MEPs demand reversal of burden of proof on forced labour

The European Parliament’s Internal Market and International Trade committees have adopted their position on keeping products made using forced labour out of the EU market, demanding that the responsibility for preventing the arrival of such goods lies with European companies. Coupled with the coming Corporate Sustainability Due Diligence Directive (CSDDD), this means that Europe’s risk managers need to work even closer with their legal, compliance and supply chain colleagues to ensure that their supply chains are up to scratch, and not exposing them to serious legal and reputational risks, not to mention D&O exposures. The draft regulation on prohibiting products made with forced labour was first proposed by EC president Ursula von der Leyen in September 2022 during her State of the Union address. “The objective of this proposal is to effectively prohibit the placing and making available on the EU market, and the export from the EU, of products made with forced labour, including forced child labour. The prohibition covers domestically produced and imported products. Building on international standards and complementing existing horizontal and sectoral EU initiatives, in particular the corporate sustainability due diligence and reporting obligations [CSDDD], the proposal lays down a prohibition supported by a robust, risk-based enforcement framework,” explained the EC at the time. The European Parliament explained that, as it stands, the new draft regulation would put in place a framework to investigate the use of forced labour in companies’ supply chains. “If it is proven that a company has used forced labour, all import and export of the related goods would be halted at the EU’s borders, and companies would also have to withdraw goods that have already reached the EU market. These would then be donated, recycled or destroyed,” it explained. The key point for Europe’s risk and insurance management community is that MEPs have now amended the EC’s proposal and want the Commission to create a list of geographical areas and economic sectors at high risk of using forced labour. For goods produced in these high-risk areas, the authorities would no longer need to prove that people have been forced to work, as the burden of proof would fall on companies. The parliament committees also want goods that have been removed from the market to be allowed back only after the company demonstrates that it has stopped using forced labour in its operations or supply chain, and remedied any relevant cases. MEPs have also updated and widened the definitions used in the text. They want the definition of forced labour to be aligned with International Labour Organization (ILO) standards and include “all work or service which is exacted from any person under the menace of any penalty and for which the said person has not offered himself or herself voluntarily”. Co-rapporteur Samira Rafaela said: “Forced labour is a grave human rights violation. The ban that we have voted for today will be essential in blocking products made using modern slavery and taking away the economic incentive for companies to engage in forced labour. It will protect whistle-blowers, provide remedy to victims, and defend our businesses and SMEs from unethical competition. Our text includes strong provisions on a database and is gender-responsive, all key elements for sustained impact.” After the vote, co-rapporteur Maria-Manuel Leitão-Marques said: “27.6 million workers worldwide suffer from forced labour, a kind of modern slavery – we should dedicate this victory to them. We have ensured that products made with forced labour are banned from the internal market until workers are compensated for the harm done to them. Banning forced labour also protects companies that follow the rules from unfair competition. Finally, we make it easier to prove state-imposed forced labour.” The two committees adopted the draft report with 66 votes for, 0 against and ten abstentions. Plenary will now have to confirm the vote as the European Parliament’s negotiating mandate and then, once the European Council adopts its position, talks can start over the final shape of the regulation. Parliament is also working on other pieces of legislation promoting decent work and responsible business, such as the proposal on the CSDDD currently being negotiated. Under the CSDDD as it stands, EU companies will be required to identify and, where necessary, prevent, end or mitigate the negative impact of their activities on human rights and the environment. They will also have to monitor and assess the impact of their value-chain partners, including suppliers as well as those in sale, distribution, transport, storage, waste-management and other areas. In related rules, the regulation on deforestation-free products entered into force on 29 June 2023. It is focused on the “expansion of agricultural land that is linked to the production of commodities like soy, beef, palm oil, wood, cocoa, coffee, rubber and some of their derived products, such as leather, chocolate, tyres, or furniture. As a major economy and consumer of these commodities linked to deforestation and forest degradation, the EU is partly responsible for this problem and it wants to lead the way to solving it,” explained the European Parliament. Under this regulation, any operator or trader that places these commodities on the EU market, or exports from it, must be able to prove that the products do not originate from recently deforested land or have contributed to forest degradation. And in January 2021, the Conflict Minerals Regulation came into force across the EU. Again, it is designed to force European companies to take a closer look at their supply chains and ensure they are not indirectly funding child labour and financing armed conflict through trade in four minerals – tin, tantalum, tungsten and gold.

MEPs demand reversal of burden of proof on forced labour

Regulation would force EU companies to ensure supply chains are clean

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