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Minister Buschmann, Lindner: Many companies do not have the human and financial resources

Photo: Chris Emil Janssen / IMAGO

The federal government will probably not agree to the EU plans for a supply chain law due to resistance from the FDP. Finance Minister Christian Lindner and Justice Minister Marco Buschmann said they could not support the result of the discussions between the EU Commission, Parliament and member states. “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 the two FDP politicians.

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.

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 and could be finalized in the coming weeks. The text then has to be finally adopted by the EU states and the European Parliament.

Germany's abstention could cause proposed legislation to fail

An EU diplomat told the dpa news agency that with Germany abstaining, it was unclear whether there would still be a sufficient majority among EU countries for the project. There is speculation that other countries will follow Germany's decision and now also not agree to the project. According to another EU diplomat, the Belgian Council Presidency is still working on an agreement on the law.

There is already a supply chain law in Germany, but the EU version goes beyond the requirements of the German law in some aspects. According to the drafts, for example, it should apply to companies with 500 or more employees; in Germany, only companies with more than 1,000 employees are obliged to do so.

It is also envisaged that companies can be held liable under civil law and claims for damages can be asserted. This has so far been ruled out in the German supply chain law. In other aspects, however, the EU draft could make it easier for companies than the German law (read more here).

FDP ministers believe the burden on companies is too high

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.

They also objected to the construction sector being classified as a so-called risk sector. This could threaten the existence of small and medium-sized companies. “In our opinion, many companies simply do not have the appropriate human and financial resources,” argue the ministers. There is a “fear that even less will be built in Germany in the future.”

In Germany, the major business associations had called for a no to the EU plans. The FDP presidium had already spoken out clearly against the EU directive in mid-January. In practice, however, companies are often much further ahead - read a report here.

If the European project fails, German companies would have to continue to comply with requirements under the German Supply Chain Act that their European competitors do not have to observe. At the same time, model calculations by German industrial companies for the EU Parliament show that the control effort with the EU directive is likely to be lower than with German legislation.

kko/dpa-AFX/Reuters