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Lessons learned from the 28 February Paris Court ruling in the "TotalEnergies" case

published on 15 March 2023 | reading time approx. 10 minutes

The court's ruling in the "TotalEnergies Uganda" case was eagerly awaited by companies subject to the obligation to implement and publish a due diligence plan pursuant to the "Duty of Care" law of 28 March 2017.

The main lessons of the court's decision »
Our analysis »
Conclusion »

For the record, Total's development project in Uganda ("Tilenga") involves the construction of a gigantic pipeline 1440 km long to the port of Tanga, in Tanzania, on the Kenyan border (East African Crude Oil Pipeline, "EACOP").

Opposed to this project, various associations in France and Uganda have enjoined TotalEnergies from June 2019 to "meet its due diligence obligations with regard to both the inadequacies of its due diligence plan and its effective implementation and publication." They denounce serious risks of human rights and environmental violations, particularly due to the displacement of local populations, greenhouse gas emissions induced by the operation of the oil complex, and impacts on access to water for local communities and ecosystems. After several rulings to determine the competent court, the French Court of Cassation referred the case to the Nanterre summary jurisdiction, which relinquished jurisdiction in favor of the Paris summary jurisdiction. The latter's judgment was highly expected as other companies have been summoned by associations for insufficient implementation of their vigilance plans, and other summonses could follow shortly.

If the court does not rule on the merits of the case, as this is a summary procedure, it is possible to draw useful lessons as to the scope of the obligations incumbent on companies subject to the duty of care law. These obligations are expected to increase substantially in the coming years following the entry into force of the Sustainability Due Diligence Directive, which is expected to be adopted in the coming months, due to the lowering of thresholds.^[1]

The main lessons of the court's decision

1. Need for prior dialogue between the company and stakeholders

The ruling dismisses the associations' claim, considering that they should have given TotalEnergies another formal notice to perform its due diligence obligations, as the first formal notice dated June 2019 and was based on the due diligence plan drawn up in 2018. However, since then, and given the twists and turns of the legal action to determine the competent court, more than three years have passed, during which time TotalEnergies has adapted and updated its due diligence plan. The judge therefore considers that the associations should have based their formal notice on the latest known compliance plan, namely the one published by TotalEnergies in 2022 for the year 2021. TotalEnergies thus published three compliance plans after the one that served as the basis for the initial formal notice.

The argument is logical, insofar as it would have been difficult for the judge to rule on the alleged shortcomings of the 2018 vigilance plan, even though the Vigilance Law had only come into force in March 2017, and it was clear that the plan would evolve as TotalEnergies' projects developed.

In addition, the ruling recalls that the law provided for the need for a three-month prior consultation to allow the parties to meet. This is a mandatory phase of dialogue and amicable exchange, during which the company can respond to criticisms of its due diligence plan.

In this case, the associations felt that this dialogue was not useful, convinced that their demands would not be heard by TotalEnergies, and therefore refused to enter into mediation despite the injunction issued by the Nanterre interim relief judge on 1 June 2022.

In their view, the due diligence obligations are continuous and do not require the reiteration of formal notices with each new plan, unless the law is deprived of its full scope, since a new plan is published each year and they are required to respect a three-month time limit before taking legal action. In view of the procedural remedies that may be exercised by the company in question, the prior obligation to issue a formal notice on the basis of the last published plan could therefore, in certain cases, make it virtually impossible to obtain a decision on the merits within a reasonable time.

This argument was not followed by the judge.

The first lesson to be learned from this decision is nevertheless the importance of respecting this phase of dialogue following a formal notice, in order to establish a true adversarial debate between the parties and not only through press releases.

2. Impossibility for the interim relief judge to rule on the substance of the due diligence plan

The associations considered that the imminence of serious damage to human rights and the environment justified asking the interim relief judge to suspend the start-up work on the Tilenga and EACOP projects.

Once again, the judge considered that, in the absence of a finding of imminent damage, it was not for him to assess the reasonableness of the measures adopted in the monitoring plan, which would require an in-depth examination of the case, which was the sole responsibility of the judge on the merits. He added that the interim relief judge cannot, without exceeding his powers, interpret an act, but only draw the consequences of a clear act. In this case, it is not disputed that TotalEnergies does have a compliance plan, that the headings in the plan are not summary, which would make the plan non-existent, and that there is no obvious unlawfulness.

The second lesson of the judgment is that recourse to the interim relief judge is only justified in the event of the manifest absence of one of the elements of the due diligence plan, which is highly unlikely given the maturity of the companies concerned.

3. Assessment of the content of due diligence measures

While the summary judgment judge cannot rule on the substance of the due diligence plan, but only on its existence, the judgment contains interesting considerations on the nature of the obligation to establish a due diligence plan under the terms of the law of 28 March 2017.

Indeed, it is noted that:

the content of the due diligence measures imposed by the law remains general, in the absence of the publication of the decree nevertheless provided for by the law and which could provide details on their content

the law does not mention any text likely to enlighten the judge on the assessment of the conformity of the due diligence plan with "guiding principles, international standards, nomenclatures, classifications of due diligence" and positive law does not provide for "any reference framework, typology of the measures concerned, modus operandi, master plan, monitoring indicators, measuring instruments..."

Similarly, the judgment notes the absence of a control body, with the judge alone being entrusted with the task of carrying out this control on the basis of the standard notion of "reasonableness of the vigilance measures contained in the vigilance plan, an imprecise, vague and flexible notion."

This judgment gives us a better idea of the solitude of the judge when faced with the implementation of human rights and environmental protection objectives established by the legislator.

It is difficult to imagine that one or more judges would be able, even with the support of experts and other amicus curiae, to determine whether a due diligence plan is sufficiently precise and robust to identify and prevent serious violations of human rights, fundamental freedoms, human health and safety and the environment in the context of its activities and its chain of subcontractors, all the more so when the projects in question are supported by the states concerned, in this case Uganda and Tanzania.

The third lesson of the ruling is that by giving a judge the task of determining whether a due diligence plan is not only in place but also effective, and in the absence of a reference framework for its application, which could have been provided for in a decree, the law appears very difficult to apply.

Our analysis

Conditions of effectiveness of the law: Comparison with the Sapin II law

Unlike the Duty of Vigilance Act, the Sapin II Act, which was passed a few months earlier (November 2016), established a regulator (the AFA), which defined a very precise set of guidelines (recommendations and guides), so that this law was able to be applied effectively and substantially modify the practices of the companies concerned in terms of anti-corruption compliance.

It should also be noted that the AFA does not have the power (although it is sometimes tempted to do so) to assess the relevance of risk mapping, as regards the identification, evaluation and prioritization of corruption risks or the enforcement actions implemented as part of action plans to reduce their net risks. It is commonly accepted that this responsibility lies with the company itself, not the regulator.

However, the Sapin II law is specified by a reference framework aimed at guiding companies in the implementation of the law, with controls by the AFA, recommendations accompanied by warnings if necessary, controls to follow up on warnings and the possibility of recourse to the AFA's sanctions committee.

First observation: The Duty of Vigilance Law is largely ineffective for lack of a regulator and a relevant benchmark.

Comparison with the German law "Lieferkettengesetz" (to the detriment of the French law)

Coming into force at the beginning of 2023, this German "vigilance" law is substantially similar in content to the French law of 28 March 2017, from which it was largely inspired.

However, it is very interesting to note that the German legislator did not replicate the flaws noted by the 28 February ruling:

Because it institutes a regulator (Bundesamt für Wirtschaft und Ausfuhrkontrolle – “BAFA”) to monitor the implementation of the law. Placed under the supervision of the Ministry of the Economy, this body also has the power to impose administrative sanctions in the event of failure to apply the law. These sanctions can reach 2 per cent of the worldwide turnover of the group concerned, which is a strong incentive for companies to implement the law effectively.
Because the German law provides for a precise reference framework of international standards (an appendix lists 14 international conventions) on the basis of which the regulator and ultimately the judge must assess the extent to which a given vigilance program meets the requirements of the law and this reference framework. These include the Stockholm Convention on Persistent Organic Pollutants (POPS, 2019), the Minamata Convention on Mercury (2013), the Basel Convention on the Control of Transboundary Movements of Hazardous Wastes, the conventions of the International Labor Organization, the UN International Convention on Social, Economic and Cultural Rights (2009) and the UN International Covenant on Civil and Political Rights (1966).
Because BAFA's mission is to publish application guides for the law, in order to help the companies concerned to implement it. Thus, following the example of the AFA in France in the area of anti-corruption, the BAFA has published on its website several application texts, including a guide for the implementation of human rights and environmental risk mapping in the subcontracting chain of companies (August 2022). This guide proposes a methodology for implementing the law, unlike the Vigilance Law which, in the absence of an implementing decree and a dedicated regulator, leaves companies free to determine their choice of methodology and thus exposes them to criticism from stakeholder.

Second observation: While the German legislator was strongly inspired by the French vigilance law, he took care to provide the means for its effective application by the companies concerned, which is not the case for the French law, as the 28 February ruling clearly illustrates.

Can the European directive remedy the shortcomings of the Vigilance Law?

The draft European directive of 23 February 2022, if adopted, should make it possible to remedy the shortcomings of the Vigilance Law. Once adopted by the Parliament and the Council, a priori during the spring of 2023, it should be transposed into the domestic law of the Member States within 2 years, for entry into force in 2025.

This project provides for:

rigorous definitions
the inclusion of a climate strategy in line with the Paris Agreement
the creation of an independent authority responsible for compliance with the law
administrative sanctions
mandatory involvement of stakeholders
a presumption of liability in case of damage

This directive would affect a much larger number of companies than those covered by the French (and German) law, with the thresholds for application reduced to 500 employees and 150 million euros in turnover (or 250 employees and 40 million euros for high-risk sectors). Non-European companies operating on the territory of the Union would also be affected.

We will have the opportunity to come back to the text of the directive in detail once it has been adopted.

Third observation: The European vigilance directive should make it possible to fill the gaps in the French vigilance law and make it more effective, in the interest of the companies concerned but also of the stakeholders, and to accelerate the inclusion of human rights and ecological transition considerations in their business model.

Conclusion

As this had already been noted by the French National Assembly commission, in a report published on 15 December 2021 on the duty of vigilance of multinationals, the lack of clarity of the law as well as the absence of guidelines and a reference framework for application and an authority in charge of the implementation of the law make the latter largely ineffective. This was also the finding of the Paris Court of Justice in its 28 February ruling, and it is likely that the lower courts will follow suit.

The European directive should fill these gaps, although it is to be hoped that it will not impose overly restrictive obligations on companies. In this respect, the entry into force of the CSRD on non-financial reporting may increase the burden (and associated costs) for companies, particularly those that were not previously concerned.^[2]

However, between now and 2025, companies should not wait to anticipate the changes expected from the European directive and the CSRD and implement action plans dedicated to preparing for this transition. This is all the more true for companies that are not currently concerned by the duty of care law.

Is it not the fault of the French legislator to have been right too early and not to have been able to pursue its efforts by providing the law with the authority, means and tools to make it effective? However, notwithstanding the absence of such instruments, we can still be pleased that this law, imperfect as it may be, has opened the way to more ambitious projects (German law, European directive) and has led major French companies to adopt vigilance plans that are often ambitious and have thus placed the challenges of respecting human rights and the environment in their supply chain at the heart of their strategies and business models.

[1] As a reminder, the French duty of care law applies to large companies with more than 5,000 employees in France or 10,000 abroad. The draft European directive foresees that the thresholds for the applicability of the directive would be 500 employees and 150 million euros in turnover worldwide, these thresholds being lowered to 250 employees and 50 million euros in turnover, if more than 50 per cent of the activities are carried out in so-called high-risk sectors, notably textiles, agriculture or raw materials. In addition, the German law called "Lieferkettengesetz", which came into force on 1 January 2023, provides for thresholds of 3,000 employees, then 1,000 as of 1 January 2024.

[2] As a reminder, the CSRD will progressively concern a growing number of companies (50,000 companies according to estimates) starting in 2024. It will apply to all listed companies, as well as to large companies meeting 2 of the 3 criteria below: (i) 250 employees, (ii) 40 million euros in net sales, (iii) 20 million euros in balance sheet.