EU Forced Labour Regulation

I. Key Provisions

The EU Forced Labour Regulation is intended to contribute at European level to achieving the UN goal of ending forced labour worldwide by 2030. To this end, it prohibits the placing and making available on the Union market or exporting from the Union market of products produced [under] forced labour and therefore follows a product-based approach (similar to the EUDR and CBAM).

Emphasis must be put on the broad scope of the regulation. Personally, it covers all economic operators, i.e. "any natural or legal person or association of persons placing or making available products on the Union market or exporting products". Every form of distribution is covered, including distance sales, i.e. products offered for sale online if the offer is targeted at end users in the EU. In particular, there is no exemption for small and medium-sized enterprises ("SME"), meaning that the Regulation applies to numerous companies that were previously exempt from legal acts such as the German  Act on Corporate Due Diligence Obligations in Supply Chains ("German Supply Chain Act") or the EU's Corporate Sustainability Directive ("CSDDD") due to their size. The ban covers products for which forced labour was used at any stage of the supply chain. The Regulation uses the definition of forced labour contained in Convention No. 29 of the International Labour Organisation ("ILO"). The Convention defines forced labour as " 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 voluntarily ". The practical advantage of this reference is the harmonisation with the CSDDD, which also uses the definition from the ILO Convention.

In the event of a violation, the authorities can prohibit the placing on the market, making available or export of the products concerned. They can also order the products concerned to be withdrawn or disposed. In the event that a company does not comply with such an order, the regulation stipulates penalties that must be "effective, proportionate and dissuasive" and are to be issued by the member states. These penalties must be notified to the Commission by 14 December 2026, with the Commission providing guidance to Member States on the method for calculating financial penalties and the applicable thresholds by 14 June 2026.

Where a supply chain of strategic or critical importance for the Union is concerned, the competent authority may refrain from disposing the product and order the economic operator to withhold the product until it has been demonstrated that any forced labour has been ended. If only replaceable components of the product are affected by forced labour, only the affected part may be ordered to be disposed of. It should be noted that forced labour must actually be ended. According to the recitals of the Regulation, a change in the supply chain through a change of supplier is expressly not sufficient.
 

II. Monitoring and Enforcement

Compliance with the ban is monitored by the EU Commission and national authorities, who also bear the burden of proof for any violations. The EU Commission will investigate suspected cases outside the EU, while national authorities are responsible for national suspected cases. Decisions are enforced by the national authorities. The ban issued by a national authority is recognised by the other Member States and is therefore valid throughout the EU.

In order to prove that a product originates from forced labour, an investigation at the relevant companies is required. Using a risk-based approach, the authorities will prioritise serious cases and focus on particularly high-risk products, economic sectors and companies. In addition, the EU Commission will set up a database with reliable information on forced labour risks. This database, accessible through the Forced Labour Single Portal, is intended to support companies in avoiding violations of the Regulation. In addition, the EU Commission will publish numerous guidelines by 14 June 2026 (including guidance on due diligence obligations in connection with forced labour and information on risk indicators). This is intended to support SMEs in particular.
 

III. Relationship to the CSDDD and German Supply Chain Act

The EU Forced Labour Regulation supplements the CSDDD and the German Supply Chain Act.

The CSDDD, which entered into force on 25 July 2024, aims to promote sustainable and responsible corporate conduct across companies’ operations and global supply chains. It requires in-scope companies to identify and address adverse human rights and environmental impacts, including taking measures to prevent forced labour. As part of the first Omnibus package, the recently adopted “Stop the Clock” Directive postpones the Member States’ transposition deadline and the initial phase of the CSDDD’s application by one year, giving companies additional time to prepare for their due diligence obligations.

The German Supply Chain Act (which already came into force on 1 January 2023) obliges large companies within its scope of application to fulfil human rights due diligence obligations along their supply chains in addition to environmental due diligence obligations. The definition of forced labour in the Forced Labour Regulation also corresponds to the definition used in the German Supply Chain Act.

The EU Forced Labour Regulation does not introduce any additional specific due diligence performance obligations for economic operators other than those already provided for in EU or national law. The responsibility to investigate lies primarily with the Commission and the Member States. In practice, however, the Regulation has a clear indirect effect in this regard as companies must carefully scrutinise their supply chains in order to avoid products being withdrawn from the market regardless of fault and/or address other risks from a contractual, regulatory compliance or reputation perspective.
 

IV. Conclusion

The EU Forced Labour Regulation is an important step in the fight against modern slavery and forced labour. It complements the CSDDD and other specific modern slavery legislation across the world. While this Regulation is broad in its scope, it does not impose a new specific due diligence obligation from a performance or process perspective.  However, the clear indirect effect of this Regulation will mean that companies must take measures, including due diligence steps, to prevent being involved with products produced with forced labour and avoid potential investigation or sanctions under the Regulation, breach of contract or other claims, and reputation risks. This applies in particular to SME, which were not previously in scope of other ESG legislation. In addition, unlike the CSDDD and the German Supply Chain Act, the Forced Labour Regulation introduces direct product-related obligations and thus makes compliance with the ban on forced labour a prerequisite for the marketability of products in the EU. Finally, it should be noted that - unlike the CSDDD or German Supply Chain Act – to date, there are no indications that the requirements of the Forced Labour Regulation and its severe legal consequences may be weakened by the aim of the EU's Omnibus initiative (which seeks to strengthen competitiveness of the EU by reducing bureaucracy).

Please do contact us to discuss the potential impact of the EU Forced Labour Regulation on your business, supply chain or business relationships or transactions.