German Supply Chain Act envisages fines of up to 2% of turnover

If annual turnover exceeds 400 million euros, a fine of up to 2% of worldwide turnover would be possible in certain cases, according to the draft. From 2023, only companies with more than 3,000 employees in Germany will be affected.

Large German companies could face fines of up to 2% of their annual global turnover if they violate a planned supply chain law, a revised draft of the legislation seen by Reuters on Monday shows.

Starting in 2023, German companies will be obliged to take action against human rights violations and environmental issues at their foreign suppliers. Government sources said the draft law is to go to cabinet as early as Wednesday. The draft law was sent to Germany's state governments on Monday, giving them the opportunity to comment ahead of the cabinet meeting.

The bill would allow companies with fines of 175,000 euros or more to be temporarily excluded from public contracts. The size of fines was open until now. If annual turnover exceeds 400 million euros, a fine of up to 2% of worldwide turnover would be possible in certain cases, according to the draft.

From 2023, only companies with more than 3,000 employees in Germany will be affected. From 2024, this would broaden to companies with more than 1,000 employees. This means that in the first stage more than 600 companies would be affected, and in the second stage almost 2900.

(Writing by Paul Carrel; Editing by Kirsten Donovan)

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