Piercing the corporate veil? The future of transnational civil claims for business-related human rights abuses under the upcoming European Union due diligence directive

Abstract

Victims of human rights violations inflicted by European transnational corporations (TNCs) face near-insurmountable obstacles to seek justice. Often confronted with a lack of legal recourse in their home country where the harm has occurred, the only remaining chance to obtain a remedy is to sue the TNC where it is headquartered in the European Union. However, a multitude of obstacles arise when filing a transnational suit in the EU – from high legal costs and procedural hurdles to barriers in international private law. The result is a ‘David v Goliath’ match-up between vulnerable plaintiffs and enormous corporate entities whose yearly revenues often rival the gross domestic product of the very countries in which they operate. Yet this imbalance could be about to change. In April 2020, the European Commission announced plans to develop a legislative proposal by 2021 requiring European Union businesses to carry out due diligence in relation to the potential human rights impacts of their operations. A Resolution of a Draft Directive on corporate due diligence and corporate accountability (‘the Directive’) adopted by the European Parliament in March 2021 included provisions on the civil liability of TNCs. If passed, the Directive would ensure that European TNCs could be held liable for ‘any harm arising out of potential or actual adverse impacts on human rights that they have caused or contributed to by acts or omissions’. For the first time, the onus would be on the TNC to prove that they took all due care in line with the Directive to avoid such harm. However, these promising provisions were slightly diminished by the rejection of two proposed amendments to key EU Regulations that would have given victims a greater ability to establish jurisdiction in EU courts as well as an opportunity to choose the applicable law upon which their claim would be adjudicated. The future of civil liability claims against TNCs in the EU, and whether the corporate veil could ultimately be pierced, is therefore unclear. In light of these developments, this thesis shall aim to determine the outlook for future civil liability claims brought to EU Member State courts by victims of human rights abuses committed by EU-based TNCs in third countries with the objective of setting recommendations for a future legislative proposal by the European Commission.