Mr. Conor Linehan:

The Deputy's reference to the biodiversity convention is well made. We often tend to think of environmental measures in terms of the climate change convention and the conferences of the parties, COPs. The Deputy is right that the biodiversity COP has been taking place recently. Some of the big issues it is concerned with are protection of genetic resources and monoculture and deforestation. They are issues that Irish companies need to think about in the areas where they operate abroad. The biodiversity convention certainly comes into this.

On the number of companies, I saw that in an earlier committee hearing, one of the human rights bodies had calculated that maybe about 400 Irish entities would be caught by this. The thresholds are around €150 million worldwide turnover and 500 employees. But there are lower thresholds of €40 million worldwide turnover and 250 employees in particularly environmentally sensitive sectors such as mining, aquaculture and so on.

There are uncertainties about the practicalities of how this will operate and what a director and a board need to think about in practical terms in order to achieve compliance with all of this. It is a market-based measure and very much a framework piece of draft legislation. Our written submission made the point that expressions such as "where relevant" and "as appropriate" feature a fair bit in it. In one sense you can see the use of those expressions as almost acknowledgements of the kind of practical difficulties that are referred to but it is a market-based measure which is setting up this regime and, to an extent, leaving it to the market to find its own level in terms of what can be borne between any two contractual counter-parties in a value chain to which this legislation is relevant. It does provide for civil liability, first in relation to individual directors. The institute has emphasised how this has become an important issue at boardroom level. A real importance of this measure is the specific article on directors' duties. For many years, there has been an unresolved debate as to whether the core directors' duties that have always been there as to whether to act in the best interests of the company is one that despite sustainability indices, environmental, social, and governance, ESG, and all the awareness we now have about sustainability issues, is still really a duty about the financial bottom line and only the financial bottom line. This draft directive puts it beyond doubt that is no longer the case because it very clearly says that they must take account of this when they are discharging their duty to act in the best interests of the company and it requires member states to amend their national legislation wherever directors' duties are expressed to reflect that. We will see changes and not only a statutory instrument transposing this measure but also probably changes to the Companies Act to reflect all of that.

It provides for civil liability. It quickly goes on to water that down a bit. Article 22 says that "Member States shall ensure that companies are liable for damages if: (a) they failed to comply with the obligations laid down in Articles 7 and 8." Those are the obligations where actual or potential human rights or environmental adverse impact risks are identified. They need to step in to prevent, mitigate or terminate if at all possible. If there are any failures in that it speaks first of civil liability. It then sort of waters it down a bit. Of course, it has a causation element. There is a strong causal element to begin with as it refers to a company failing to comply and the failure or the adverse impact caused by the company's failure to observe its due diligence under this. It is open to the company by way of part defence to point the finger others in the supply chain and say it relied on their assurances, on contracts with them and their record and it was not unreasonable to do so. The starting point is a civil liability for breach of the obligations here. They are no different from the type of defences one would find for civil liability regimes outside of this territory. Ultimately it is a market-based measure. The idea is that it will not all be down to one responsible party in many cases. They will face civil liability in many cases outside of this with joint or several responsibility amongst many parties. There will be contractual relationships between the parties here and it is in that context that I think it will play out.