This week’s EU Omnibus developments
The official negotiating positions of all co-legislators is now confirmed, with a vote at European Parliament this week providing the final missing piece.
After failing to secure a majority in the previous vote, the centre-right European People’s Party (EPP) broke with tradition and formed an alliance with the far-right instead of the centre-left or other pro-European colleagues.
The result is that Parliament has agree to push for brutal reductions to the Corporate Sustainability Reporting Directive (CSRD) and Corporate Sustainability Due Diligence Directive (CS3D).
While the European Commission and Council want the revised CSRD to apply to companies with more than 1,000 employees (up from 250 under the current law), Parliament will try to raise the threshold to 1,750.
Both Parliament and Council agree the scope of CS3D should be cut to companies with more than 5,000 employees.
Parliament will fight to have CS3D’s transition plan requirements removed completely, while Council wants them retained, albeit heavily diluted.
For a fuller list of how Parliament, Council and Commission will negotiate on the Omnibus, see this chart from law firm Herbert Smith Freehills Kramer.
Trialogues will kick off immediately, as legislators work to get a final text signed off before the Christmas break.
The EPP’s decision to ally with the far-right has far reaching implications for lawmaking – not just on sustainability issues.
The EPP is the biggest party in parliament, and its support is therefore crucial for any proposal to pass.
If it continues to consider the far-right a suitable partner with which to form majorities, it will give those parties a lot more influence over how EU law is drafted.
Parliament also has veto power over some Level 2 rules, including the European Sustainability Reporting Standards (ESRS), which means the far-right may get to decide whether the planned revisions to the standards are sufficient.
EFRAG confirmed this week that it will publish its draft ERS proposal on December 4th.
In the meantime, the Commission officially published the ‘quick fix’ update for the ESRS on Monday, freezing the reporting expectations of Wave One companies under CSRD, so they don’t have to increase their disclosures for the next two years, as originally required.
The Commission also launched a call for evidence on the Taxonomy Regulation on Monday, ahead of revisions to its climate and environmental Delegated Acts.
Feedback is being invited until December 5th.
And more than 100 academics and lawyers wrote to the legal affairs committee of European Parliament this week, warning that the EU’s first Omnibus package sets a “dangerous legal precedent” for EU lawmaking.
The letter said there were “substantive and procedural deficiencies associated with this proposal, which indicate that the Omnibus I package may infringe upon fundamental principles of EU law”.
The EU faces “a high risk of legal challenges” if the process continues, they suggested, which would contribute to legal uncertainty for companies operating in the region.