Germany

Germany

Summary of developments
  • KiK Case: liability for German company examined, jurisdiction and legal aid confirmed (filed 2015, ongoing).
  • Siemens vs. Neubürger: director’s liability for breaking duty of care regarding subsidiaries (2013).
  • Government’s National Action Plan considers legislative reform concerning HRDD in 2020 (2016).
  • Greens Party supports a motion calling for HRDD obligations, civil liability, and access to remedy (2016).
  • Human rights due diligence included by the Social Democrats (SPD) in their electoral program (2017).
  • A coalition of NGOs presented a legislative proposal which introduces mandatory HRDD for German companies (2016).

Case Law

KIK Case

 

In a nutshell

In more detail

Name of Case

KiK-Case

Muhammad Hanif, Muhammad Jabbir, Abdul Aziz Khan Yousuf Zai, and Saeeda Khatoon / Baldia Factory Fire Association against KiK Textilien und Non-Food GmbH

Area of Law

Tort Law

Tort law (law of Pakistan)
EU Rome II Regulation on conflict of laws

Jurisdiction

Germany, but with Pakistani law applied

German, Regional Court (Landgericht) in Dortmund, filed on 13 March 2015.

KiK Textilien und Non-Food GmbH is based in Bönen (near Dortmund), Germany.

Current Stage

Pending

On 30 August, 2016 the court issued its initial decision accepting jurisdiction and granting the claimants claimants legal aid.

Requirement/Result

Compensation

The employees of Ali Enterprises (AE) and their families seek 30,000€ each in compensation for KiK’s breach of its direct duty of care owed to them (negligence). They argue the scope of the duty was to secure a healthy and safe working environment at the factory, which supplied around 70 percent of its production directly to KiK (no subsidiary involvement).

Material Scope

Breach of duty of care. Relationship between parties gives rise to an “imposition or assumption of responsibility.”

Breach of duty of care. Relationship between parties gives rise to an “imposition or assumption of responsibility.” KiK had the de facto ability to exert economic pressure on its supplier, Ali Enterprises, and de jure ability to claim a breach of the Code of Conduct between it and Ali Enterprises.

Personal Scope

Claimants: Workers and family members of deceased workers.

Defendant: KiK (company supplying directly from the factory where the harm occurred).

 

Reach of the requirements

Proximity between workers of the supplier and  company needed to establish a duty of care.

Proximity between buyer and factory entitles factory workers to rely on buyer to procure a safe and healthy working environment, including fire safety measures to ensure the safety of workers in the event of fire.

Enforcement

Pending

Pending

Pros

Trans-national liability along the supply chain.

The case may help to develop tort law further in other jurisidctions.

Liability of buyer who is neither direct employer nor controlling parent company for working conditions in its supply chain.

The legal argument is unprecedented, it could lead to a progressive interpretation of the law.

Cons

No collective redress (class-action) possible in German courts, many potential claimants will have their claims time-barred.

No collective action possible in German courts.

Law of the forum where the harm occurred applies (EU Rome II regulation). The court may be cautious when applying foreign law, therefore leading to a conservative interpretation. Moreover, German courts do not have the same tradition of developing case law from analogies as in the common law.

Resources

Case updates and analysis from the European Center for Constitutional and Human Rights (ECCHR).

Video of evidence from ECCHR (German only).

♦ Business & Human Rights Resource Center coverage.

♦ "Discount Workers, a fight for justice in global supply chains", film by Chris Patz and Ammar Aziz (Trailer).

Siemens v. Neuburger

 

In a nutshell

In more detail

Name of Case

Siemens v. Neubürger

Siemens Aktiengesellschaft against former Siemens CFO Heinz-Joachim Neubürger

Area of Law

Corporate Law

Corporate law (Law on Stock Companies – AktG)

Jurisdiction

Germany

 

Current Stage

First instance decision

First instance decision in December 2013 became final without appeal.

Result

Compensation of 15 Million € to be paid to Siemens.

Compensation of 15 Million € to be paid by Mr. Neubürger to Siemens, as a result of a breach of a duty of care under sec. 93 para. II of the German Stock Corporation Act.

While Mr Neubürger was Chief Financial Officer at Siemens, a system of fake consultancy contracts had been used for financing bribery in subsidiaries’ countries, including Nigeria.

Material Scope

Directors’ duty to establish a group-wide compliance system, that includes subsidiaries.

Directors’ duty to establish a compliance system that extends into its operations worldwide, that includes subsidiaries.

Scope and scale of the duty depend on the type and size of the enterprise; the relevant legal provisions; the geographical location; and analgous cases.

Personal Scope

Claimant: the corporation

Defendant: former Chief Financial Officer of the corporation

Claimant: the corporation suffered damages in undertaking costly investigations

Defendant: former Chief Financial Officer of the corporation

Reach of the requirements

Internal relations between corporation and its directors

Internal contractual relations between corporation and its directors who have joint liability

Enforcement

None, out of court settlement.

While a decision would have been enforceable, a settlement between the parties was reached in January 2015.

Pros

Clarifies that directors’ duties may extend to subsidiaries abroad.

First ruling to clarify that directors’ duties may extend to the entire group of subsidiaries, even those operating abroad.

Cons

Limited to claims of a company against its directors.

First instance decision.

This contractual duty applies only to internal relations within the corporation itself.

No confirmation by a higher court. Not binding on other courts.

Resources

♦ Ruling (in German).

Policy Developments

National Action Plan

The National Action Plan, approved in 2016, establishes a set of clear expectations and goals concerning the implementation of human rights due diligence by German companies:

  • "the Federal Government expects all enterprises to introduce the process of corporate due diligence (...) Their compliance will be reviewed annually from 2018."

  • "In the absence of adequate compliance, the Federal Government will consider further action, which may culminate in legislative measures and in a widening of the circle of enterprises to be reviewed."

  • "The aim is that at least 50% of all enterprises based in Germany with more than 500 employees will have incorporated the elements of human rights due diligence described in this chapter into their corporate processes by 2020."

  • "If (...) the target is thus missed, the Federal Government will consider further action, which may culminate in legislative measures."

Resources

♦ German National Action Plan (English).

♦ NGO comments on the NAP (English).

Germany’s Green Party motion on mandatory human rights due diligence

In 2016, the Green Party of Germany presented a motion asking the Parliament to introduce legal human rights due diligence obligations for companies.In particular:

" 1) to develop a Human Rights Due Diligence Law which should demand certain Companies to undertake:

- an ongoing human rights Risk analysis;

- appropriate prevention means to avoid human rights violations;

- effective remedial actions in case of human rights violations;

- suitable organisational duties such as Whistleblower protection and Compliance structures;

- documentation and reporting about the taken measures;

2) to improve civil litigation options for victims of human rights abuses caused by companies and to create collective redress means;

3) to establish effective sanctions for companies in case of non compliance with human rights due diligence."

Resources

♦ Full text of the motion (in German).

SPD election program

The Social Democratic Party (SPD) of Germany vowed to address mandatory human rights due diligence in its program for the 2016 federal parliamentary elections:

"Three quarters of humanity live without social security and under massive violation of workers’ rights. The SPD engages worldwide for decent work. This means strengthening corporate responsibility and entails mandatory Human Rights Due Diligence, which includes accountability and transparency along supply chains, the strengthening of social security systems and the implementation of living wages, in order to secure ESC-Rights globally. In public procurement we promote a binding regulation ensuring the adherence to environmental, social and human rights standards. We also want to strengthen corporate accountability internationally for example within the initiative for a binding treaty at the UN." (SPD Election program, July 2017, p. 113)

Resources

♦ SPD Electoral program (in German), July 2017.

Human Rights Due Diligence Act proposal by NGOs

A coalition of non-governmental organisations and scholars presented in 2016 a legislative proposal to embed human rights due diligence into law. The bill sets out the following primary obligations:

  • "Every company is obliged to exercise due diligence (...)"

  • "Every company shall conduct a risk analysis relative to human rights (...) whereby  it shall identify, evaluate, and if necessary prioritize in an adequate manner the risks of its contributing to human rights abuses"

  • "if the company detects a risk that it may be contributing to human rights abuses, it shall incorporate adequate preventive measures"

  • "Compliance with the obligations (...)  shall be documented (...)"

The proposed law applies to companies established in Germany, including Small and Medium Enterprises (SMEs):

  • "(...) that operate, themselves or through a controlled company, in a high-risk sector or in conflict or high-risk zones"

It provides for administrative enforcement mechanisms and civil liability for violations of the duty of care created by the bill, defined as a duty to conduct mandatory human rights due diligence in accordance with the bill.

Resources

♦ FAQs and Summary of the proposal (English).

  • Law
  • Legal Case
  • Policy development