Germany’s New Supply Chain Act – Part 3 of 4 – Litigation

This represents a political compromise. It was reached after long and heated debate between those who wished to expand and those who wished to limit corporate liability for impacts in supply chains. That debate took place against the backdrop of the Jabir v KiK case ("Jabir case"). In that case, a German clothing retail company was sued in Germany by the victims of a fire in a textile factory operated by one of the company’s suppliers in Pakistan in 2012.

According to the claimants, the work safety measures enforced by the operator of the factory did not satisfy the minimum labour law standards set out in a code of conduct. The code of conduct was agreed with the German company and was based on "relevant rules of the United Nations". The claimants argued that the non-compliance with the code of conduct caused the severity of the damages.

The German courts considered whether the German company was potentially liable under tort and contract law. Eventually, the German courts dismissed the claim because the tort law claim was time-barred under Pakistani law and that there was no basis for a contractual claim. The new Act provides for a clarification that it is not intended to change this legal regime.