Corporate Social Responsibility (CSR)

Sustainable Economic Activity

The lawyers in our Corporate Social Responsibility (CSR) Taskforce advise you in all aspects of the dynamic field of business, environment, and human rights.

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Our economy is global: electronic components for computers and smartphones or parts for the automotive and engineering industry, textiles or food – almost every product originates from global supply chains as we are closely linked together on an international level.

When it comes to the discussion about sustainability in the economic sphere, the idea is increasingly gaining ground that companies should take responsibility for ensuring that their suppliers observe human rights and comply with environmental standards.

Corporate Social Responsibility (CSR) stands for businesses voluntarily contributing to sustainable development and implies responsible corporate action by all market participants. Its core is the socially, ecologically, and economically responsible corporate management that has an impact throughout the entire value chain. Numerous companies use codes of conduct or CSR agreements to obligate their contractual partners to observe minimum standards of occupational health and safety and to object to child labor, forced labor, or discrimination in their companies or at their suppliers. Voluntary assumption of social responsibility is being legalized in the form of binding statutory provisions, for example through the Minimum Wage Act, which already includes CSR approaches.

In2011, the United Nations Human Rights Council adopted Guiding Principles on Business and Human Rights, representing a global instrument for eliminating and preventing human rights violations in a business context. In 2015, the international community  adopted the 2030 Agenda with 17 global goals for a better future based on these principles.

In 2016, the German federal government initiated the National Action Plan – Transposition of the UN Guiding Principles on Business and Human Rights (NAP). As apparently only few companies comply with their human rights due diligence obligations in the supply chain, the German government agreed on a “Due Diligence Act” (also referred to as Supply Chain Act) after tedious political negotiations.

In France (Loi de Vigilance), the Netherlands (Wet Zorgplicht Kinderarbeid), and the United Kingdom (Modern Slavery Act), statutory provisions to prevent human rights violations and child labor in the supply chain already exist. Following the narrow failure of the referendum on the “Corporate Responsibility Initiative” in Switzerland in November 2020, the Swiss parliament’s legislative proposal with far-reaching reporting obligations for companies in the areas of the environment, employee protection, human rights and anti-corruption entered into force.

The New German Supply Chain Act

After a lengthy dispute within the coalition, the German government agreed to adopt a new Supply Chain Act on February 12, 2021. The draft bill from the Ministries of Labor, Economic Affairs, and Development was approved by the federal cabinet on March 2, 2021. The legislative procedure is to be concluded prior to the end of the current legislative period. If the procedure goes according to schedule, the Act will enter into force on January 1, 2023 after a transition period.

As of this date, the statutory provisions will initially only apply to large companies with 3,000 or more employees that have their registered office or head office in Germany. From 2024, this threshold will be lowered to 1,000 employees. Even so, German SMEs would initially not be affected by this Act.

In principle the “supply chain”,as defined in the drafted Act, begins with the extraction of raw materials and ends with the delivery to consumers. According to the proposals, however, companies will in principle only be responsible for their own business area and their direct suppliers. Where a grievance in the supply chain becomes known, companies are supposed to be obligated to take remedial action.

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„Supply & Comply" (in German Language)

Human rights and environmental due diligence obligations

Companies will need to introduce and effectively implement appropriate risk management systems to comply with their human rights and environmental due diligence obligations. This is intended to identify risks and prevent violations of protected legal rights (including life, health, fair working conditions, freedom of association, and protection against child labor, slavery, forced labor, and torture etc.).

Risk management must also include an appropriate risk analysis: Companies will be required to identify threats to protected legal interests in their own business areas and those of their direct suppliers.

Where risks are identified, appropriate preventive measures need to be taken. These include training and the establishment of a complaints procedure (e.g. whistleblower hotline). If protected legal rights have been violated, companies must take appropriate remedial action in their business area without delay. Compliance with the corporate due diligence must be reported on an ongoing basis on the internet.

The originally planned lifting of the corporate veil under civil law was not implemented. However, aid organizations will be able to take legal action via class action lawsuits. Non-governmental organizations and trade unions will get the opportunity to represent individuals before German courts.

The responsible authorities will supervise compliance with the new provisions. They are given “robust authority” for this purpose and would be able to perform on-site inspections and enforce compliance with penalty payments. In the event of violations, substantial and in some cases high sales-related fines could be imposed on the company and its management. Heavily fined companies could be excluded from tenders for up to three years.

CSR in EU Regulations

In the EU, legislative proposals for mandatory social standards in supply chains are also expected in 2021. The European Parliament’s Committee on Legal Affairs voted in favor of a specific proposal for a Supply Chain Act on January 27, 2021. In parallel, the EU Commission is currently drafting its own concept for corporate due diligence in the supply chain, which is set to be presented in early summer 2021. Justice Commissioner Didier Reynders and Commissioner for Jobs and Social Rights Nicolas Schmit already presented their plans last year: Since only one in three companies in the EU carefully examines its supply chains in relation to human rights and environmental impact, the EU is working on presenting mandatory due diligence standards. Some members of the European Parliament want to see a much stricter European Supply Chain Act that should apply to companies with as few as 250 employees and affect the entire supply chain. In the event of serious violations, a ban on imports is also proposed.

On January 1, 2021, the EU Conflict Minerals Regulation entered into force, imposing extensive due diligence requirements on importers of gold, wolfram, tin, and tantalum.

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Sustainable Corporate Governance

Moreover, the EU is currently working on a number of other sustainability projects, including a revision of the ”EU CSR Directive(EU–CSR-RL 2014/95). According to the Directive, the relevant companies in Germany will also have to submit a “non-financial statement” as part of their (consolidated) management reporting from December 31, 2017. At a minimum, this includes statements on environmental, social, and employee issues as well as on the respect for human rights and on anti-corruption (Sections 289 b et seqq., 315 b et seq. German Commercial Code (HGB)). The current revision aims to expand the scope, contents, and audit of non-financial statements. For example, the company’s effects on the environment are to be discussed in greater detail in the future. In addition, it is intended to integrate the control of “climate-related risks and opportunities.”

The regulation of long-term and sustainable corporate management and monitoring is part of another EU project (Sustainable Corporate Governance). This could particularly affect Directive 2017/1132 (aspects of corporate law) and Directive 2007/36 (exercise of certain rights of shareholders in public listed companies). It is currently still unclear, however, which areas of action are affected in particular.

The lawyers in our Corporate Social Responsibility (CSR) Taskforce advise companies, public institutions, and organizations in all aspects of the dynamic field of business, environment, and human rights.

Our services include the following:

  • We provide you with an overview of existing national, European, and international legal requirements of sustainable economic activity in the supply chain, keeping you informed of all current legislative activities and their effects. We also advise you on how to take the right steps at an early stage to effectively and economically implement the legal duties in the areas of CSR, human rights, social standards, sustainability, and the environment in your company and to avoid (potentially sanctioned) infringements.
  • We are experts in the interpretation and practical implementation of the new German Supply Chain Due Diligence Act
  • We support our clients in the required (update of) risk analysis, develop and implement effective compliance and risk management systems for due diligence in global supply chains or assist in extending existing systems to include “supply chain compliance”.
  • We draft customized sets of rules and codes of conduct (supplier code of conduct, business codes, CSR agreements, human rights policy statements). We review your distribution and supply contracts and adapt them with you in terms of compliance, CSR, and sustainability requirements.
  • We develop concepts for effective compliant supply chain management for your company, define your future supply chain policy, and establish efficient early warning systems with you.
  • We act as an external reporting office for your company, advise you on establishing a functioning complaints management system (e.g., a whistleblower hotline due to the new requirements of the Supply Chain Due Diligence Act) and assist you in operating and monitoring your internal or external whistleblower systems.
  • We work with you to develop and establish a suitable sustainability and CSR reporting and notification system for customers, authorities, and the public that meets statutory requirements (e.g., of the Supply Chain Due Diligence Act) and supports your positive corporate communications.
  • We work with you to analyze the measures your company has taken to date to comply with legal and contractual sustainability requirements. We examine the steps your company needs to implement to comply with new requirements of the Supply Chain Due Diligence Act and the requirements for sustainable corporate governance. We suggest necessary adjustments so that your company does not have to face negative consequences such as liquidated damages, fines, or exclusion from public contracts. We also offer seminars, training, workshops, and qualification measures for your company’s employees (e.g., from the Procurement department) and for managers who are responsible for these issues.
  • We review CSR issues and human rights compliance in the context of corporate transactions (compliance and human rights due diligence), perform risk and impact assessments, and implement the recommendations and results of our reviews with you in your company.
  • We assist you in litigation and regulatory proceedings related to human rights violations, due diligence violations, and disputes in global supply chains.
  • We advise you on all reputation issues that your company may face in connection with CSR and support your crisis management.
  • We advise you on issues relating to the liability of your general managers and executive board members in the event of due diligence violations. We also defend and represent companies and their management in criminal or fine proceedings and in the event of civil claims.
  • In the event of a suspected breach of CSR requirements, we support you in conducting internal investigations and take the necessary clarification steps on your behalf in close cooperation with senior executives, as well as any subsequent communication to the relevant authorities that may be required.
  • If there are indications that, for example, one of your business partners has violated relevant obligations (possibly at your company’s expense), and if you want to take legal action, we will gladly advise you in connection with the filing of criminal charges or reports with the competent supervisory authorities.

Current Publications

Sorgfalt muss sein - Neue Lieferkettengesetze in Deutschland und Europa: Auf was sich Unternehmen einstellen müssen
Verantwortung - Das Magazin für Nachhaltigkeit, CSR und innovatives Wachstum vom F.A.Z. Institut, November 2021  
Lieferkettensorgfaltspflichtengesetz - Gesetzliche Rahmenbedingungen für eine nachhaltige Beschaffung
Magazin „Klinik Einkauf“, October 2021  
Das Lieferkettensorgfaltspflichtengesetz – Eine Herausforderung (auch) für die deutsche Automobilindustrie
RAW, September 2021 by Dr. Christoph Schork, LL.M., Birgit Schreier
Neues Lieferkettengesetz: Sorgfaltspflichten für Unternehmen
Deutsche Handwerks Zeitung, May 04, 2021
Diese neuen Pflichten kommen auf Händler zu
E-tailment, April 21, 2021
Das neue Lieferkettengesetz: Wachhund an der (Liefer)Kette
Cassini, March 2021
Das neue Lieferkettengesetz - Wie können sich Unternehmen vorbereiten?
Nachrichten für Außenhandel, March 11, 2021
The Draft Supply Chain Act – New Compliance Requirements for Companies
After a lengthy dispute, the coalition government has reached a compromise on the German Supply Chain Act. Released in mid-February, the initial draft of the law had been widely amended by a second draft at the end of February. As of 2023, larger companies are to be obliged to comply with human rights and environmental requirements in their supply chains. In the event of violations, substantial fines may be imposed. More specifically, the draft law, also referred to as the “Due Diligence Act”, provides for the following regulations: Who is affected? In the drafting of the bill, it was feverishly discussed whether medium-sized companies would also have to implement the new regulations. The draft bill now provides for the scope of application of the Supply Chain Act to initially only extend to companies with at least 3,000 employees (as a rule) and a registered office or principal place of business in Germany. As of 2024, this number will drop to 1,000 employees. Temporary workers working at a company for more than six months need to be included in the headcount. If the group parent company has its registered office or principal place of business in Germany, all employees worldwide from all group companies need to be included. According to the justification given for the draft law, between 2,000 and 3,000 companies will be affected by the new regulations. This number is likely to be significantly higher, however, once the regulations relating to worldwide staff become effective. The new corporate due diligence requirements With the draft law, companies are obliged to comply with due diligence obligations on human rights, making it clear that these due diligence obligations particularly relate to the supply chains of the companies. The “supply chain” within the meaning of the law starts with the extraction of raw materials and ends with the delivery to the end customer. Within the meaning of the Act, Companies are, however, generally only responsible for their own business operations and for their direct suppliers. The authorities are asked to support the companies and to offer assistance in meeting their obligations. Risk management and risk analysis Companies must introduce and effectively implement appropriate risk management systems to comply with their due diligence obligations. These systems should be designed to identify risks and to prevent violations of protected rights (including life, health, fair working conditions, freedom of association, and protection against child labor, slavery, forced labor, and torture, etc.). Companies must also designate individuals or departments responsible for monitoring compliance with their due diligence obligations, such as a human rights officer. Management must regularly, but at least once a year, obtain information about the human rights officer’s work. Risk management must also include an appropriate risk analysis: Companies will be obliged to identify threats to protected legal assets in their own business areas and those of their direct suppliers. The government thus initially opts for a weakened form of risk analysis. Companies will not have to monitor and analyze the entire supply chain, including indirect suppliers, as had been previously discussed. Declaration of principle and preventive measures Companies that identify risks must take appropriate preventive measures. This primarily includes the adoption of a declaration of principle by management, which should describe the process by which a company intends to meet its due diligence obligations, identify the relevant risks and international agreements to which the company needs to adhere. It will also have to formulate the expectations the company places on its employees and suppliers in the supply chain. The draft law also explicitly mentions training in the relevant business areas as another appropriate preventive measure. Where protected rights have been violated, companies must take appropriate remedial action in their own business area with undue delay. For the elimination of grievances with direct suppliers, a concept must be created and implemented. In serious cases, in which it is impossible to eliminate grievances., it may be required to terminate the business relationship as a last resort. At least once a year, all preventive measures must be reviewed in terms of their effectiveness Internal complaint procedures Each company subject to the law must set up its own complaints procedure (such as a whistleblower hotline) or participate in an external complaints system whose effectiveness needs to be continually reviewed and updated as necessary. This should enable all affected individuals to point out human rights risks and violations in the supply chain. Once the company becomes aware of a violation, it must take action, irrespective of whether the perpetrator is a direct supplier or a more distant link in the supply chain. The new transparency requirements Companies must consistently document that they meet their due diligence obligations. Any such documentation must be kept for seven years. In addition, a report on meeting the due diligence obligations in the previous fiscal year must be published on the company’s websites no later than four months after the end of the fiscal year. The report that needs to comply with the legally stipulated structure and content must also be submitted to the competent authority for review and evaluation. If the requirements for the report are not met, the authority may require the company to make improvements. Legal action Contrary to the initial proposals in the benchmark paper issued in spring 2020, those affected by a breach in the supply chain cannot take legal action before German courts. Instead, they may authorize a trade union or a non-governmental organization to pursue their claims and to file legal action. Administrative control The Federal Office of Economics and Export Control is set to act as a supervisory authority (that may also impose fines) to monitor the implementation of these obligations. The supervisory authority should adopt a risk-based approach, meaning that (in addition to opening investigations on the basis of specific indications or requests) it will not only carry out spot checks ex officio but will focus on cases with the most serious risks. Moreover, the draft law creates a basis for the competent authority to issue necessary orders to companies, such as appropriate obligations to act or a plan of action. Where necessary, persons commissioned by the authority or authorized third parties may enter and inspect company and business premises to examine business documents and records. Correspondingly, companies and their representatives may be obliged to provide information to the competent authority and to hand over the relevant documents – including those relating to affiliated companies, foreign subsidiaries, and (in)direct suppliers. Companies or their representatives are to support the authority in implementing the measures. In addition, the competent authority also has the investigative powers set out in the Administrative Offenses Act so that it may also carry out searches in the company and seize evidence found. Penalty payments and fines In addition to the aforementioned measures, the supervisory authorities may also impose penalty payments of up to EUR 50,000.00 to enforce rules of conduct. Certain intentional or negligent breaches of the due diligence obligations stipulated in the Act may be sanctioned with fines. The bill provides for fourteen different breaches of duty, covering different factual variants that may result in fines such as the failure or the incorrect or untimely meeting of obligations relating to due diligence, risk analysis, or the complaints procedure. Fines may reach a maximum of up to EUR 8,000,000.00 or up to 2% of average (worldwide) annual revenue (of the three fiscal years preceding the authority’s decision) of the legal entities or affiliations operating as an economic unit. The extent to which the maximum limit is exhausted is governed, among other things, on the basis of considering the significance of the administrative offense, the nature of the charge (intent/negligence, consideration of assistance), the motives and objectives of the perpetrator, the performance (number and position of individuals in the company) and effects of the administrative offense, as well as pre- and post-offense conduct (previous offenses or steps to resolve the issue and compensate for damage). The financial circumstances of a company may also be taken into account Exclusion from public contracts Companies that have been fined with a minimum of EUR 175,000.00 (as a rule) for a serious infringement by a final court decision may also be sanctioned by exclusion from participating in a competition and the award of a public contract for three years (and until proven self-purification). Under the draft law, this exclusion is supposed to be mandatory above a certain contract value. What is next? The draft bill of the Supply Chain Act was approved by the German Cabinet on March 2, 2021. The legislative process is to be completed by summer recess and thus before the general elections. If this timeline is upheld, the law can enter into force on January 1, 2023 as planned. According to press reports, however, there are still discussions in the ministries, for example on the issue of whether trade unions and non-governmental organizations will be allowed to represent victims of human rights violations before German courts. In parallel, legislative proposals for mandatory social standards in supply chains are expected in the EU this year. On January 27, 2021, the Legal Affairs Committee of the European Parliament voted in favor of a specific proposal for a supply chain law. Moreover, the EU Commission is currently developing its own concept for corporate due diligence in the supply chain, which is to be presented in the summer of 2021. Advice for use in practice Although it is not yet certain whether the Supply Chain Act will enter into force in accordance with the current draft, the direction of the law is clear: companies subject to the law will soon be subject to far-reaching due diligence and transparency obligations whose implementation will require organizational effort. In the event of omitted, delayed, or inadequate implementation of the relevant obligations, companies risk not only penalty payments and fines but also the exclusion from awarding public contracts. Civil liability cannot be ruled out either. Against this background, companies should already examine whether and which obligations they are facing and how they will be able to implement them in a legally and technically sensible manner.
Der Entwurf des Lieferkettengesetzes
Update Distribution & Trade, February 26, 2021
Alleingang bei Sorgfaltspflichtengesetz
Lebensmittel Zeitung, February 19,  2021
Menschenrechte: Handel und Industrie kritisieren Sorgfaltspflichtengesetz
Lebensmittel Zeitung, February 18, 2021
Gesetzliche Rahmenbedingungen für eine nachhaltige Beschaffung geplant
Klinik Einkauf, December 2020
Legal requirements for the supply chain – Conflict Minerals Regulation (EU) to enter into force on 01/01/2021
A new EU Regulation will impose mandatory requirements on importers of conflict minerals to observe due diligence obligations from 2021. Its aim is to ensure that conflict minerals were obtained without the use of forced or child labor and that the relevant proceeds are not used for the financing of armed groups. At the same time, this provides an outlook on the legislative options for shaping the supply chain. What are “Conflict Minerals”? Smartphones, tablets, electronic components for vehicles, lighting products, or computer boards: all of these products that we are using in our high-tech everyday life contain mineral components. Many of these products require the use of the economically important minerals tin, tantalum, tungsten, and gold. They are referred to as “conflict minerals” as they often originate from politically unstable crisis-ridden regions that are affected by armed conflicts. Objective of the EU Regulation The EU is committed to breaking the link between the trade in conflict minerals, the financing of conflicts, and the associated exploitation of people. European economic operators are supposed to organize and monitor their sourcing of raw materials in such a way that they do not contribute to human rights violations in conflict-affected regions. Modeled after the U.S. Dodd-Frank Act and the OECD Due Diligence Guidance for Responsible Supply Chains In the U.S., annual legal reporting requirements for certain conflict minerals have been in place since 2010. In addition, the Organisation for Economic Co-operation and Development (OECD) issued a Due Diligence Guidance for Responsible Supply Chains of Minerals from Conflict-Affected and High-Risk Areas in 2012. The Guidance contains legally non-binding recommendations to help companies comply with human rights and avoid contributing to conflicts in high-risk areas. The EU Regulation has been modeled after this international standard and commits businesses in the European Union to a “concept of responsible sourcing.” Scope of application From 2021, the Conflict Minerals Regulation will apply to all importers declaring tin, tantalum, tungsten, and gold – above certain thresholds – for release for free circulation in the European Union or instruct anyone to do so (so-called “Union importers”). No less than 95% of the total volumes of each mineral and metal imported into the European Union is subject to the obligations of Union importers set out in the Regulation. Due diligence obligations for the import of conflict minerals: Risk management system The core of the Regulation is the obligation of Union importers to maintain a risk management system: The companies are to identify and address actual and potential risks linked to conflict minerals to prevent or mitigate adverse impacts associated with their sourcing activities. Such risk management systems comprise entire sets of measures: Union importers are to adopt and clearly communicate to suppliers and the public up-to-date information on their supply chain policy. Senior management is to be assigned responsibility to oversee the supply chain due diligence process and to maintain records of those systems for a minimum of five years. The OECD Due Diligence Guidance is to be incorporated into supplier relations and adopted in contracts and agreements with suppliers. A grievance mechanism as an early warning system for risk awareness and A traceability system are to be established. Audits by independent third parties and disclosure requirements Union importers are also required to have their risk management system audited by independent third parties, such as auditing firms. The audit reports are to be made available to the competent German regulatory authority. They will thus be accessible to downstream buyers in the supply chain in the form of a report to be published annually on the Internet. Recognition of supply chain due diligence schemes and list of responsible smelters and refiners Union importers will be able to demonstrate compliance with the requirements of the Regulation by using a system developed and overseen by governments, industry associations or relevant organizations. The systems must be submitted for recognition by the EU Commission. The Commission will also establish and keep a global,up-to-date list of responsible smelters and refiners. Checks and sanctions The competent authority for the enforcement of the Conflict Minerals Regulation in Germany is the Federal Institute for Geosciences and Natural Resources. It has extensive rights of intervention and may not only obtain information, summon individuals to appear, and enforce remedial action by way of fines of up to EUR 50,000.00. In substantiated cases, the Institute may even access company premises and inspect commercial documents. Conclusion and outlook The Conflict Minerals Regulation requires Union importers to comply with extensive due diligence obligations in their supply chains. By introducing mandatory standards for risk management systems, the EU is demonstrating that it is increasingly focusing on the social responsibility of European businesses to observe human rights. The Regulation sets out the means available to legislators to enforce supply chain due diligence obligations. It is therefore also of interest to companies that do not import conflict minerals, but are discussing the issue of supply chain responsibility.
Lieferkettengesetz: Eine Herausforderung für deutsche Unternehmen
VR International No. 10 | October 2020
Neue gesetzliche Vorgaben für Supply-Chain-Compliance
ComplianceBusiness, Ausgabe 3, September 2020, S. 8-11
Eckpunktepapier eckt bei Altmaier an
Lebensmittelzeitung, September 10, 2020
The new white paper - EU combats distortions of competition by third states
Update State Aid / Update Corporate/M&A, August 2020
Corporate Social Responsibility in der Lieferkette - Eckpunkte eines "Sorgfaltspflichtengesetzes"
Update Compliance, No. 10

Current Lectures

Das neue Lieferkettengesetz: Rechte und Pflichten von Unternehmen in der internationalen Lieferkette
QAD Allocation Kundentag, November 3, 2021  
Das neue Lieferkettengesetz - Rechte und Pflichten von Unternehmen in der internationalen Lieferkette
Die digitale Garage - Thema Lieferkettensorgfaltspflichtengesetz - Kooperation mit Cassini Consulting & MaibornWolff GmbH, November 10, 2021   
Sorgfaltspflichten in globalen Lieferketten: Neue Anforderungen an Geschäftsführer
Kölner Forum für GF Heuking Kühn Lüer Wojtek, October 28, 2021  
Das neue Lieferkettengesetz: Eine juristische Einordnung der Rechte und Pflichten von Unternehmen in der internationalen Lieferkette
BME-Region Berlin-Brandenburg, October 27, 2021  
Paneldiskussion: Wie verändert das Lieferkettengesetz den Einkauf?
Procurement Summit 2021, September 30, 2021
Das neue Lieferkettengesetz - Bedeutung und Folgen für Unternehmen
FAZ Institut, June 23, 2021
Sorgfaltspflichten in globalen Lieferketten: Wie Manager Risiken im Unternehmen vermeiden können
Webinar, Interim Profis, January 22, 2021
Was auf Organe und D&O-Versicherer zukommt II: Kernpunkte des Lieferkettengesetzes
DGVH-EDUCATION-WEEK, December 14-18, 2020
Vertragliche und gesetzliche Haftungsrisiken im Unternehmen vermeiden
Zollforum Baden-Württemberg - online, November 27, 2020

Our lawyers in the field of Corporate Social Responsibility (CSR)

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