Before her trip to the People’s Republic, Commission President Ursula von der Leyen spoke out clearly in favor of a new China policy. Now the EU’s Foreign Affairs Representative also announced a new course. “System rivalry has increased, competition has intensified”, Josep Borrell said after a meeting of EU foreign ministers in Luxembourg. The three axes – partner, competitor, system rival – need to be reweighted and “balanced”, he said. Eric Bonse reports.
The new Instrument for the Strengthening of the European Defense Industry (EDIRPA) was actually intended for rapid deployment – for the period from the end of 2022 to 2024. But it is only now that the regulation is clearing an important hurdle: Today, it is to be voted on in a joint meeting of the Foreign Affairs Committee and the Industry Committee. Among other things, there are differences over the content of the regulation, including the question of how high the share of joint procurements may be that comes from third countries outside the EU, as Stephan Israel analyzes.
The JURI Legal Affairs Committee has been struggling for a long time to reach a compromise, and today MEPs are voting on their position on the Due Diligence Act (CSDD). Rapporteur Lara Wolters had to accept significant compromises: Small and medium-sized enterprises, for example, are almost completely exempt from the directive under the compromises. However, Parliament still wants to include more companies than the Council and the Commission. Charlotte Wirth gives an overview.
If you enjoy reading Europe.Table, please feel free to forward us. If this mail was sent to you: Here you can test our briefing for free.
The realignment of Europe’s China policy is moving forward. Following EU Commission President Ursula von der Leyen, EU Foreign Affairs Commissioner Josep Borrell has now also announced a new course. “System rivalry has increased, competition has intensified”, Borrell said after a meeting of EU foreign ministers in Luxembourg. The US, he said, is now also taking a different stance on China. The EU must react to this, he said.
The background is the growing tensions over the Taiwan Strait, but also controversial statements by the Chinese ambassador in Paris, Lu Shaye. In an interview on French television, Lu questioned the status of the countries of the former Soviet Union under international law, since “there is no international agreement to concretize their status as sovereign countries”. This led to sharp protests in Ukraine and the Baltic states.
Borrell called Lu’s remarks “unacceptable”. However, the dispute had already been resolved, he said after the meeting in Luxembourg. Earlier, the Chinese government clarified its position. On Monday, the Foreign Ministry then clarified its position. “China respects the status of the former Soviet republics as sovereign countries after the dissolution of the Soviet Union“, a spokeswoman said. China was one of the first countries to establish diplomatic relations with the ex-Soviet republics, she said.
“Beijing has distanced itself from the ambassador’s unacceptable remarks, which is good news”, Borrell said. He added that this settles the case. However, not all EU countries apparently see it that way. Lithuanian Minister Gabrielius Landsbergis announced that the three Baltic countries – all of which were part of the Soviet Union – would summon Chinese representatives. Luxembourg’s Foreign Minister Jean Asselborn spoke of a “mistake”.
There was agreement that relations with China needed to be reassessed. The assessment that China is a partner, competitor and system rival at the same time still applies, said Borrell. However, these three axes would have to be reweighted and “balanced”. The Spaniard wants to present the new position statement at the next meeting of EU foreign ministers in the Gymnich format. After that, the matter will also be referred to the European Council.
In a guest article for the French Sunday newspaper “Le Journal du Dimanche”, Borrell has already hinted at where the journey is headed. The EU wants to stick to the one-China policy, he wrote with regard to Taiwan. But this does not apply under all circumstances and certainly not if force is used, he added. Europe needs to be “very present”, Borrell demands, because “Taiwan affects us economically, commercially and technologically” – for example, in semiconductors.
That is why European warships should patrol the Taiwan Strait. The point, he said, is to “demonstrate Europe’s commitment to freedom of navigation in this absolutely crucial area”. In doing so, Borrell contradicts French leader Emmanuel Macron, who has downplayed the importance of the Taiwan issue and called on the EU not to blindly follow the US on Taiwan, but to back the status quo.
The Vice President of the EU Commission emphasizes the economic importance of China for Europe. Joint trade, he said, amounts to a value of €5 billion per day. “This cannot be ignored”. He also said the EU must continue to cooperate with China on climate protection and health policy.
Economic policy was also the topic of a meeting between EU Trade Commissioner Valdis Dombrovskis and Chinese Trade Minister Wang Wentao in Brussels. Dombrovskis stressed the need to eliminate existing imbalances in trade and investment to the detriment of the EU. He also called for a “level playing field” in trade and market access. Wang Wentao stressed the interest in good economic relations.
However, these could soon be subjected to a stress test. For example, von der Leyen has announced that she wants to reduce the EU’s economic dependence on China and engage in targeted “de-risking”, for example in the strategically important high-tech sector. In addition, the EU Commission is preparing new regulations to control critical foreign investments in China. The proposal is expected in a few weeks.
The EU is struggling to follow up its commitment to more joint arms procurement with action. One recent example is the travails in procuring one million artillery shells for Ukraine, another is the delay in the Instrument to Strengthen the European Defense Industry through Joint Procurement (EDIRPA). MEP Michael Gahler (CDU) is rapporteur in the EU Parliament for the regulation, which will be voted on today (Tuesday) in a joint meeting of the Foreign Affairs Committee (AFET) and the Industry Committee (ITRE).
Why did it take so long? “Unfortunately, we lost about four months due to internal parliamentary disputes over competencies“, says Michael Gahler. The legal basis for the instrument is Article 173, which deals with industrial policy. However, the Foreign Affairs Committee with its Security and Defense Subcommittee also wanted to have a say because of the military connection. Finally, the Internal Market Committee joined in because it deals with public tenders. Michael Gahler is confident, however, that in addition to the procedural obstacles, the substantive hurdles have also been overcome and the trilogue can begin in May.
There were also major differences to be overcome in terms of content. For example, on the question of how high the proportion of joint procurements that come from third countries outside the EU should be. The Internal Market Committee, for example, was in favor of a 50 percent share, while others wanted a maximum of 20 percent. “In principle, I want as much as possible to come from the EU”, says Michael Gahler.
However, one must also be pragmatic enough and allow components from third countries if they are only produced outside the EU. The CDU MEP therefore expects that after the trilogue with the member states, the compromise will be a 30 to 40 percent share.
The Commission presented the new instrument last July with fanfare and against the backdrop of Russia’s war against Ukraine for rapid deployment. Vice President Margrethe Vestager spoke of a “historic milestone” in the realization of the European Defense Union. She said member states had taken bold steps to hand over much-needed defense equipment to Ukraine, and that the EU was now helping to replenish stocks and introduce incentives for joint procurement in “the same spirit of solidarity”.
The Commission has recently denied media reports that it is considering withdrawing the bill out of frustration at the slow pace of deliberation in Parliament. EDIRPA was actually intended for rapid deployment for the period from the end of 2022 to 2024, and in fact Internal Market Commissioner Thierry Breton is already working on a more ambitious successor program, the “European Defence Investment Programme” (EDIP), for which additional funds from the European Investment Bank (EIB) are to be mobilized.
Similar to the EU, the EIB has not yet been able to finance armaments. Already the €500 million from the EU budget cannot be used for the direct purchase of war material. The member states are only to be able to draw on the funds to pay for the additional costs of coordinating joint purchasing.
Michael Gahler sees EDIRPA primarily as a “trial run” for the member states to recognize the advantages of joint procurement. As early as 2007, the EU set itself the goal of making 35 percent of defense investments jointly, says Gahler. But the share of joint procurement is still below 20 percent, he said. When several countries purchase jointly, it is not only economies of scale that arise, says the politician. If they all purchase the same equipment, interoperability between the European armed forces is also guaranteed.
EDIRPA is now on the home stretch, and there is also hope for the urgent joint ammunition procurement for Ukraine. The Swedish presidency is counting on EU ambassadors being able to agree on Wednesday to a compromise on how to legally implement the second track of the March political agreement.
As a reminder, the plan of EU foreign affairs envoys Josep Borrell and Thierry Breton envisages a three-track approach. On the first track, €1 billion of the European Peace Facility (EFF) will be reserved to compensate member states that discharge artillery shells, especially 155-millimeter caliber, by the end of May. The EFF’s resources come from a separate fund outside the EU budget. And therefore its restrictions do not apply with regard to arms procurement.
According to Borrell, everything is going according to plan with this first rail. Two-thirds of the funds have already been committed. There are problems with the second track, for which a further billion has been earmarked to replenish the stocks in the member states and to supply Ukraine with more artillery shells and missiles.
A precise definition of “Made in Europe” was wrangled over until recently with regard to supply chains and components from third countries. Paris is pushing for the strictest possible interpretation. At the same time, France also wants to procure missiles with the means, which Poland rejects.
Diplomats warned against defining it too narrowly. The EU would thus not achieve the ambitious goal of supplying Ukraine with one million artillery shells this year. Sixteen companies in eleven member states could produce ammunition, but most of them already had full order books.
According to the proposal by Borrell and Breton, the third track is therefore to expand production capacities in the EU. To this end, the Internal Market Commissioner has visited all factories in the member states in recent weeks and intends to present his plan on May 3 on how the capacities of the European defense industry can be strengthened.
The JURI Legal Affairs Committee has struggled for a long time to reach a compromise. Today, the MEPs will vote on their position on the Due Diligence Act (CSDD). Some of the meetings with rapporteurs and shadow rapporteurs have lasted until the early morning.
In order to reach an agreement, rapporteur Lara Wolters had to accept significant compromises: Small and medium-sized enterprises (SMEs), for example, are almost entirely excluded from the directive under the compromises. Similar to the Council’s proposal, the directive is to be applied to all companies only gradually: Companies with 250 employees that had sales of less than €150 million in the last fiscal year will not have to perform due diligence until four to five years after the directive is implemented.
“It was more important to me to have a good, coherent law than one that is implemented as quickly as possible”, Wolters (S&D) told the press yesterday. She said it was important for Parliament to speak with one voice, after all the directive will be important all over the world. EPP shadow rapporteur Axel Voss was pleased: “Our main goal was not to turn this legislation into a huge bureaucratic task for companies, which then have to audit thousands of suppliers for no reason”.
However, Parliament still wants to involve more companies than the Council and Commission. Affected are:
Although SMEs are only indirectly affected by the law, Parliament wants to ensure that they can cushion any consequences. For example, the compromise text includes clauses on responsible contracting and support for SMEs so that corporations do not simply pass the financial and administrative burden down the value chain.
Nevertheless, SME representatives are dissatisfied: The proposal would overburden companies, writes the German Engineering Federation, for example, criticizing the “enormous bureaucratic effort” of the law. The Zentralverband des Deutschen Handwerks (German Confederation of Skilled Crafts) takes a similar view: The burdens that would be imposed on SMEs are particularly inappropriate in view of the fact “that the EU is one of the regions with the highest human rights and environmental standards in an international comparison”.
In contrast to the Commission proposal and the Council compromise, the compromise proposal does not contain a definition of high-risk industries. This is no longer absolutely necessary, as SMEs are now only indirectly covered by the law, Wolters explained.
However, the rapporteur and shadow rapporteur are in favor of conflict-sensitive due diligence in risk areas. What exactly is to be understood by this is to be worked out by the member states in guidelines. Given the problems the Commission had with the designation of conflict areas under the Conflict Minerals Regulation, it seems questionable whether national authorities are up to the task.
A definition of high-risk sectors can only be found in Article 13, which specifies the guidelines that member states must draw up for their companies. This includes a list of risk factors and risk sectors, based on the OECD Guidelines for Responsible Enterprises. Here, the financial sector is listed as a risk sector.
The Council was not guided by this and grants the financial sector a special position. It is almost completely exempted from the due diligence obligation. Parliament, on the other hand, was able to agree on a compromise that makes the financial sector more accountable. Banks, insurance companies, investors or fund managers must perform due diligence. And:
One sticking point in the search for a compromise within Parliament has long been the so-called Internal Market clause. The aim here is to ensure that national laws are as compatible as possible at a later date. In other words, the transposition of the directive should not lead to fragmentation of the market.
However, the choice of words in the compromise raises eyebrows. The compromise text refers to “full harmonization”. In this context, one usually speaks of minimum or maximum harmonization. The former wording means that national laws may not be weaker than EU laws. The latter means that they must not be stricter. The Internal Market Committee came out in favor of this variant in March, with a majority of EPP, Renew and EKR.
Full harmonization, on the other hand, leaves room for interpretation. However, when asked yesterday, Lara Wolters stressed that the intention was not to prevent member states from going further than the EU directive. “The new Single Market Clause does not involve full harmonization“. The point was that “the implementation of the CSDDD should be as uniform as possible in order to achieve a level playing field in the Single Market”, emphasized René Repasi (SPD). He had voted against the Internal Market Committee’s call for maximum harmonization in March.
Another sticking point in the negotiations of the rapporteurs and shadow rapporteurs was civil liability, where the EPP and Renew in particular blocked. They extensively resisted a reversal of the burden of proof. In the end, however, they accepted that companies must answer in court for shortcomings in due diligence and the resulting consequences.
It is not only those affected themselves who can take legal action against companies before European courts. Representatives of civil society, such as NGOs, may also file lawsuits on their behalf. Class action lawsuits are also permitted, according to the Parliament’s compromise paper. The text allows corporations to organize themselves into industry initiatives and multi-stakeholder communities to facilitate the due diligence process. However, companies will still remain liable for due diligence shortcomings.
Independently of this, national authorities can impose sanctions on companies that fail to meet their due diligence obligations. In contrast to the Conflict Minerals Regulation, where penalties range from €726 to over €50,000, Parliament is trying to prevent fragmentation here. The penalties are to be based on the companies’ sales and may comprise up to five percent of sales.
Unlike the Commission and the Council, the compromise text of Parliament also contains a climate component. Companies must submit climate transition plans on how they intend to make their value chains climate-neutral by 2050.
However, whether the payment of directors is tied to compliance with these plans as well as their due diligence obligations is still pending. This point will be voted on separately, as it was not possible to agree on a compromise with the EPP here. “Other stakeholders and political parties have tried to regulate things that have nothing to do with supply chain legislation, such as board behavior and corporate governance”, Voss commented.
In Markus Kurze’s view, the people of Saxony-Anhalt are currently concerned about two European issues in particular: the end of the combustion engine and cyber security.
Kurze is chairman of the European Affairs Working Group and parliamentary director of the CDU state parliamentary group in Saxony-Anhalt. The 52-year-old emphasizes that a sense of proportion is essential in energy and climate policy. “You can only take people with small and medium salaries along with you if they can pay for it in the end”. Many are also prepared to do something personally for climate protection.
But especially in an area like Saxony-Anhalt, not everyone can get to work by train, bus or bike. Without energy security, it would not be possible to switch completely to electromobility. The politician takes a critical view of the fact that, as of 2035, no new cars will be allowed to be registered in the European Union that run on gasoline or diesel.
His curriculum vitae, says Markus Kurze, was marked by highs and lows: The educator and elementary school teacher was not recognized for his training in the GDR after reunification, and after his first state examination in the West, he – like many at the time – was not offered a trainee teacher position. Eventually, he joined the children’s and youth work of a welfare association and the disaster control.
Kurze found his way to politics through a hobby: After studying legends from his home region, he wrote books about the history of the Jerichow region. In the course of his research, he also came into contact with a mayor whose life story inspired him: “I wanted to work with people, and he gave me the initial spark to go into politics”, says Kurze. No sooner said than done: In 1998, he became state chairman of the Young Union in Saxony-Anhalt, and in 2002 he won a direct mandate to enter the state parliament.
As a member of the Committee for Federal and European Affairs, Media and Culture, Kurze is also concerned with media policy – he has been a member of the Saxony-Anhalt Media Authority since 2003. He caused media hype last year in the discussions about increasing the broadcasting fee and a possible abolition of ARD. “At the time, there was a rush of indignation, and the pressure on me personally was also quite high”, the politician recalls. He still calls for restructuring: “We can no longer afford public broadcasting on this scale in this media world – and for citizens, €20 is also a lot of money”.
In 2016, the media accused Kurze of being under the influence of alcohol during a speech as parliamentary director in the state parliament. The German business newspaper Handelsblatt later called him a “system breaker“. When asked about this, Kurze reacted calmly. It had been suggested to him that the effects of the Christmas party had still been felt: “That was certainly not my strongest day, and yet I hit the sore spot in my speech”. Janna Degener-Storr
Before her trip to the People’s Republic, Commission President Ursula von der Leyen spoke out clearly in favor of a new China policy. Now the EU’s Foreign Affairs Representative also announced a new course. “System rivalry has increased, competition has intensified”, Josep Borrell said after a meeting of EU foreign ministers in Luxembourg. The three axes – partner, competitor, system rival – need to be reweighted and “balanced”, he said. Eric Bonse reports.
The new Instrument for the Strengthening of the European Defense Industry (EDIRPA) was actually intended for rapid deployment – for the period from the end of 2022 to 2024. But it is only now that the regulation is clearing an important hurdle: Today, it is to be voted on in a joint meeting of the Foreign Affairs Committee and the Industry Committee. Among other things, there are differences over the content of the regulation, including the question of how high the share of joint procurements may be that comes from third countries outside the EU, as Stephan Israel analyzes.
The JURI Legal Affairs Committee has been struggling for a long time to reach a compromise, and today MEPs are voting on their position on the Due Diligence Act (CSDD). Rapporteur Lara Wolters had to accept significant compromises: Small and medium-sized enterprises, for example, are almost completely exempt from the directive under the compromises. However, Parliament still wants to include more companies than the Council and the Commission. Charlotte Wirth gives an overview.
If you enjoy reading Europe.Table, please feel free to forward us. If this mail was sent to you: Here you can test our briefing for free.
The realignment of Europe’s China policy is moving forward. Following EU Commission President Ursula von der Leyen, EU Foreign Affairs Commissioner Josep Borrell has now also announced a new course. “System rivalry has increased, competition has intensified”, Borrell said after a meeting of EU foreign ministers in Luxembourg. The US, he said, is now also taking a different stance on China. The EU must react to this, he said.
The background is the growing tensions over the Taiwan Strait, but also controversial statements by the Chinese ambassador in Paris, Lu Shaye. In an interview on French television, Lu questioned the status of the countries of the former Soviet Union under international law, since “there is no international agreement to concretize their status as sovereign countries”. This led to sharp protests in Ukraine and the Baltic states.
Borrell called Lu’s remarks “unacceptable”. However, the dispute had already been resolved, he said after the meeting in Luxembourg. Earlier, the Chinese government clarified its position. On Monday, the Foreign Ministry then clarified its position. “China respects the status of the former Soviet republics as sovereign countries after the dissolution of the Soviet Union“, a spokeswoman said. China was one of the first countries to establish diplomatic relations with the ex-Soviet republics, she said.
“Beijing has distanced itself from the ambassador’s unacceptable remarks, which is good news”, Borrell said. He added that this settles the case. However, not all EU countries apparently see it that way. Lithuanian Minister Gabrielius Landsbergis announced that the three Baltic countries – all of which were part of the Soviet Union – would summon Chinese representatives. Luxembourg’s Foreign Minister Jean Asselborn spoke of a “mistake”.
There was agreement that relations with China needed to be reassessed. The assessment that China is a partner, competitor and system rival at the same time still applies, said Borrell. However, these three axes would have to be reweighted and “balanced”. The Spaniard wants to present the new position statement at the next meeting of EU foreign ministers in the Gymnich format. After that, the matter will also be referred to the European Council.
In a guest article for the French Sunday newspaper “Le Journal du Dimanche”, Borrell has already hinted at where the journey is headed. The EU wants to stick to the one-China policy, he wrote with regard to Taiwan. But this does not apply under all circumstances and certainly not if force is used, he added. Europe needs to be “very present”, Borrell demands, because “Taiwan affects us economically, commercially and technologically” – for example, in semiconductors.
That is why European warships should patrol the Taiwan Strait. The point, he said, is to “demonstrate Europe’s commitment to freedom of navigation in this absolutely crucial area”. In doing so, Borrell contradicts French leader Emmanuel Macron, who has downplayed the importance of the Taiwan issue and called on the EU not to blindly follow the US on Taiwan, but to back the status quo.
The Vice President of the EU Commission emphasizes the economic importance of China for Europe. Joint trade, he said, amounts to a value of €5 billion per day. “This cannot be ignored”. He also said the EU must continue to cooperate with China on climate protection and health policy.
Economic policy was also the topic of a meeting between EU Trade Commissioner Valdis Dombrovskis and Chinese Trade Minister Wang Wentao in Brussels. Dombrovskis stressed the need to eliminate existing imbalances in trade and investment to the detriment of the EU. He also called for a “level playing field” in trade and market access. Wang Wentao stressed the interest in good economic relations.
However, these could soon be subjected to a stress test. For example, von der Leyen has announced that she wants to reduce the EU’s economic dependence on China and engage in targeted “de-risking”, for example in the strategically important high-tech sector. In addition, the EU Commission is preparing new regulations to control critical foreign investments in China. The proposal is expected in a few weeks.
The EU is struggling to follow up its commitment to more joint arms procurement with action. One recent example is the travails in procuring one million artillery shells for Ukraine, another is the delay in the Instrument to Strengthen the European Defense Industry through Joint Procurement (EDIRPA). MEP Michael Gahler (CDU) is rapporteur in the EU Parliament for the regulation, which will be voted on today (Tuesday) in a joint meeting of the Foreign Affairs Committee (AFET) and the Industry Committee (ITRE).
Why did it take so long? “Unfortunately, we lost about four months due to internal parliamentary disputes over competencies“, says Michael Gahler. The legal basis for the instrument is Article 173, which deals with industrial policy. However, the Foreign Affairs Committee with its Security and Defense Subcommittee also wanted to have a say because of the military connection. Finally, the Internal Market Committee joined in because it deals with public tenders. Michael Gahler is confident, however, that in addition to the procedural obstacles, the substantive hurdles have also been overcome and the trilogue can begin in May.
There were also major differences to be overcome in terms of content. For example, on the question of how high the proportion of joint procurements that come from third countries outside the EU should be. The Internal Market Committee, for example, was in favor of a 50 percent share, while others wanted a maximum of 20 percent. “In principle, I want as much as possible to come from the EU”, says Michael Gahler.
However, one must also be pragmatic enough and allow components from third countries if they are only produced outside the EU. The CDU MEP therefore expects that after the trilogue with the member states, the compromise will be a 30 to 40 percent share.
The Commission presented the new instrument last July with fanfare and against the backdrop of Russia’s war against Ukraine for rapid deployment. Vice President Margrethe Vestager spoke of a “historic milestone” in the realization of the European Defense Union. She said member states had taken bold steps to hand over much-needed defense equipment to Ukraine, and that the EU was now helping to replenish stocks and introduce incentives for joint procurement in “the same spirit of solidarity”.
The Commission has recently denied media reports that it is considering withdrawing the bill out of frustration at the slow pace of deliberation in Parliament. EDIRPA was actually intended for rapid deployment for the period from the end of 2022 to 2024, and in fact Internal Market Commissioner Thierry Breton is already working on a more ambitious successor program, the “European Defence Investment Programme” (EDIP), for which additional funds from the European Investment Bank (EIB) are to be mobilized.
Similar to the EU, the EIB has not yet been able to finance armaments. Already the €500 million from the EU budget cannot be used for the direct purchase of war material. The member states are only to be able to draw on the funds to pay for the additional costs of coordinating joint purchasing.
Michael Gahler sees EDIRPA primarily as a “trial run” for the member states to recognize the advantages of joint procurement. As early as 2007, the EU set itself the goal of making 35 percent of defense investments jointly, says Gahler. But the share of joint procurement is still below 20 percent, he said. When several countries purchase jointly, it is not only economies of scale that arise, says the politician. If they all purchase the same equipment, interoperability between the European armed forces is also guaranteed.
EDIRPA is now on the home stretch, and there is also hope for the urgent joint ammunition procurement for Ukraine. The Swedish presidency is counting on EU ambassadors being able to agree on Wednesday to a compromise on how to legally implement the second track of the March political agreement.
As a reminder, the plan of EU foreign affairs envoys Josep Borrell and Thierry Breton envisages a three-track approach. On the first track, €1 billion of the European Peace Facility (EFF) will be reserved to compensate member states that discharge artillery shells, especially 155-millimeter caliber, by the end of May. The EFF’s resources come from a separate fund outside the EU budget. And therefore its restrictions do not apply with regard to arms procurement.
According to Borrell, everything is going according to plan with this first rail. Two-thirds of the funds have already been committed. There are problems with the second track, for which a further billion has been earmarked to replenish the stocks in the member states and to supply Ukraine with more artillery shells and missiles.
A precise definition of “Made in Europe” was wrangled over until recently with regard to supply chains and components from third countries. Paris is pushing for the strictest possible interpretation. At the same time, France also wants to procure missiles with the means, which Poland rejects.
Diplomats warned against defining it too narrowly. The EU would thus not achieve the ambitious goal of supplying Ukraine with one million artillery shells this year. Sixteen companies in eleven member states could produce ammunition, but most of them already had full order books.
According to the proposal by Borrell and Breton, the third track is therefore to expand production capacities in the EU. To this end, the Internal Market Commissioner has visited all factories in the member states in recent weeks and intends to present his plan on May 3 on how the capacities of the European defense industry can be strengthened.
The JURI Legal Affairs Committee has struggled for a long time to reach a compromise. Today, the MEPs will vote on their position on the Due Diligence Act (CSDD). Some of the meetings with rapporteurs and shadow rapporteurs have lasted until the early morning.
In order to reach an agreement, rapporteur Lara Wolters had to accept significant compromises: Small and medium-sized enterprises (SMEs), for example, are almost entirely excluded from the directive under the compromises. Similar to the Council’s proposal, the directive is to be applied to all companies only gradually: Companies with 250 employees that had sales of less than €150 million in the last fiscal year will not have to perform due diligence until four to five years after the directive is implemented.
“It was more important to me to have a good, coherent law than one that is implemented as quickly as possible”, Wolters (S&D) told the press yesterday. She said it was important for Parliament to speak with one voice, after all the directive will be important all over the world. EPP shadow rapporteur Axel Voss was pleased: “Our main goal was not to turn this legislation into a huge bureaucratic task for companies, which then have to audit thousands of suppliers for no reason”.
However, Parliament still wants to involve more companies than the Council and Commission. Affected are:
Although SMEs are only indirectly affected by the law, Parliament wants to ensure that they can cushion any consequences. For example, the compromise text includes clauses on responsible contracting and support for SMEs so that corporations do not simply pass the financial and administrative burden down the value chain.
Nevertheless, SME representatives are dissatisfied: The proposal would overburden companies, writes the German Engineering Federation, for example, criticizing the “enormous bureaucratic effort” of the law. The Zentralverband des Deutschen Handwerks (German Confederation of Skilled Crafts) takes a similar view: The burdens that would be imposed on SMEs are particularly inappropriate in view of the fact “that the EU is one of the regions with the highest human rights and environmental standards in an international comparison”.
In contrast to the Commission proposal and the Council compromise, the compromise proposal does not contain a definition of high-risk industries. This is no longer absolutely necessary, as SMEs are now only indirectly covered by the law, Wolters explained.
However, the rapporteur and shadow rapporteur are in favor of conflict-sensitive due diligence in risk areas. What exactly is to be understood by this is to be worked out by the member states in guidelines. Given the problems the Commission had with the designation of conflict areas under the Conflict Minerals Regulation, it seems questionable whether national authorities are up to the task.
A definition of high-risk sectors can only be found in Article 13, which specifies the guidelines that member states must draw up for their companies. This includes a list of risk factors and risk sectors, based on the OECD Guidelines for Responsible Enterprises. Here, the financial sector is listed as a risk sector.
The Council was not guided by this and grants the financial sector a special position. It is almost completely exempted from the due diligence obligation. Parliament, on the other hand, was able to agree on a compromise that makes the financial sector more accountable. Banks, insurance companies, investors or fund managers must perform due diligence. And:
One sticking point in the search for a compromise within Parliament has long been the so-called Internal Market clause. The aim here is to ensure that national laws are as compatible as possible at a later date. In other words, the transposition of the directive should not lead to fragmentation of the market.
However, the choice of words in the compromise raises eyebrows. The compromise text refers to “full harmonization”. In this context, one usually speaks of minimum or maximum harmonization. The former wording means that national laws may not be weaker than EU laws. The latter means that they must not be stricter. The Internal Market Committee came out in favor of this variant in March, with a majority of EPP, Renew and EKR.
Full harmonization, on the other hand, leaves room for interpretation. However, when asked yesterday, Lara Wolters stressed that the intention was not to prevent member states from going further than the EU directive. “The new Single Market Clause does not involve full harmonization“. The point was that “the implementation of the CSDDD should be as uniform as possible in order to achieve a level playing field in the Single Market”, emphasized René Repasi (SPD). He had voted against the Internal Market Committee’s call for maximum harmonization in March.
Another sticking point in the negotiations of the rapporteurs and shadow rapporteurs was civil liability, where the EPP and Renew in particular blocked. They extensively resisted a reversal of the burden of proof. In the end, however, they accepted that companies must answer in court for shortcomings in due diligence and the resulting consequences.
It is not only those affected themselves who can take legal action against companies before European courts. Representatives of civil society, such as NGOs, may also file lawsuits on their behalf. Class action lawsuits are also permitted, according to the Parliament’s compromise paper. The text allows corporations to organize themselves into industry initiatives and multi-stakeholder communities to facilitate the due diligence process. However, companies will still remain liable for due diligence shortcomings.
Independently of this, national authorities can impose sanctions on companies that fail to meet their due diligence obligations. In contrast to the Conflict Minerals Regulation, where penalties range from €726 to over €50,000, Parliament is trying to prevent fragmentation here. The penalties are to be based on the companies’ sales and may comprise up to five percent of sales.
Unlike the Commission and the Council, the compromise text of Parliament also contains a climate component. Companies must submit climate transition plans on how they intend to make their value chains climate-neutral by 2050.
However, whether the payment of directors is tied to compliance with these plans as well as their due diligence obligations is still pending. This point will be voted on separately, as it was not possible to agree on a compromise with the EPP here. “Other stakeholders and political parties have tried to regulate things that have nothing to do with supply chain legislation, such as board behavior and corporate governance”, Voss commented.
In Markus Kurze’s view, the people of Saxony-Anhalt are currently concerned about two European issues in particular: the end of the combustion engine and cyber security.
Kurze is chairman of the European Affairs Working Group and parliamentary director of the CDU state parliamentary group in Saxony-Anhalt. The 52-year-old emphasizes that a sense of proportion is essential in energy and climate policy. “You can only take people with small and medium salaries along with you if they can pay for it in the end”. Many are also prepared to do something personally for climate protection.
But especially in an area like Saxony-Anhalt, not everyone can get to work by train, bus or bike. Without energy security, it would not be possible to switch completely to electromobility. The politician takes a critical view of the fact that, as of 2035, no new cars will be allowed to be registered in the European Union that run on gasoline or diesel.
His curriculum vitae, says Markus Kurze, was marked by highs and lows: The educator and elementary school teacher was not recognized for his training in the GDR after reunification, and after his first state examination in the West, he – like many at the time – was not offered a trainee teacher position. Eventually, he joined the children’s and youth work of a welfare association and the disaster control.
Kurze found his way to politics through a hobby: After studying legends from his home region, he wrote books about the history of the Jerichow region. In the course of his research, he also came into contact with a mayor whose life story inspired him: “I wanted to work with people, and he gave me the initial spark to go into politics”, says Kurze. No sooner said than done: In 1998, he became state chairman of the Young Union in Saxony-Anhalt, and in 2002 he won a direct mandate to enter the state parliament.
As a member of the Committee for Federal and European Affairs, Media and Culture, Kurze is also concerned with media policy – he has been a member of the Saxony-Anhalt Media Authority since 2003. He caused media hype last year in the discussions about increasing the broadcasting fee and a possible abolition of ARD. “At the time, there was a rush of indignation, and the pressure on me personally was also quite high”, the politician recalls. He still calls for restructuring: “We can no longer afford public broadcasting on this scale in this media world – and for citizens, €20 is also a lot of money”.
In 2016, the media accused Kurze of being under the influence of alcohol during a speech as parliamentary director in the state parliament. The German business newspaper Handelsblatt later called him a “system breaker“. When asked about this, Kurze reacted calmly. It had been suggested to him that the effects of the Christmas party had still been felt: “That was certainly not my strongest day, and yet I hit the sore spot in my speech”. Janna Degener-Storr
