Scope and key aspects

The RSIBC bill contains: (i) a general duty of care, and (ii) additional specific due diligence obligations. Each of these two parts of the bill have a different scope of application:

The general duty of care would be imposed on "all" companies including subsidiaries, with activities that may have an adverse effect on human rights and the environment outside of the Netherlands. This also includes the activities of business relations. Companies within the meaning of the RSIBC bill are:

• Dutch NVs or BVs
• general (vof) or limited (cv) partnerships where all of the direct or indirect members are a BV or NV and therefore have limited liability; and
• regulated financial institutions, regardless of their legal form.

The RSIBC bill would also apply to non-Dutch large companies that are in any way active in the Netherlands (and that carry out activities outside of the Netherlands).

Some of the RSIBC bill's key aspects include:

• requiring companies to adhere to the general duty of care, creating a stand-alone obligation for in-scope companies towards those affected by the company's value chain – if violated, this could qualify as a tort towards those affected;
• seemingly attributing the responsibility for the execution of due diligence obligations and corresponding policies to a single board member;
• requiring companies to report on that due diligence in their management report – this reporting requirement is subject to the same reporting regime as that for other financial and non-financial information (with the Dutch Financial Crimes Act being applicable as well);
• explicitly presenting civil liability as a remedy for non-compliance, including shifting the burden of proof to companies that fall under the RSIBC once a claimant successfully presents the court with reasonable grounds to suspect that the company's action or inaction caused the adverse impact.

The RSIBC bill has received significant criticism. The Dutch Council of State called the initial draft bill "irresponsible" and "contrary to principles of legal certainty and proportionality". Its many criticisms referred to the lack of legal certainty because of the open norms included in the RSIBC bill, its broad scope, and the significant administrative and criminal enforcement mechanisms that will be in place. The Council of State also considered that the initial RSIBC bill could not be properly executed and enforced in its current form. Although the revised bill addresses some of this criticism, critics stress that pertinent items were not sufficiently dealt with. Indeed, we expect difficulties in the implementation, execution and enforcement if the RSIBC bill were to become law.

The requirements – general duty of care

The first chapter of the RSIBC bill sets out a general duty of care. This duty is threefold. Companies will have to: (1) take all measures that can reasonably be required of the company to prevent the adverse effects; (2) where prevention is not possible, minimise these adverse effects as much as possible, undo them, and remedy where appropriate; and (iii) where adequate minimisation is not possible, refrain from carrying out the activity or end the relationship.

The RSIBC bill provides a non-exhaustive list of situations that will have an adverse effect on human rights or the environment, including:

• restriction of freedom of association and collective negotiation;
• discrimination;
• forced labour;
• child labour;
• climate change;
• environmental damage;
• unsafe workings conditions;
• violation of animal welfare regulations;
• slavery; or
• exploitation.

The requirements – due diligence

A company falling under the scope of the RSIBC bill's due diligence obligations must conduct due diligence throughout its value chain. The RSIBC bill defines a value chain as the whole of a company's own activities, services, products, production lines, supply chains and customers as well as the activities of its business relations, both upstream and downstream.

The bill contains detailed provisions that give substance to the due diligence obligation:

Due diligence within policies, policy documents, management systems and business processes

A company must establish a policy that is covered in an annually updated policy document, in which the company commits itself to observing due diligence throughout its value chain. The policy document is drafted in concert with stakeholders, experts and business relations. The company must provide adequate resources, including financial and human, to facilitate the development of the policy and the policy document.

The RSIBC bill requires that a single director be put in charge of introducing and implementing the policy, including into management systems and regular business processes.

Analysing, assessing and prioritising risks

The next step in the due diligence process is examining, collecting and analysing the potential and actual risks of adverse impacts on human rights, climate change and the environment, caused by the company's own activities and those of its business relations. This needs to be done on an annual basis. After the analysis, the company assesses its own involvement in the identified risks in order to determine the appropriate approach to prevent, mitigate or end those risks. For risks related to business relations, the company assesses the extent to which the business relation has its own due diligence policies to prevent, mitigate or end those risks.

The company must prioritise – after discussing with its stakeholders, experts and business relations – the risks based on the severity and degree of likelihood of the potential and actual adverse effects on human rights or the environment.

Addressing adverse effects

Plan of action, including climate plan

The company must ensure an adequate approach to potential and actual adverse effects deriving from its own activities and the activities of its business relations. To this end, it must draft and publish a plan of action. If the company is not equipped to address all the adverse effects at once, the company first addresses the more severe risks which are determined based on the prioritisation mentioned above, and then addresses the less serious risks.

In addition, the company must adopt a specific climate plan, including an adequate approach to risks related to climate change. If the company finds that these risks are present, the company must include in the climate plan objectives for net greenhouse gas emissions reductions by at least 55% by 2030 compared to the levels in 1990. If a company's variable compensation is linked to a director's contribution to corporate strategy and long-term interests for sustainability issues, it also takes into account the director's contributions towards preparing and complying with the climate plan.

Ending own activities

When the company's efforts do not achieve the desired result, the company must end its own activity causing or contributing to the adverse effects. The company is required to appoint a director who will be responsible for elaborating and implementing the decision to end the activity.

Influencing business relation

If it is an activity of a business relation that results in actual adverse effects on human rights or the environment, the company must use its influence over the business relation to prevent, mitigate or end that adverse effect. If the company's efforts are unsuccessful, the company, whether temporarily or not, must terminate the relationship with that business relation. The company is required to appoint a single director who is responsible for implementing the decision to terminate a business relationship.

Monitoring

The company must monitor the application and effectiveness of its policy and measures for due diligence, on an annual basis. The RSIBC bill sets out the conditions for monitoring, including consulting with relevant stakeholders, experts and business relations, and collecting data related to the plan of action and the climate plan. The responsibility for monitoring how due diligence is carried out lies with the director responsible for introducing and implementing the policy.

Reporting

An important part of the due diligence process is reporting on due diligence. In-scope companies are required to draw up and publish a report on their due diligence policies and measures on an annual basis. This includes the risk-analysis results; the selected priorities; implementation of the action plan and the climate plan; and the measures taken to prevent, mitigate or end the adverse effect risks. Reporting would again be the responsibility of the director introducing and implementing the policy. The reporting obligation under the RSIBC bill would be part of the non-financial information in the management report and would be - for that reason - subject to the Dutch Financial Crimes Act.

Remedies

Finally, the RSIBC bill aims to create enough recovery options to effectively enforce RSIBC obligations. For those purposes, the bill provides that the company must either have a functioning and accessible recovery mechanism, or cooperate willingly with an existing recovery mechanism. Via this recovery mechanism, a stakeholder can file a complaint and submit the complaint to the company. If the complaint is upheld, the company must take certain steps, depending on its level of involvement.

If a company has caused or contributed to or is – via the activities of a business relation – directly related to the adverse effect, the company must, in consultation with the individual concerned, provide or contribute to adequate redress.

Supervision and enforcement

Supervision

The Netherlands Authority for Consumers and Markets (ACM) would supervise RSIBC compliance on the basis of a supervision strategy that is updated every five years. The ACM would work closely with other regulators, within the Netherlands and the European Union.

Anyone who suspects that an in-scope company is not complying with the due diligence obligations has the right to submit a complaint with the ACM.

ACM Enforcement

The ACM would be authorised to issue administrative orders; administrative fines of up to a maximum of 10 percent of net sales; or penalties for each breach of the due diligence obligations as included in the RSIBC bill. Violation of the RSIBC bill's reporting obligation would constitute an economic crime.

Private enforcement

The RSIBC bill contains a far-reaching provision on private enforcement. For example, it shifts the burden of proof to the defendant under certain circumstances. If a claimant starts court proceedings for losses caused by an adverse effect on human rights or the environment as defined in the RSIBC bill and can demonstrate that there are facts which suggest a connection between these losses and an in-scope company's acts or failure to act, that company would have to prove that it did not violate the RSIBC bill's obligations. This evidentiary rule takes priority over evidentiary rules that apply in the country where the adverse impact takes place. However, it does not prejudice additional liability of other parties in the value chain.

The RSIBC bill also aims to reduce the threshold for acquiring jurisdiction in the Netherlands for RSIBC-related mass claims.

State of play and next steps

The revised version of the RSIBC bill is now pending in the House of Representatives. The members of parliament who submitted the draft bill hope it will come into effect on 1 July 2024, with several provisions being phased in at a later date.

After its publication, the RSIBC bill received extensive media attention, especially from organisations such as the Confederation of Netherlands Industry and Employers (VNO-NCW). These organisations have heavily criticised the bill for its lack of clarity and its often far-reaching provisions, asserting that it would negatively impact the desire for doing business in the Netherlands, and that it unfairly increases the risk of director liability, among other things.

The development of the RSIBC bill runs parallel to the development of the European Corporate Sustainability Due Diligence Directive (CSDDD), currently being debated in the European Parliament. See for more information on the CSDDD the article we wrote in February 2022. The Dutch government originally intended to develop a separate Dutch CSR Act, but the Minister for Foreign Trade and Development Cooperation recently mentioned that this process is on hold in view of the RSIBC bill. Together with the drafters of the RSIBC bill, the minister is exploring options for a bill that would receive broad support.

The same minister and the Minister of Economic Affairs and Climate Policy have stated that the RSIBC bill's strict rules could affect the level playing field within the EU and negatively affect the Dutch business climate. Both ministers prefer to build upon the CSDDD. We will have to wait for the debate on the RSIBC bill in the House of Representatives to see how this plays out. To be continued.