The Law as a tool to secure a long standing presence in the Indo-Pacific Region
Presence in Indo-Pacific
In a divided world, with the remnants of the pandemics, trade wars and the like a major question to ask for Western companies about their presence in Indo-Pacific: how to keep control of their locally implanted units at a minimal cost?
Sending top executives for short term visits, or expatriates on an attractive package belong to the past.
Par quoi remplacer ce mode de contrôle ?
The most economical solution is to rely on governance including both international and local standards, local laws and software law and local best practices.
Newsletter No. 10 - Think globally, act locally
I - Thinking globally: ESG as a benchmark
There is no better way to be recognised locally as a good foreign business than to rely on international standards, such as ISO 26000.
From a soft law approach, one may rely on principles such as the definition of ESG provided by the government of Canada, which can be adjusted to any local environment : “ESG is a balanced integration of social and environmental considerations with business decisions and activities’”
Such reference is useful given that the ISO Norm is not compulsory, provides only general directions and does not guarantee a certification by an accredited neutral third party.
Therefore, complying with the norm on a voluntary basis must take into account the characteristics of the local environment, whilst benefiting from the credibility of the international reach of an ISO norm.
Taking France as an example, following ISO 26000 is prima facie evidence of compliance with the “Loi PACTE” of 22nd May 2019 and sections 1833 and 1835 of the Civil Code as amended accordingly.
A holistic use of the Norm is best in an international, diversified environment.
As declared by Perrin Beatty, President of the Canadian Chamber of Commerce: “For most Canadian companies, it is no longer about “good” business practices but about “honourable behaviour”. This no longer a matter of philanthropy, proper practices form part of running a business.”
II - Acting locally : the guiding principles in each concerned country
In order to achieve a consistency between international and local ESG principles, on may look at the list of so-called “thématiques centrales” by the French Ministry of Economy and Finance;
- Governance of the entity;
- Human rights;
- Work conditions and relations;
- Environment;
- Loyal practices
- Consumers’ interest
- Local communities and local development.
Being aware of ESG principles does not mean in a single country, but by reference to eg the mandatory rules applicable to listed companies, such as in Singapore in June 2016, in Hong Kong in July 2020, in India in 2021.
One can also refer to the Financial Sector (Climate-related Disclosures and other Matters) Amendments Act 2021 (FSAA) of New Zealand which imposes obligations on private, non-listed companies.
III - Australia as a trend setter
Australia is influential on ESG issues beyond its borders, in other common law countries of the Indo-Pacific Region including Malaysia, Singapore and India.
As at year 2022, the priority in ESG issues is given by Australia to the environment, particularly the effects of global warming.
The Australian Competition & Consumer Commission (ACCC) has started checking the statements on the environmental qualities of products and services.
According to ACCC, such practices when not true (greenwashing) can consist of scientifically non verifiable commitments of reduction of carbon emissions in the future, or of conformity with the targets of the Paris Convention. Or, according to the Federal Court of Australia “Chevron” case of December 2019) they may consist in false statements about the impact on the environment.
This is not just about “soft law”, and includes the duty to take appropriate measures to mitigate the consequences of climate change. That principle has been asserted by the Land and Environment Court of New South Wales in the case Bushfire Survivors for Climate Action Incorporated v Environment Protection Authority [2021] NSWLEC 92 of 2021, opening the field to potential liability actions against companies in breach.
The personal liability of corporate executives for breaching environmental obligations continues to increase. In Queensland, for example, directors and officers are now deemed personally liable under a presumption known as a "deemed-liability offence," which they can only avoid by demonstrating that they took all due care or that they were unable to influence the company's decision.
Good behaviour is not limited to not disseminating misleading information (a negative obligation) but extends to spontaneously disseminating truthful information (a positive obligation). A "Task Force on Climate-Related Financial Disclosures (TCFD)" paves the way toward mandatory disclosure of biodiversity loss risks for all Australian companies. With the risk, expressed in the form of explicit threats, that non-compliant board members could be personally liable under the Corporations Act 2001 (Cth), sections 180(1), 181(1), and 299A(1).
Climate change is a dominant, but not unique, theme; others are evolving, such as human rights and labor relations.
For example, in a notable 2020 decision in Cassimatis v Australian Securities and Investments Commission, the Federal Court of Australia held that a company's poor reputation related to its poor respect for human rights could constitute evidence of a "breach of directors' duties" and lead to the personal liability of a director.
Another evolving theme is labor relations and conditions. The Government of Western Australia's Code of Practice, entitled "Psychological Hazards in the Workplace," aims to expand the scope of employer responsibility in health matters beyond physical conditions to include psychological and social conditions such as stress, exhaustion, abuse, violence, aggression, harassment, and burnout. It defines the employer's responsibilities accordingly: leadership, procedures, support, etc.—the list is long—and employers are expected to assess risks, take measures, and verify their implementation.
In conclusion
In conclusion, a French company abroad cannot be less rigorous in terms of CSR/ESG than it would be in France. It will benefit from the same positive impacts recognized for CSR in general and will protect its local directors, including those appointed by headquarters and not resident in the country of the subsidiary, whose duties are identical to those of resident directors.
Companies must draw inspiration from both international and local principles, in varying proportions adapted to each country. And at the national level, prioritise the legal approach.
In France, the Office of the Ambassador for Bioethics and Corporate Social Responsibility has published a remarkable document entitled "Introduction to the ISO 26000 Guide on Social Responsibility for Small and Medium-Sized Enterprises."
After rightly pointing out that "The first stage of responsibility is compliance with the national law in force in all territories where the organization operates," the document very pertinently states that this applies "even to those where local governance is deficient."
In these countries where national law is "weak," to use the terminology used in the Introduction, "these international standards of behaviour are a red line that protects against the risk of being complicit in their violation and subject to legal action."
Advice is valuable where local law is deficient, but this is not the case in the Indo-Pacific countries where our firm advises its clients (Malaysia, Australia/New Zealand, Singapore, India).
Local regulations are sufficiently developed for a French company established there to consider itself "compliant" with international standards by following local positive and soft law.
With degrees between Australia/New Zealand, where ESG standards integrate and sometimes even exceed all CSR principles, and other countries where, despite developed local standards, it remains useful to maintain ISO 26000 as a complementary global guide.
In all cases, to quote again from the Ambassador's Office document, "This implies that the organization must keep itself regularly informed of legislative developments."
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The content above is purely for informational purposes, relating to a selected overview of legislative, regulatory and case law developments in the relevant geographical area, which is not and does not claim to be exhaustive.
It does not constitute legal advice in relation to any particular case and should not be regarded as such. A more detailed doctrinal study on any of the topics mentioned may be requested.
Philippe Girard-Foley is a Registered Foreign Lawyer accredited by the Supreme Court of Singapore before the Singapore International Commercial Court – Certificate of Full Registration under Section 36P Legal Profession Act (Chapter 61).