Representatives of European Union member states on Friday agreed a new law intended to protect human rights in supply chains, diplomats have told dpa, although Germany abstained.
The European Supply Chain Act is intended to hold large companies accountable if they profit from child or forced labour outside the EU.
Germany, Europe's largest economy, abstained due to divisions within its Social Democrat (SPD)-led coalition government. The liberal Free Democrats (FDP), a minority partner in the government, fear the legislation will unduly burden the economy.
The FDP fear that the law will drive companies out of Europe. German ministers from the larger SPD and Green parties are in favour of the law.
Germany's FDP justice minister, Marco Buschmann, told reporters in February that the legislation could damage the local economy. "The risks for our country and its economy, which is characterized by small and medium-sized enterprises, outweigh the benefits," Buschmann told the Rheinische Post, a German regional newspaper.
The legislation still needs the definitive approval of the European Parliament and of ministers to become law. But the text approved by senior diplomats on Friday represents a hard-won compromise between member states and parliamentary negotiators.
Normally, once negotiators for member states and the parliament have agreed a compromise, the steps on its final passage into law are little more than formalities.
But the Supply Chain Act has had a much bumpier ride than usual. The initial compromise with parliamentary negotiators was brokered in December by Spain, acting on behalf of all EU member states.
But that compromise failed to win adequate support among senior diplomats, with particular concerns coming from Germany and Italy.
That obstacle forced Belgium - which in January took over from Spain as negotiator-in-chief - to persuade parliamentary negotiators to tweak the agreement.
The new compromise raises the threshold at which companies will fall under the new rules: from 500 employees and annual revenue of €150 million ($163 million) in the old compromise, to 1,000 employees and €450 million in the new agreement.
The law will come into effect gradually over a five-year period, affecting larger companies earlier, starting with those that have more than 5,000 employees and €1.5 billion in annual revenue.
On Friday, the revised deal won adequate support among member states, despite Germany's abstention.
The agreement unblocks the EU's lawmaking process and makes it very likely that the Supply Chain Act will ultimately become law.
The new settlement needs the support of an absolute majority in the European Parliament, and the final step is approval by ministers who vote on behalf of their member states.
Most EU laws need the approval of at least 15 of the EU's 27 member states. The member states in favour also generally need to represent at least 65% of the EU population - although this requirement is waived if at least 24 member states are in favour.