COMPLIANCE AND CONTINENTAL LAW

By Jean-Marc Baïssus, CEO, Fondation pour le droit continental

« Corporate social responsibility », « sustainable development », « compliance », these words are now part of the corporate world’s everyday life and mirror an in-depth evolution of the place taken by law in the workings of the economy. Within this complex mix of legal norms – labour law, competition law, environment law … – but also of recommendations, guidelines and « good practices », one now even witnesses the consolidation of constitutional level obligations with a reference to the observance of Human Rights both at U.N. level, or through the OECD guiding principles. Whereas many jurists still remain skeptical in respect of the actual scope of what they consider as « soft law », the realities of economic activity draw a very different picture. Compliance policies are now a major preoccupation for corporate lawyers.

For if the nature of a legal prescription is its compulsory nature, as it entails a sanction, how else should one read the impact upon Apple’s public image of the denunciation of working conditions experienced in the factories of its Chinese supplier Foxconn ? Is a sanction by its consumers not at stake when a large telecom group is being criticized by an NGO for the behaviour of one of its subsidiaries in an Arab-speaking country which allegedly accepted the request of the authorities to block access to Internet and the social networks so as to prevent demonstrators joining the « Arab spring »?

The larger number of economic operators still sees in such compliance requirements the illustration of the stifling proliferation of regulations weighing down entrepreneurial freedom. In this, they remain aligned with the deregulation dogma epitomized by the so-called « Washington consensus ». They are then free to underline the competitive disadvantages in respect of emerging economies, which are said to profit from the unsufferable legal straightjacket that developed countries are tying up their own corporations into.

But another vision is breaking through, both in Europe and the U.S. Experts like Michael Porter, who cannot be taxed with being hostile to business, are showing that corporations as important as General Electric, Walmart, Intel or Nestlé are now geared towards taking into account the interests of all the stakeholders they partner with, the shareholders of course, but also clients, suppliers, employees and the social environment at large. Economic efficiency now calls for this approach. As these world-class corporations cannot allow themselves to practice double standards according to which country they have settled in, they are now disseminating legal exemplarity through their subsidiairies, especially within emerging economies.

A virtuous convergence therefore appears between the best interests of a company and the concern of jurists for the progress of the rule of law. Businesses need lawyers so that the rules they abide by at home mutate more and more into international standards that are compulsory for all. A strategic shift becomes obvious in the role played by legal rules. Instead of being a burden, they morph into a long-term investment which will enhance differences with competitors who are unable to guarantee that their production is “compliant”. Just as the consumer now shows he has an increasing inclination for what is certified to be organic, he will require tomorrow a guarantee that the product he wishes to buy was, for instance, made in a factory which observes labour law standards.

In the context of this major upheaval, continental law finds an extraordinary opportunity to get better known. By tradition, it has always been a law drafted to keep a balance between the different interests at stake. We therefore have to promote our own kind of legal compliance and work towards an improved convergence between the rule of law and the interests of businesses.