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The Netherlands – Child Labour Due Diligence Act

Introduction. 2

Policy. 2

Relevant Provision. 3

Article 1 – Definitions. 3

Article 3 – Declaration. 3

Article 4 – Due Diligence. 4

Article 5 – Administrative Fine. 4

Article 7 – Criminalization. 5

Criticisms. 5

Current Framework/Future Action – EU and National Level 6

Child Labour in Dutch Companies (Example) 7

 

Introduction

Dutch authorities establish a positive duty of care on corporations to ensure their supply chains and contractual relations for the supply and manufacture of goods and services are free from child labour. Critics however worry about the possible distorting effects on competition of Dutch companies and the Dutch economy due to increased administrative burdens. A Dutch company illustrates how even with compliance of the new due diligence law, supply chains may never be free from child labour.

The Dutch policy on its Child Labour Due Diligence Act (the ‘Act’) is found in the recitals of the Act, which states…

Policy

The Dutch policy on its Child Labour Due Diligence Act (the ‘Act’) is found in the recitals of the Act, which states that it is desirable to prevent people from using goods and services in the Netherlands that have been created with the help of child labour. It further notes that preventing the supply of goods and services that are contaminated with the help of child labour has been established in law, namely the OECD (the Organization of Economic Co-Operation and Development) Multinational Guidelines and the UN Sustainable Development Goals.

The Explanatory Memorandum to the Act notes the cases of child labour in the supply chains of the famous Swedish company Ikea. It further notes that despite such a scandal, there are still reports of child labour involved in products sold on the Dutch market. It argues that both companies and governments have a duty to protect children against exploitation, pointing to children’s rights as being human rights and the several international treaties establishing the idea and guidelines that companies should take responsibility to combat child labour. The Dutch government also states that companies should not obtain an unfair advantage by using child labour in their supply of goods and/or services by creating an uneven playing field between corporations by selling tainted goods and/or services at the same price as those without child labour. By placing a legal duty of care/due diligence obligation on corporations to prevent child labour in the supply chains, the Dutch government states consumers will have more certainty that they are not buying child labour tainted products. It is argued that companies are better placed to have sufficient knowledge and resources to investigate their supply chains for child labour. It is stated that where a corporation does not have the necessary knowledge and resources it can be supported by NGOs or other companies with experience in this area, which may be further co-financed by the government. Through the due diligence duty of care the Dutch government aims to take a preventative approach to international corproate social responsibility risks, engaging in multi-stakeholder consultations and cooperation facilitated by government intervention when necessary, through, for example, funding programs and establishing trading preferences.

Relevant Provision

Article 1 – Definitions

This article of the Act defines important terminology, including defining the person responsible. This definition is particularly important when a violation is perpetrated through the actions of a corporation. The difficulty is defining whether the corporation itself would be responsible or the members of the board/those with decision making authority. The Act in this article states that the person responsible is the natural or legal person who, alone or together with others, is responsible for the company. A natural person would be, for example, a director or human person, as opposed to a legal person such as, for example, a corporation who gains its status as person through recognition under law.

In the context of a multinational enterprise or in group relationships created through contracts, responsibility is attributed to the legal entity under whose authority supplies are made. The Act states that actual power or influence within the legal entity is not relevant unless there are internal regulations or policies which establishes responsibility to a competent legal entity. The distinction or allocation of responsibility in the context of a multinational enterprise or group relationships is important to clarify because such groups and corporate families use sophisticated structures the minimize and manipulate allocated responsibility which results in responsibility being attributed to lower level corporate entities that are typically under funded. This creates the problem of a lack of preventative and safety measures and also the problem of a lack resources to compensate those affected by the corporation’s/corporate group’s actions. This Act creates the possibility of going behind the façade created through corporate group structures to hold a controlling corporation responsible if an internal regulation within the group establishes responsibility.

Article 3 – Declaration

This article of the Act requires a Dutch company, or a company that systematically supplies goods or services to a user in the Netherlands, to declare it had exercised due diligence to prevent those goods and services from being sold/provided by means of child labour. This due diligence obligation extends to corporations who offer goods or services in the Dutch language in the Netherlands, delivers to users every year in the Netherlands or has a regular customer(s) who purchasers products or services annually. This due diligence statement is a one-time statement at the time of supply, unless legal requirements change. However, the Act’s explanatory memorandum policy paper states that it is the responsibility of the corporation to ensure that its supply chain continuously complies with its previous due diligence declaration. To ensure that its suppliers and/or manufacturers comply with child labour free requirements, the explanatory memorandum states that a company may make undertakings or statements a requirement in its contracts with suppliers and/or manufacturers.

Article 4 – Due Diligence

This article of the Act clarifies what due diligence means and what is required of corporations in making a due diligence statement. The Act requires corporations to investigate whether within their supply chain there is a reasonable suspicion of child labour and to draw up an action plan if the investigation shows reasonable grounds to suspect use of child labour. The Act states that the action plan must include measures the corporations has enacted to prevent the use of child labour and the corporation’s efforts at consultations with social partners/civil society organizations to ensure effective measures are enacted.

The Act’s explanatory memorandum states that while the due diligence statement may be a one-off statement, the corporation’s responsibility to be alert to possibility of child labour is continuous. It is further explained that if a corporation’s investigations reveal the use of child labour within its supply chain, it is not necessary that the corporation must end the supply or manufacturing relationship, but they must at least take steps to ensure the goods or services in question are not provided with the help of child labour. It is explanatory memorandum it is argued that companies have a responsibility for the children they have in their production chains, they must work towards an appropriate individual solution for each child. The corporation must also investigate where there is reasonable suspicion of the use of child labour, such as when the relevant goods, or a component of the goods, is manufactured in countries where child labour is likely or where child labour plays a role similar goods/components.

While there are certain required components of this due diligence statement and action plan, the Dutch government has given corporations the freedom of form so as to allow some flexibility to corporations depending on its size and industry.

Article 5 – Administrative Fine

This article established one of two possible punishments for failing to comply with the Act’s due diligence requirements. The Act’s explanatory memorandum explains that the amount of the fine would be line with the seriousness of the violation and in the view of the general aversion in Dutch society to the use of child labour in the production process and supply chain. It is explained that it is not necessary for a violation or failure to comply be knowing committed, it may include instances where the offender reasonable knew or could have suspected their acts or omissions could lead to a violation.

The Dutch government explained that a civil penalty in the form of a fine was chosen as punishment because the burden of proof against a corporation in the criminal context for a violation or failure to comply would be difficult to prove and also because such civil remedies are already within the existing administrative powers of the government authority responsible for the supervision and administration of the Act.

Article 7 – Criminalization

This article of the Act however provides for criminal punishment for the controller of a corporation that has committed a violation or failed to comply with the Act’s due diligence requirements. The article provides for a term of imprisonment up to 6 months, depending on the seriousness of the violation and on the general aversion in Dutch society to the use of child labour in production processes and supply chains.

While criminal law and criminal punishment carry harsh, and possibly well placed, punishment and stigma, criminal law may be slow to react to, investigate and convict perpetrators. Criminal law deals with issues after the event, after a corporation has committed a violation or after they have failed to comply. Criminal law may be further removed from the operation and dealings of markets and corporations, making it difficult for prosecutors to understand evidence and establish proof of guilt beyond a reasonable doubt, thus leading to lower convictions against corporations and/or directors who enable the use of child labour within its production processes and/or supply chains.

Civil law on the other hand may be better placed to prevent violations and quicker to react to violations given the administrative and supervisory role of the responsible government authority. Individuals within the responsible government authority may also have more specialized knowledge and experience of markets, corporate dealings and of child labour and thus may be better placed to recognize when and where child labour is and is likely to take place.

Therefore, criminal law and civil law together, rather than one or the other, could cover responsibility of corporations, and its directors, on all fronts.

Criticisms

In a Report by the Dutch General Committee on Foreign Trade and Development Cooperation several questions were raised by the committee, including concerns about the distortion of business competition in the Netherlands by adding additional administrative burdens, whether the bill was necessary/whether the Act added anything new to the legal landscape and whether it was in fact possible to enforce the rights of children given the lack of binding international legal consensus. Opposing political parties further argue that the Act may have distorting effects on competition of Dutch companies.

Current Framework/Future Action – EU and National Level

Due to the fragmentation and stand alone measures by member states on corporate responsibility, progress in protecting and hold corporations responsible for violations of human rights has been slow and uneven, as stated by the European Commission.

On October 24, 2019, the Act was published in the official gazette and adopted the proposal, which shall enter into force no later than January 1, 2020. However, EU Directive 2024/1760 entered into force July 2024, which seeks to guide the EU’s action on fostering sustainable economic, social and environmental development of developing countries. It states that all businesses have a responsibility to respect human rights, which are recognized to be universal, indivisible, interdependent and interrelated. As stated in section 16 of the Directive, its aim is to ensure companies active in the internal market contribute to sustainable development, transition of economies and societies through identification, prioritization, prevention and mitigation, bringing to an end, minimisation and remediation of actual or potential adverse human rights concerned connected with companies’ operations. The Directive along with member states’ transposition into internal law seeks to deliver on the UN Sustainable Development Goals, and in the context of child labour, goal number 8.

Part 1 of the Annex to the Directive addresses rights and prohibitions included in international human rights, including the Convention on the Rights of the Child. The Directive seeks to reinforce the prohibition of employment of a child under the age completed compulsory schooling, not less than 15, and the prohibition of worst forms of child labour, below the age of 18, interpreted in line with the ILO (International Labour Organizaiton) Worst Forms of Child Labour Convention, 1999 (No. 182).

As a directive, rather than a regulation, member states of the EU retain the flexibility to choose how to implement the Directive through their own national laws. Member states will have a transposition deadline of July 26, 2027.

In November 2022, a coalition of Dutch political parties introduced a bill, Responsible and Sustainable International Business Act, which if passed will replace the previous Child Labour Due Diligence Act. The law firm Ropes & Gray LLP explains that the amended bill defines due diligence as a continuous process whereby corporations must investigate, prevent, mitigate or terminate potential or actual adverse impacts of their activities and business relationships on human rights and the environment in countries outside the Netherlands. This amended bill further includes annual monitoring of a corporation’s application and effectiveness of their due diligence policy and associated measures.

Child Labour in Dutch Companies (Example)

The Cocoa industry is well known for its use of illegal and exploitive child labour practices, particularly in Cote d’Ivoire and Ghana , the top two producing countries of the world’s cocoa supply. Tony’s Chocolonely, a Dutch chocolate company gaining popularity in the US, Europe and Japan, entered the chocolate producing scene with claims that, with its 100% traceable cocoa, it can prove to the chocolate producing giants that things can be done differently. The company claims that by placing human rights at the centre of is business model it will end exploitation in their cocoa supply chain and help change the industry as a whole.

Tony’s implements the International Labour Organization’s Child Labour Monitoring and Remediation System (CLMRS) which promotes child protection and addresses child labour in supply chains. Tony’s uses 5 Sourcing Principles to combat child labour within their coca supply chains. The company claims that what sets their system apart from the rest of the industry is by ensuring 100% of their supply chain, including each household and partner cooperative, is covered by CLMRS. This system discusses child labour with families, identifies cases and ensures timely investigations and follow up on instances of child labour. The company states that partner cooperatives along its supply chain are each individually responsible for the implementation and effectiveness of their own CLMRS system, with hands on support from Tony’s and the International Cocoa Initiative field teams. Through this system of due diligence, the company found 1072 cases of child labour out of 31, 358 children in the cocoa communities that are part of the company’s partner cooperatives . The company further stated that in 2002 their system resulted in a child labour rate of 10.5, significantly below the industry average .

While Tony’s claim that 100% traceable cocoa will lead to the elimination of child labour in the cocoa industry, there are criticisms that the company’s corporate and marketing practices may just be virtue signalling rather than meaningful and effective measures. Slave Free Chocolate is a grassroot organization bringing awareness to child slavery in cocoa farms in West Africa. On their List of Ethical Chocolate Companies Tony’s Chocolonely did not make the list due to promises, lack of tangible industry changes, persistent use of child labour and continued association with Barry Callebaut , a Swiss-Belgian cocoa processor and chocolate manufacturer, which has also had several claims of child labour against them. Furthermore, despite claims from Tony’s of leading changes in industry practices, it has been noted that child labour in the cocoa sector rose from 31% in 2008/09 to 45% in 2018/2019 while severity of forms of child labour also increased.

Tony’s responded to criticisms by stating they pay more to ensure their cocoa beans are fully segregated and 100% traceable . The company further states they deliberately chose to partner with Barry Callebaut to show it is possible to be fully traceable while working with large processors. The company also states that while there are instances of illegal child labour in the cocoa farms where they source their cocoa beans, they are 100% traceable which enables them to proactively solve issues.

Dutch law requiring due diligence and active remedial steps in corporate supply chains may be the reason behind Tony’s Chocolonely practices. But the example of Tony’s Chocolonely raises several questions: whether paying more money to ensure traceable source material could be funding exploitative practices of processors and manufacturers known to be involved with child labour; whether claims of being champions of human rights are meaningful or just really good marketing; and whether being better than industry averages of bad behaviour and child labour is enough.

On paper, both the United States and the Netherlands prohibit the worst forms of child labor, but in practice the Netherlands has moved further toward making companies legally responsible for abuse in their global supply chains, while the U.S. focuses more on domestic workplace rules and targeted import bans.

• In the U.S., federal child labor rules under the Fair Labor Standards Act set minimum ages, limit hours, and ban hazardous work for minors, with civil money penalties that can now exceed $15,000 per violation and higher penalties when a child is seriously harmed or killed. (https://www.dol.gov/sites/dolgov/files/WHD/child-labor/child-labor-report-congress_2023-2024.pdf)(https://www.callaborlaw.com/blog/us-department-of-labor-releases-new-guidance-for-child-labor-law-penalty-assessment)(https://www.nist.gov/blogs/manufacturing-innovation-blog/understanding-federal-and-state-child-labor-laws) In theory, this framework is strong, but enforcement data show an 88% increase in federal child labor violations over the last five years and nearly 5,800 children found working in violation of federal law in FY 2023, even as several U.S. states have recently weakened protections by expanding hours or permitted jobs for teens. (https://www.wagehourlitigation.com/2024/01/child-labor-law-penalties-on-the-rise-employers-fact-various-avenues-to-increased-expense/)(https://www.dol.gov/agencies/whd/data)(https://www.epi.org/blog/child-labor-remains-a-key-state-legislative-issue-in-2024-state-lawmakers-must-seize-opportunities-to-stop-the-rollback-of-child-labor-protections/)[1]​

• The Netherlands also bans the worst forms of child labour domestically and reports no confirmed cases of those worst forms within its borders in recent human‑rights reviews. (https://www.state.gov/reports/2024-country-reports-on-human-rights-practices/netherlands) What makes it distinctive is the Child Labour Due Diligence Act, which requires any company supplying goods or services to Dutch end‑users—regardless of where they are based—to investigate whether there is a reasonable suspicion of child labour in their supply chains, take action to prevent it, and file a due‑diligence declaration, with fines that can reach up to 10% of global turnover and potential criminal liability for repeat offenders. (https://www.aoshearman.com/en/insights/mandatory-human-rights-due-diligence-laws-the-netherlands-led-the-way-in-addressing-child)(https://www.jtl.columbia.edu/bulletin-blog/the-netherlands-steps-up-efforts-to-eliminate-child-labor)(https://www.qima.com/whitepaper/netherlands-child-labor)[7]​

• In theory, both systems say children should not be exploited; in practice, the U.S. model is centered on policing how minors work inside U.S. borders and stopping some abusive imports, while the Dutch model adds an explicit, enforceable duty of care over global supply chains, treating child labour anywhere in the chain as a corporate responsibility problem, not just a foreign governance issue. (https://www.jtl.columbia.edu/bulletin-blog/the-netherlands-steps-up-efforts-to-eliminate-child-labor)(https://www.akingump.com/en/insights/alerts/supply-chain-due-diligence-laws-go-orange-netherlands-latest-to)(https://aublr.org/2020/05/why-the-worlds-largest-chocolate-port-is-fighting-child-labor/)[8]​

 

This article provided by KARA Volunteer Eshanee Singh

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& Child Protection Read More Here.

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