9 steps for boards to improve compliance in the face of armed conflict
Companies have recently been facing increasing scrutiny as a result of their operations in armed conflict zones. It now appears essential to account for this nascent risk with robust solutions. We outline below 9 steps that may contribute to improving a company’s compliance with domestic and international laws of armed conflict.
1. Implement insightful M&A due diligences
First in the order of events, it is recommended that due diligence pertaining to M&A operations be upgraded to include armed conflicts-involved risks. Although relevant law is scattered, it appears to be currently moving towards a tighter regulation for buyer companies.
As such, in France, since a judgment by the Cour de Cassation from 25 November 2020, and in accordance with European law, the absorbing company may be held accountable for offenses committed by the target company prior to the merger. The decision should, in addition, be considered together with a series of four decisions issued by the Cour de Cassation on 7 September 2021, that confirmed a company may be charged with complicity in crimes against humanity. An astute M&A due diligence must therefore account for this new risk, and be accompanied by a sharp strategy at the merger agreements drafting stage.
2. Understand relevant international, regional and domestic law
The law applicable to companies who participate in armed conflict consists of a set of international and domestic legislations. Applicable law and the competent judge may be that of the company’s registered head office, or of the location of the operation. International crimes such as crimes against humanity, or war crimes, for which companies may be prosecuted, may be incorporated in domestic law with their own specificities. Importantly, modes of liability, including the determination of the material and moral elements that may be constitutive of complicity, may also vary from one jurisdiction to another.
A substantial understanding of relevant legislations therefore appears to have become necessary.
3. Create dedicated committees
Committees have proven efficient in supervising companies’ efforts in tackling specific matters, including governance, the fight against child labour, or climate change. A committee in charge of ensuring compliance in the face of armed conflict may mirror such preexisting instances. It may as such be responsible for compliance, organise the trainings, review incident reports, make recommendations and monitor the compliance processes.
Its presence also allows for more flexibility delegations of powers, distributing the risk amongst members instead of imposing it on one individual.
4. Publish an informative code of conduct
A company’s code of conduct is an effective solution to outline its values, and the commitment it expects from its employees. Easily accessible, the document may make clear to all employees that ethics are a fundamental aspect of each employee’s position, or encourage communication in case crises arise. It is also an adequate place to reaffirm the need for employees to comply with relevant international, regional and domestic law and to emphasize the company’s zero-tolerance policy for disregard of applicable law.
The code may also provide for a reporting process in case of incident, in order to encourage employees to alert the company. This may include the use case, guarantee of anonymity, and communication channels, including email or postal mail.
5. Develop an optimal role distribution
A compliance strategy is all the more efficient when imbued throughout the company and becomes a shared objective amongst employees. While ingraining a culture of vigilance amongst all employees will be key, some positions will assume more prominent roles. It will thus prove important to allocate these and ensure clear information. Each organisation will determine the structure it deems fit, and broadly, we shall mainly see detailed roles for the board, the risk committee previously mentioned, and the General Counsel.
6. Ensure regular training
Frequent trainings are essential in order to ensure goals and indicators are understood and implemented at all levels of the company.
All-staff trainings my involve broad overviews of relevant international and domestic law, a presentation of the company’s code of conduct and insist on applied knowledge, such as incident identification and reporting processes. On the other hand, employees dedicated to compliance processes may require more detailed training. General Counsels may thus receive trainings addressing the latest developments in courts, legislation in relevant jurisdictions and ongoing debates regarding corporate accountability as a result of participation in armed conflict, whilst in-house investigation teams may benefit from getting regular updates on new technologies and processes.
7. Invest on monitoring and investigation
It is essential for companies operating globally, including in areas they might not possess sufficient knowledge about, to ensure a constant monitoring of geopolitical developments at all times. Alongside monitoring, that aims at getting an insightful grasp of the geopolitical environment affecting areas where the company operates, investigations may appear necessary to analyse the impact of geopolitical developments on the company. This may for instance entail the investigating of a specific stakeholder the company considers partnering with, or the source of a potential funding.
Both these missions may be attributed to a dedicated department, or outsourced. While the latter option may offer more capacity and resources, an in-house department may have a better understanding of the company’s supply chain, its operations, the strategic points, and the effects of developments on the company’s activity and operations.
Proactivity is thus imperative and aiming at eluding knowledge to avoid accountability reveals most often counterproductive, preventing an effective decision-making process, whilst not exonerating one from what one should have known.
8. Benefit from whistleblowing
By enhancing the company’s monitoring and investigation efforts, giving the public or employees the means to report incident they are aware of may reveal beneficial. Companies may do so by creating a hotline, creating and publicising a dedicated email address and sharing a postal address where mail may be sent.
The responsibility that comes with this influx of information may be dreaded at first, as it appears that the company loses its ability to claim its ignorance of events. However, the benefits that come with it, in particular the chance of defusing a potential armful situation, outweigh the risk, especially considering how narrow the window for a company to argue it was not aware of an incident oftentimes is, in relation to what the courts deem it should have known.
9. Anticipate with contingency plans and processes
Lastly, companies operating in conflict zones must ensure appropriate mechanisms allow for swift reaction and decision-making. It is thus crucial to have established processes guiding every echelon’s reaction in the event of an incident, whilst leaving room for some flexibility. It is recommended these processes identify who will be in the loop and the role of each employee. A clear vision of when to reach out to, and what to share with external resources, including private investigators, auditors and lawyers will also contribute to a prompt reaction. Finally, a comprehensive plan may consider the appropriate time the authorities shall be informed of potential security breaches.
The coherence and fitness of the contingency plan and processes may be tested during a crisis management simulation.
The measures detailed here may not apply to importers of tin, tantalum, tungsten and gold, who may be submitted to dedicated and specific due diligence obligations, in accordance with the Conflict Minerals Regulation. The articles published on our website aim at sharing reasoning with our audience in order to provide a better understanding of the practice of the laws applicable to armed conflicts. For the sake of making it accessible to a large audience, the analysis is kept short and overlooks the intricacies that would call for dedicated attention in reality. It should not be interpreted as legal advice.