Clifford Chance

The recent summons before the Paris Court of a French electricity producer in the context of local conflicts over a wind farm project in Mexico illustrates the extraterritorial effects of the French Vigilance Law. The Law provides another tool in litigation strategies to challenge transnational business involvement in human rights impacts overseas.

Representatives of the local community of Union Hidalgo in Mexico, Mexican human rights organization Proyecto de Derechos Economicos, Sociales y Culturales (ProDESC) and Berlin-based human rights organization European Center for Constitutional and Human Rights (ECCHR) have brought proceedings before the Paris Court against a French majority state-owned electricity producer, seeking an injunction from the French judge ordering the company to comply with its duty of vigilance.

This case provides a good illustration of the extraterritorial effect of the French Vigilance Law: it is about a project in Mexico, involving the Mexican subsidiary of the French parent company and all plaintiffs are non-French persons and organisations.

Factual background

The wind farm project at the heart of this dispute started in 2015 at Gunaa Sicaru in Mexico. The French company's Mexican subsidiary in charge of the project conducted discussions with a local representative which, allegedly, did not represent all the relevant community. In 2017, the same company entered into an energy supply agreement with the Mexican government and requested the required authorization to produce energy, including in the region in which the windfarm project is situated.

Human Rights risks

To recap, the French Vigilance Law ("the Law") imposes obligations on certain French companies to identify and prevent risks of serious violations to human rights, health and safety and environment, but does not specifically define such "serious violations". For fuller information regarding the Law, please see our briefing here.

The NGOs and representatives from the local community allege that the company's vigilance plan does not identify the human rights risks involved in the windfarm project or appropriate measures taken to prevent the violation of the right of indigenous peoples to express their free, prior and informed consent, as well as a failure to ensure access to information and public participation in decision-making processes related to the project.

Under international law, indigenous communities have the right to be consulted, should a project be planned on their land. As regards international law, the principle of "free, prior and informed consent" or "FPIC" is a specific right recognised, among others, by the United Nations Declaration on the Rights of Indigenous Peoples (UNDRIP) and the International Labour Organization Convention 169. The claimants therefore consider that an infringement to this principle is a 'serious violation' as contemplated by the Law.

Alleged inadequacy of the Vigilance Plan

As with other legal actions commenced under the French Vigilance Law, what is challenged is not the existence or the absence of a vigilance plan but rather the substance of such plan. Indeed, the company in this case has published a vigilance plan containing all the five elements required by the law, namely:

• A risk mapping; 
• Due diligence procedures;
• Risk mitigation actions;
• An alert or reporting mechanism; and
• A monitoring mechanism to assess the effectiveness of measures taken under the plan. 

The company had also identified as a "salient" risk the risk of impairment of indigenous communities' rights, "as part of dialogue and consultation processes, in particular when land issues or population displacements are at stake" and mentioned actions to mitigate such risk. Moreover, in a statement in response to the formal letter sent by NGOs, the company confirmed that its subsidiary had engaged in discussions with local communities. While this is not contested by the claimants, they argue that such discussions have not been effective and have not been held with the appropriate representatives.

This debate demonstrates the difficult task faced by the Courts in addressing disputes under this new legislation, especially when the plaintiffs do not rely on a mere lack of vigilance plan, but on an alleged insufficiency, particularly as the duty is new and there is as yet no established case law. In this respect, the fact that the law is not specific on what can be considered as "reasonable vigilance measures" allows a wide range of interpretations. We expect judges will try to define objective criteria, to the extent possible, perhaps by reference to standards reflected in instruments such as the UN Guiding Principles for Business and Human Rights and the OECD Guidelines, as part of their role of bringing more legal certainty to companies.

Concluding remarks

This is the third action brought under the auspices of the French Vigilance Law since it came into effect in 2017. We understand that formal notices have been lodged against seven other companies – more claims are likely to follow. As these numbers suggest, the French Law has already provided an attractive mechanism for NGOs to seeking to hold companies accountable for alleged failures in addressing human rights risks associated with their business activities, including those occurring outside of France and involving overseas subsidiaries.

The outcomes of these first few cases are much-awaited by companies, the legal community and civil society. In this regard, a recent decision by the Court of Appeal of Versailles can be seen as a first victory for companies in that it confirms that cases concerning the Vigilance Law will be dealt with by the Commercial Court. If the Paris Court takes the same view, then this latest legal action is likely also to be dismissed on jurisdictional grounds, leaving it to the Commercial Court to deal with the substantive application of the law as and when cases are brought before it.