Dusseldorf Slave-like working conditions, catastrophic conditions in the accommodation and unexplained deaths: The supply chain law that came into force at the turn of the year should actually prevent large German companies from also contributing to human rights violations like in Qatar. But the 24 paragraphs and five articles that Labor Minister Hubertus Heil (SPD) praises as a “robust law” could prove largely ineffective, according to experts.
“No German company that is active in Qatar will have to cancel its contract there after 2023,” says Lothar Harings, partner and foreign trade expert at the Graf von Westphalen law firm. The law does not oblige anyone to immediately stop their own activities there because of human rights violations.
For companies, it is enough to first address problems with suppliers in the relevant countries and to document risks, says Harings. The legislature does not specify a period by which a defect must be remedied. Because of the principle of appropriateness, the requirements for companies are too different.
Supply chain law: vague rules, high penalties
For this reason, forced laborers in emerging countries cannot hope for a quick improvement. In countries like Qatar, the legal system makes it difficult for German companies to enforce better working conditions with suppliers and subcontractors. “If environmental and human rights violations are caused by the state,” says Harings, explaining the provisions of the law, “it is difficult to shift responsibility to the companies involved.”
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Even Beate Streicher, human rights expert at Amnesty International in Berlin, does not believe that the situation of migrant workers in Qatar will improve directly as a result of the supply chain law. “There are shortcomings in the law,” says the lawyer. That is why we are now hoping for an even stricter EU directive.
The vague regulations are offset by tangible fines if the Federal Office of Economics and Export Control (BAFA) believes that they are violated. Fines of up to two percent of sales are threatened.
In an emergency, there is also the exclusion from public contracts – and this for a period of up to three years. “More legal certainty”, as Minister of Labor Heil recently promised in an interview, is unlikely to result from this.
mountain of bureaucracy
Germany’s large companies are currently fighting a mountain of bureaucracy, instead of fighting around the world for improved occupational safety and environmental protection from January. Bafa recently sent them around 300 questions with 437 tick options. “Without this handout, many companies would find it much more difficult to document their risks,” believes Hamburg lawyer Lothar Harings.
Qatar is just one of many countries that have been attracting attention for years due to forced labour, non-payment of wages and violations of occupational safety and health. Due to the protests surrounding the ongoing World Cup, it is probably the most prominent at the moment.
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The kafala system, which has been practiced there for decades, brings the companies active there into conflict with the supply chain law. In most Arab countries, the system only allows foreign workers to work if a local sponsor is available – usually a local employer or government agency. Migrant workers usually have to hand over their passport to him upon entry.
This has serious consequences for foreign workers. It forces them to ask their guarantors for permission when changing jobs or leaving the country – a request that they can certainly be denied. The kafala system thus restricts freedom of movement and undoubtedly violates human rights.
The Chinese could take over the questionable billion dollar business
Germany’s economy is thus in a delicate situation. Not only does it have an extensive gas business in common with the desert peninsula on the Persian Gulf, companies from the Federal Republic of Germany are earning a great deal from the construction of the glittering metropolitan region. Siemens, for example, has been working there on an order worth two billion euros since 2015. The Munich-based company is equipping substations with German technology – including for the lighting in football stadiums.
Hochtief has built an eight-kilometer shopping center in Doha for over 1.3 billion euros. In 2015, the people of Essen were awarded the contract to dig a sewage tunnel under the city for 265 million euros. The Stuttgart Strabag subsidiary Züblin has also been involved in the construction of the sewage system since 2019 – with an order in the hundreds of millions.
The German supply chain law is powerless against the kafala system in the Gulf.
(Photo: dpa)
Even the German state is an employer in Qatar – via Deutsche Bahn. She landed a contract in 2008 to oversee the €17 billion construction of a 300-kilometer rail network, which is due to be completed by 2026. For this purpose, the Germans founded a joint venture with the local company Qatari Diar.
The construction management includes, among other things, the project for the Doha Metro, which started punctually before the start of the soccer World Cup. More than 20 drilling machines from the Baden specialist Herrenknecht were used.
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The German supply chain law passed in June 2021, which is called the “Supply Chain Due Diligence Act” in full and is abbreviated to LkSG, is unlikely to change much in the coming years. “Possibly the Bafa will impose conditions on German companies for future projects in Qatar,” hopes Amnesty expert Streicher. But that’s not for sure. Lawyer Harings points out that if Chinese companies then take over the job, the foreign workers will be of little help.
Meanwhile, the law, which will apply from January to companies with at least 3,000 employees and from 2024 to companies with more than 1,000 employees, creates an immense workload. The affected companies must set up risk management and trained employees must check their own supply chains for possible violations of environmental regulations, the ban on child labor, forced labor or starvation wages.
In addition, the law requires complaints offices in the companies that are activated for foreign employees of suppliers.
Accordingly, German job portals have been filled with well-paid job advertisements in recent weeks. Corporations like Dr. Oetker, Mercedes-Benz, Strabag, Rheinmetall and Rewe searched for “human rights officers”, “coordinators for LkSG” or “CSR specialists for the supply chain”. Without additional manpower, it seems, the bureaucracy cannot be managed.
There is resistance in the industry
In addition, the requirements at European level are also increasing: In February, the EU Commission presented a proposal for a directive that already obliges companies with more than 500 employees and a turnover of more than 150 million euros. Companies in the construction or textile industry, for example, where the risk of such violations is high, should even be included from a threshold of 250 employees and a turnover of 40 million euros.
Compensation claims by foreign suppliers’ employees or those who have caused damage to the environment are also to be allowed. The EU Parliament followed up again in mid-November. NGOs should also be given permission to file complaints.
In German industry there is resistance to all this. Alexander Tesche, chairman of the Foreign Construction Committee of the Main Association of the German Construction Industry, calls for “a complete reassessment of the draft guidelines in the light of current realities”, which he includes the aftermath of the pandemic and the Ukraine war. “A pause for thought and action until at least 2024 would be helpful,” he says.
The DIHK already criticized in a statement at the end of May 2022: “An effective supply chain law requires practicality, proportionality and legal certainty.” But now there is a risk of “serious additional bureaucratic burdens and high liability risks”.
More: Supply chain law: Draft by the EU Commission provides for stricter rules than in Germany