Member states from the European Union has finally voted for the Corporate Sustainability Due Diligence Directive. The Belgian presidency has succeeded to reach a draft and an agreement that has been approved by the majority of EU’s member states following the France and Italy’s votes. However, the agreed Directive lacking some of the original compromises and the draft has been changed according to the political decisions between countries. Even though those step backs, the Directive is believed to be an important step for human rights and protection of environment in supply chains and it would be important to reach sustainability goals. After the previous draft, the scope of the Directive has been reduced by approximately 70%. The agreed Directive introduces a double step process to determine the scope, which are 1000 employees and 450M€ turnover. It can be foreseen that more than 5 thousand European companies will be under the scope of the Directive. With the agreed text, vote by the JURI committee of the European Parliament is also completed. The next step for the Directive will be the plenary vote.

26.03.2024

THE FIRST INVESTIGATIONS FROM DIGITAL MARKETS ACT 

The European Commission has launched first investigations of Digital Markets Act. The European Commission has announced that investigations started over Apple, Amazon, Google and Facebook owner Meta’s for use of personal data for advertising and restrictions on promotion on other services. The investigations are conducted as per the Digital Markets Act which came into effect earlier this month. Following the investigations in case companies found non-compliance, they might face fines that could be 10 per cent from the global turnover. Investigation against Meta is about whether the “pay or consent” subscription model is compliant with the Digital Markets Act.

26.03.2024

EU COUNCIL CLEARS A DIRECTIVE ON ENVIRONMENTAL CRIMES

The European Council formally adopted a directive on the protection of the environment through criminal law. The directive establishes and broadens EU-wide minimum rules on the definition of criminal offences and penalties regarding environment. With the proposed directive, the number of criminal offences will increase from nine to 20. New criminal offences include timber trafficking, the illegal recycling of polluting components of ships and serious breaches of legislation on chemicals. For the uncompliant companies, the maximum possible fines will be at least 5% of the total worldwide turnover or alternatively €40 million or 3% of the total worldwide turnover or €24 million. There can also be additional measures such as an obligation for the offender to reinstate the environment or compensate for the damage. EU member states will have two years for the adoption of this directive. 

26.03.2024

DECISION AGAINST KLM FOR MISLEADING GREEN CLAIMS 

In a greenwashing case brought by the campaign group Fossielvrij against the Dutch airline KLM, it has been decided by the court that KLM had broken the law with misleading advertising in 15 of the 19 environmental statements with vague environmental claims regarding its sustainable aviation fuels. According to the court, the statements from KLM are misleading because they were too vague and  KLM’s presentation and policies on sustainable aviation fuels are also investigated. Following the court’s decision, KLM believes it would be good that the court gives more clarity about what is possible and how they can continue to communicate transparently and honestly about company’s approach and activities.

20.03.2024

EU COUNCIL AND PARLIAMENT AGREES TO BAN PRODUCTS MADE WITH FORCED LABOUR 

The European Council and the European Parliament have reached a provisional agreement on the regulation that prohibits the products made with forced labour in the EU market. The provisional agreement supports the main objective of excluding the products of forced labour from the EU market. According to the agreement the Commission will establish a database containing verifiable and regularly updated information about forced labour risks, including reports from international organisations (such as the International Labour Organization). The Commission will issue guidelines for companies and competent national authorities to help them to comply with the regulation. These guidelines are expected to include possible measures and best practices for companies and also SME’s. 

Following the plenary session that ended on Friday, 23 February 2024, the Financial Action Task Force for Combating Money Laundering ("FATF") updated its statements on the countries included in the list known as the grey list, which identifies regions with strategic deficiencies to combat money laundering and terrorist financing. It was announced that, following the last meeting, Barbados, Gibraltar, Uganda and the United Arab Emirates have been removed from the FATF's increased monitoring process. In addition, FATF also made statements regarding Turkey's situation on the grey list. It has been declared that, In October 2021, Türkiye made high-level political commitment to work with the FATF to strengthen the effectiveness of its AML/CFT regime. At its February 2024 Plenary, the FATF made the initial determination that Türkiye has substantially completed its action plan and warrants an on-site assessment to verify the implementation of the AML/CFT reforms has begun and is being sustained, that the, and that the necessary political commitment remains in place to sustain implementation in the future. FATF noted that Turkey had undertaken key reforms in the following areas:

• Enhancing its approach to risk-based AML/CFT supervision;
• Taking steps to ensure sanctions for AML/CFT breaches and beneficial ownership requirements are dissuasive;
• Enhancing resources for its FIU and the use of financial intelligence produced;
• Undertaking more complex ML investigations and prosecutions in line with risks;
• Improving its asset recovery system;
• Prioritizing TF investigations, prosecutions and confiscations related to UN-designated groups;
• Enhancing its implementation of targeted financial sanctions for terrorism financing; and
• Enhancing outreach to a broad range of NPOs and taking steps to ensure that supervision of NPOs is risk-based and does not disrupt or discourage legitimate NPO activity, such as fundraising.

26.02.2024

DIGITAL SERVICES ACT IS NOW IN FORCE IN EU

The Digital Services Act, which regulates the responsibilities of companies providing digital services for the content published on their platforms, came into force in the European Union on 17 February 2024. Following the deadline set in the Act, which was finally adopted by the European Council on 4 October 2022, the new rules came into force on 17 February 2024. The Digital Services Act aims to create a safer online environment for users and businesses across the EU and to protect fundamental rights in the digital space by establishing new rules on the following issues Tackling illegal content online, including goods, services and information, in full respect of the EU Charter of Fundamental Rights; tackling societal risks online; traceability of sellers in online marketplaces; transparency measures for online platforms; and an enhanced supervision mechanism. Under the Regulation, all online intermediary companies that provide users with access to content, products and services on digital media will have to comply with the Digital Services Act.

17.02.2024

ING MIGHT BE SUED BECAUSE OF CLIMATE POLICY

Milieudefensie, a non-governmental organisation based in the Netherlands, has announced that it is filing a lawsuit against ING, the largest bank in the Netherlands, on the grounds that its climate change policies are inadequate. Milieudefensie's grounds for the lawsuit, which will be filed in a Dutch court, are that ING supports major polluters that contribute to climate change and is therefore in breach of its 'due diligence' obligations. It also states that ING should reduce its carbon emissions, align its internal policies with the Paris Agreement and break ties with companies that contribute to pollution. ING responded to Milieudefensie's cease and desist letter as follows: "We are confident that we take impactful action to fight climate change and sustainability is part of our overall strategic direction. We will of course respond in court if necessary." Milieudefensie had previously made a similar claim against Shell and had been successful.

The United Arab Emirates (UAE) is expected to be removed from the Financial Action Task Force's (FATF) grey list in February, after being included on the list on 4 March 2022. The possible removal of the UAE from the grey list came after the country's national strategy document on combating money laundering and the financing of terrorism was announced by the Minister of Foreign Affairs and International Cooperation. It was announced that the UAE is committed to developing its national AML system. The UAE was included in the grey list in 2022 due to the following issues: limited AML supervision of certain entities and other non-financial businesses and professions, inadequate AML risk assessment and identification methodologies in the country. The UAE's deficiencies in international cooperation mechanisms for information sharing and investigations, and inadequate enforcement of financial sanctions against identified individuals and entities.

The Corporate Sustainability Due Diligence Directive ("CSDDD"), which has long been on the European Union's agenda to ensure due diligence in the supply chains of companies operating in the European Union, has reached its final stage, but the voting by the member states on the Directive has been postponed. The vote, which was due to take place in the European Parliament last week, has been postponed after it became clear that Germany, Sweden, Estonia, Finland, the Czech Republic and Slovakia would vote against the Directive. In order for the Directive to be approved, at least 55% of Member States representing more than 65% of the total population of the European Union must vote in favour. The vote on the directive has now been postponed for an indefinite period of time. Especially following the change in Germany's position in favour of the Directive in the last few days, no new schedule has been set for the postponed vote by the member states.

The German Supply Chain Due Diligence Act ("LkSG"), which imposes due diligence obligations on companies to prevent potential human rights risks and environmental violations within the companies and in their supply chains, has completed its first year and first phase of implementation and entered the second phase with the start of 2024. While the companies obliged under the LkSG are determined by the number of employees, there would not be an official list published by the BAFA. From 2024, the number of companies subject to the LkSG is expected to increase approximately five times, as the employee number criteria for companies is reduced from 3,000 employees to 1,000 employees. In the first phase in 2023, LkSG has applied to companies with more than 3,000 employees, and it is estimated that corresponded to around 900 companies. Yet, as of 2024, it is estimated that approximately 5,000 German companies and their suppliers will fall under the scope of the LkSG.