After a long period of slow progress on supply chains, there is finally movement on the dossier. Yesterday, Lara Wolters (S&D) presented her report on due diligence for companies. And it is much stricter than the Commission’s proposal, as Charlotte Wirth analyzes. Under Wolters’ pen, the number of companies covered by the law increases significantly, and SMEs and financial service providers would also be affected. In the Council, negotiations are currently going in the opposite direction. Difficult negotiations are on the horizon.
A postponed Council of Ministers and an Emmanuel Macron who was miffed by Olaf Scholz’s trip to China: Relations between Germany and France have recently been in a state of considerable disarray. Till Hoppe spoke about this with Nils Schmid and Brigitte Klinkert, the two chairs of the Franco-German Parliamentary Assembly. “As an Alsatian, I sometimes see how both sides misunderstand each other,” says Klinkert. In the area of defense policy, she says, a “new balance” must be found. But both are optimistic, with Schmid, for example, emphasizing the “great strategic convergence” of the two countries in many areas.
Lara Wolters (S&D) was already rapporteur for the parliamentary own-initiative report on the supply chain law, on which the European Parliament voted in March 2021. Wolters has already spoken out in favor of an ambitious law. It should therefore come as no surprise that her report on due diligence for companies is significantly more ambitious than the Commission’s proposal.
Particularly with regard to the scope of the law, the nature of business relationships between companies and suppliers, and access to justice for injured parties, Wolters’ report differs significantly from the Commission’s proposal.
If the Wolters report has its way, the due diligence obligation would affect significantly more companies than the Commission envisages. Under the Commission’s proposal, companies with 500 or more employees and global sales of €40 million would be affected. In high-risk industries, the law would also affect companies with 250 or more employees and sales of €40 million or more.
In the Wolters report, companies with 250 or more employees and €40 million in annual sales and listed companies are covered by the law, as are companies with 50 or more employees and €8 million in annual sales in high-risk industries. Even if 30 percent of a company’s activities involve high-risk industries, it is bound by due diligence. For the Commission, it would be 50 percent.
But Lara Wolters’ definition of high-risk industries also goes much further than that of the Commission. Thus, not only textiles, agriculture and the extraction of minerals, but also energy, construction, information technologies and financial services would fall under high-risk industries.
This already indicates a first point of contention in the trilogues. On the one hand, the Commission envisages only a very limited due diligence obligation for financial services – for example, they do not have to terminate their business relationships under certain circumstances if due diligence violations occur. But even that goes too far for some member states. Italy and France in particular are pushing for financial services not to be covered by due diligence at all. Germany, Luxembourg, Malta and Ireland, for example, want to remove investors from the list of financial institutions, according to sources close to the negotiations.
Lara Wolters is also likely to have a difficult time with her proposal within Parliament. The EPP in particular, but also parts of the Renew Group, are opposed to the inclusion of financial services in the legislative text and do not want to cite them as a high-risk sector.
Lara Wolters also gives very different answers to the question of how far the duty of care should extend, different answers than the Council is currently discussing. In particular, it is a question of which definition is chosen. Does the law apply to the entire value chain, i.e. not only the development of raw materials, production and trade (upstream activities), but also how a product is disposed of or what impact it has on the environment (downstream activities)? For Lara Wolters, the answer is that both should fall under due diligence, so she advocates the term “value chains.” In the Council, however, the preferred term is “supply chains,” which only covers upstream activities.
Thus, Wolter’s proposal goes significantly further than the German Supply Chain Act. Germany is already resisting an overly broad definition in the Council and has a clear preference for the term supply chains.
German industry, too, will certainly find the concept of the value chain too far-reaching. The BDI, for example, has already criticized the Commission’s proposal as “far removed from reality.” The requirements would have to be “limited to direct suppliers in order to be implementable in daily practice,” said Wolfgang Niedermark, a member of the BDI’s executive board, to Europe.Table a few months ago.
The EPP is also not convinced of the inclusion of the entire value chain. According to information from Europe.Table, the group wants to advocate a risk-based approach and not extend due diligence to either the entire supply chain or the entire value chain.
Whereas the Commission’s due diligence applies above all to human rights and, under certain conditions, also to environmental protection, Lara Wolters’ due diligence is broader. Matters of good governance, such as issues of corruption, are also covered by her report. Furthermore, Wolters interprets the issue of environmental protection much more strictly than the Commission: She is not only concerned with possible or actual negative effects on the environment, but also with issues of combating and adapting to climate change.
At the same time, Wolters proposes a much more precise definition of environmental damage, including air, soil and water pollution. Furthermore, companies should not only mitigate the consequences for human rights and the environment, but also provide remedies in the form of financial compensation or measures for restoration and rehabilitation. Wolters thus meets the demands of non-governmental organizations in particular, which criticized that the Commission did not go far enough in this respect.
Under the Commission’s proposal, companies’ due diligence obligations also apply to their “established” business relationships. It is a potential loophole because many companies, especially in the textile sector, are constantly changing their suppliers, for example. Within the Council, many member states, led by France, adhere to the Commission’s definition. This is because the term “established business conditions” is also found in the French “Rana Plaza” law.
In the Wolters report, the term “established” is omitted. Due diligence applies to business relationships along the entire value chain. In addition, Wolters’ report contains clear commissions to prevent companies from passing responsibility downwards and ending up with the weakest link at the end of the value chain bearing the costs of due diligence. The report talks about “appropriate, fair contractual provisions” and “mutual obligations of the contracting parties,” for example.
Moreover, it is not enough for companies to simply mention in contracts with their suppliers that a duty of care also applies to them: They must also investigate and prove that suppliers and other parties with whom they have business relationships also comply with this duty and can comply at all – if they cannot, companies must provide financial and technical assistance.
Wolters is thus addressing the fear of many companies and cooperatives from third countries that they could be forced out of the market by the Supply Chain Act. After all, it is especially small suppliers at the end of supply chains that have to bear the biggest burden. With the Conflict Minerals Regulation, for example, small miners and cooperatives were the big losers. As Europe.Table reported, they couldn’t handle the costs and administrative hurdles and were forced out of the market – and into illegality.
If companies rely on so-called industry coalitions (industry schemes) for their due diligence, as they already do under the Conflict Minerals Regulation, Wolters has also tightened the conditions here. The responsibility remains with the companies. They must ensure that the coalitions perform their work satisfactorily.
The question of the personal responsibility of directors and company managers for compliance with due diligence was already a major point of contention when the Commission proposal was being drafted. In the Commission’s draft, the personal liability of directors is still included, but in a weakened form. Company bosses will have to draw up a plan on how the company will take into account the transition to a sustainable economy as well as the Paris climate targets in its corporate strategy.
The remuneration of the directors should then also be based on the implementation of this strategy. Wolters has tweaked this. The plans must also address, for example, how companies intend to fight climate change and, more specifically, how they reduce their greenhouse gas emissions. A “large part of the payment” is to be linked to whether they meet this obligation.
Difficult negotiations are likely to ensue here at the trilogue at the latest. In the Council, the majority of member states are not convinced that the remuneration of company directors should be linked to sustainability criteria. Not even the more progressive countries like Sweden want to go along with this. It is much more likely that the liability of directors will be removed from the Council draft.
Stakeholders are more involved in due diligence in the Lara Wolters report. For example, they must be consulted and informed about the entire due diligence process by the respective companies. Furthermore, in the event of misconduct, not only directly affected parties but also legal entities representing them should be able to file complaints against companies or take legal action against them.
Wolters’ text explicitly grants affected parties access to European courts. At the same time, the burden of proof under Wolters’ pen is different from that of the Commission: Thus, while plaintiffs must present elements that point to a company’s liability, it is then up to the companies to present further evidence to exonerate them. Accordingly, the burden of proof has not been entirely reversed, but Wolters does make it easier for injured parties to take legal action against companies.
Nevertheless, Wolters will find it very difficult to prevail against the EPP group and parts of the Renew group on this point in Parliament. According to information from Europe.Table, the EPP in particular is in favor of a “safe harbor clause,” in which companies would go through a certain checklist and, if they fulfill it, cannot be held liable for any damages.
Corporate liability is likely to be a particularly thorny issue for Germany in the subsequent trilogue negotiations. During the drafting of the German Supply Chain Act, a dispute arose between then Development Minister Gerd Müller and then Economics Minister Peter Altmaier. The latter was able to prevail. Legal liability for companies was dropped. At the same time, Altmaier promised companies that the European law would not go any further than the German law on this and other issues. It is therefore foreseeable that Berlin will push back in the trilogue now.
Ms. Klinkert, Chancellor Scholz was harshly criticized in France – most recently because he traveled alone to China. Is Germany isolating itself in the EU?
Klinkert: Franco-German relations have grown historically and are very strong. But in every relationship, there are ups and downs. The crucial thing is that we talk to each other openly, as we did on Monday at the Franco-German Parliamentary Assembly.
Is the German government communicating too little with Paris and the other EU partners?
Schmid: In my view, it’s less a communication problem than differences in political cultures. The German government is trying to work through the issues at hand point by point. The French government attaches more importance to symbols such as the Franco-German Council of Ministers.
Klinkert: As an Alsatian, I sometimes see how both sides misunderstand each other. But I am optimistic: We will not forget that we are fighting for common goals and values.
The Council of Ministers was postponed because the two governments could not reach agreement on many issues. An alarm signal?
Schmid: After the great departure of the Aachen Treaty of 2019, we now see the travails of the level. This concerns, for example, the joint armament projects, the improvement of transport links across the border, or energy issues. But at the same time, we see a great strategic convergence. Take, for example, the Corona reconstruction fund or the industrial policy support for battery cells, semiconductors or hydrogen.
One of the main points of contention is armaments policy. Paris criticizes Germany for relying too heavily on US manufacturers within the framework of the special assets for the Bundeswehr. Do you lack a clear commitment to Franco-German projects such as the new FCAS fighter aircraft or the MGCS main battle tank?
Klinkert: Germany’s defense policy has changed considerably in the wake of Chancellor Scholz’s “turnaround.” We first have to find a new balance here. But we are united in our desire to strengthen European defense. That is why we have agreed that the defense committees of the National Assembly and the Bundestag will work closely together. That is an important step.
Schmid: To quickly close the Bundeswehr’s equipment gaps, we have to buy what’s available on the market. This applies in particular to the successor to the Tornado fighter aircraft. But tranches are also earmarked for the Franco-German armaments projects. It is not easy to reconcile the interests, including those of industry. But we are counting on the two governments to make progress on this before the Council of Ministers in January. A clear signal would be very important. We want FCAS and MGCS to be successful.
Germany also comes under heavy criticism for its energy policy. Mr. Schmid, should Germany move toward France and other EU countries, for example, on capping gas prices or a new EU credit program to finance energy price subsidies?
Schmid: Every government has launched programs to protect households and companies from high energy prices. The sums in Germany and France are quite similar on an annual basis. It is crucial that we coordinate our efforts at European level. Before we talk about new European pots, we should first spend the money from the Corona recovery fund. But the German government would do well to be open to the partners’ proposals on gas prices and joint gas purchasing.
Both governments see US subsidies for industry under the Inflation Reduction Act as a problem for the location. Are new free trade talks with Washington the right response, as the German government is seeking?
Schmid: I don’t see the conditions in the USA for a new attempt at a general free trade agreement. Both Republicans and Democrats take a critical view of this. We should concentrate on talking about cooperation on issues for the future, such as the regulation of artificial intelligence. We could then record the results in sectoral agreements.
The German government attaches great geopolitical importance to EU enlargement. France has long been skeptical about the admission of the Western Balkan states. Has Paris changed its mind?
Klinkert: There is indeed a change of mood. This can also be seen in Emmanuel Macron’s proposal to bind like-minded countries more closely to the EU via the new European Political Community. If individual states want to join the EU and meet the criteria, then we support that.
The chances of diesel drivers receiving compensation from manufacturers because of a “thermal window” have once again been significantly reduced following another ruling by the European Court of Justice (ECJ). With their decision (case number C-873/19), the Luxembourg judges remain in line with a ruling from July 14 of this year. According to this ruling, the defeat device could be “permissible by way of exception” if it is proven that it is necessary to prevent risks during operation and avoid engine damage. The issue in both cases was whether a thermal window constitutes an impermissible defeat device for exhaust gas recirculation under all circumstances.
Tens of thousands of lawsuits filed by diesel owners against manufacturers over the thermal windows are pending before the courts in Germany and many other Member States. It is important to note that the thermal windows cannot be compared with the “test bench detection” of VW vehicles with the EA 189 diesel engine, which was at the center of the VW diesel scandal.
A thermal window is a control of exhaust gas recirculation in vehicles depending on the outside temperature. Basically, exhaust gas recirculation is carried out to reduce the formation of nitrogen oxides (NOx). However, exhaust gas recirculation is not possible at certain outside temperatures. It can cause risky engine damage at particularly low and particularly high temperatures and is therefore switched off at low temperatures with the aid of the thermal window – for example, from outside temperatures below five degrees Celsius.
With its two decisions, the ECJ defines the circumstances under which the thermal window defeat device is permitted by way of exception. It is now up to the national courts to decide whether the respective defeat device in the pending cases is an “impermissible” or an “exceptionally permissible” defeat device.
In recent months, more and more legal protection insurers have already refused to finance lawsuits brought before the courts by diesel owners on account of the thermal windows. The reason is that the German Federal Court of Justice (JURA) has found no fault on the part of the manufacturer in a number of cases involving the thermal window and has rejected the claims for damages or rescission of the purchase.
The case, which has now been decided in Luxembourg, was also about whether recognized environmental associations such as the environmental organization Deutsche Umwelthilfe (DUH) may take legal action against a type approval for a car that may be equipped with an illegal defeat device. The Luxembourg judges confirmed DUH’s right to take legal action.
The case involves vehicles from the manufacturer VW. A VW spokesman states: “There is no threat of official shutdowns of vehicles or hardware retrofits.” After the ruling, lawsuits by DUH and other environmental NGOs could be admissible in a few cases. “However, as before, they will remain unsuccessful on the merits.” The ECJ repeated and upheld what was already known about the admissibility of thermal windows. “The thermal windows used in VW Group vehicles remain permissible unchanged.” Likewise, it can be assumed that civil lawsuits “which base an alleged claim for damages on the presence of a thermal window” will remain unsuccessful as before.
Tens of thousands of civil lawsuits have also been filed against Mercedes by diesel drivers in Germany alone because of the thermal window. The Stuttgart-based company has also always rejected the claims as unfounded. Mercedes has largely been successful in the courts with this legal opinion.
According to the Stuttgart-based group, 29,000 customer lawsuits have already been dismissed by regional courts. In 1,300 cases, the plaintiffs have been proven right in the regional courts. Four decisions in the higher regional courts have been in favor of the plaintiffs, and over 3,000 decisions in favor of the Group. The Federal Court of Justice (JURA) ruled in favor of the Stuttgart-based group in all cases.
At more than 125 years old, the German-Belgian Chamber of Commerce is the oldest German Chamber of Commerce abroad in the world. According to Martin Kotthaus, Ambassador for Bilateral Affairs in Belgium, this is “a good indicator of the always great importance of German-Belgian trade relations“. Given the dangers Russia’s invasion of Ukraine has posed to security and energy supplies, the diplomat underscores the joint approach of Brussels and Berlin to address these challenges.
Belgium now plays a key role as a transit country for energy supplies from all over the world. “Supplies from Belgium have played a significant role in enabling Germany to become independent of Russian gas so quickly. As a transit country, Belgium is currently Germany’s second-largest gas supplier after Norway,” says Kotthaus.
A large part of Germany’s gas demand is now met by supplies from the LNG terminal in Zeebrugge. “Belgium, but also the Netherlands, have strong ambitions to position themselves as energy centers as well as energy hubs in Northern Europe,” Kotthaus says, noting that the Belgian government under Prime Minister Alexander De Croo published a revised hydrogen strategy on Oct. 18. “In it, it is clear that Belgium wants to strengthen its position as a major energy hub in Europe and is determined to invest accordingly.”
Belgium is in the process of developing international partnerships in the field of green hydrogen, he said: “The country is cooperating with Oman and Namibia, among others, but is also looking at Chile and Egypt.” In addition, the ports of Antwerp and Zeebrugge have decided to join forces for the future in 2021, which may offer opportunities for Germany. The port of Antwerp is home to the world’s second-largest chemical cluster after Houston, Texas, he said. Many of the major German chemical companies have important branches there. “Naturally, therefore, in addition to the gas pipelines, there are also numerous cross-border pipeline infrastructures that are to be further expanded,” Kotthaus said.
The connection between Germany and Belgium is also being strengthened in the field of electricity. With the inauguration of the Aachen Liège Electricity Grid Overlay (ALEGrO) at the end of 2020, an approximately 90-kilometer underground line built by German grid operator Amprion and Belgian grid operator Elia went into operation, running from the German town of Oberzier to Lixhe near the Belgian-Dutch border.
“As Ambassador, it is a great pleasure to work on further deepening the already close relations between Germany and Belgium. I assume that these will become even more intensive as a result of the energy transition, particularly in the areas of wind energy and hydrogen,” says Kotthaus.
The 60-year-old diplomat has been used to an international life since his childhood. As a civil engineer, his father implemented projects abroad in the 1960s and 1970s, “during the great era of the German construction industry.” As a child, Kotthaus lived with his family in Ghana, Egypt, Turkey, Brazil and Nigeria. Born in Burscheid, in the Rheinisch-Bergisch district, the lawyer and father of two daughters has held various diplomatic posts since the 1990s, including permanent representative at the embassy in Angola, press spokesman at the embassy in Washington and press spokesman at the Permanent Representation to the EU. He has served as Ambassador to Belgium since 2018.
“We are Belgium’s number one trading partner and the Belgians are our number nine trading partner. This is an impressive figure – especially in relation to the size of the country and its 11.6 million inhabitants,” says Martin Kotthaus. Isabel Cuesta
After a long period of slow progress on supply chains, there is finally movement on the dossier. Yesterday, Lara Wolters (S&D) presented her report on due diligence for companies. And it is much stricter than the Commission’s proposal, as Charlotte Wirth analyzes. Under Wolters’ pen, the number of companies covered by the law increases significantly, and SMEs and financial service providers would also be affected. In the Council, negotiations are currently going in the opposite direction. Difficult negotiations are on the horizon.
A postponed Council of Ministers and an Emmanuel Macron who was miffed by Olaf Scholz’s trip to China: Relations between Germany and France have recently been in a state of considerable disarray. Till Hoppe spoke about this with Nils Schmid and Brigitte Klinkert, the two chairs of the Franco-German Parliamentary Assembly. “As an Alsatian, I sometimes see how both sides misunderstand each other,” says Klinkert. In the area of defense policy, she says, a “new balance” must be found. But both are optimistic, with Schmid, for example, emphasizing the “great strategic convergence” of the two countries in many areas.
Lara Wolters (S&D) was already rapporteur for the parliamentary own-initiative report on the supply chain law, on which the European Parliament voted in March 2021. Wolters has already spoken out in favor of an ambitious law. It should therefore come as no surprise that her report on due diligence for companies is significantly more ambitious than the Commission’s proposal.
Particularly with regard to the scope of the law, the nature of business relationships between companies and suppliers, and access to justice for injured parties, Wolters’ report differs significantly from the Commission’s proposal.
If the Wolters report has its way, the due diligence obligation would affect significantly more companies than the Commission envisages. Under the Commission’s proposal, companies with 500 or more employees and global sales of €40 million would be affected. In high-risk industries, the law would also affect companies with 250 or more employees and sales of €40 million or more.
In the Wolters report, companies with 250 or more employees and €40 million in annual sales and listed companies are covered by the law, as are companies with 50 or more employees and €8 million in annual sales in high-risk industries. Even if 30 percent of a company’s activities involve high-risk industries, it is bound by due diligence. For the Commission, it would be 50 percent.
But Lara Wolters’ definition of high-risk industries also goes much further than that of the Commission. Thus, not only textiles, agriculture and the extraction of minerals, but also energy, construction, information technologies and financial services would fall under high-risk industries.
This already indicates a first point of contention in the trilogues. On the one hand, the Commission envisages only a very limited due diligence obligation for financial services – for example, they do not have to terminate their business relationships under certain circumstances if due diligence violations occur. But even that goes too far for some member states. Italy and France in particular are pushing for financial services not to be covered by due diligence at all. Germany, Luxembourg, Malta and Ireland, for example, want to remove investors from the list of financial institutions, according to sources close to the negotiations.
Lara Wolters is also likely to have a difficult time with her proposal within Parliament. The EPP in particular, but also parts of the Renew Group, are opposed to the inclusion of financial services in the legislative text and do not want to cite them as a high-risk sector.
Lara Wolters also gives very different answers to the question of how far the duty of care should extend, different answers than the Council is currently discussing. In particular, it is a question of which definition is chosen. Does the law apply to the entire value chain, i.e. not only the development of raw materials, production and trade (upstream activities), but also how a product is disposed of or what impact it has on the environment (downstream activities)? For Lara Wolters, the answer is that both should fall under due diligence, so she advocates the term “value chains.” In the Council, however, the preferred term is “supply chains,” which only covers upstream activities.
Thus, Wolter’s proposal goes significantly further than the German Supply Chain Act. Germany is already resisting an overly broad definition in the Council and has a clear preference for the term supply chains.
German industry, too, will certainly find the concept of the value chain too far-reaching. The BDI, for example, has already criticized the Commission’s proposal as “far removed from reality.” The requirements would have to be “limited to direct suppliers in order to be implementable in daily practice,” said Wolfgang Niedermark, a member of the BDI’s executive board, to Europe.Table a few months ago.
The EPP is also not convinced of the inclusion of the entire value chain. According to information from Europe.Table, the group wants to advocate a risk-based approach and not extend due diligence to either the entire supply chain or the entire value chain.
Whereas the Commission’s due diligence applies above all to human rights and, under certain conditions, also to environmental protection, Lara Wolters’ due diligence is broader. Matters of good governance, such as issues of corruption, are also covered by her report. Furthermore, Wolters interprets the issue of environmental protection much more strictly than the Commission: She is not only concerned with possible or actual negative effects on the environment, but also with issues of combating and adapting to climate change.
At the same time, Wolters proposes a much more precise definition of environmental damage, including air, soil and water pollution. Furthermore, companies should not only mitigate the consequences for human rights and the environment, but also provide remedies in the form of financial compensation or measures for restoration and rehabilitation. Wolters thus meets the demands of non-governmental organizations in particular, which criticized that the Commission did not go far enough in this respect.
Under the Commission’s proposal, companies’ due diligence obligations also apply to their “established” business relationships. It is a potential loophole because many companies, especially in the textile sector, are constantly changing their suppliers, for example. Within the Council, many member states, led by France, adhere to the Commission’s definition. This is because the term “established business conditions” is also found in the French “Rana Plaza” law.
In the Wolters report, the term “established” is omitted. Due diligence applies to business relationships along the entire value chain. In addition, Wolters’ report contains clear commissions to prevent companies from passing responsibility downwards and ending up with the weakest link at the end of the value chain bearing the costs of due diligence. The report talks about “appropriate, fair contractual provisions” and “mutual obligations of the contracting parties,” for example.
Moreover, it is not enough for companies to simply mention in contracts with their suppliers that a duty of care also applies to them: They must also investigate and prove that suppliers and other parties with whom they have business relationships also comply with this duty and can comply at all – if they cannot, companies must provide financial and technical assistance.
Wolters is thus addressing the fear of many companies and cooperatives from third countries that they could be forced out of the market by the Supply Chain Act. After all, it is especially small suppliers at the end of supply chains that have to bear the biggest burden. With the Conflict Minerals Regulation, for example, small miners and cooperatives were the big losers. As Europe.Table reported, they couldn’t handle the costs and administrative hurdles and were forced out of the market – and into illegality.
If companies rely on so-called industry coalitions (industry schemes) for their due diligence, as they already do under the Conflict Minerals Regulation, Wolters has also tightened the conditions here. The responsibility remains with the companies. They must ensure that the coalitions perform their work satisfactorily.
The question of the personal responsibility of directors and company managers for compliance with due diligence was already a major point of contention when the Commission proposal was being drafted. In the Commission’s draft, the personal liability of directors is still included, but in a weakened form. Company bosses will have to draw up a plan on how the company will take into account the transition to a sustainable economy as well as the Paris climate targets in its corporate strategy.
The remuneration of the directors should then also be based on the implementation of this strategy. Wolters has tweaked this. The plans must also address, for example, how companies intend to fight climate change and, more specifically, how they reduce their greenhouse gas emissions. A “large part of the payment” is to be linked to whether they meet this obligation.
Difficult negotiations are likely to ensue here at the trilogue at the latest. In the Council, the majority of member states are not convinced that the remuneration of company directors should be linked to sustainability criteria. Not even the more progressive countries like Sweden want to go along with this. It is much more likely that the liability of directors will be removed from the Council draft.
Stakeholders are more involved in due diligence in the Lara Wolters report. For example, they must be consulted and informed about the entire due diligence process by the respective companies. Furthermore, in the event of misconduct, not only directly affected parties but also legal entities representing them should be able to file complaints against companies or take legal action against them.
Wolters’ text explicitly grants affected parties access to European courts. At the same time, the burden of proof under Wolters’ pen is different from that of the Commission: Thus, while plaintiffs must present elements that point to a company’s liability, it is then up to the companies to present further evidence to exonerate them. Accordingly, the burden of proof has not been entirely reversed, but Wolters does make it easier for injured parties to take legal action against companies.
Nevertheless, Wolters will find it very difficult to prevail against the EPP group and parts of the Renew group on this point in Parliament. According to information from Europe.Table, the EPP in particular is in favor of a “safe harbor clause,” in which companies would go through a certain checklist and, if they fulfill it, cannot be held liable for any damages.
Corporate liability is likely to be a particularly thorny issue for Germany in the subsequent trilogue negotiations. During the drafting of the German Supply Chain Act, a dispute arose between then Development Minister Gerd Müller and then Economics Minister Peter Altmaier. The latter was able to prevail. Legal liability for companies was dropped. At the same time, Altmaier promised companies that the European law would not go any further than the German law on this and other issues. It is therefore foreseeable that Berlin will push back in the trilogue now.
Ms. Klinkert, Chancellor Scholz was harshly criticized in France – most recently because he traveled alone to China. Is Germany isolating itself in the EU?
Klinkert: Franco-German relations have grown historically and are very strong. But in every relationship, there are ups and downs. The crucial thing is that we talk to each other openly, as we did on Monday at the Franco-German Parliamentary Assembly.
Is the German government communicating too little with Paris and the other EU partners?
Schmid: In my view, it’s less a communication problem than differences in political cultures. The German government is trying to work through the issues at hand point by point. The French government attaches more importance to symbols such as the Franco-German Council of Ministers.
Klinkert: As an Alsatian, I sometimes see how both sides misunderstand each other. But I am optimistic: We will not forget that we are fighting for common goals and values.
The Council of Ministers was postponed because the two governments could not reach agreement on many issues. An alarm signal?
Schmid: After the great departure of the Aachen Treaty of 2019, we now see the travails of the level. This concerns, for example, the joint armament projects, the improvement of transport links across the border, or energy issues. But at the same time, we see a great strategic convergence. Take, for example, the Corona reconstruction fund or the industrial policy support for battery cells, semiconductors or hydrogen.
One of the main points of contention is armaments policy. Paris criticizes Germany for relying too heavily on US manufacturers within the framework of the special assets for the Bundeswehr. Do you lack a clear commitment to Franco-German projects such as the new FCAS fighter aircraft or the MGCS main battle tank?
Klinkert: Germany’s defense policy has changed considerably in the wake of Chancellor Scholz’s “turnaround.” We first have to find a new balance here. But we are united in our desire to strengthen European defense. That is why we have agreed that the defense committees of the National Assembly and the Bundestag will work closely together. That is an important step.
Schmid: To quickly close the Bundeswehr’s equipment gaps, we have to buy what’s available on the market. This applies in particular to the successor to the Tornado fighter aircraft. But tranches are also earmarked for the Franco-German armaments projects. It is not easy to reconcile the interests, including those of industry. But we are counting on the two governments to make progress on this before the Council of Ministers in January. A clear signal would be very important. We want FCAS and MGCS to be successful.
Germany also comes under heavy criticism for its energy policy. Mr. Schmid, should Germany move toward France and other EU countries, for example, on capping gas prices or a new EU credit program to finance energy price subsidies?
Schmid: Every government has launched programs to protect households and companies from high energy prices. The sums in Germany and France are quite similar on an annual basis. It is crucial that we coordinate our efforts at European level. Before we talk about new European pots, we should first spend the money from the Corona recovery fund. But the German government would do well to be open to the partners’ proposals on gas prices and joint gas purchasing.
Both governments see US subsidies for industry under the Inflation Reduction Act as a problem for the location. Are new free trade talks with Washington the right response, as the German government is seeking?
Schmid: I don’t see the conditions in the USA for a new attempt at a general free trade agreement. Both Republicans and Democrats take a critical view of this. We should concentrate on talking about cooperation on issues for the future, such as the regulation of artificial intelligence. We could then record the results in sectoral agreements.
The German government attaches great geopolitical importance to EU enlargement. France has long been skeptical about the admission of the Western Balkan states. Has Paris changed its mind?
Klinkert: There is indeed a change of mood. This can also be seen in Emmanuel Macron’s proposal to bind like-minded countries more closely to the EU via the new European Political Community. If individual states want to join the EU and meet the criteria, then we support that.
The chances of diesel drivers receiving compensation from manufacturers because of a “thermal window” have once again been significantly reduced following another ruling by the European Court of Justice (ECJ). With their decision (case number C-873/19), the Luxembourg judges remain in line with a ruling from July 14 of this year. According to this ruling, the defeat device could be “permissible by way of exception” if it is proven that it is necessary to prevent risks during operation and avoid engine damage. The issue in both cases was whether a thermal window constitutes an impermissible defeat device for exhaust gas recirculation under all circumstances.
Tens of thousands of lawsuits filed by diesel owners against manufacturers over the thermal windows are pending before the courts in Germany and many other Member States. It is important to note that the thermal windows cannot be compared with the “test bench detection” of VW vehicles with the EA 189 diesel engine, which was at the center of the VW diesel scandal.
A thermal window is a control of exhaust gas recirculation in vehicles depending on the outside temperature. Basically, exhaust gas recirculation is carried out to reduce the formation of nitrogen oxides (NOx). However, exhaust gas recirculation is not possible at certain outside temperatures. It can cause risky engine damage at particularly low and particularly high temperatures and is therefore switched off at low temperatures with the aid of the thermal window – for example, from outside temperatures below five degrees Celsius.
With its two decisions, the ECJ defines the circumstances under which the thermal window defeat device is permitted by way of exception. It is now up to the national courts to decide whether the respective defeat device in the pending cases is an “impermissible” or an “exceptionally permissible” defeat device.
In recent months, more and more legal protection insurers have already refused to finance lawsuits brought before the courts by diesel owners on account of the thermal windows. The reason is that the German Federal Court of Justice (JURA) has found no fault on the part of the manufacturer in a number of cases involving the thermal window and has rejected the claims for damages or rescission of the purchase.
The case, which has now been decided in Luxembourg, was also about whether recognized environmental associations such as the environmental organization Deutsche Umwelthilfe (DUH) may take legal action against a type approval for a car that may be equipped with an illegal defeat device. The Luxembourg judges confirmed DUH’s right to take legal action.
The case involves vehicles from the manufacturer VW. A VW spokesman states: “There is no threat of official shutdowns of vehicles or hardware retrofits.” After the ruling, lawsuits by DUH and other environmental NGOs could be admissible in a few cases. “However, as before, they will remain unsuccessful on the merits.” The ECJ repeated and upheld what was already known about the admissibility of thermal windows. “The thermal windows used in VW Group vehicles remain permissible unchanged.” Likewise, it can be assumed that civil lawsuits “which base an alleged claim for damages on the presence of a thermal window” will remain unsuccessful as before.
Tens of thousands of civil lawsuits have also been filed against Mercedes by diesel drivers in Germany alone because of the thermal window. The Stuttgart-based company has also always rejected the claims as unfounded. Mercedes has largely been successful in the courts with this legal opinion.
According to the Stuttgart-based group, 29,000 customer lawsuits have already been dismissed by regional courts. In 1,300 cases, the plaintiffs have been proven right in the regional courts. Four decisions in the higher regional courts have been in favor of the plaintiffs, and over 3,000 decisions in favor of the Group. The Federal Court of Justice (JURA) ruled in favor of the Stuttgart-based group in all cases.
At more than 125 years old, the German-Belgian Chamber of Commerce is the oldest German Chamber of Commerce abroad in the world. According to Martin Kotthaus, Ambassador for Bilateral Affairs in Belgium, this is “a good indicator of the always great importance of German-Belgian trade relations“. Given the dangers Russia’s invasion of Ukraine has posed to security and energy supplies, the diplomat underscores the joint approach of Brussels and Berlin to address these challenges.
Belgium now plays a key role as a transit country for energy supplies from all over the world. “Supplies from Belgium have played a significant role in enabling Germany to become independent of Russian gas so quickly. As a transit country, Belgium is currently Germany’s second-largest gas supplier after Norway,” says Kotthaus.
A large part of Germany’s gas demand is now met by supplies from the LNG terminal in Zeebrugge. “Belgium, but also the Netherlands, have strong ambitions to position themselves as energy centers as well as energy hubs in Northern Europe,” Kotthaus says, noting that the Belgian government under Prime Minister Alexander De Croo published a revised hydrogen strategy on Oct. 18. “In it, it is clear that Belgium wants to strengthen its position as a major energy hub in Europe and is determined to invest accordingly.”
Belgium is in the process of developing international partnerships in the field of green hydrogen, he said: “The country is cooperating with Oman and Namibia, among others, but is also looking at Chile and Egypt.” In addition, the ports of Antwerp and Zeebrugge have decided to join forces for the future in 2021, which may offer opportunities for Germany. The port of Antwerp is home to the world’s second-largest chemical cluster after Houston, Texas, he said. Many of the major German chemical companies have important branches there. “Naturally, therefore, in addition to the gas pipelines, there are also numerous cross-border pipeline infrastructures that are to be further expanded,” Kotthaus said.
The connection between Germany and Belgium is also being strengthened in the field of electricity. With the inauguration of the Aachen Liège Electricity Grid Overlay (ALEGrO) at the end of 2020, an approximately 90-kilometer underground line built by German grid operator Amprion and Belgian grid operator Elia went into operation, running from the German town of Oberzier to Lixhe near the Belgian-Dutch border.
“As Ambassador, it is a great pleasure to work on further deepening the already close relations between Germany and Belgium. I assume that these will become even more intensive as a result of the energy transition, particularly in the areas of wind energy and hydrogen,” says Kotthaus.
The 60-year-old diplomat has been used to an international life since his childhood. As a civil engineer, his father implemented projects abroad in the 1960s and 1970s, “during the great era of the German construction industry.” As a child, Kotthaus lived with his family in Ghana, Egypt, Turkey, Brazil and Nigeria. Born in Burscheid, in the Rheinisch-Bergisch district, the lawyer and father of two daughters has held various diplomatic posts since the 1990s, including permanent representative at the embassy in Angola, press spokesman at the embassy in Washington and press spokesman at the Permanent Representation to the EU. He has served as Ambassador to Belgium since 2018.
“We are Belgium’s number one trading partner and the Belgians are our number nine trading partner. This is an impressive figure – especially in relation to the size of the country and its 11.6 million inhabitants,” says Martin Kotthaus. Isabel Cuesta
