German FDP is obstructive: no EU liability yet

Due to disagreements in the German coalition, the European Union must postpone the introduction of chain liability and mandatory precautionary measures for (medium) large companies. The two liberal FDP ministers Lindner (Finance) and Buschmann (Justice) believe that the European new due diligence law deviates too much from the existing German law on chain liability.

According to FDP members, the planned EU law goes far beyond what is considered practical and reasonable, and they fear it will have negative consequences for the German economy. The blocking position was met with sharp criticism in advance from politicians from the SPD and the Greens, who are also at odds with the FDP members about the financing of the desired agricultural transition.

As in other EU countries, within the German coalition, ministers abstain from voting on EU decisions in the event of political disagreements. Because Italy also abstained from voting in Brussels at the last minute, the proposal did not receive the required two-thirds majority.

Due to the blockade in Germany, the approval of the European supply chain law has been temporarily halted. This raises the question whether the directive can be adopted before the European elections in early June. The Netherlands (like some other EU countries) already has a due diligence scheme as part of the Corporate Social Responsibility Act, but it is (still?) limited and voluntary.

In Germany, a national law has been in force since 2023 requiring large companies to ensure compliance with international human rights and environmental standards in their own supply chains. The EU law would apply to companies with 500 employees or more, including companies that do not have their headquarters in one of the EU member states, but generate high turnover in the EU. 

Under the 'careful governance rules', companies must not only assess their own actions for human rights and the consequences for the environment and climate, but also those of their (raw material) suppliers and their customers. Violations can also result in fines.

Smaller companies with at least 250 employees would have to comply with the regulations if 20 million euros of their turnover is achieved in the textile industry, agriculture and food production or the extraction and processing of mineral raw materials. 

This would mean that (for example) food processors would not only have to check whether their suppliers of potatoes, onions or sugar beets comply with EU rules on pesticides, but also (for example) whether their buyers pay the statutory minimum wage.