German liberals have confirmed the Berlin government would abstain in voting on the EU’s proposal for a corporate due diligence law that would see companies becoming liable for human rights breaches in their supply chains, with the majority now likely hinging on Italy.

The Corporate Sustainability Due Diligence Directive (CSDDD) has been harshly criticised by business representatives as it could create further administrative burdens at a time when both the EU and national governments are seeking to reduce red tape.

Ministers of Germany’s liberal FDP party (Renew) have now confirmed that Germany will abstain on the law, which in the voting procedure at the EU level de facto works as a ‘no’ vote.

“The Federal Ministry of Finance and the Federal Ministry of Justice have held intensive discussions on the trilogue result of the draft EU Corporate Sustainability Due Diligence Directive (CSDDD),” FDP ministers Christian Lindner and Marco Buschmann wrote in a letter to business associations.

“Both houses cannot support the result. In the Council of the European Union, this results in Germany abstaining, which has the effect of a ‘no’ vote,” they added.

Germany has officially supported the EU law from the outset but has also raised concerns as it wanted to prevent too high a burden on companies, particularly small- and medium-sized ones.

When the law was initially passed by EU countries in 2022, Germany submitted a diplomatic note calling for a so-called “safe harbour” clause which would make it easier for companies to reduce legal liability.

“The trilogue result would lead to companies being liable under civil law to a considerable extent for breaches of duty in the supply chain,” the ministers wrote in their letter.

While acknowledging some “partial success to make the liability rules more practicable” during the negotiations, the draft EU law would still go beyond what is set in a similar German law, known as the supply chain act, they added.

“The liability regime represents a greater burden compared to the German Supply Chain Due Diligence Act, which does not contain a liability regime, and would place an additional burden on the companies concerned,” the ministers wrote.

Another combustion engine saga?

The German abstention likely means that the final adoption of the law now hinges on the position of Italy, and speculation about what Rome could do has grown in recent weeks.

If Germany abstained, Italy would do so as well, the German daily Handelsblatt reported in January, adding that this would result in no majority of the law.

Among member states, a broad majority known as qualified majority is necessary, which means that 55% of member states, representing at least 65% of the EU’s population, need to vote yes.

Some smaller countries, such as Sweden, Finland, Czechia, and Estonia, have in the past raised concerns and thus could potentially also vote against the deal.

This resembles a similar situation from last year, where a last-minute abstention of Germany on the de-facto phase-out of cars with internal combustion engines, part of the EU’s new CO2 standards for cars, was preliminarily stopped after Germany surprisingly abstained despite previously stating support.

On the CO2 standards for cars, Italy also voted against and together with some smaller countries blocked the final adoption.

The situation could only be resolved after the European Commission struck a deal with Germany, committing to further allow cars with internal combustion engines after 2035 if they run solely on climate neutral fuels known as e-fuels.

“Nobody is surprised”

However, unlike the e-fuels saga, the German abstention on the due diligence law had already been expected, particularly as the German FDP is now campaigning for the EU election by promising to cut EU bureaucracy.

In Brussels, “nobody is surprised by that”, an EU diplomat said.

A vote on the CSDDD at the level of EU ambassadors is planned for 9 February, which was “still far away”, another diplomat said. Furthermore, Germany has not officially indicated its voting position yet, they added.

The Ministry for Labour and Social Affairs, led by Hubertus Heil (SPD/S&D), which is leading negotiations for Germany, is a strong supporter of the law.

If the German government reaches no formal agreement before that date, however, internal rules of the government coalition would see the country abstain automatically, a move often referred to as “German vote”.

However, it is unlikely that changes could still be made to the final agreement as the deal reached in the trilogue negotiations in December was a “fragile creature”, the first diplomat said.

Time is pressing because work on legislation is expected to end soon, as the European Parliament holds its last session ahead of this June’s European Elections in April.

[Edited by Zoran Radosavljevic]

Source: Εuractiv.com