The planned new EU supply chain law threatens to fail because of Germany. The Federal Ministry of Justice and the Federal Ministry of Finance could not support the plans, government circles said on Thursday.
“This results in Germany abstaining in the Council of the European Union, which ultimately has the effect of a “no” vote,” says a letter from Justice Minister Marco Buschmann and Finance Minister Christian Lindner, both FDP, to the German Press Agency is present. A final vote among the EU states is still pending in the EU Council. “The Pioneer” first reported on the attitude of the FDP ministries.
The EU Supply Chain Act aims to hold large companies accountable if they profit from child or forced labor outside the EU. Larger companies must also create a plan to ensure their business model and strategy are consistent with meeting the Paris climate targets to limit global warming.
Negotiators from the European Parliament and the EU states agreed on a compromise on the project in mid-December. But there is still only a political deal. A precise legal text is currently being drafted by officials – this could be finalized in the coming weeks. It then has to be finally approved by the EU states and the European Parliament.
An EU diplomat told the German Press Agency that with Germany abstaining, it was unclear whether there would still be a sufficient majority among the EU countries for the project. There is speculation that other countries will follow Germany’s decision and now also do not agree to the project. This means that one of the flagship projects of EU trade policy is in jeopardy.
According to another EU diplomat, the Belgian Council Presidency will continue to push the project forward. An agreement is being worked on, it said.
There is already a supply chain law in Germany, but the EU version goes beyond the requirements of the German law. The German law applies to companies with more than 1000 employees. This limit is likely to be reduced by the EU version. It is also envisaged that companies can be held liable under civil law and, for example, assert claims for damages. This has so far been ruled out in the German supply chain law.
Buschmann and Lindner criticized that the EU law would lead to companies being significantly liable under civil law for breaches of duty in the supply chain. In addition, significantly more companies would be affected than under the current German legal situation. The construction sector should also be classified as a so-called risk sector. This could be a threat to the existence of small and medium-sized companies in this area, which has already been hit by increased building interest rates. “In our opinion, many companies simply do not have the appropriate human and financial resources,” argue the ministers. “It is to be feared that even less will be built in Germany in the future.”
Several leading German business associations recently called on Chancellor Olaf Scholz (SPD) to refuse approval of the new EU supply chain law. They warned of “legal uncertainty, bureaucracy and incalculable risks.”(dpa)
This post was updated on February 1st at 10:40 am