German Supply Chain Law: RegE (Government Draft Law), FAQ and EU

In our blog post "Here we go after all: National Supply Chain Act coming!" of 12 February 2021, we reported: After tough negotiations, the responsible ministers Heil, Müller and Altmaier have reached a compromise on human rights due diligence in the supply chain. As announced, the German Federal Cabinet has now also debated the Supply Chain Act. It adopted the government draft as early as 3 March 2021. The German Federal Government has briefly summarised in a corresponding notification what it considers to be the most important points of the draft.

The Draft Law can be found on the website of the Federal Ministry of Labour and Social Affairs (Bundesministerium für Arbeit und Soziales, BMAS) on the German Due Diligence Act. Further information can also be found there, starting with a further summary from the point of view of the BMAS on the original draft bill of the BMAS up to a total of more than thirty comments on the draft law.

Finally, the website of the Federal Ministry for Economic Cooperation and Development (Bundesministeriums für wirtschaftliche Zusammenarbeit und Entwicklung, BMZ) on the Supply Chain Act is also instructive (a uniform terminology has not yet been developed). The BMZ has summarised the central regulations there and answers initial questions about the Supply Chain Act. In addition, a more detailed catalogue of questions and answers issued by the BMZ is available for download as a pdf. These FAQs provide a good overview of the current draft legislation. The same applies to the FAQ, which the BMAS has made available on its website www.csr-in-deutschland.de (see here).

Finally, the Federal Ministry for Economic Affairs and Energy has also issued a press release on the draft law.

According to the BMZ, the objective is still for the German Federal Parliament to pass the law before the summer break. Not least in view of the sometimes fierce criticism of the draft law from both the business community and human rights organisations, it remains to be seen whether this will actually happen.

The BMAS' comment that the Due Diligence Act (not yet passed by the Federal Parliament) is to be adapted to a future European regulation with the aim of preventing competitive disadvantages for German companies is also cause for concern. According to the German daily newspaper FAZ, EU Commissioner for Justice Didier Reynders expects the German government's legislative initiative to provide support for the planned regulation at the EU level. At the same time, he had clearly expressed that the EU Commission would like to go farther in its proposal for an EU-wide supply chain law. The Commission wanted to send a "strong signal". To be precise, this means: "We want to go far, far down the supply chain and far in terms of the number of companies affected." In other words, it is to be expected that a European regulation will go beyond the current draft for the German Supply Chain Act. A specific regulatory proposal from the EU Commission is expected next June. According to current planning, the German Supply Chain Act should then almost be passed.

Conclusion:

It remains enthralling! Even if there are delays along the way, the Supply Chain Act can definitely be expected at German and/or European level in one form or another sooner or later. This is not only relevant for those companies for which the human rights due diligence obligations provided for by law in the future will apply directly. It is to be expected that precisely these companies will expand their supplier contracts in order to fulfil their human rights due diligence obligations. This means that the future legal requirements will also be passed on to companies that do not necessarily fall directly within the scope of the law. Not only, but also for this reason, all companies would do well to deal more intensively with the topic of human rights due diligence in the future.

Dr André Depping

Dr Daniel Walden