Questions & Answers : Water giant SUEZ is summoned on the basis of duty of vigilance law

What are the facts behind this legal action based on the French duty of vigilance law?

During the evening of 10 July 2019, some 2,000 liters of oil were released at the Caipulli drinking water treatment plant managed by ESSAL, an entity controlled by French multinational SUEZ, which is responsible for the sanitation network in the Chilean city of Osorno. The leak was due to negligence in the plant’s maintenance and management. The plant’s water source was contaminated with hydrocarbons, thereby affecting the entire water supply for 49,000 households, equivalent to 140,500 inhabitants (97.9% of the population). The contamination also reached two waterways – the Rahue and Damas rivers. The health crisis could have been avoided if the problems of poor lighting, faulty infrastructure and staff shortage had been properly handled.

At first, ESSAL informed the Los Lagos regional ministerial health secretariat that the situation was under control and that the service would be restored within 24 hours. But the situation turned out to be more complicated and the water supply was cut off for more than 10 days, during which time the inhabitants of Osorno, as well as establishments providing essential services to the city – hospitals, health centers, dialysis centers and residential care homes for the elderly – were deprived of their drinking water supply, prompting a major health crisis.

Because of the serious health implications, a health emergency was officially declared on 12 July 2019. During this period the health crisis grew worse because of the delayed and incomplete installation of alternative water supply points that should have been immediately put in place by ESSAL. In addition, the water supplied was insufficient and of poor quality. Water supply services were not fully restored until 21 July 2019, and the health emergency had to be extended until 31 August 2019, the goal still being to tackle the health emergency.

The result was a violation of Osorno inhabitants’ right to the physical and psychological integrity of the person, which is connected to the right to remain healthy, the right to live in a healthy environment and the right to water.

These human rights abuses are all the more serious partly because ESSAL failed to introduce preventive and remedial measures, even after the Superintendencia de Servicios Sanitarios (SISS), the public entity in charge of inspecting this type of service in Chile, had warned about the many irregularities in the infrastructure and the related “high risk” back in 2018. This was therefore not an isolated incident, but a health crisis caused by ESSAL’s dereliction of its duties.

In August 2020, the SISS also imposed a record fine on ESSAL of 2,720 annual tax units, equivalent to approximately $1,640,878,080 (Chilean pesos) or approximately €1,880,000.

The deterioration of Chile’s sanitation services must be seen in a broader context stemming from privatisation. Until the end of the 1980s, the State was responsible for providing these services. Between 1977 and 1997, drinking water needs in urban areas rose from 85.6% to 99.3%. Conversely, since the beginning of the privatisation process initiated under the dictatorship of Augusto Pinochet and continued in the 1990s during the democracy, under pressure from the World Bank and the International Monetary Fund, urban sanitation coverage slowed down as prices shot up disproportionately, the pretext being the need to finance the infrastructure and supply sanitation equipment. For example, rates for Osorno clients rose by 343.6% between 1998 and 2017, while income growth for sanitation companies was 69.8% (up to $448.803 billion in 2018), with profits close to 50% (amounting to $345.632 billion in 2018). At the same time, inhabitants saw a gradual decline in service quality: although profits have risen, total investments have steadily declined since 2014.

What were the health impacts?

During the crisis, the Minister of Health sounded a warning on the effects on public health, especially the risk of increased numbers of gastrointestinal diseases and hepatitis A due to poor water quality. Without epidemiological tests, there is no data to establish the precise number of deaths and illnesses caused by the water contamination and by the fact that vital services in the hospitals, healthcare centers, dialysis service and seniors’ residential care homes had no potable water for 10 days. This water crisis prevented the province’s main hospital, San José de Osorno, from running smoothly, affecting emergency admissions, intensive care units, surgery, general medicine, pediatrics and neonatology services, among others. Furthermore, patients needing urgent attention were sent to other hospitals, and about 500 people suffered from cancellations in surgery, medical procedures, and consultations with specialists.

Besides the impact on health, the economic impact of the crisis was strongly felt by small and medium-sized local businesses that suffered huge losses since they could not function properly and, in some cases, had to close their businesses during the water shutdown.

What does the action filed today by FIDH, Observatorio Ciudadano, Red Ambiental, and LDH consist of?

France’s Duty of Vigilance law governing parent and instructing companies was enacted on 27 March 2017. It requires companies of a certain size to identify and prevent risks of violations of human rights and fundamental freedoms and of damage to health, safety and the environment stemming from their operations and those of their subsidiaries and/or business partners (sub-contractors and suppliers) by drawing up, publishing, and effectively implementing a vigilance plan.

After giving the companies formal notice, victims, organisations, and unions that have a proven legal interest in the case can go to court to ensure this obligation is fulfilled. The judge can order companies to publish and effectively implement their vigilance plans in accordance with the law. Furthermore, multinational companies can be held responsible under the terms of civil liability for the impacts of their activities on the environment and the population. They could be ordered to “compensate for the harm that could have been avoided by fulfilling these obligations.”

As of 29 January 2020, five formal notices had been issued in France to companies on the basis of the law, while two writs had been submitted before the court. Under the terms of this law, which allows organisations to demand that companies fulfill this obligation, Red Ambiental Ciudadana de Osorno, a community association based in Osorno, the International Federation for Human Rights (FIDH) and its member organisations in Chile and France, Observatorio Ciudadano, and Ligue des droits de l’Homme (LDH), formally notified the SUEZ Group, as parent company, that it must comply with the law on Corporate Duty of Vigilance. It must take steps to make up for the failings and illegalities in the provision of a water supply to Osorno in order to prevent another health crisis from occurring in the city or in other locations in Chile where ESSAL and other subsidiaries of the French group are operating.

Our organisations demanded that SUEZ publish a new vigilance plan that includes detailed and adequate measures to mitigate and prevent the risk of human rights abuses, particularly the right to good health, water and a healthy environment, as well as a mechanism for monitoring the effective implementation of these measures.

Following this formal notice, FIDH, LDH, Observatorio Ciudadano, and Red Ambiental Ciudadana de Osorno met with SUEZ twice to discuss and try to obtain a modification of the vigilance plan that would take their concerns into account, and thus avoid the recurrence of such a health crisis in the future.

As the 2021 vigilance plan published by SUEZ on 29 April 2021 did not meet the expectations expressed by the four organisations, they summoned the company to appear before the Nanterre judicial court.

What will be the next steps?

The Court will have to rule on the requests of the applicant associations to order the SUEZ Group, if necessary under penalty, to publish within six months a new complete due diligence plan meeting the obligations set out in the French duty of vigilance law. In particular, the SUEZ Group is asked to detail its risk mapping by prioritising the risks and including the precise methodology used to prioritise the risks and the methods of consultation with local communities and stakeholders. It is also asked to describe the measures for mitigating these risks and preventing serious human rights violations.

The purpose of this vigilance plan will be to put in place effective measures to prevent new health crises from occurring due to the negligent behaviour of SUEZ’s subsidiaries.

Why is this legal action relevant?

The demonstrations that have taken place since October 2019 and throughout 2020 in Chile express the public’s discontent with the consequences of the military dictatorship’s and successive governments’ neoliberal policies, a prime example being the management of the water supply, which was suddenly privatised during the Pinochet dictatorship.
The system of privatisation of public services is now being seriously questioned because of major disruptions to the supply of drinking water to a signifcant part of Chile’s urban population. The water supply sector in Chile is subject to regular incidents. Between 2010 and 2017 sanitation companies in Chile were penalised 699 times – an average of 87 sanctions per year – for failing to fulfill their obligations to provide contractual services. Fines amounted to close to 25.110 billion USD, or 3.140 billion USD annually, on average. In the case of Aguas Andinas, the company that controls ESSAL, for instance, between 2008 and 2017 five major shutdowns were reported, affecting over 1.1 million clients for 26.9 hours.

The situation regarding access to water is already critical and is further aggravated by Chile’s considerable exposure to hydrological risks. Projections for the rise in water demand show that Chile will be one of the countries most affected by climate change due to the rise in temperature, decreased rainfall, melting glaciers, and increased cloud cover, requiring the introduction of tangible, far-reaching measures to secure water for the population.
It is thus essential for the concession-holding companies and their parent companies to factor in and address the risks of future human rights violations connected to these incidents.

The ill-feeling of Osorno residents towards ESSAL and the many deplorable incidents that can be blamed on the company, convinced the Municipality of Osorno to include the question of whether to terminate the current ESSAL concession agreement in Osorno in its citizen consultation on a possible new constitution for Chile. The population voted 90% in favor of this proposal and only 6.7% against. If the municipality of Osorno were to take back public control of the water supply, it would be a first for the country.

Faced with the risk of losing the Osorno concession contract, the SUEZ Group threatened to turn to private arbitration courts as it had previously done in Argentina and Indonesia. These mechanisms for settling disputes between investors and the State form a parallel justice system that is obscure and only available to the most powerful. Many multinational companies have used this system to call into question environmental and public health policies as well as regulations on rates for drinking water among others, by demanding billions of euros in compensation. Often, the very threat of recourse to this type of private arbitration is enough to dissuade governments from taking action to protect human and environmental rights.

The Suez Group has a large presence in Chile and, at the time of the events denounced, held 43% of the water market in Chile through several sub-subsidiaries. On 11 September 2020, SUEZ, through its subsidiary Aguas Andinas SA, which previously controlled the sub-subsidiary Empresa de Servicios Sanitarios de Los Lagos SA ("ESSAL"), entered into an agreement with the Canadian company Algonquin Power & Utilities Corp. for the sale of its 53.51% stake in ESSAL. However, as of July 2019, SUEZ controlled ESSAL and still controls a large part of the Chilean water market.

Why introduce this action in France rather than in Chile?

While Chilean health and judicial authorities have sanctioned ESSAL, a SUEZ-controlled company in Chile, multiple times, the quality of water provision has not been substantially improved.

In such a situation, the French Law on Corporate Duty of Vigilance could be used to oblige SUEZ, ESSAL’s parent company, to live up to its responsibility to respect human rights and ensure that they are respected in its value chain. SUEZ earned €159 million in profits from the operations of its subsidiary Aguas Andinas, through which it controls ESSAL and other subsidiaries in Chile, but has not been held accountable for the catastrophic impacts of the recurring water shutdowns and the irregularities in its water provision services.

It is common knowledge that SUEZ has many operations in Chile: 43.8% of the Chilean urban population is supplied by companies controlled by the SUEZ Group, making it a major player in Chile with regard to impact on respect for human rights and the environment. The company must take urgent action to avoid another health crisis like the one that struck Osorno and must ensure that the country is equipped to cope with water stress, considering the present situation regarding climate change. Moreover, the company must comply with the obligations that are imposed both by the French Law of Corporate Duty of Vigilance and the United Nations Guiding Principles on Business and Human Rights.

Read more