The predictability of liability rules in the CS3D and its reversal in the Omnibus proposal
A. Introduction
1. Global supply chains and ‘private international law’. The globalisation of supply chains or ‘global value chains’ over the past few decades has brought with it a globalisation of litigation between companies and alleged victims of corporate misbehaviour, whether it be degradation of social, human, or environmental rights. These claims are settled through mechanisms of an area of law known as private international law or ‘conflict of laws’. This area of law determines a. whether a court may or must hear a claim brought before it (‘ jurisdiction ’); b. what law that court will apply (‘ applicable law ’); c. and when a judgment is issued, whether and how that judgment may be enforced (‘ recognition and enforcement ’). 2. A key fact which is not immediately intuitive, but highly relevant when drafting legislation on global value chains is that courts regularly apply the laws of a different State to the claim they have been asked to settle. For instance, in non-contractual claims (which includes most claims relevant to the current issue), EU harmonisation of the private international law rules in the ‘Rome II’ Regulation 1 means that courts generally will apply the law of the place where the damage occurred . Precisely as a result of global value chains, that law will often be the law of a non-EU Member State . Consequently, an EU law on due diligence in the supply chain, unless proper attention is paid to its application to events outside the EU, risks not being applicable at all to damage occurring outside the EU. 3. Liability claims under the CS3D. The Corporate Sustainability Due Diligence Directive or ‘CS3D’, 2 which entered into force on 25 July 2024, is very aware of the private enforcement of the rights protected by it and of the private international law context of such enforcement. 3 particularly with respect to applicable law. To be noted: Neither jurisdictional rules nor recognition and enforcement are impacted by the CS3D or Omnibus (in particular it does not provide for any 'extraterritorial' application of EU law as sometimes claimed). 4. Liability claims brought under the CS3D necessarily must relate to issues that come within the subject-matter of the Directive. This subject matter in accordance with Article 1(1), in relevant part are “rules on (a) obligations for companies regarding actual and potential human rights adverse impacts and environmental adverse impacts, with respect to their
1 In particular Regulation 864/2007 on the law applicable to non-contractual obligations (“Rome II”) [2007] OJ L199/40. 2 Directive 2024/1760 of 13 June 2024 on corporate sustainability due diligence, [2024] OJ L https://eur- lex.europa.eu/legal-content/EN/TXT/PDF/?uri=OJ:L_202401760 .
3 The European Commission noted the relevance of private enforcement in its Impact Assessment: “As regards private enforcement of the due diligence obligation, the policy options, which include civil liability provisions going beyond harm done at the level of the direct supplier, do not go beyond what is necessary. Effective enforcement of the due diligence duty is key to achieving the objectives of this initiative.”: European Commission Impact Assessment Report 23 February 2022, https://tinyurl.com/mzxh7chj p.70.
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