22 November 2023

Dutch bill on responsible and sustainable international business conduct – recent developments

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On 15 September 2023, the sponsors of this bill (RSIBC bill) – Van der Graaf (CU), Van Dijk (SP), Thijssen (PvdA), Van der Lee (GroenLinks), Koekkoek (Volt) and Hammelburg (D66) – submitted a memorandum of amendments. While key parts of the RSIBC bill remain intact, a number of changes have been made, including removing some of the more controversial aspects of the earlier draft (but certainly not all). See this article on the bill's previous version, its controversial aspects and the heavy criticism it received.

What the recent amendments will mean for the future of the RSIBC bill remains to be seen. The current status and envisaged timeline of the proposed EU Corporate Sustainability Due Diligence Directive (CSDDD) are also relevant in this context.

Key proposed changes

Compared to the RSIBC bill published in November 2022, a number of key elements have changed.

Obligations of parent company and subsidiary

A new provision stipulates that if a parent company and a subsidiary are both in scope of the due diligence obligation under the RSIBC bill, the parent company may decide to: (i) meet the due diligence obligation in the value chain on its own behalf and that of its subsidiary (with the latter not having to perform the same due diligence as a result), or (ii) support the subsidiary in meeting the due diligence obligations. This, however, will not limit the subsidiary's liability under the bill.

Foreign companies

The RSIBC bill's due diligence obligations will apply to large foreign companies as well, provided that there is a sufficient nexus with the Netherlands and that the foreign company qualifies as a "large" foreign company under the Dutch statutory definition. The latter means that a foreign company will have to meet two out of three of the following criteria: 250 full-time employees; EUR 50 million turnover; EUR 25 million balance sheet total (see this article for the amended size criteria as adopted by the Commission in October 2023).

The proposal would amend the nexus requirement to only those foreign companies being in scope that have "a substantial link with the Netherlands evidenced by a proportionally large number of customers or activities in the Netherlands". By contrast, the November 2022 version of the RSIBC bill applied to large foreign companies "carrying out an activity in the Netherlands or selling a product on the Dutch market." Although the amendment appears to introduce a higher threshold for foreign companies to qualify, the 2023 proposal offers no guidance on how a "substantial link" should be determined.

Climate plan

A separate obligation to prepare a climate plan to ensure at least a 55% reduction of net greenhouse gas emissions from 1990 levels by 2030, has been deleted. Instead, the bill sponsors have included a requirement that absolute greenhouse gas emission reduction targets be explicitly integrated into the risk action plan. The risk action plan is a mandatory part of the step in the due diligence obligation to adequately address the identified potential and actual risks of adverse impacts on human rights, the environment and climate change. Companies are to include absolute targets in their plan of action for greenhouse gas emission reductions for 2030 and beyond, at five-year intervals through 2050. In addition, a provision requiring an "adequate" action plan also requires that the negative impact of climate change be included in the plan.

Director responsibility

The 2023 proposal also removes the provision requiring companies to assign responsibility for various aspects of the due diligence process to a single director. This original single director responsibility included establishing and implementing a due diligence policy, overseeing its execution, and reporting to the board. In the 2023 proposal, these obligations would be imposed on the company only, and thus on the board as a whole.

Reporting on due diligence

Under a new provision, companies already subject to CSRD obligations are not required to separately comply with the RSIBC bill's reporting requirements as well.

In addition, criminal enforcement for non-compliance with the reporting requirement is explicitly limited to the company in the proposal. The notes to the amended draft bill do make a reference to article 51 of the Dutch Criminal Code to clarify that there are situations in which a director can be held criminally liable for actions of the company.

Burden of proof

The reversal of the burden of proof for civil legal claims has been deleted from the RSIBC bill. The burden of proof now continues to rest, as a starting point, with the claimant, although this has been relaxed somewhat. If the claimant presents sufficient concrete information indicating that a company is in breach of its due diligence obligations, the company must present adequate factual evidence to justify its challenge, leaving the claimant with enough evidence to further substantiate and prove its alleged facts.

Consequences of administrative sanctions

The proposal includes a new provision, stipulating that companies that have been subject to, for example, an administrative sanction will no longer be eligible for government funding or subsidies, nor will they be allowed to participate in trade missions.

General duty of care remains

The amended RSIBC bill does not change the proposed general duty of care for Dutch companies engaged in foreign trade. Under the duty of care, these companies must:

  • take all measures that can reasonably be required of them to prevent adverse effects on human rights or the environment of their own activities and those of their business partners;
  • where prevention is not possible, minimise these adverse effects as much as possible, undo them, and remedy them, where appropriate; and
  • where adequate minimisation is not possible, refrain from carrying out the activity or end the relationship with the relevant business partner(s).

In their answers to numerous questions from the members of the Standing Committee on Foreign Trade and Development Cooperation, the sponsors of the RSIBC bill argue that, in their view, this duty of care already rests on every company under the OECD guidelines and has been adopted in Dutch case law on the basis of tort.

Procedure and next steps

The Dutch House of Representatives has decided that the RSIBC bill qualifies as a "non-controversial topic", meaning that the bill's parliamentary process can continue despite the caretaker status of the Rutte cabinet. On 28 September 2023, following a procedural meeting of the standing committee, the Dutch Council of State was asked to provide advice on the recent amendments to the RSIBC bill. The Council of State was very critical of the previous version of the bill and it will be important to see its position on the amendments. Finally, the House of Representatives is also organising a meeting with the business community to discuss the RSIBC bill in its amended form.

With all of this, it seems uncertain how the bill will progress: the House of Representatives was on "election recess" from 27 October to 22 November 2023 (election day), and whether the RISBC bill will be advanced in light of yesterday's election results, remains to be seen.

How RSIBC bill relates to EU's CSDDD proposal

The proposed CSDDD (see this article for more information) is currently being debated in trialogue negotiations between the Commission, the European Parliament and the Council. The scope of the CSDDD in areas such as inclusion of the financial sector and the downstream part of the value chain, remains a subject of debate.

As for the envisaged timeline: a final report by the Dutch EU rapporteurs on the CSDDD explicitly considered that momentum exists in Brussels to reach an agreement, under high-level political support. A political agreement between the three EU bodies is expected by the end of this year. If this timeline is met, the political agreement could be voted on in the February 2024 plenary session of the European Parliament, ahead of European elections in June 2024. How developments regarding the CSDDD will affect the development and timeline of the RSIBC bill, remains to be seen.