Several EU member states have yet to decide on their position on some key aspects of the EU’s draft law to hold companies accountable for human rights and environmental violations throughout their value chain, slowing down the ongoing negotiations on the file.

[...] Negotiations are proceeding sluggishly, with a third round of negotiations on Thursday (7 September) focusing on technical aspects rather than the more contested elements of the directive, which include the scope of the directive.

“We’re advancing at the technical level,” an EU diplomat told EURACTIV, adding that there is good communication with the European Parliament negotiators. [...]

Divided opinions

The “process of opinion-forming in the federal government continues”, a spokesperson for the German labour ministry, which is in charge of the negotiations, told EURACTIV last week. This revealed that the German government still has not formed an opinion on the law that national governments in the EU Council have officially found a common negotiating position in December last year.

Other countries, like Luxembourg and the Netherlands, officially maintain the same position reached in the common approach from December. Yet, this position does not give the Spanish presidency a practical mandate to lead negotiations with the Parliament on the most contested issues.

In particular, while EU lawmakers want to make sure financial services are covered by mandatory due diligence rules, last year member states provisionally agreed that it should be up to individual countries to decide whether to include them or not.

In line with last year’s position, France continues to oppose the inclusion of financial services under mandatory due diligence rules, a position shared by a number of other countries.

“Taking into account the specificities of the regulated financial undertakings, Bulgaria supports their exclusion from the scope of the Directive,” said a Bulgarian spokesperson, while a Czech official said the country supports maintaining the discretion of member states as agreed in the common position.

Contested definitions

The definition of value chain is another key and contentious point, with the European Parliament pushing to include a part of the downstream segment of value chains, like the sale and transportation of products, under the directive.

A narrower definition, limited to the supply chain and excluding the downstream part, would also exclude financial services, whose adverse impacts are mostly related to their downstream activities.

For Czechia and Lithuania, the definition needs to be refined to provide better legal certainty, while both Poland and Slovakia are specifically in favour of narrowing the scope of the directive to the supply chain part only.

“Extending the concept to activities like product development, production, sale and delivery […] requires further detailed discussions,” a Polish official told EURACTIV, adding that “the introduction of a new (wider) concept may trigger some chaos” as the term ‘chain of activities’ does not exist in international guidelines.

Administrative burdens

Another concern shared by several member states, including Poland, Slovakia, Sweden and Germany, is the administrative burden on companies, which, according to some countries, would be excessive especially if downstream activities ended up being covered by the rules.

“Companies should not be held liable for activities within their value chain which are out of their control,” a Slovakian spokesperson told EURACTIV.

The German government recently called on EU institutions to lower EU reporting obligations for companies in an effort to cut bureaucracy and is likely to push for companies under 1,000 employees to be excluded from the directive, in line with its national due diligence law.

The EU Commission is also expected to come forward with an initiative to lower reporting requirements in the coming weeks.

While meetings will continue in the coming weeks to sort out details on a technical level, member states will likely make more substantial decisions in the next negotiation round set to take place in November.