German parliament passes mandatory human rights due diligence law
In December 2019, German Labour Minister Hubertus Heil and Development Minister Gerd Müller announced their intention to prepare key points of a mandatory due diligence law.
According to Redaktionsnetzwerk Deutschland, the ministers were planning on presenting these on 10 March 2020, but were stopped by the Chancellery and the Ministry of Economics.
On 25 June 2020, German newspaper Handelsblatt first reported on the details of these unofficial draft key points.
At a press conference on 14 July, Federal Ministers Heil and Müller presented the results of a second quantitative survey assessing German companies' due diligence efforts in line with the German National Action Plan (NAP) on Business & Human Rights. Only 22% of the 455 companies that submitted a vaild survey response could show that they adequately meet the NAP requirements. Under the NAP, the Government has agreed to consider mandatory due diligence legislation if less than 50% of German companies with more than 500 employees introduce human rights protections by 2020. The current coalition agreement states that if companies’ voluntary implementation proves insufficient, the Government "will introduce appropriate legislation". As the results of the second survey show this to be the case, the Ministers stressed their aim is to adopt a law before the current election period ends in 2021. Civil society organisations and coalitions including Germanwatch and the 'Supply Chain Law Initiative' have called on the Federal Government and Chancellor Merkel to follow through. Minister Heil as well as NGO statements also maintained that an ambitious German law would give more credibility to Germany's efforts towards EU-level due diligence.
The three ministries involved - Labour, Development and Economics ministries - were unable to reach an agreement on key points, and particularly on the issue of liability, in time for the Cabinet to adopt them at the last meeting of the year 2020. Their adoption had initially been planned for August 2020 - according to the CSO coalition Initiative Lieferkettengesetz, Economics Minister Altmeier was blocking the process.
In early 2021, the issue was negotiated directly among Chancellor Merkel, Vice Chancellor Scholz and the relevant ministries.
On 12 February 2021, the ministries announced that they had agreed on a compromise for a legislative proposal, presented by Ministers Altmaier, Heil and Müller at a joint press conference. CSOs welcomed the agreement as an important and overdue step that also adds momentum towards EU-wide legislation, however criticised in particular the lack of civil liability and called on German MPs to ensure the proposal is strengthened and due diligence requirements are UNGP-aligned in the upcoming parliamentary procedure. Major business associations and the Ministry of Economics were also criticised for advocating against a stronger law.
On 3 March, after a brief formal stakeholder consultation (Verbändeanhörung), the Federal Cabinet passed an official government draft, which was debated in the parliament's lower house (Bundestag) and then referred to the Bundestag's Labor and Social Affairs Committee on 22 April. The upper house (Bundesrat) first discussed the matter on 7 May, and agreed not to raise any objections to the government draft.
Voices across civil society, business (see joint statement by more than 50 companies), administration and academia welcomed the announcement of the government draft, but called for urgent improvements in parliament to eliminate weaknesses and ensure the law is more in line with international standards and efforts at EU level.
The adoption of the law by the Bundestag, originally scheduled for 20 May, was postponed at short notice. According to media reports, business groups and conservative MPs saw a need for further discussion around civil liability. Civil society and other voices strongly criticised the delay. On 27 May, the governing parties agreed on a further compromise, clearing the way for formal adoption by the Bundestag.
The final plenary debate and vote took place in the morning of 11 June – the law was adopted with 412 votes in favour, 159 against, and 59 abstentions. Civil society welcomes it as an important first step and paradigm shift in Germany but also points to gaps left by the compromise.
The “Act on Corporate Due Diligence in Supply Chains” will enter into force in 2023 to initially cover companies with 3,000 or more employees, and from 2024 onwards companies with 1,000 or more employees. These companies must identify risks of human rights violations and environmental destruction at direct suppliers and, if they gain "substantiated knowledge" of a potential abuse, also at indirect suppliers. They must take countermeasures and document them to the Federal Office for Economic Affairs and Export Control (BAFA), which can issue fines if companies violate their due diligence obligations. Affected parties can demand that BAFA takes action. See here for a CSO analysis of "what the new SUPPLY CHAIN ACT delivers – and what it doesn’t."
You can find all final amendments (in German) to the Federal Government's legislative draft here , which was otherwise passed unchanged by the Bundestag. On 25 June the law was also approved by the parliament's upper house (Bundesrat).
The final legal text as published in the Federal Law Gazette on 22 July, as well as the previous government draft and all statements as part of a formal stakeholder consultation are available on the website of the Federal Ministry of Labour and Social Affairs.
More on this subject can be found below, and additional information is also available in German here.