KU Leuven Faculty of Law 2018 - 2019 Models of Corporate Supply Chain Liability Supervisor: Drs. Caro VAN DEN BROECK Master thesis, submitted by Promotor: Prof. Matthias Edward STORME Penelope A. BERGKAMP as part of the final exam for the degree of MASTER OF LAWS Summary This thesis examines the exposure of EU-based multinational corporations to supply chain liability (SCL) under extra-contractual, civil liability or tort law. The theoretical models and case law are analysed. The analysis shows that common law jurisdictions dominate the development of SCL, with the civil law jurisdictions likely to follow along. It also demonstrates that the courts so far have been reluctant to entertain the grand new theories of SCL – the concept of corporate social responsibility, supply chain responsibility, and the related company law, stakeholder, and public trust models have not (yet) been accepted as potential legal bases for SCL. Instead, courts have reinterpreted existing tort law concepts to fit the case of SCL. The English courts have led the way in exploring this area of potential corporate liability. If English law is illustrative of the future development, SCL will center on control of a business partner’s activity by the EU-based multinational corporation. Such control can be de facto or, maybe, presumed based on a duty to control. The core concept of control is supplemented by the familiar concept of knowledge, actual or presumed – knowledge of risks may trigger a duty to intervene. Although the more radical SCL models have been relegated to back stage, they may revive if legislatures or possibly courts cross the ‘bridges’ between the existing law and the new models. This thesis identifies these bridges: in first instance, the promise to control, the duty to control and the duty to know, and, subsequently, once these bridges have been crossed, the concept of enterprise liability (economic unity), the duty to meet expectations, and the duty to pursue the public good. Considering the similarities between civil liability in common law and civil law, the developments in UK will likely become relevant to the prospects of Belgian supply chain liability cases. i Table of Contents Summary .................................................................................................................................................... i Preface ....................................................................................................................................................... v List of abbreviations ............................................................................................................................ vi Table of Figures ................................................................................................................................... vii 1 Introduction ..................................................................................................................................... 1 1.1 Rana Plaza factory collapse ....................................................................................................................... 1 1.2 Oil pollution in Nigeria ................................................................................................................................. 2 2 Definition ........................................................................................................................................... 3 3 Foundations ...................................................................................................................................... 5 3.1 Corporate social responsibility ................................................................................................................. 5 3.2 Supply chain responsibility ........................................................................................................................ 7 3.3 Soft law and hard law ................................................................................................................................... 8 3.4 From responsibility to liability? ............................................................................................................... 9 4 Research methodology .............................................................................................................. 12 4.1 Research question ....................................................................................................................................... 12 4.2 Methodology .................................................................................................................................................. 14 4.3 Scope of research ......................................................................................................................................... 15 4.3.1 Jurisdictions covered ................................................................................................................... 15 4.3.2 Limitations ....................................................................................................................................... 15 5 Structure ......................................................................................................................................... 17 6 Legal bases of supply chain liability ...................................................................................... 18 6.1 Introduction ................................................................................................................................................... 18 6.2 Statutory due diligence requirements ................................................................................................ 18 6.2.1 Overview of SCL statutes ........................................................................................................... 19 6.2.2 Impact of due diligence requirements on SCL ................................................................. 21 6.3 Overview of SCL case law ......................................................................................................................... 22 6.4 Civil liability: open norms model .......................................................................................................... 23 6.4.1 Principles of tort liability ........................................................................................................... 24 ii 6.4.1.1 Belgian and FrencH tort law ............................................................................................................. 24 A. Standard of care ......................................................................................................................................... 26 B. Causation ...................................................................................................................................................... 28 6.4.1.2 Common law ............................................................................................................................................ 29 A. Pre-trial stage ............................................................................................................................................. 30 B. Novelty ........................................................................................................................................................... 31 C. ThresHold to proceed to trial ............................................................................................................... 34 6.4.2 United Kingdom ............................................................................................................................. 34 6.4.2.1 Chandler v Cape ..................................................................................................................................... 34 6.4.2.2 Thompson v Renwick plc ................................................................................................................... 35 6.4.2.3 Okpabi v SHell ......................................................................................................................................... 36 A. Proximity is a matter of de facto, not de jure control ................................................................ 37 B. Fair, just and reasonable ........................................................................................................................ 39 6.4.2.4 AAA v Unilever ....................................................................................................................................... 40 6.4.2.5 Lungowe v Vedanta .............................................................................................................................. 41 6.4.2.6 Conclusions on UK supply chain liability case law ................................................................. 43 6.4.3 Canada ............................................................................................................................................... 44 6.4.3.1 Choc v Hudbay ........................................................................................................................................ 44 6.4.3.2 Das v George Weston Limited .......................................................................................................... 45 6.4.4 United States ................................................................................................................................... 46 6.4.5 The application of common law in tHe NetHerlands