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16 Feb 2021

European Coalition for Corporate Justice

Commentary: A foot in the door - Will the German draft law open doors for EU-wide corporate accountability?

After months of tough negotiations, the German government announced it has agreed on a draft supply chain law last Friday. According to our member Germanwatch, representing the German CorA network of circa 70 German NGOs, the agreement is “an important first step” in strengthening human rights in the value chains of German companies...

If approved by parliament, Germany will become only the second EU country with a comprehensive, cross-sectoral corporate human rights and environmental due diligence law...

The agreement falls short of providing victims of human rights violations improved legal protection before German courts, despite all three ministers for development cooperation, for labour and social affairs, and for the economy acknowledging that the purpose of the law should be to enhance judicial remedy for overseas victims.

To be effective, the future German law must include a civil liability provision to strengthen compensation claims by affected workers and other foreign victims. Two of the three ministers fought hard for stronger civil liability rules, but ultimately ran out of steam due to concerted pressure from corporate lobby groups.

To better align the proposal to the UN Guiding Principles, the Bundestag will also need to clarify that companies must proactively identify risks throughout their entire value chain, instead of letting companies off the hook until they are prompted by complaints.

The agreement has also been criticised for neglecting environmental risks and harms.

If they are serious about delivering real change, German lawmakers will have to take into account that the worst cases of human rights violations and environmental damage, such as child labour or toxic waste dumps, are typically found at the bottom of corporate value chains.

They will also have to extend obligations to small and medium-sized enterprises, especially those in high-risk sectors...

Even if Germany civil society had hoped for a more ambitious text, the agreement sends a strong message that the momentum for EU-wide due diligence legislation is gaining important ground.

Brussels should use the German announcement as a springboard for a Europe-wide framework that provides judicial remedy for overseas victims, as well as legal certainty and a level-playing field for all businesses operating in the EU.

Members of the European Parliament will be able to have their say on the issue at next month’s plenary session. We strongly urge them to vote in favour of MEP Lara Wolters’s report on corporate due diligence