Description

General consensus suggests that ‘Mandatory Due Diligence’ laws such as the UK Modern Slavery Act 2015, the French Duty of Vigilance Law and the European Commission’s proposal for a Directive on Corporate Sustainability Due Diligence Directive are a force for good. There is no doubt that they embody noble ambitions to eradicate human rights abuses and labour exploitation in international supply chains. By piggybacking on existing supply chain networks, mandatory due diligence legislation has extensive cross-border potential. Businesses are encouraged and expected to monitor their global supply chains and report on their findings. The adoption of these initiatives is widely lauded, but are there unforeseen consequences? This work-in-progress paper argues that these initiatives have been undermined in three key aspects. First, the vague and problematic wording in these regulations with respect to interpretation, enforcement and remedies is susceptible to regulatory arbitrage by companies. Second, as a result of companies outsourcing their legal responsibilities to third parties through the mechanisms of contracts and corporate law, the regulatory bite of these regulations has been significantly attenuated. Finally, because these regulations have been used as a leverage in multilateral negotiations and agreements, they have been perceived by developing countries as illegitimate attempts to interfere in their internal affairs. This paper cautions that to ensure mandatory due diligence initiatives are genuine attempts to improve the welfare of all, it is important that it does not become tools for risk allocation, and to build in safeguards against politicisation and corporate complacency.