“KiK”). The claimants seek damages for personal injury and death resulting from a catastrophic fire in 2012 at the Karachi factory of KiK’s supplier, Ali Enterprises (“Ali”).  The fire claimed 260 lives and injured a further 32. KiK was Ali’s main customer at the time, utilising around 75% of the Baldia factory’s production capacity.

In September 2016, the Dortmund court accepted jurisdiction and granted the claimants legal aid. The case is currently pending before the Regional Court (Landgericht) of Dortmund. This is the first case of its kind in Germany, concerning damages claims based on the liability of a transnational company for human rights violations abroad.

German courts bound to apply Pakistani law

Under the Rome II Regulation, the law applicable to compensation claims arising out of a tort or delict is the law of the country in which the damage occurred, i.e. Pakistan.  Pakistani tort law is based on English common law so, if the case proceeds to a trial on the merits, we will have the unusual situation of a German court deciding a case based on the English common law of negligence.  This is all the more remarkable given that the English courts have never before attributed liability to a purchaser company for human rights impacts in its supply chain.

Claimants’ argument: voluntary assumption of responsibility for safe working conditions at supplier’s factory [1]

The law does not necessarily impose a duty on a purchaser company to prevent adverse human rights impacts in its supply chain.  However, a duty can be voluntarily assumed.  In KiK, the claimants contend that KiK owed them a duty of care to procure a healthy and safe working environment and breached this duty by failing to do its share to prevent the fire, and the resulting harm.  The claimants argue that the number of factory workers killed and injured was exacerbated by insufficient fire safety conditions at the premises, including a lack of fire alarms and extinguishers, closed emergency exits and barred windows. According to the claimants, KiK contributed to this situation by failing to enforce adequate health and safety standards at the factory.

According to the claimants, KiK’s position in relation to Ali was similar to that of a parent company. The claimants stress that “corporate structure is in itself not relevant to the assumption of responsibility”; which is consistent with the comments made by the English Court of Appeal in the recent parent company liability case involving Unilever (see our blog post here). On the basis of the principles set out in the English case of Caparo v Dickman [1990] UKHL 2, the claimants argue that the following circumstances evidence the existence of a duty of care:

  • Close integration of Ali into KiK’s supply chain: In its 2010 Sustainability Report[2], KiK stated that they were responsible not only for their direct employees but also for others who are involved in other countries in producing the goods ordered by KiK; KiK declared in this document that it designs processes, sets and enforces standards within its supply chain, and that it would “assume social responsibility above and beyond our core business activities”;
  • Contractual terms and conditions related to safe work environment: Each purchase order constituted a separate contract with Ali and incorporated KiK’s Code of Conduct[3], which required a clean and safe working environment. KiK declared in its 2010 Sustainability Report that the Code of Conduct was intended to have binding force, that “anyone who, through their work, contributes to our success, does so in appropriate conditions and with full access to their rights” and that the instrument to pursue this goal was the Code of Conduct as a “binding basis for all our commercial relationships”. Consequently, Ali was contractually obliged to undertake “convincing efforts” to guarantee work safety standards required by KiK at the Baldia factory.
  • Sufficient potential influence over supplier to enforce the safety standards: KiK had sufficient potential influence over Ali to enforce implementation of the safety standards. KiK could have achieved this by a programme of audits, Corrective Action Plans, or on-site visits by KiK representatives (especially those focusing on corporate social responsibility issues). It could have imposed the ultimate sanction for non-compliance, i.e. termination of the contract. KiK had de facto influence over Ali as the latter was integrated into KiK’s supply chain and the majority of the work at the Baldia factory was ordered by KiK.

The claimants argue that this all meant that: the harm suffered by the victims was sufficiently foreseeable to KiK; that there was sufficient proximity between the claimants and KiK; and that in the circumstances it is fair, just and reasonable to assign a duty of care to Kik.

The claims may be time-barred

The parties are currently debating whether the claims (which were brought two and a half years after the fire) are time-barred. Under Pakistani law the claims would be time-barred as the statute of limitation is two years. In contrast, this defence would not be available under German law, where the statute of limitation is three years. In December 2014, KiK had waived its right to raise the defence of the statute of limitation, but now contests the applicability of this waiver to the claims pending before the Dortmund court. The claimants appear to be arguing that, due to the fact that the waiver was governed by German law, this law also applies to the statute of limitation. In this case, the claims would have been brought before the expiration of the limitation period and the case could proceed to the merits stage.[4] A court hearing on the question of whether the claims are time-barred was held on 29 November 2018, and the Dortmund court is set to issue its decision on this preliminary matter on 10 January 2019.


The KiK case presents the unusual situation in which a German court is being asked to decide a case on common law principles, in circumstances where there is no firm precedent for a duty of care. More broadly, it is also the first time that a German court will consider the liability of transnational companies for human rights violations regarding damages claims. While the claimants seek to import the common law approach, it is possible that German law could influence the court.

It is notable that no provisions of German law explicitly prescribe responsibility for a supplier or subsidiary in this context. Nevertheless, there have been attempts to establish responsibility by reference to other concepts under German law. For instance, it could be considered if a decision of the Regional Court of Munich[5] regarding §§ 91, 93 AktG (German Stock Corporation Act) which states that members of the management board have to apply the diligence of a responsible and conscientious manager could potentially be relevant here. In this case, which concerned the management board’s liability for bribery, the court defined the due diligence standard applicable to the management board. It held that the implementation of an inadequate compliance system and insufficient monitoring by the management board constituted a breach of duty under § 93 AktG. Some commentators argue that this decision may have general implications for the responsibility of a management board concerning CSR or human rights violation.[6]  Others have pointed out that KiK’s Code of Conduct could be considered to contain elements of a third-party beneficiary contract (Vertrag zugunsten Dritter) for the benefit of workers employed by KiK’s suppliers. As a result, these workers would be entitled to contractual claims against KiK.[7]

The German government[8] amongst other EU member states followed the EU Commission’s call to develop a national action plan for the implementation of the UN Guiding Principles on Business and Human Rights. The German plan relies on companies’ voluntary commitment in regard to transparency and reporting requirements and the implementation of mechanisms to prevent and redress human rights violations. The progress is to be reviewed in 2020 and legislative measures might be taken if the number companies that have committed voluntarily will be considered insufficient.  The KiK case is an illustration of how voluntary commitments such as codes of conduct may crystallise into “hard” legal commitments.

Absent compulsory due diligence and reporting requirements, there appears to be a “Catch 22” for European transnational companies with operations or suppliers in common law countries such as Pakistan, Bangladesh, India and Anglophone Africa – by fulfilling the responsibility to respect under the UN Guiding Principles and implementing group human rights policies, there is an increased likelihood that a duty of care will arise.

As a matter of policy, it is hoped that legislators and judges address this Catch-22 and develop law which consolidates upon the existing consensus around the UNGPs and encourages businesses to fulfill the responsibility to respect.  In the meantime, businesses should be alive to the fact that a duty to prevent human rights impacts in their overseas supply chains and operations may exist and ensure that they discharge any such duty by rigorously implementing their existing policies and procedures.

Prepared by Lucja Nowak and Jonas Poell, Munich office and Peter Hood and Julianne-Hughes Jennett from the Business and Human Rights practice in London. Many thanks to Josephine Becker for her assistance in preparing this post. 


[1]  Claimants’ arguments summarised here are based on the claimants’ legal opinion prepared by Professor Sheldon Leader, Professor Jane Wright and Dr Anil Yilmaz of the School of Law, University of Essex, which is available at: https://www.ecchr.eu/fileadmin/Juristische_Dokumente/Legal_Opion_Essex_Jabir_et_al_v_KiK_2015.pdf.

[2]  Available at http://www.kik-textilien.com/unternehmen/fileadmin/user_upload_de/Tschechien/NHB_E_online.pdf.

[3]  According to the KiK Sustainability Report 2010 the Code of Conduct is aligned with SAI’s (Social Accountability International) SA8000 Standard and comparable with the BSCI (Business Social Compliance Initiative) Code of Conduct. Therefore, KiK’s Code of Conduct can be seen as an example for many other Codes of Conduct used by other companies.

[4]  “KIK-Opfern droht Niederlage”, Frankfurter Rundschau, 6 June 2018, available at:  http://www.fr.de/wirtschaft/menschenrechte-kik-opfern-droht-niederlage-a-1519085.

[5]  LG München I, Urteil vom 10.12.2013, 5 HK O 1387/10, NZG 2014, 345.

[6] Saage-Maaß/Leifker, “Haftungsrisiken deutscher Unternehmen und ihres Managements für Menschenrechtsverletzungen im Ausland”, BB 2015, 2499, 2502; Spießhofer, “Wirtschaft und Menschenrechte – rechtliche Aspekte der Corporate Social Responsibility”, NJW 2014, 2473.

[7] Heinlein, “Zivilrechtliche Verantwortung transnationaler Unternehmen für sichere und gesunde Arbeitsbedingungen in den Betrieben ihrer Lieferanten”, NZA 2018, 276, 279.

[8]  Published 21 December 2016, available at https://www.auswaertiges-amt.de/blob/610714/fb740510e8c2fa83dc507afad0b2d7ad/nap-wirtschaft-menschenrechte-engl-data.pd .

The Australian Modern Slavery Bill: the next frontier in corporate accountability for adverse human rights impacts

Last week, the Australian Parliament approved the Modern Slavery Bill and it is set to come into force early in 2019.  This post looks at the requirements of the Act, how it compares to the UK Modern Slavery Act and what it tells us about the changing legal landscape for business and human rights.

The Australian Modern Slavery Bill

Big business often necessitates complex supply chains. The link between company and end-consumer is rarely simple, and the proliferation of actors in business operations can often carry significant risk.  In keeping with corporates around the world, Australian entities do not operate in isolation. Protracted supply chains and a global presence are features that characterise many of Australia’s biggest businesses. Modern slavery plagues supply chains across the world, requiring global coordination and commitment to eradicate. In recognition of this, the Australian Modern Slavery Bill 2018 (soon to be the “Modern Slavery Act“) has been approved by both the House of Representatives and the Senate.

Expected to be effective early in the new year, the Modern Slavery Act will require Australian entities, as well as entities that carry on business in Australia, to submit a “Modern Slavery Statement”, where they have a consolidated annual revenue of AUD$100 million or more. This requirement must be fulfilled within 6 months of the end of the relevant reporting period.

In parallel with the introduction of this reporting requirement, a “Modern Slavery Statements Register” will be established and maintained, which will be publicly accessible on the internet.

What is Modern Slavery?

“Modern Slavery” can encompass a diverse array of conduct, including human trafficking, forced labour and other practices involving the exploitation of human beings. In recognition of this, the Modern Slavery Act defines “modern slavery” broadly, so as to include a number of different offences, including trafficking in persons and the worst forms of child labour.

What is in a “Modern Slavery Statement”?

The Modern Slavery Act requires that the statement set out an entity’s:

  • identity;
  • structure, operations and supply chains; and
  • exposure to risks of modern slavery practices in its operations and supply chains, as well as in the operations and supply chains of any entity that it either owns or controls.

The statement must also disclose actions that the entity, and any entity it owns or controls, has taken to assess and address modern slavery risks, as well as how it determines the effectiveness of those actions.

Any process of consultation an entity engaged in with the entities that it owns or controls, as well as the details of relevant approvals required by the principal governing body of that entity must be set out in the Modern Slavery Statement. Approval from senior management, such as the board of directors, and sign off by a “responsible member” (for example, a director) is required.

It is anticipated that further formal guidance will be issued by the Australian government in respect of these requirements.

Are there penalties for non-compliance?

While there are no financial penalties for non-compliance, the Minister will be empowered to send a written request to a non-compliant entity, requesting an explanation for the non-compliance, or that the entity undertake specified remedial action, or both.

Where the Minister is satisfied that the reporting entity has failed to comply with its request, it will be empowered to publish details of this failure on the Modern Slavery Statements Register, or in any other way considered appropriate.

How does the Australian Act compare to the UK Modern Slavery Act

The Australian Act was influenced by the 2015 UK Modern Slavery Act.  S. 54 of the UK Act requires commercial organisations doing business in the UK with a revenue of over £36 million to publish a statement on the measures taken to address the risks of slavery and trafficking.  The UK government has issued guidance on the areas which should be covered in a statement but these remain optional.  This has led to criticism.  In its 2018 report on companies in the FTSE 100 “From Disclosure to Action“, the BHR Resource Centre concluded that “Three years on [from the introduction of the UK Act], most companies still publish generic statements committing to fight modern slavery, without explaining how. Sadly, only a handful of leading companies have demonstrated a genuine effort in their reporting to identify and mitigate risks.”  Only 17% of the 2017 / 2018 statements produced by FTSE 100 companies contained an assessment of the effectiveness of a business’s procedures.

By virtue of the AUD$100 million (approximately GBP£58 million) threshold, the Australian Act will apply to fewer companies than its British forebear.  However, it imposes far more onerous reporting requirements.  In particular, the mandatory requirement to report on structure, operations and supply chain, exposure to risk and the effectiveness of measures taken to address the risk will require businesses to say more in their statements and should go some way to preventing businesses from publishing generic statements.  The introduction of a state run Modern Slavery Register under the Australian Act is also significant, enabling consumers, investors and regulatory authorities to determine whether a business complies.  In the UK, there is no equivalent (save for a register maintained by the NGO, Business and Human Rights Resource Centre).

A UK government inquiry is due to report in 2019 on the effectiveness of s.54 of the UK Act and it is widely anticipated that it will recommend stricter reporting requirements.  The Australian Act may well influence British legislators in determining the requirements of an amended act and businesses with dual reporting requirements may want to get ahead of the curve and adopt internal policies and procedures which allow them to meaningfully fulfil the stricter requirements set out in the Australian Act.

Part of a wider move towards mandatory human rights reporting       

The introduction of the Australian Modern Slavery Act is the latest in a series of legislative developments around the globe which “harden” certain requirements under the UN Guiding Principles, traditionally seen as “soft” law.  And, as we have written before, more such developments are on the horizon.

Large multinationals with overseas operations and complex international supply chains may increasingly find themselves subject to multiple reporting requirements in multiple states.  Fortunately, these new developments are all based on Pillar 2 of the UN Guiding Principles: the business responsibility to respect human rights.  Businesses which voluntarily take steps to respect human rights under the UNGPs now, including by implementing effective and meaningful human rights due diligence which addresses all human rights impacts in their value chain will be prepared to meet these overlapping reporting requirements.  What’s more, businesses which do so will be better placed to reduce the risk of “hard” legal liability which can flow from an adverse human rights impact and to build trust amongst their stakeholders.

Madeleine Parker is an associate in Hogan Lovells’ Sydney office, Julianne Hughes-Jennett is a partner and Peter Hood is a consultant in the Business and Human Rights team based in London


EMA publishes draft guideline on the quality of water for pharmaceutical use


The EMA has published a draft Guideline on the quality of water for pharmaceutical use. The draft is intended to provide guidance to the industry. It concerns the pharmaceutical use of different grades of water in the manufacture of active substances and medicinal products for human and veterinary use. New methods that are equivalent to the distillation for water will be included in the guideline.

The guidance provided by the draft should also be considered for new marketing authorisations, variation applications to marketing authorisations as well as Advanced Therapy Medicinal Products.

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The EMA launches a public consultation on eSource Direct Data Capture in clinical trials

The European Medicines Agency (EMA) has published a draft qualification Opinion[1] concerning the use of eSource Direct Data Capture (DDC) in the conduct of clinical trials in the EU. The draft Opinion was adopted by the Agency’s Committee for Medicinal Products for Human Use (CHMP). It presents CHMP’s views on the “regulatory acceptability” of eSource DDC. EMA invites the public to comment on this opinion by 14 March 2019.

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EMA launches public consultation on the use of patient disease registries for regulator purposes


On 5 November 2018, the EMA published a discussion paper concerning the use of patient disease registries for regulator purposes. The discussion paper was published within the context of the EMA’s Patient Registries Initiative (PRI). The consultation period is open to stakeholders until 29 June 2019. It has been published to allow stakeholders to participate in the discussion by commenting on the paper.

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“Specific Instances” under OECD Guidelines – What can financial institutions learn from the recent ANZ case on providing finance to a company engaged in human rights abuses

The Australian National Contact Point for the OECD Guidelines for Multinational Enterprises (“AusNCP”), which handles “specific instances” relating to alleged non-observance of the Guidelines, has released its final statement (https://cdn.tspace.gov.au/uploads/sites/112/2018/10/11_AusNCP_Final_Statement.pdf) on a case concerning the Australia and New Zealand Banking Group’s (“ANZ”) financing of a Cambodian company engaged in human rights abuses.

In 2011, ANZ provided Phnom Penh Sugar (“PPS”), a company based in Cambodia, with a loan facility through its partially-owned Cambodian subsidiary, ANZ Royal Bank. PPS used the loan to finance the development of a sugar plantation and refinery. PPS was said to have engaged in forced evictions, arbitrary arrests, child labour and dangerous working conditions leading to workplace deaths, throughout the development of the project.

A complaint was lodged in 2014 to the AusNCP by two NGOs, Equitable Cambodia and Inclusive Development International, on behalf of 681 displaced families. They complained that ANZ, as financier to PPS, had breached certain aspects of the General Policies and Human Rights chapters in the OECD Guidelines because it failed to take reasonable measures to prevent or remedy human rights abuses. The AusNCP considered that it was “difficult to reconcile ANZ’s decision to take on PPS as a client with its own internal policies and procedures – which appear to accord with the OECD Guidelines – as the potential risks associated with this decision would likely have been readily apparent“. Concerns about PPS were already publically available when ANZ decided to accept it as a client in 2011.

In its recommendations, the AusNCP did not endorse the complainants’ suggestion that ANZ be forced to divest its profits from the loan to provide compensation to the displaced families; making specific recommendations about financial compensation falls outside the AusNCP’s scope of authority. Instead, the AusNCP recommended that ANZ introduces methods to promote internal compliance with its own corporate standards relating to human rights and further strengthens the application of its human rights due diligence arrangements, to ensure that future human rights risk is captured. It also recommended that ANZ establishes a grievance resolution mechanism for victims in relation to breaches of ANZ’s corporate standards in relation to human rights. ANZ is to report back to AuNCP on its progress in 12 months’ time.

Other financial institutions, and indeed companies in general, should take note of the following key points in the AusNCP’s conclusions and recommendations:

  • It is not sufficient for a company to have internal human rights standards; these must also be consistently applied when establishing new commercial relationships. A financial institution is therefore advised to set in place internal control systems to promote compliance with its stated human rights standards. For example, when deciding whether to take on a new client, it is important to collect and assess publicly available information on that client’s human rights record and the particular risks associated with the project that is being financed.
  • It is recommended that financial institutions put in place a grievance mechanism to support the effective operation of its human rights standards.

A full list of all specific instances that have been lodged to date with OECD NCPs, many of which are still under progress, can be found here: http://mneguidelines.oecd.org/database/searchresults/?q=%23all.

The EMA has adopted new guidelines on good pharmacovigilance practices in paediatric populations


The EMA Good Pharmacovigilance Practices consist of several chapters of the Notice to Applicants that are regularly updated. A new GVP Considerations Chapter (IV) regarding specific considerations for the paediatric population came into effect on 8 November 2018. The Considerations Chapter addressed pharmacovigilance issues that frequently arise with the paediatric population and related pharmacovigilance structures and processes. It provides guidance on how to make use of existing tools and processes specifically regarding the paediatric population.

The Considerations Chapter also covers the roles and responsibilities of the Marketing Authorisation Holders, applicants for marketing authorisation, and the EMA Paediatric Committee (PDCO) and the Pharmacovigilance Risk Assessment Committee (PRAC).

The last part of the Considerations Chapter covers various EU plans such as the paediatric investigation plan and the risk management plan in the EU.

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