The new Dutch Child Labour Due Diligence Law: Some FAQs
On November 13, 2019, the new Dutch Child Labour Due Diligence Law was published in the Dutch Government Gazette. It introduces a duty of care for companies to prevent the supply of goods or services which have come into existence using child labour. Companies likely to be affected must set out a plan of action on how to combat it and issue a due diligence statement on their investigation and plan of action.
Though the exact date the act comes into force is not yet known, companies will have six months from the law’s effective date to submit the required documentation demonstrating compliance with the statute. Companies, even those registered outside the Netherlands, selling goods or services to Dutch end-users are required to exercise due diligence to assess whether the services or goods being supplied have been produced using child labour.
Under the Act, firms are required to ensure due diligence through the following:
- Investigate their supply chains to identify any suspicion of child labour
- Draft and implement a plan of action to terminate child labour if identified from investigations
- Create an action plan to avoid the use of child labour
- Submit a declaration to the yet-to-be-determined regulatory body, affirming that they have exercised an appropriate level of supply chain due diligence to prevent child labour
In cases of non-compliance with the Child Labour Due Diligence Law, the supervisory authority must first issue a compliance order. It can only impose an administrative fine if the company fails to duly comply with this order.
The Consequences of Failure to Exercise Due Diligence
Non-compliance with the obligation to submit the required statement can result in an administrative fine of a maximum of EUR 4,350 or a fine of up to EUR 8,700. Failure to exercise due diligence or develop and execute a plan of action as required by the Act may result in a fine of up to EUR 870,000 or a fine of up to 10% of the company’s turnover in the preceding financial year.
Repeated non-compliance with the Act within five years of the imposition of an administrative fine is an economic offense under the Dutch Economic Offences Act. While the Act’s criminal provision is ambiguous, company directors could face up to two years in prison or a fine of up to EUR 21,750.
The Act reflects a significant new step in combating child labour in corporate supply chains, introducing mandatory requirements under an administrative and criminal penalty regime. It fits into an increasing global focus on CSR and labour trafficking in corporate supply chains.
Although several aspects of the Act need to be further clarified by subordinate legislation, companies should start assessing the possibility of any form of child labour in their supply chains. They should also consider reviewing whether existing compliance programs will be sufficient to comply with the Act’s requirements.
Several key questions remain: When will the implementation of the law begin? What should the statement include? What constitutes sufficient due diligence? and Which government body will be in charge of regulating and enforcing the law? These elements will be specified in the General Administrative Orders to be announced by the Dutch government. The law’s effectiveness will largely depend on how these administrative orders take form.
Despite its flaws, the Dutch law is a critical moment for the international movement toward mandatory due diligence.
Due Diligence investigations: Mitigate Critical Risks
At CRI®, we provide due diligence services wherever you are. Use our DueDiligence360™ reports to help you comply with anti-money laundering, anti-bribery, and anti-corruption regulations ahead of a merger, acquisition, or joint venture. You can also use them for third-party risk assessment, onboarding decision-making, and identifying beneficial ownership structures.
On November 13, 2019, the new Dutch Child Labour Due Diligence Law was published in the Dutch Government Gazette. It introduces a duty of care for companies to prevent the supply of goods or services which have come into existence using child labour. Companies likely to be affected must set out a plan of action on how to combat it and issue a due diligence statement on their investigation and plan of action.
Though exact date the act comes into force is not yet known, companies will have six months from the law’s effective date to submit the required documentation demonstrating compliance with the statute. Companies, even those registered outside the Netherlands, selling goods or services to Dutch end-users are required to exercise due diligence to assess whether the services or goods being supplied have been produced using child labour.
Under the Act, firms are required to ensure due diligence through the following:
- Investigate their supply chains to identify any suspicion of child labour
- Draft and implement a plan of action to terminate child labour if identified from investigations
- Create an action plan to avoid the use of child labour
- Submit a declaration to the yet-to-be-determined regulatory body, affirming that they have exercised an appropriate level of supply chain due diligence in order to prevent child labour
In cases of non-compliance of the Child Labour Due Diligence Law, the supervisory authority must first issue a compliance order. It can only impose an administrative fine if the company fails to duly comply with this order.
The Consequences of Failure to Exercise Due Diligence
Non-compliance with the obligation to submit the required statement can result in an administrative fine of maximum EUR 4,350 or a fine of up to EUR 8,700. Failure to exercise due diligence or develop and execute a plan of action as required by the Act, may result in a fine of up to EUR 870,000 or a fine of up to 10% of the company’s turnover in the preceding financial year.
Repeated non-compliance with the Act within five years as of the imposition of an administrative fine is an economic offense under the Dutch Economic Offences Act. While the Act’s criminal provision is ambiguous, company directors could face up to two years in prison or a fine of up to EUR 21,750.
The Act reflects a significant new step in combating child labour in corporate supply chains, introducing mandatory requirements under an administrative and criminal penalty regime. It fits into an increasing global focus on CSR and labour trafficking in corporate supply chains.
Although several aspects of the Act need to be further clarified by subordinate legislation, companies should start assessing the possibility of any form of child labor in their supply chains. They should also consider reviewing whether existing compliance programs will be sufficient to comply with the Act’s requirements.
A number of key questions – such as when the implementation of the law will begin, what the statement should include, what exactly constitutes sufficient due diligence, and which government body will actually be in charge of regulating and enforcing the law – remain unanswered for now. These elements will be specified in the General Administrative Orders to be announced by the Dutch government. The law’s effectiveness will largely depend on how these administrative orders take form.
Despite its flaws, the Dutch law is a critical moment for the international movement toward mandatory due diligence.
Due Diligence Investigations: Mitigate Critical Risks
At CRI™, we provide due diligence services wherever you are. Use our DueDiligence360™ reports to help you comply with anti-money laundering, anti-bribery, and anti-corruption regulations ahead of a merger, acquisition, or joint venture. You can also use them for third-party risk assessment, onboarding decision-making, and identifying beneficial ownership structures.
Due Diligence helps you Identify key risk issues clearly and concisely using accurate information in a well-structured and transparent report format. Our comprehensive range of reports includes specialised reports that support specific compliance requirements. Protect your reputation and the risk of financial damage and regulator action using our detailed reports. They enhance your knowledge and understanding of the customer, supplier, and third-party risk, helping you avoid those involved with financial crime.
The CRI Group™ invites you to schedule a quick appointment with them to discuss in more detail how conducting due diligence and compliance can help you and your organisation.
Based in London, CRI Group™ works with companies across the Americas, Europe, Africa, Middle East and Asia-Pacific as a one-stop international Risk Management, Employee Background Screening, Business Intelligence, TPRM, Due Diligence, Compliance Solutions and other professional Investigative Research solutions provider.
We have the largest proprietary network of background-screening analysts and investigators across the Middle East and Asia. Our global presence ensures that no matter how international your operations are we have the network needed to provide you with all you need, wherever you happen to be. CRI Group™ also holds BS 102000:2013 and BS 7858:2012 Certifications, is an HRO certified provider and partner with Oracle.
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