Legal opinion: What obligations does the financial sector have under the German Supply Chain Act?

Since January 2023, the rules of the Supply Chain Act in Germany have applied to all companies above a certain size. This also includes financial institutions. However, the Federal Office for Economic Affairs and Export Control (BAFA), which is responsible for enforcing the law, argued in its guidance published in August 2023 that the law's due diligence obligations are not binding for financial institutions with regard to their core business.

Contrary to the BAFA guidance, the legal opinion concludes that a correct interpretation of the LkSG clearly shows that financial institutions have a supplier relationship within the meaning of the LkSG with their customers for a number of financial products. According to the expert opinion, in many cases, the due diligence obligations of the LkSG therefore also apply to financial institutions in relation to their core business (e.g. lending or the management of investment assets). It argues that the BAFA's guidance is unlawful in its current form and must be amended.