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Commentary: Don’t Settle For Less - Thoughts on the Current Draft German Supply Chain Act

"Don’t Settle For Less: Thoughts on the Current Draft German Supply Chain Act", 22 April 2021

The German Parliament will debate today a draft for a due diligence act intended to protect human rights in global supply chains, as submitted by the German government...

...In this blogpost, we argue that the German Draft Law – at least in its present form – is far from being as ambitious as the drafters pretend it to be. In this line, we highlight three key areas of concern within the draft legislation. Against the backdrop of the existing international framework and the proposed directive of the EU Parliament, we show that the current German Draft Law needs to be amended in order to live up to its own claim to fully implement international standards...

...The first area of concern relates to the material as well as the geographical scope of application of the Draft Law...

...First, the material scope of the envisaged law is limited to corporations with more than 3.000 employees (§ 1 (1) Nr. 2 Draft Law). Even in 2024, when this minimum-threshold will be reduced to 1.000 employees as stipulated in § 1 (1) Draft Law, last sentence, the law would still only cover about 2.900 corporations in total...

...Second, regarding the geographical scope of application, the Draft Law only applies to companies with either headquarter, main base of business or registered office in Germany (§ 1 (1) Nr. 1 Draft Law). The demand expressed in the run-up to the legislative initiative to also address companies merely operating in Germany was thus not included in the current version of the Draft Law...

...The rationale of due diligence acts should be the effective protection of human rights along the whole supply chain. The truth is that indeed the risk of human rights violations increases the further down the supply chain one looks. However, with its limitation of due diligence to solely apply vis-à-vis direct suppliers, the current German Draft Law does not live up to this reality. More precisely, the current version extends the company’s due diligence to indirect suppliers only provided it has obtained corresponding substantiated knowledge about a possible violation of human rights or environmental obligations (§ 9 (3) Draft Law)...

...Finally, the current Draft Law does not provide for civil liability of corporations for those human rights violations that have occurred due to a breach of their due diligence obligations...

...the current Draft Law should be amended in the three areas carved out above. If the objective is really to establish a law that provides for an “effective remedy” for victims of human rights violations in global supply chains and that guarantees corporate accountability, we urge German lawmakers not to settle for less than is envisaged by international standards. Making the suggested changes would not only be consistent with the German presidency’s position in the EU Council, but also constitute a necessary step towards the effective protection of human rights in global supply chains.

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