A Trend Towards "Due Diligence Law": Curbing the Corporate Impunity

Abstract

Corporate must respect human rights wherever they operate. This has been a long-standing debate to include human rights elements in businesses, to control corporate freedom in countries hosting foreign investments. For this, several attempts were made to bring a multilateral agreement at the international level, as well as some developed states introduced draft legislation to regulate their subsidiaries abroad, none of which were adopted for various reasons. Nevertheless, the argument on human rights is consistent. Consequently, the soft law; voluntary standards developed by international organisations, was adopted as internal corporate policies. Recent evidence of human rights violations in some developing countries raises the question of the adequacy of existing voluntary standards as they are most impacted in subsidiaries supply chain/ activities. The due diligence test focuses on the role of corporations to uphold best business practices, and it ensures a duty of care when large corporations do business without a strong mechanism to ensure their accountability in the event of failure. A handful of developed states – France, Germany, the Netherlands and the European Union - have enacted legislation to combat corporate freedom and take responsibility for human rights abuses in their subsidiaries, subcontractors or supply chains. This paper provides a comparative analysis of such recent laws on duty on Due Diligence and studies how they regulate human rights and business. The paper adopts doctrinal analysis that combines descriptive and analytical approaches and concludes that if the laws are effectively enforced, the corporations would be held accountable for their human rights violations by the court of the country where parent corporations are located.