The EMCs
Consultation Version of the European Model Clauses (EMCs) Is Launched
The European Model Clauses (EMCs) are a set of model clauses that aim to support effective human rights and environmental due diligence (HREDD). They are designed to be in alignment with the requirements of the new EU Corporate Sustainability Due Diligence Directive (CSDDD), which entered into force in July of 2024.
A first version of the EMCs was published in October 2023 for electronic consultation. Following that initial consultation, the European Working Group has now released the Zero Draft of the EMCs.
The consultations for the Zero Draft are being coordinated by the Responsible Contracting Project (RCP) with the financial support of the Initiative for Global Solidarity (IGS) which is implemented by Deutsche Gesellschaft für Internationale Zusammenarbeit (GIZ) GmbH on behalf of the German Federal Ministry for Economic Cooperation and Development. This inclusive consultation process aims to ensure that the first official version of the EMCs (the EMCs 1.0), which will be published in early 2025, is the product of an inclusive, balanced, and legitimate process.
By participating in the consultation process, stakeholders can ensure that their perspective is considered in the final EMCs. Various stakeholder groups, including in-scope companies and smaller companies in the Global North and the Global South, civil society organizations, academics, think tanks, consultancies, and national and international governmental organizations, are encouraged to participate. To learn more about the consultation process click here
Feedback can be provided in writing (by emailing or by completing this form) or by participating in meetings and workshops, which may be virtual.
The consultation period closes on December 2, 2024.
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Background and Key Principles
The EMCs build on the 2021 Model Contract Clauses to Protect Workers in International Supply Chains, Version 2.0 (MCCs 2.0). The key difference is that, while the MCCs 2.0 were written primarily for US companies operating in the US legal context, the EMCs are written for companies that are, or will be, subject to - or otherwise impacted by - the new mandatory human rights and environmental due diligence (mHREDD) laws coming from Europe.
When they are finalized, the EMCs will be aligned with the German Supply Chain Due Diligence Act (LkSG) and the CSDDD, as well as with the United Nations Guiding Principles on Business and Human Rights (UNGPs) (2011), the OECD Guidelines for Multinational Enterprises on Responsible Business Conduct (2023) and the OECD Due Diligence Guidance for Responsible Business Conduct (2018).
Like the MCCs 2.0, the EMCs are pan-industry and modular, meaning that companies can select which clauses to include in their contracts and adapt them to suit their particular HREDD-related needs. The EMCs include clauses that can support companies’ HREDD processes, including on cooperation, stakeholder engagement, information sharing, responsible purchasing practices, internal grievance mechanisms, and human rights remediation. Critically, the EMCs include clauses that operationalize the “exit as a last resort” principle enshrined in the UNGPs, the OECD guidance, and the new mHREDD laws. This means that the EMCs contractualize the prioritization of remediation over traditional contract remedies (e.g., suspension of payment, termination, and damages) in the event of an actual adverse impact.
The EMCs seek to improve the effectiveness of contracts as tools for HREDD by moving away from a risk-shifting, one-sided, perfect compliance model of contracting toward a shared-responsibility model where the parties cooperate, on an on-going basis, to prevent and, when needed, remedy adverse human rights and environmental (HRE) impacts. In this way, the EMCs track the new mHREDD laws, which identify contracts as important preventive and corrective measures that must be appropriate and effective for addressing adverse HRE impacts. The CSDDD specifies that contracts should not be used simply to transfer due diligence obligations to business partners, such as suppliers.*
Article 18 of the CSDDD contemplates that the EU Commission will, within 30 months of the Directive’s entry into force, develop guidance on voluntary model contractual clauses that companies can use to meet the new requirements. While the EMCs were not developed at the EU Commission's request, the European Working Group hopes that they will serve as a helpful resource for the Commission as it develops its guidance.
For a brief intro to the EMCs, check out this video and accompanying slides.
For analysis of the content of mandatory due diligence laws with respect to contracts, see the RCP Policy Brief: What the EU CSDDD Says About Contracts (July 2024) and Complying with Mandatory Human Rights Due Diligence Legislation through Shared-Responsibility Contracting: The Example of Germany’s Supply Chain Act (LkSG), (2023) (2023) (Ch. 14 in ABA Book available here).
* Article 18 on Model Contractual Clauses and the accompanying Recital 66 contemplate clarify that the forthcoming European Commission guidance on contracts "should aim to facilitate a clear allocation of tasks between contracting parties and ongoing cooperation, in a way that avoids the transfer of the obligations provided for in this Directive to a business partner and automatically rendering the contract void in case of a breach. The guidance should reflect the principle that the mere use of contractual assurances cannot, on its own, satisfy the due diligence standards provided for in this Directive.".
The EMCs reflect the 3 "Rs" of responsible contracting:
1. Responsible allocation of risks and responsibilities: Set aside supplier-only guaranties of perfect compliance in favor of a joint commitment to cooperate in carrying out human rights and environmental due diligence (HREDD)
2. Responsible purchasing practices: Commit the buyer to engage in purchasing practices that can support effective HREDD
3. Remediation first and responsible exit: If an adverse impact happens, provide remedy to victims and take measures to ensure the harm stops and does not reoccur before turning to traditional contract remedies (e.g., suspending payment and canceling orders). Exit should only be pursued as a last resort, taking measures to mitigate the impact.
The EMCs seek to improve the effectiveness of contracts as tools for preventing and addressing adverse HRE impacts**, as required by the new mHREDD laws. As traditionally used, contracts tend to undermine the effectiveness of companies’ HREDD processes by transferring both the contractual and the financial responsibility for upholding HRE standards to other actors in the supply chain, namely their suppliers (e.g. manufacturers).
Traditional, one-sided contracts that place the entire responsibility for upholding HRE standards on suppliers and allow the buyer to exit the contract immediately in the event of--even small--deviations from the supplier code of conduct, are ineffective for avoiding adverse HRE impacts. By extension, traditional contracts are not fit for purpose when it comes to carrying out effective HREDD, as required by the new laws**.
The EMCs move away from the traditional, one-sided model of contracting towards a model of shared-responsibility contracting where both parties to the contract, the buyer (e.g. brands and retailers) and the supplier, contractually commit to carry out on-going and risk-based HREDD in cooperation with one another.
For a brief intro to the EMCs from several members of the European Working Group, including Martijn Scheltema, Co-Chair of the Working Group, Beata Faracik, Co-Founder, Polish Institute for Human Rights, and RCP Director, Sarah Dadush, check out this video and accompanying slides.
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** For analysis of the content of mandatory due diligence laws with respect to contracts, see the RCP Policy Brief: What the EU CSDDD Says About Contracts (July 2024) and Sarah Dadush, Daniel Schönfelder & Bettina Braun, Complying with Mandatory Human Rights Due Diligence Legislation through Shared-Responsibility Contracting: The Example of Germany’s Supply Chain Act (LkSG), Chapter 14, Contracts for Responsible and Sustainable Supply Chains: Model Contract Clauses, Legal Analysis, and Practical Perspectives, (Susan Maslow & David Snyder eds., ABA Business Law Section, 2023) (Book available here).
***Article 18 on Model Contractual Clauses and the accompanying Recital 66 contemplate the development of guidance on contracting by the European Commission and clarify that this guidance "should aim to facilitate a clear allocation of tasks between contracting parties and ongoing cooperation, in a way that avoids the transfer of the obligations provided for in this Directive to a business partner and automatically rendering the contract void in case of a breach. The guidance should reflect the principle that the mere use of contractual assurances cannot, on its own, satisfy the due diligence standards provided for in this Directive.".