The impact of the EU Directive on Corporate Sustainability Due Diligence on Asian Companies: a PIL analysis

On 24 May 2024, after a long legislative-journey, the European Union formally adopted the Directive on Corporate Sustainability Due Diligence («CSDDD»). This landmark Directive mandates that EU Member States require large companies operating in the EU market to identify, prevent, and mitigate actual or potential adverse impacts on human rights and the environment across their operations. Notably, the CSDDD establishes liability rules for non-compliance with these due diligence obligations. One of the key features of the CSDDD is its extraterritorial reach. As a matter of fact, the new Directive is designed to impact on the production processes carried out by many non-EU companies. The Directive directly applies to non-EU companies (or parent companies of corporate groups) with annual net turnover exceeding EUR 450 million in the EU market. Additionally, the CSDDD indirectly influences numerous other businesses, as it mandates that companies to which the Directive applies implement due diligence measures across the activities of their subsidiaries and business partners throughout their supply chains, regardless of geographic location. Given the strong economic ties between Europe and Asia, the CSDDD is poised to affect many Asian companies that either operate within the EU or engage in supply chains linked to the EU market. However, the Directive is remarkably silent on matters of private international law, making it unlikely that non-EU companies could be held liable under the CSDDD for violations of the due diligence obligations. This presentation will examine the EU private international law rules on jurisdiction and applicable law, arguing that these rules are inadequate to deal with the question of liability of non-EU companies for violation of the due diligence obligations laid down by the CSDDD, and therefore to ensure a consistent and effective enforcement of the latter. Possible solutions to address these gaps will also be explored.