The issue is almost certainly that because the translation is done on the phone, not the AirPods, and per the DMA Apple is required to allow access to that feature to any headphone manufacturer who asks for it. Under the DMA Apple is not allowed to differentiate with software features.
From the
text of the DMA, bold parts highlighted by me:
In other words, if the translation is done by iOS, then Apple has to give access to that feature to the headphone companies it is competing against. It's not a surprise Apple doesn't want to do that.
This is absolutely a result of EU regulations. Don't be mad at Apple for withholding features when the EU has declared iOS is a public utility.