BHR update – Outcome of the last plenary session of the European Parliament

EU Forced Labour Import Ban

Update

On 23 April 2024, the European Parliament adopted the EU Forced Labour Import Ban with 555 votes in favour, 6 votes against and 45 abstentions.

Under this regulation, the EU prohibits the sale, import, and export of any product or parts thereof made with forced labour regardless of their origin and processing stage (i.e. extraction, harvest, production, manufacture, or processing).

The EU Forced Labour Import Ban provides for public enforcement including investigatory powers for authorities, fines and seizure as well as detention of goods. National authorities or, in case of third countries involved, the European Commission will be competent to investigate suspicious goods, supply chains, and manufacturers but also to enforce the import ban.

In case of demonstrable forced labour, the authorities can order the product to be withdrawn from the EU market and to be confiscated at the border. Tainted goods will be subject to donation, recycling or destruction and in case of non-compliance, companies could be fined.

The EU Forced Labour Import Ban may be lifted and the goods may be allowed back on the EU market subject to elimination by the company of forced labour from its supply chains.

The European Commission can also identify products or groups of products that represents a greater risks of forced labour and for which importers and exporters will have to submit additional details to  customs (for example, information on the manufacturer and suppliers of these products).

In summary, this far-reaching piece of legislation requires – like the U.S. Uyghur Forced Labor Prevention Act – a high degree of supply chain transparency (till tier-n) and strongly encourages sound supply chain due diligence.

Timeline

The EU Forced Labour Import Ban now has to be approved by the Council of the EU. It will then be published in the Official Journal and will become applicable 36 months from its date of entry into force, i.e., mid 2027.

CS3D

Update

On 24 April 2024, the European Parliament approved the CS3D with 374 votes in favour, 235 votes against and 19 abstentions.

The CS3D aims to impose on in-scope companies – i.e. companies operating in the EU with more than 1,000 employees and a net turnover of at least €450 million worldwide for EU companies / generated in the EU for non-EU companies – the incorporation of human rights and environmental due diligence into their management system.

Concretely, CS3D will require in-scope companies to integrate due diligence into their policies, including measures set to identify, assess and prevent adverse impacts on Human Rights through the entire chains of activities. In addition, companies must adopt a climate change plan to ensure they develop a best-efforts plan to comply with the Paris Agreement adopted in 2015. The CS3D reporting obligation can be replaced by applicable CSRD reporting.

One of the main innovations of the CS3D also relates to monetary penalties that national competent authorities can impose up to at least 5% of the net worldwide turnover.

Companies could also be subject to civil liability if they fail to comply with the obligations laid down in the CS3D, notably for failing to comply with the requirements regarding preventative and remedial measures to address (potential) adverse impacts, in situations where such failures lead to damage caused to an individual or a legal entity.

Timeline

The CS3D is scheduled to be adopted on 15 May 2024 by the Committee of the Permanent Representatives of the Governments of the EU Member States ("COREPER") and on 23 May 2024 by the Council Competitiveness Council (COMPET).

Once adopted it will be published in the Official Journal. Member States will have two years to transpose the CS3D into national law and a staged approach based on the size of the company has been included to enable a progressive application.

Please get in touch with a member of Hogan Lovells’ BHR group or your usual Hogan Lovells contact if you wish to discuss this development.

Authored by Christelle Coslin, Christian Ritz, Lourdes Catrain, Margaux Renard, and Felix Werner.