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Focus on Regulation

Dutch Child Labour Due Diligence Law

The Dutch Child Labour Due Diligence bill (the “Law“) was passed in both houses of parliament and is due to be implemented by royal ratification after 1 January 2020. The aim of the Law is to put more responsibility on companies to prevent goods and services which have come into existence through child labour to hit the Dutch market. As a result of the law entering into force, companies are advised to start establishing an action plan to mitigate risks in cases where child labour has been identified in their supply chain or activities.

Background

It is estimated that more than 168 million children are still forced into child labour every day, despite decreasing numbers. It is believed that industries such as clothing manufacturing, tin mines, and cigarette plans are among the many impacted by child labour. The eradication of child labour is on the UN 2030 Agenda for Sustainable Development and the United Nations Guiding Principles address child labour by reinforcing the importance of the International Labour Organisation Minimum Age Convention and the Worst Forms of Child Labour Convention.

Scope

The bill imposes a duty of care on all companies selling goods and services to end-users in the Netherlands, whether established in the Netherlands or not, to prevent these goods and services coming into existence through child labour. The bill makes it clear that mere transportation of goods to or through the Netherlands would not be covered by the Law (article 4(4)).

Due Diligence  

The duty of care takes the form of due diligence to be carried out by companies falling within the scope of the bill (article 4). There are two main requirements under the bill:

  1. As part of the required due diligence, companies will have to submit a disclosure statement to a supervisory authority that proper due diligence measures have been put in place (article 4(2)).
  2. Companies should implement proper due diligence measures, which are defined as assessing whether there is a “reasonable suspicion” of child labour, either in a company’ supply chain or activities (article 5(1)). The assessment should be based on an evaluation of supply chain and activity sources of which the company is “reasonably aware and are reasonably consultable” (article 5(2)). Article 5(3) states standards of due diligence and investigation will be established through further secondary legislation, but will be in line with the ILO-IOE Child Labour Guidance Tool for Business.

In case there is a reasonable suspicion, the company will need to design and establish an action plan to prevent and mitigate the risks of child labour to comply with the due diligence requirement (article 5(1)).

Enforcement and Sanctions

The bill is unclear regarding enforcement, but it seems that a person or company will be able to submit a complaint to the supervisory authority with proof that their interests have been affected by a company’s failure to comply with the law. The company will have the opportunity to respond and remedy the failure before a sanction is imposed. The Dutch Authority for Consumers & Markets has been designated as supervisory authority under the Law.

Failure to comply with the disclosure requirement under article 4(2) will attract a fine of up to €4,150.00.

Failure to comply with the due diligence requirements under article 5 will attract a fine of up to €830,000.00. In case this fine is not considered to be appropriate, a fine of up to 10% of revenue can also be imposed on an offending company.

In addition to this, if the company commits two offences within a five year period, executive directors could face imprisonment of up to four years. There is no remedy for complainants under a civil suit.

Critics

Much concern was expressed in the Dutch Parliament regarding both the feasibility and the effectiveness of the Law. In particular, members of parliament worried companies could escape liability by cutting off suppliers or ceasing to offer products on the Dutch market, without addressing the core objectives of the Law. In response to these criticisms, the Minister for Foreign Trade and Development Cooperation stated the Ministry would assist companies in eliminating child labour from their supply chain. In addition, the Minister has expressed his intention to address issues of child labour directly with the relevant authorities in production nations.

Comparison

By adopting the Law, the Netherlands becomes one of a number of European countries to address business responsibility for human rights impacts. For example, the French “Devoir de Vigilance” requires companies to inform the public on any risks regarding breaches of fundamental human rights in their organisations, including their suppliers. If such a breach takes place, companies have an obligation to remedy the breach. Failure to remedy the breach, however, does not attract a fine. At worst, people concerned by the breach can claim damages and a remedy of the breach under a civil suit.

Conclusion

Although specific standards of due diligence have yet to be published by the government, companies are advised to align their activities and supply chains with the requirements of the ILO-IOE Child Labour Guidance before entry into force of the law. In addition, companies are advised to start establishing an action plan to mitigate risks in cases where child labour has been identified in their supply chain or activities. There have been vocal criticisms and concerns that this law will lead to termination of supplier contracts with a higher risk of child labour, rather than encourage companies to address difficult root causes of suppliers using child labour. The bill does not require companies to provide annual reports to the supervisory authority (one-off disclosure is sufficient), and does not set out how companies are required to respond to child labour risk. Companies are, however, advised to start a dialogue with high risk supplier within the frame of an established action plan pursuant to article 5(1), rather than simply cut ties.

Our specialist Business and Human Rights practice can work with you to identify and manage human rights related risk. If you have any questions please get in touch with Julianne Hughes-Jennett or Peter Hood.

Julianne Hughes-Jennett is a partner and head of the firm’s Business and Human Rights Group and Steven Minke is a trainee in the International Arbitration and Business and Human Rights teams.