EU Deal on Supply Chain Law Collapses: Setback for Regulatory Progress

In a recent turn of events, the European Union’s attempt to moderate its stringent supply chain legislation has hit a snag. The proposed law, aimed at bolstering human rights and environmental protection, faced opposition, fearing it would introduce excessive bureaucracy. As a result, a compromise intended to soften these regulations has temporarily collapsed.

This setback occurred when a narrow majority of the European Parliament members voted against initiating final negotiations with EU countries. Instead, they opted to revisit the proposal’s content in early November, allowing time for all parliamentary groups to suggest further amendments.

Details of the Proposed Compromise

Initially crafted earlier this month, the compromise was a collaborative effort among the conservative European People’s Party (EPP) group, which includes Germany’s CDU and CSU, the Social Democrats, and the Liberals in a Legal Affairs Committee. The agreement proposed that only large corporations with over 5,000 employees and an annual turnover exceeding 1.5 billion euros should be subject to the law’s requirements.

This marked a significant shift from the original thresholds, which set the limits at 1,000 employees and a turnover of 450 million euros. Moreover, the compromise suggested exempting companies from civil liability at the EU level if they breached the regulations.

Political Dynamics and Reactions

The factions of the EPP, Social Democrats, and Liberals typically operate in an informal coalition within the Parliament, holding a slim majority. However, the secret ballot revealed deviations from the party lines, indicating internal dissent. “This is a disaster for the EPP,” commented Green MEP Anna Cavazzini shortly after the vote.

Some Social Democratic members had previously vehemently criticized the compromise, accusing the EPP of coercing them into agreement by threatening to collaborate with far-right factions. The far-right factions themselves, along with the Greens and the Left, opposed the compromise for varying reasons—the former found the dilutions insufficient, while the latter considered them excessive.

Jörgen Warborn, the EPP’s lead negotiator, addressed the allegations of coercion during a press conference, focusing on the majority achieved with the Social Democrats and Liberals. He emphasized the importance of this majority in addressing Europe’s challenging circumstances.

Implications and Future Prospects

The European supply chain law, ratified last year, aims to globally enhance human rights and environmental standards. It holds large companies accountable for profiting from violations such as child or forced labor.

Debate and negotiations will continue in the EU Parliament until the proposed amendments are revisited next month. For a new agreement to take shape, the EPP might need to seek alignment with either the Social Democrats and Greens or strike a compromise with right-wing factions. If a majority supports the amendments in the upcoming November vote, Parliament can then proceed to negotiate with the council of the 27 EU member states, with a goal to finalize the legislative changes by the end of the year.