Senior Republicans call for “immediate diplomatic engagement” to stop CS3D
US lawmakers claim EU directive threatens productivity, sovereignty and fiduciary duty
Senior US politicians are calling for “immediate diplomatic engagement” to halt Europe’s incoming due diligence law, describing it as a threat to national productivity and a potential violation of fiduciary duty rules.
In a letter sent on Wednesday to US Treasury and the National Economic Council, state representatives called for the EU Corporate Sustainability Due Diligence Directive (CS3D) to be indefinitely delayed.
“The Directive’s extraterritorial reach extends beyond the European Union, implicating US businesses in ways that threaten economic productivity, corporate governance principles, and jurisdictional sovereignty,” the letter claimed.
It was signed by the chairs of the House Committee on Financial Services, Senate Committee on Banking, and subcommittees for capital markets, international trade and finance, and financial institutions.
Hundreds of US firms with a significant presence in Europe will fall into scope of CS3D.
The five Republicans argued that the directive will increase litigation and enforcement risks for those companies, despite US Congress not having ratified the UN and OECD principles that underpin the law.
They asked treasury secretary Scott Bessent, and National Economic Council director Kevin Hassett to campaign for the indefinite postponement of the rules.
Real Economy Progress reported in December that the US Chamber of Commerce had hinted it would mobilise incoming president Donald Trump to destroy CS3D.
The letter argued that CS3D, which is not a reporting requirement, expects all eligible firms to “disclose information beyond what is relevant to US investors”.
It noted that the Securities and Exchange Commission recently back-pedalled on its climate disclosure rules after similar pushback.
“Additionally, CS3D mandates that US companies incorporate European stakeholder perspectives into their business planning processes to address human rights and environmental risks.
“This requirement in CS3D could violate US directors’ fiduciary duty to act in the best interest of their shareholders, exposing companies to litigation risks and enforcement actions in the US.”
It asked Bessent and Hassett to request the removal of civil liability from the law, and ensure it is not introduced into any other EU regulation that effect US companies.
The letter was sent the same day the European Commission published a proposal to amend CS3D, which included plans to shelve an EU-wide civil liability regime. There would still be a civil liability component to the Commission’s new version – it would just be enforced via existing national laws.
Wednesday’s letter also called for clarification that US companies are not bound by net-zero transition plans, saying “the US has shifted its stance on climate commitments, and CS3D’s Article 22 on mandatory transition plans should be abandoned”.
The Commission wants to remove the requirement for companies to implement their net-zero transition plans, but under its new proposal, they would still be required to develop a plan and demonstrate they’re taking actions to help achieve it.