Germany

Germany

Last updated 31/08/2020
Summary of developments
  • Initiative Lieferkettengesetz: German civil society campaign for a supply chain due diligence law (begins September 2019) and legal opinion (issued February 2020).
  • Federal Minister for Labour and Social Affairs and Federal Minister for Economic Cooperation and Development publicly committed to a joint proposal for a supply chain due diligence law for German companies (December 2019).
  • German Federal Ministry for Economic Cooperation and Development drafted a law on mandatory human rights and environmental due diligence for German companies (February 2019).
  • KiK Case: civil lawsuit on behalf of Pakistani rights’ holders against a German textile company for harm caused the result of a fire at one of its Pakistani supplier factories, killing circa 260 workers (dismissed and settled, 2019).
  • Government’s National Action Plan considers legislative reform concerning HRDD in 2020 (2016).
  • Greens Party supports a motion calling for HRDD obligations, civil liability, and access to remedy (2016).
  • A coalition of NGOs presented a legislative proposal which introduces mandatory HRDD for German companies (2016).
  • Human rights due diligence included by the Social Democrats (SPD) in their electoral program (2017).
  • Siemens vs. Neubürger: director’s liability for breaking duty of care regarding subsidiaries (2013).

Case Law

KIK Case

 

In a nutshell

In more detail

Name of Case

KiK-Case

Jabir and others v. KiK Textilien und Non-Food GmbH (Case No. 7 O 95/15)

Area of Law

Tort Law (law of Pakistan)

Negligence

Jurisdiction

Germany, but with Pakistani law applied

Heard in the Dortmund Regional Court, applying Pakistani tort law

Current Stage

Dismissed

On 10 January 2019, the German Court dismissed the lawsuit on the basis that the statute of limitations had expired.

The case did not proceed to appeal.

Requirement/Result

Negative judicial outcome.

Settled out of court.

The case was decided on procedural grounds rather than on substantive law.

The issue of KiK's potential breach of a duty of care to the workers (negligence) and liability was not even addressed by the German Court, which found the case was time-barred,

While the four plaintiffs were seeking €30,000 each in compensation from KiK, no compensation was awarded them by the Court.

In Sept. 2016 the company and the victims reached a compensation agreement through the International Labour Organisation of the UN.

Material Scope

Breach of duty of care. Relationship between parties gives rise to an “imposition or assumption of responsibility.”

Breach of duty of care. Relationship between parties gives rise to an “imposition or assumption of responsibility.” KiK had the de facto ability to exert economic pressure on its supplier, Ali Enterprises, and de jure ability to claim a breach of the Code of Conduct between it and Ali Enterprises.

Reach of the requirements

Proximity between workers of the supplier and  company needed to establish a duty of care.

Proximity between buyer and factory entitles factory workers to rely on buyer to procure a safe and healthy working environment, including fire safety measures to ensure the safety of workers in the event of fire.

Enforcement

None

None

Pros

Legal aid was granted to the Pakistani claimants.

 

Cons

No collective redress.

No collective redress (class-action) possible in German courts for victims claiming civil damages for non-contractual harm such as bodily or psychological

Law of the forum where the harm occurred applies (EU Rome II regulation). The court may be cautious when applying foreign law, therefore leading to a conservative interpretation. Moreover, German courts do not have the same tradition of developing case law from analogies as in the common law.

Cons

Application of the foreign law.

Case time-barred.

According to EU Rome II Regulation, the law of the forum where the harm occurred (lex loci damni) applies, in this case the law of Pakistan. In applying the Pakistani Statute of Limitations, which is formally 1 year with no option for deviation, the German Court dismissed the case as time-barred. The Court did not accept any of the exceptions to the Statute of Limitations pleaded by the plaintiffs.

Resources

Case updates and analysis from the European Center for Constitutional and Human Rights (ECCHR).

Video of evidence from ECCHR (German only).

Business & Human Rights Resource Center coverage.

♦ "Discount Workers, a fight for justice in global supply chains", film by Chris Patz and Ammar Aziz (Trailer).

Siemens v. Neuburger

 

In a nutshell

In more detail

Name of Case

Siemens v. Neubürger

Siemens Aktiengesellschaft against former Siemens CFO Heinz-Joachim Neubürger

Area of Law

Corporate Law

Corporate law (Law on Stock Companies – AktG)

Jurisdiction

Germany

 

Current Stage

First instance decision

First instance decision in December 2013 became final without appeal.

Result

Compensation of 15 Million € to be paid to Siemens.

Compensation of 15 Million € to be paid by Mr. Neubürger to Siemens, as a result of a breach of a duty of care under sec. 93 para. II of the German Stock Corporation Act.

While Mr Neubürger was Chief Financial Officer at Siemens, a system of fake consultancy contracts had been used for financing bribery in subsidiaries’ countries, including Nigeria.

Material Scope

Directors’ duty to establish a group-wide compliance system, that includes subsidiaries.

Directors’ duty to establish a compliance system that extends into its operations worldwide, that includes subsidiaries.

Scope and scale of the duty depend on the type and size of the enterprise; the relevant legal provisions; the geographical location; and analgous cases.

Reach of the requirements

Internal relations between corporation and its directors

Internal contractual relations between corporation and its directors who have joint liability

Enforcement

None, out of court settlement.

While a decision would have been enforceable, a settlement between the parties was reached in January 2015.

Pros

Clarifies that directors’ duties may extend to subsidiaries abroad.

First ruling to clarify that directors’ duties may extend to the entire group of subsidiaries, even those operating abroad.

Cons

Limited to claims of a company against its directors.

First instance decision.

This contractual duty applies only to internal relations within the corporation itself.

No confirmation by a higher court. Not binding on other courts.

Resources

♦ Ruling (in German).

Policy Developments

BMZ & BMAS commitment

In December 2019, the German Federal Ministers for Labour and Social Affairs (BMAS) (Hubertus Heil, Social Democrat) and for Economic Cooperation and Development (BMZ) (Gerd Müller, Christian Democrat) committed to draft a joint proposal for a supply chain due diligence law. The announcement followed the release of first round of the German National Action Plan on Business & Human Rights monitoring results, which showed that under 20% of the largest German companies surveyed actually implemented voluntary due diligence measures. The result triggered a 2018 German Government coalition agreement commitment to consider introducing mandatory due diligence legislation, if by 2020 less than 50% of the largest German companies had voluntary due diligence processes in place. While the two Ministers announced they would release the key points of their proposal in early March 2020, the publication was cancelled.

Resources

♦ Business & Human Rights Resource Centre coverage

♦ German government 'NAP' (National Action Plan on Business & Human Rights) corporate due diligence monitoring results

BMZ draft law

In February 2019, a draft law on Human Rights and Environmental Due Diligence by the German Federal Ministry for Economic Cooperation and Development (BMZ) was leaked. The bill would require large German companies to conduct due diligence along their global supply chains. It lays out the corporate due diligence obligations as well as the requirement on companies to establish an internal “compliance officer” and an effective internal grievance mechanism for foreign victims. Amendments to the German Commercial Code with new reporting requirements are foreseen as well. As for the monitoring and the enforcement of the new obligations, the Labour Inspectorate, the German Federal Institute for Occupational Safety and Health as well as the Human Rights Commissioner of the German Government should be responsible according to the bill, which also includes administrative sanctions of millions of euros, imprisonment and exclusion from German public procurements. Whilst the draft law does not provide for a specific civil liability regime, it does contain certain provisions aimed at improving access to justice for victims bringing tort claims under the general principles of German law. These include the waiver of the statute of limitations pending completion of the internal company complaint procedure; and a conflict of laws provision whereby the draft law’s due diligence obligations should apply as overriding mandatory rules, irrespective of the law otherwise applicable under principle of private international law.

Resources

♦ BMZ draft law (in German), 01/02/2019.

♦ TAZ coverage (in German), 10/02/2019.

♦ Business & Human Rights Resource Center coverage

Initiative Lieferkettengesetzv

In September 2019, 64 civil society organisations including human rights and environmental NGOs, and trade unions, launched the Initiative Lieferkettengesetz (Supply Chain Law Initiative), a broad campaign calling for a mandatory due diligence law in Germany. In February 2020, the coalition presented a legal opinion outlining the essential elements of their proposal for a German supply chain due diligence law. According to the civil society organisations’ proposal, the due diligence obligations should apply to large companies and SMEs in high-risk sectors and cover human rights and environmental risks and harms. The proposal underlines the importance of establishing the parent company’s civil liability before German courts for abuses throughout the whole supply chain, with the reversal of the burden of proof and the possibility of a "due diligence defence”, which means that the company would be responsible unless it proves that it conducted due diligence or the damage would have occurred anyway. Noncompliance with due diligence obligations would entail fines and administrative sanctions as well.

Resources

♦ Initiative Lieferkettengesetz website (in German)

♦ Business & Human Rights Resource Centre unofficial summary translation (in English) of the CSOs legal opinion (in German).

SPD election program

The Social Democratic Party (SPD) of Germany vowed to address mandatory human rights due diligence in its program for the 2016 federal parliamentary elections:

"Three quarters of humanity live without social security and under massive violation of workers’ rights. The SPD engages worldwide for decent work. This means strengthening corporate responsibility and entails mandatory Human Rights Due Diligence, which includes accountability and transparency along supply chains, the strengthening of social security systems and the implementation of living wages, in order to secure ESC-Rights globally. In public procurement we promote a binding regulation ensuring the adherence to environmental, social and human rights standards. We also want to strengthen corporate accountability internationally for example within the initiative for a binding treaty at the UN." (SPD Election program, July 2017, p. 113)

Resources

♦ SPD Electoral program (in German), July 2017.

National Action Plan

The National Action Plan, approved in 2016, establishes a set of clear expectations and goals concerning the implementation of human rights due diligence by German companies:

  • "the Federal Government expects all enterprises to introduce the process of corporate due diligence (...) Their compliance will be reviewed annually from 2018."

  • "In the absence of adequate compliance, the Federal Government will consider further action, which may culminate in legislative measures and in a widening of the circle of enterprises to be reviewed."

  • "The aim is that at least 50% of all enterprises based in Germany with more than 500 employees will have incorporated the elements of human rights due diligence described in this chapter into their corporate processes by 2020."

The 2018 coalition agreement states: “If an effective and comprehensive review of the NAP 2020 finds that the voluntary commitment of companies is insufficient, we will introduce appropriate legislation at the national level and advocate an EU-wide regulation.”

Resources

♦ German National Action Plan (English).

♦ NGO comments on the NAP (English).

Announcement of German Foreign Office monitoring of the NAP (27.8.2018).

Germany’s Green Party motion on mandatory human rights due diligence

In 2016, the Green Party of Germany presented a motion asking the Parliament to introduce legal human rights due diligence obligations for companies.In particular:

" 1) to develop a Human Rights Due Diligence Law which should demand certain Companies to undertake:

- an ongoing human rights Risk analysis;

- appropriate prevention means to avoid human rights violations;

- effective remedial actions in case of human rights violations;

- suitable organisational duties such as Whistleblower protection and Compliance structures;

- documentation and reporting about the taken measures;

2) to improve civil litigation options for victims of human rights abuses caused by companies and to create collective redress means;

3) to establish effective sanctions for companies in case of non compliance with human rights due diligence."

Resources

♦ Full text of the motion (in German).

Human Rights Due Diligence Act proposal by NGOs

A coalition of non-governmental organisations and scholars presented in 2016 a legislative proposal to embed human rights due diligence into law. The bill sets out the following primary obligations:

  • "Every company is obliged to exercise due diligence (...)"

  • "Every company shall conduct a risk analysis relative to human rights (...) whereby  it shall identify, evaluate, and if necessary prioritize in an adequate manner the risks of its contributing to human rights abuses"

  • "if the company detects a risk that it may be contributing to human rights abuses, it shall incorporate adequate preventive measures"

  • "Compliance with the obligations (...)  shall be documented (...)"

The proposed law applies to companies established in Germany, including Small and Medium Enterprises (SMEs):

  • "(...) that operate, themselves or through a controlled company, in a high-risk sector or in conflict or high-risk zones"

It provides for administrative enforcement mechanisms and civil liability for violations of the duty of care created by the bill, defined as a duty to conduct mandatory human rights due diligence in accordance with the bill.

Resources

♦ FAQs and Summary of the proposal (English).

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