In mid-September, the Czech Presidency of the Council of the European Union submitted to the Member States a draft compromise on the directive establishing a due diligence for European companies. In this document, obtained by EUROPE, it wants to specify the levels of involvement of a company when a damage is caused in its value chain, as well as the obligations which result from it.
The compromise takes up the operation proposed by the European Commission in February (see EUROPE 12897/7). The Czech Presidency also aligns itself with the turnover and employee thresholds set by the Commission for a company to be subject to the directive.
Another point that has already proved sensitive in the debates in the European Parliament is the possibility for a company to avoid civil liability by obtaining contractual guarantees from its partners. This article proposed by the Commission remains unchanged in the compromise.
However, the Czechs propose some adjustments, so as to prioritise the levels of involvement of a company when damage is caused. For them, “the actions to be taken to address potential or actual adverse impacts and the existence of civil liability depend on the level of involvement of a company in an adverse impact”.
In other words, liability is not the same when a company is “directly linked to” or “contributed to” the negative effect, as when the negative effect is its own responsibility, according to the authors of the compromise.
Furthermore, the Czech Presidency proposes to withdraw the paragraph in Article 15 according to which, in the fight against climate change, the fulfilment of the obligations of the directive should be taken into account by companies when setting certain variable remuneration.
Tightening of certain obligations for companies
On the other hand, several of the proposed changes tighten up certain provisions of the directive. For example, the Commission’s proposal states that a company must terminate a business relationship when an adverse effect resulting from the collaboration could not be prevented.
However, the Commission provides for exceptions where the relationship can continue, for example, where the risk of harm is even greater if the collaboration is discontinued.
The Czech compromise limits these exceptions and puts more pressure on a company to terminate a business relationship (Articles 7 and 8).
A discussion on this compromise in the EU Council’s Working Party on Company Law took place on Monday 26 September and continues on Tuesday 27 September.
In the European Parliament, the number of amendments to the proposal is likely to be substantial, with the draft report not expected until spring 2023 at the earliest (see EUROPE 13015/14).
See the Czech Presidency’s compromise proposal: https://aeur.eu/f/39k (Original version in French by Léa Marchal)