Why Labour Law Is a Trade – and EUDR – Issue for Malaysian Exporters: Lessons from Switzerland
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Malaysian palm oil, rubber and timber exporters should treat labour law compliance – above all worker housing under Act 446¹ – as an EUDR issue, not just an HR issue. From 30 December 2026, an EU buyer may only place a product on the EU market if it was produced in line with Malaysian law, including labour law and internationally protected human rights. From 14 December 2027, the EU Forced Labour Regulation extends a similar ban to every product, from gloves to electronics.

This week, 85,000 signatures were filed in Switzerland this week against the EFTA–Malaysia free trade agreement and the opponents to it state deforestation and forced labour as their major concerns. This is significant as it is yet another indication that exporters who cannot prove compliance on paper will eventually lose European orders – regardless of their certification.

85,000 Swiss signatures show what European buyers will be asked

On 5 October 2026, an alliance of NGOs, the Social Democrats and the Greens filed 85,000 signatures against the EFTA–Malaysia Economic Partnership Agreement. Only 50,000 valid signatures are needed. If confirmed, Swiss voters will likely decide in the first half of 2027.

The campaign targets tariff cuts on up to 12,500 tonnes of Malaysian palm oil. Its arguments are not about tariffs, however. They are about deforestation, the displacement of local communities, and violations of labour and human rights, including forced labour.

To be precise: Switzerland is not an EU member, the EUDR does not apply there and the referendum may well fail. A similar referendum on the EFTA–Indonesia agreement narrowly passed in March 2021.

The point is a different one. Tens of thousands of European citizens took the time to sign a petition on how Malaysian palm oil is produced. The purchasing and compliance teams of European companies answer to exactly these citizens – as consumers, investors, journalists and regulators. In the EU, these concerns are no longer a matter for public debate alone. They have been written into law.

The EUDR makes “produced legally” a condition of market access

The EUDR is widely understood in Malaysia as a deforestation law. That is only half of it. A product may only enter the EU market if it is deforestation-free and produced in accordance with the “relevant legislation of the country of production” (Article 2(40) EUDR). This covers eight areas: land use rights, environmental protection, forest-related rules, third-party rights, labour rights, human rights protected under international law, free, prior and informed consent, and tax, anti-corruption, trade and customs rules.

We made this point in our analysis of the EU Omnibus: the biggest EUDR hurdle for Malaysian companies is not geolocation, but proving compliance with these eight areas of law. The Swiss campaign has now put a face on two of them.

The legal mechanics leave European buyers no room for discretion. Malaysia is classified as a standard-risk country, so every consignment requires full due diligence by the EU operator. If the operator cannot conclude that the risk of non-compliance is negligible, it may not place the product on the market. A plantation’s MSPO certificate helps, but – as we explained in EUDR: MSPO Helps, But Is Not Carte Blanche – it does not replace the underlying legal evidence.

The timeline is also settled. As set out in our article on the April 2026 Simplification Package, the Commission will not reopen the EUDR. It applies to large and medium-sized companies from 30 December 2026, and to micro and small operators from 30 June 2027.

Act 446 is where many Malaysian supplier files will fail

The “labour rights” limb of the EUDR is not an abstract European standard. It points to Malaysian law and Malaysian law on worker housing is specific. The Employees’ Minimum Standards of Housing, Accommodations and Amenities Act 1990 (Act 446) regulates worker housing differently depending on the setting: housing for employees working on estates is subject to the Act’s housing and amenities requirements, while accommodation for other employees is subject to a separate regime under which a Certificate for Accommodation is required. Housing employees without a certificate can lead to a fine of up to RM50,000, according to the Labour Department.  

In our experience, worker housing is the area where practice most often falls short of the law – particularly for foreign workers on plantations, in factories and in centralised accommodation. Overcrowded hostels, missing certificates where required and undocumented rent deductions are not rare. Each can amount to a breach of Malaysian law. Under the EUDR, each is therefore a reason for a European buyer to reject the consignment.

Housing also matters beyond Act 446. “Abusive working and living conditions” is one of the ILO’s eleven indicators of forced labour. Since the 2022 amendments to the Employment Act 1955, forced labour is an offence under Malaysian law itself. Other indicators of forced labour under the ILO include restriction of movement – as is present when a worker cannot leave a plantation – retention of identity documents – as is still a prevalent practice among many companies in Malaysia – or debt bondage – such as when a foreign worker is coerced into working against his/her will to repay a debt to a recruiter.

Geography adds a further layer. Act 446 applies only in Peninsular Malaysia and Labuan. Sabah and Sarawak enacted equivalent minimum housing and accommodation provisions in 2025 through Part IVA of their respective Labour Ordinances, but those provisions have not yet been brought into force. Employers of non-resident workers may nevertheless be subject to separate administrative or licensing requirements concerning accommodation.  

ILO conventions count  

The EUDR does not import every ILO convention into Malaysian supply chains. It refers to the law of the country of production and to human rights protected under international law. What counts is therefore what Malaysia has itself committed to – and that is considerable. Malaysia has ratified the core conventions on forced labour, child labour and equal pay. In 2022, it also ratified the ILO Protocol of 2014 to the Forced Labour Convention, which requires active prevention and remediation of forced labour.

The practical consequence is simple: a Malaysian producer cannot argue that a European buyer is imposing foreign standards. The standards are Malaysia’s own. The open question is only whether the producer can show that it meets them.

From December 2027, the forced labour ban reaches every product

The EUDR covers seven commodities. The EU Forced Labour Regulation (Regulation (EU) 2024/3015) covers everything. From 14 December 2027, it prohibits placing any product made with forced labour on the EU market, or exporting it from the EU. It applies to all companies, with no size thresholds, and regardless of origin or sector. For Malaysia, that brings machinery and appliances, transport equipment and chemicals – all of which are key exports to the EU – alongside palm oil and rubber and related products.

30 December 2026, when the relevant obligations under the EUDR will start to apply, will therefore just be the beginning of a wider trend, not an isolated phenomenon for products in the palm oil, rubber and timber sectors. And the obligations for Malaysian exporters will be significant:  

What Malaysian exporters should do now

The need to credibly demonstrate – rather than just giving assurances – that one’s production is free from forced labour will become the norm before exporting to Europe: the question European buyers will ask is not “Do you comply?” but “Can you prove it?”. Exporters should use the remaining weeks before 30 December 2026 to build that proof:

• Audit every worker housing arrangement: own estates, factories and centralised accommodation providers. Check compliance with the requirements applicable to each type of housing and, where required, obtain or renew Certificates for Accommodation and keep them on file.

• Document the most important forced labour indicators: recruitment fees, passport retention, wage deductions, working hours and freedom of movement are the most relevant ones.

• Extend the review upstream: smallholders, contractors and labour suppliers are part of the EUDR supply chain and their breaches become yours.

• Build one legality file per supply chain: you must cover all eight areas of Article 2(40) EUDR – not only geolocation.

• Review your sales contracts thoroughly: European buyers are passing EUDR risk down through warranties, audit rights and indemnities, as we explained in our EUDR guide for palm oil, rubber and wood exporters.

• Look beyond 2026: manufacturers outside the EUDR commodities should prepare for the Forced Labour Regulation now; buyers will start asking well before December 2027.

The Swiss vote may pass or fail. The direction of travel in Europe will not change either way.

Frequently asked questions

Does the Swiss referendum on the Malaysia trade deal affect the EUDR?

No. Switzerland is not an EU member and the referendum concerns the EFTA–Malaysia agreement. It does show, however, which concerns European buyers face from their own customers and stakeholders.

Does the EUDR require compliance with Malaysian labour law?

Yes. Article 2(40) EUDR defines “relevant legislation” to include labour rights and human rights protected under international law in the country of production. A product produced in breach of Malaysian labour law is not EUDR-compliant.

Is worker housing relevant for EUDR compliance?

Yes. Act 446 sets binding minimum standards for employee housing in Peninsular Malaysia and Labuan. A breach may therefore be a breach of the EUDR legality requirement.

Does Act 446 apply in Sabah and Sarawak?

No. Equivalent worker-housing provisions were enacted under the Sabah and Sarawak Labour Ordinances in 2025, but have not yet come into force. Employers of non-resident workers may nevertheless be subject to separate administrative or licensing requirements concerning accommodation.

Is MSPO or any other certification enough for the EUDR?

No. MSPO can facilitate compliance, but EU operators must still verify legality, including labour law compliance, through their own due diligence.

When does the EU Forced Labour Regulation apply?

From 14 December 2027, to all products and all companies placing products on, or exporting them from, the EU market.

About the author

Prof. Dr. Harald Sippel is an Austrian-qualified attorney (Rechtsanwalt) and Senior Foreign Advisor at Aqran Vijandran in Kuala Lumpur, supporting foreign companies – with particular depth in Europe and Korean client work – on Malaysian matters across all practice areas. He among others assists Malaysian companies with EU market access for Malaysian–European supply chains, including the EUDR and the EU Forced Labour Regulation.

Raja Nadhil Aqran is the Managing Partner of Aqran Vijandran, advising Malaysian and international clients on corporate, employment and dispute-related matters. He regularly provides guidance to businesses on Malaysian regulatory and employment-law issues affecting cross-border operations and supply chains.

Meta description: Labour law compliance – above all Act 446 worker housing – now decides EUDR market access for Malaysian exporters. What the Swiss referendum signals.

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