Addressing the European Parliament in Strasbourg on January 19th 2022, soon after France had taken up its six-month term at the helm of the rotating presidency of the European Union, Emmanuel Macron enthusiastically championed the move for a corporate “due diligence” directive.
The objective of the legislation is to better control the social and environmental practices of multinational corporations, from TotalEnergies to Nike, whose products, for example, are the result of deforestation or the enslavement of Uyghurs in China. “Our wish is that this proposition by the Commission is realised in the quickest time and that it can follow its course between the institutions as fast as possible,” said the French president.
But what Macron did not say that day was that the French economy and finance ministry would lend all its force to exclude a key sector from the directive; the banks. According to documents seen by Mediapart, Paris has recently succeeded with that aim, at least at the level of the European Council, the institution which relays the positions of the governments of EU member states, after more than a year of lobbying. This involves initially delaying the inclusion of the financial sector from the scope of the directive, through the introduction of a clause to “review” the situation “once an impact assessment” has been carried out.
It now remains to be seen whether the European Parliament, which in June adopted a resolution in favour of including the financial sector (and controlling the activities of direct clients of banks), will engage in a standoff with the Council in the negotiations over the proposed directive.
Enlargement : Illustration 1
“Banks like BNP Paribas, which finance projects that take part in the deforestation of the Amazon, would be able to continue to shut their eyes,” commented Manon Aubry, a French Member of the European Parliament (MEP), from the radical-left LFI party, who been following the matter closely. “They won’t be held responsible,” she added.
“It’s a proper move of force by Paris,” said Juliette Renaud, a specialist on the issue for the NGO Les Amis de la Terre, the French branch of the Friends of the Earth organisation. “All the more so given there is no unanimity on the subject within the Council, and that an actor like the European Central Bank asked, as recently as last week, to include this [financial] sector in the directive.”
A closed-door meeting between representatives of the Council, the Commission and Parliament was held on Wednesday this week, at the parliamentary building in Strasbourg. With no agreement yet emerging, a fifth so-called “trialogue” is due to take place in December.
Meanwhile, Julia Otten, senior policy officer with the NGO Frank Bold, a non-profit law firm, who is closely following the progress of the due diligence directive, told financial news website IPE: “One diplomat described this as a trialogue not just between the Commission, the Council and the Parliament, but one where the finance sector is clearly sitting at the table too, mainly French banks.”
Contacted by Mediapart, the French finance ministry expressed satisfaction at the compromise reached among the member states, but refuted any suggestion it was influenced by a banking lobby, and BNP Paribas in particular. “France never asked for the exclusion of the financial sector […],” a spokesperson said. “We want the financial sector to be treated like the other sectors, so that it has no negative effect on the industrial sector when it exports.”
In sum, the message here is that if the French government is taking care of the financial sector, it is not because it wants to protect banks like BNP Paribas and the Société Générale, but rather it is so that the country’s industrial sector can continue to export and conclude major contracts abroad, which often depend on the granting of bank credit.
The French economy and finance ministry also underlined that there was no question of excluding all of the financial sector from the constraints of the directive, but rather to concentrate the controls imposed on the “upstream” activities of banks so as not to penalise the “downstream” activities. That would translate, for example, into banks being required to exercise vigilance over the plastic used for their credit cards (as would be applicable in any industrial or service industry activity), but that the policing requirement would be removed regarding the activities of the clients of banks who are financed “downstream”. However, it is precisely that “downstream” activity which is at the heart of the issue for numerous NGOs and MEPs.
According to a point-by-point document (see below) prepared for a meeting held on November 15th between the advisors of the governments of the 27 EU member states, a carefully worded note set out the terms of the concessions sought by Paris: “Given the delicate balance on this issue achieved in Council and the difficulties to find a compromise with the position of the European Parliament,” it read, “the Presidence [editor’s note, the rotating six-month EU Council presidency currently handed to Spain] would propose to exclude the financial sector from the scope of the Directive, and delay its extension to this sector to a later stage by adding a review clause, once a detailed impact assessment has been done.”
Enlargement : Illustration 2
The get-out clause for the financial sector, previously alluded to by Euractive, marks a clear evolution of the Council’s position. In December 2022, the 27 member states elaborated an initial compromise, but which did not satisfy NGOs. It identified a quite limited number of financial services that could be subject to the directive, and also, under pressure from France, made that provision optional. It would have meant each country could decide on its application or not.
One year later, and while a number of countries, including the Netherlands, continue to call for the whole of the financial sector to be included in the scope of the directive, and while others, like Germany, want to include banks but exclude investment funds, this new “review” clause amounts to a de facto exclusion of all of the sector, and in every member country.
As also reported by Euractive, 61 NGOs, from rights campaigners to environmental groups, sent a joint letter to EU member country representatives ahead of the November 15th meeting in which they urged the financial sector to be included in the directive. “Financial institutions are crucial to shaping sustainable economic systems, exerting leverage over a broad range of other economic sectors and business activities, and have a key role in upholding the protection of human rights, the environment and climate globally,” they wrote. “At the same time, EU banks, insurers, investors and asset managers are involved in severe adverse impacts.”
Mediapart obtained another working document which recorded the exchanges between officials from the EU member states during a videoconference held on October 17th. According to those minutes, France opposed all the propositions for a compromise which had been put forward by the Spain (occupying the presidency of the EU), on October 12th.
The common point of all the options put forward was to place the financial sector on the perimeter of the directive. For the first time it was underlined that France was the obstacle in reaching an agreement, stressing that while there was a will to reach a compromise, Paris regarded the inclusion of financial sector as a threat to the internal market.
The member states must now reach an agreement with the European Parliament, which is likely to be reached by the end of December. According to several sources close to the discussions, the MEPs may give way on the issue in exchange for concessions on what they regard as other important matters, for example surrounding rules on access to justice.
Once again, it is behind closed doors that the future of one of the most significant legislative texts of the current parliamentary term is being played out, far from the scrutiny of citizens. The meetings are in EU jargon called “trialogues”, because they are held by representatives of the bloc’s three largest institutions (the council, the Commission and the Parliament). However, the existence of what is now a ritual is not even specified in EU treaties. “If these debates were held in a public manner, France would never acknowledge removing the responsibility of the financial sector to this degree, to serve the profits of BNP Paribas and the Société Générale,” said French MEP Manon Aubry.
The battle to establish “due diligence” practices upon multinationals intensified after the Rana Plaza eight-storey building collapse in Bangladesh in 2013, when more than 1,100 people died amid the rubble of mostly garment factories whose clients, from Mango to Benetton, never faced legal consequences.
France introduced a pioneering law in 2017 which imposed on large companies a duty of vigilance over their practices, and which Emmanuel Macron occasionally cites as a reference. The law includes the financial sector, although not the activity of clients of banks. The draft EU directive currently under discussion is more ambitious in its global approach, more protective of the victims of the activities of corporations and, above all, more detailed in its terms, which would give it a wide impact.
If an agreement is found during the next trialogue, to be held between now and the end of the year, the text of the proposed directive will be submitted for approval by the European Parliament (probably in January, and when no amendments can be tabled). It will also be submitted before the economy ministers of the 27 member states. The leftwing parties, meanwhile, hope to use it as a trophy of their making during the campaigning for the European Parliament elections in June next year.
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- The original French version of this report can be found here.
English version by Graham Tearse