21. Further, all remaining elements of this justification by the Commission are faulty . Firstly, the ‘subsidiarity principle’ entails that the EU does not take action unless it is more effective than action taken at the national, regional or local level. The Commission’s argument on this point undermines its recourse to the very legal basis of the CS3D, which is both the free movement of establishment, and the Internal Market. It is the very existence of different national regimes, which would otherwise hinder the functioning of the internal market, which justifies the use of Article 114 TFEU as a legal basis. The European Commission acknowledged so much in various parts of its legislative proposal that led to the CS3D. 10 Next, the suggestion that the deletion “ ensures respect for existing, national liability regimes – with which companies in scope are familiar - in line with the subsidiarity principle and ensures greater legal certainty on liability risks” belies reality. The scope for the ‘familiar’, national regime to be pushed aside, is increased as a result of the deletion of Article 29(7). A Member State court using Article 16 Rome II, may consider its implementation of the CS3D as being of overriding mandatory law; equally, it may decide its implementation should not so override the normally applicable law. Moreover, a Member State court in this new formulation may set aside not just the laws of a third State, but also the laws of another Member State, something which as noted is ruled out in the current formulation of Article 29(7). 22. In conclusion , the European Commission's assertion, that the proposed changes in the Omnibus in relation to civil liability (Article 29) would improve legal certainty is highly questionable. In this legal opinion I explored how complex the legal landscape would be with these proposed deletions. Much more complex than the adopted CS3D. The CS3D provides for a substantively higher level of legal certainty and harmonisation across the EU. The original CS3D harmonizes the effects of the newly introduced due diligence duties on liability (Article 29(1)) and ensures that this standard of conduct is the applied standard (Article 29(7)) if push comes to shove and a company has to defend itself in court.
10 See ia the following extract from COM(2022) 71: “ the differences between national rules on sustainable corporate governance and due diligence obligations have a direct impact on the functioning of the internal market, and that impact is likely to increase in the future. (...) It is foreseeable that these distortions and impacts would become more serious with time as more and more Member States will adopt diverging national laws or may even lead to a race to the bottom in forthcoming due diligence legislations. Distortions are also relevant for civil liability in case of harm caused in a company’s value chain. Some national legal frameworks on due diligence include an express civil liability regime linked to the failure to execute due diligence, while others expressly exclude a specific civil liability regime. A number of companies have been brought before courts for causing or failing to prevent adverse impacts at the level of their subsidiaries or value chains. Such cases are decided based on differing rules today.”
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