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Political volte-face hits EU supply chain law amid unwavering Belgian ambition

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Belgian officials have started to test the waters for a speedy legislative solution to save the draft EU corporate due diligence law by mid-March, Euractiv understands, after numerous member state defections forced them to abort a closely-watched vote among EU ambassadors on Wednesday (28 February).

Over half of the bloc’s 27 member states effectively blocked progress on the Corporate Sustainability Due Diligence Directive (CSDDD) this morning, spoiling chances for Belgian diplomats holding the Presidency of the Council to smoothly get the legislation over the finishing line before the EU Parliament goes on recess for the upcoming June elections.

Many countries – including Austria, Bulgaria, Czech Republic, Hungary, Lithuania, Luxemburg, Malta and Slovakia – joined the ranks of those already averse to passing the law – namely, Germany, Italy, Sweden, Estonia and Finland – a source close to negotiations said.

The most sobering volte-face, however, came from French officials, who are understood to have held one-to-one meetings with Belgian diplomats last week to substantially downsize the scope of the legislation, withholding their support for the legislation.

France had previously shifted to endorsing the draft CSDDD – which aims to ramp up corporations’ accountability for labour, environmental and human rights abuses across their supply chains – after the financial sector was largely excluded from some of the law’s core due diligence requirements.

However, the country now seems to have put pressure on Belgian negotiators to increase the employee threshold for companies to fall under the scope of the directive from 500 to 5,000 (thus aligning the EU law to existing French rules), effectively bringing the number of affected companies from 15,000 to 1,400.

The much broader-than-expected opposition at the inter-member-states level came after weeks of strenuous lobbying efforts initiated by national industry associations as well as Germany’s ministers from the liberal FDP party.

Now, Belgian envoys have a tight window to reach a new compromise text that can be backed by a qualifying majority and put to the final approval of the Parliament before its last pre-election plenary session in April.

Problematically though, the newly-advanced requests at stake are understood to entail much more meaningful changes than the usual EU legislative pathway would envision once the political trilogue phase is closed – i.e., after co-legislators seal a political agreement on a draft text of the law, which for the CSDDD happened in December.

After the trilogue stage, a  so-called ‘corrigendum’ period is usually utilised to translate laws into national languages before getting the final stamp of approval – and now Belgians aim to use this timeframe to turbo-charge negotiations and clinch a new deal instead.

“There is still a small window under the corrigendum procedure,” an EU diplomat told Euractiv, pointing to a new target deadline around mid March.

However, Lara Wolters, the Dutch MEP (S&D) in charge of the file, painted a considerably more sombre picture after today’s political U-turn from member states after “over two years of careful negotiation”.

‘Flagrant disregard’ for Parliament, chief negotiator says

“To walk back on commitments or come up with more demands shows a flagrant disregard for the European Parliament as co-legislator” Wolters said at a press conference on Wednesday late afternoon. “So what happened today is very concerning.”

“The failure of member states to improve this agreement is an outrage” she added, chastising German, French and Italian officials in particular for yielding to industry lobbying.

Referring to Germany’s and France’s main business associations (BDI and Medef), she said “I have the feeling that they have their leaders on speed dial, and that is putting it politely.”

While the situation in Italy was not as clear, she added, “what is very clear is that behind the scenes there, [President] Giorgia Meloni has been pressured and lobbied,” Wolters said.

She called on Council negotiators to “get their act together and stop blocking this law” as time for passing the law runs thin.  “The time for political posturing is over now.”

Many in the centre-left spectrum of the EU house shared the rapporteur’s outrage.

“This is no time for political games by the member states,” Ilan de Basso, Swedish MEP for centre-left S&D group, said.

“If there is a corrigendum, we will analyse the changes closely. The legislation must be effective to deal with the issue at hand,” he added.

Doubling down on the political accusations, Heidi Hautala, negotiator for the Greens/EFA, said: “The FDP party, part of the governing coalition in Germany, succeeded in its sabotage and pulled along several member states.” 

The other side of the political spectrum, however, conveyed a different stance on the ongoing negotiations.

“It is no wonder that there is still no foreseeable majority for this law and that so many Member States have reservations,” Angelika Niebler, MEP for Bavarian conservative CSU (EPP), said in a statement, urging the Belgian presidency to “finally pull the brakes and admit the failure of the law.”

“The law is not fit for purpose” Svenja Hahn of German liberal FDP party (Renew) posted on X. “Cosmetic changes are not enough. Better: a new attempt in the next mandate,” she added, with a view to possible re-negotiations.

German government spokesperson Steffen Hebestreit, meanwhile, told reporters that he “lacks the imagination” that an agreement could still be reached ahead of the European Elections in June.

Deal-makers or deal-breakers?

The calls by German liberals and conservatives were echoed by the business community, with Peter Adrian, president of the German Chamber of Industry and Commerce (DIHK) saying the stop of the law “is good news in very challenging times for companies”.

Environmental and human rights organisations, meanwhile, were up in arms.

“It is utterly deplorable that EU capitals have turned their backs on the political agreement reached in December,” Nele Meyer, Director of the European Coalition for Corporate Justice, said in a statement.

Anti-poverty group Oxfam, meanwhile, blamed the German, French and Italian governments for their failure to support the deal.

“By withdrawing their support to an already-made deal, Germany triggered the boycott of these landmark EU supply chain rules,” the group’s Marc-Olivier Herman said.

“Not content with letting 99 percent of companies off the hook, France, in a last-minute move akin to a wrecking ball, has asked to exempt another 14,000 companies. This is an assault on human rights and the planet,” he added.

“Germany, Italy and France should be dealmakers, not deal-breakers,” he lamented.

[Edited by Nathalie Weatherald]

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