US lawmakers eye legal ‘shield’ against overseas due diligence laws

A proposed bill would give US firms the right to sue if protections aren’t respected 

Senior Republican lawmaker Bill Hagerty has put forward a bill seeking to “shield” US firms from overseas due diligence requirements. 

The proposal by the Tennessee state representative would give companies the right to take legal action if the protections it affords them are not respected.  

The Prevent Regulatory Overreach from Turning Essential Companies into Targets Act, or PROTECT, was unveiled on Wednesday. 

It’s the latest attempt by Republican lawmakers to remove US firms from the scope of the EU’s Corporate Sustainability Due Diligence Directive (CS3D), which currently applies to large companies with significant business operations within the EU – regardless of where they are headquartered. 

Hagerty was one of five senior Republicans that wrote to the US Treasury and the National Economic Council last month calling for “immediate diplomatic engagement” to halt CS3D, describing it as a threat to national productivity and a potential violation of fiduciary duty rules. 

If adopted, PROTECT would prohibit US firms from being forced to comply with “any foreign sustainability due diligence regulation”.

This includes protecting them from “adverse action” taken in instances of non-compliance, and establishes “a private right of action” for companies “to bring civil actions when aggrieved”. 

“No judgment by a foreign court brought against an entity integral to the national interests of the United States in relation to any foreign sustainability due diligence regulation shall be recognised in the courts of the United States,” the text states.