The planned EU supply chain law threatens to fail because of Germany. The Ministry of Justice and the Ministry of Finance could not support the plans, government circles said on Thursday. “In the Council of the European Union, this results in Germany abstaining, which ultimately has the effect of a ‘no’ vote,” says a letter from Justice Minister Marco Buschmann and Finance Minister Christian Lindner, which is available to the German Press Agency. 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 that their business model and strategy are compatible with meeting the Paris climate goals to limit global warming.
Political deal
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 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.
Interpretation too strict?
There is already a supply chain law in Germany, but the EU version goes beyond the requirements of the German law. German law applies to companies with more than 1,000 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 is currently excluded in the German supply chain law. There is currently no comparable law in Austria.
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.”
Reactions from Austria
The Industrial Association and the Austrian Chamber of Commerce have reiterated their criticism of the planned EU supply chain law because of the threat of over-regulation. The nature conservation organization WWF harshly criticized the attitude of the company representative organizations, even though they emphasized that they were not opposing the fundamental goals of the project. However, Austria’s approval is still open as negotiations are still ongoing, according to the office of Economics Minister Martin Kocher (VP).
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