Shauryaveer Chaudhry, Devang Pandey, Izzuddin Qasam and Shreyansh

In this episode of the Law School Policy Review podcast, Shauryaveer, Devang, Izzuddin and Shreyansh speak with Professor Anton Zimmermann of Heidelberg University on the evolving landscape of corporate human-rights due diligence and the EU’s Corporate Sustainability Due Diligence Directive (CSDDD).

The conversation explores the CSDDD’s extraterritorial reach and its implications for Indian corporations and supply chains, alongside questions of international jurisdiction, sovereignty, cross-border evidence and civil liability following the Omnibus I Directive. The discussion also considers the “Brussels effect” and its implications for multilateralism, compares the European framework with India’s CSR and BRSR regimes, and concludes with what Indian exporters should watch in the post-Omnibus landscape.

LISTEN TO THE PODCAST

Shauryaveer Chaudhry: Hi, everyone. Welcome to yet another podcast for the Law School Policy Review. Today we have Professor Anton Zimmermann with us, who is a Junior Professor of Private Law, Private International Law and International Procedural Law at Heidelberg University, Emmy Noether research group on the relationship of Public and Private International Law. He has also taught at the National Law University, Delhi and has undertaken research stays at Kyoto University, bringing extensive international and comparative expertise to his work. Thank you so much for being here with us today, Professor. Devang, would you like to start with the first question?

Devang Pandey: Professor, for the very first question, your recent article in the Archiv des Völkerrechts borrows the language of universal jurisdiction, traditionally a criminal law concept, to describe the CSDDD’s approach to civil liability. Could you explain, for a general audience, what is actually at stake when a European court can adjudicate liabilities for conduct that occurred entirely in a third country, between two third-country parties, under third-country law?

Anton Zimmermann: Sure. First of all, thank you so much for having me. It’s a great pleasure. And to answer your question, I think we have to firstly stress how important a step it was by the European legislature to introduce a private law liability regime for supply chains in the first place. Because usually when we thought of supply chains beforehand, it was mostly just public law due diligence regulation. So, it was a really novel step to introduce this kind of private law liability regime in the CSDDD. And before I start criticising it, I would really like to highlight that, in principle, I’m very much in favour of a civil liability mechanism to safeguard human rights.

Now, coming to the problem, I think the main issue with the CSDDD’s liability regime is one of territorial scope. To understand this problem better, we need to look at two different things: first, the customary International Law of Jurisdiction; and second, the territorial scope of the CSDDD.

Starting with the International Law of Jurisdiction, it distinguishes between ‘jurisdiction to prescribe’ and ‘jurisdiction to enforce.’ Enforcement jurisdiction covers the enforcement of legal acts, whereas jurisdiction to prescribe asks when a state is actually entitled to prescribe legal rules for a certain situation. Prescriptive jurisdiction under International Law cannot be limited to merely domestic cases, because if that were the case, then no one would be allowed to regulate cross-border relationships. However, there are certain limitations on prescriptive jurisdiction as well. And the mainstream today will probably say that what is required is a so-called genuine link between the state regulating the behaviour and the behaviour or situation in question. On the other hand, that means that if there is no genuine link between the regulating authority or the regulating state and the situation in question, that would amount to a breach of International Law and an infringement of the sovereignty of a foreign state. For example, if the German state were to regulate marriages in India, then India would rightfully claim that this constitutes an infringement of Indian sovereignty. That’s how we can see how International Law or the rules on jurisdiction relates to questions of sovereignty.

Now, what is sufficient for such a genuine link? There are quite a few cases where it’s generally accepted that there is a sufficient genuine link between a situation and a certain state. For example, there is territoriality. If something happens on the territory of a state, then that state is of course entitled to regulate this behaviour. Also, states are allowed to regulate the behaviour of their own nationals, including their own corporations, even when they act abroad. The problem comes when we look at the scope of the CSDDD, which is stated in Article 2 of the CSDDD, which only requires a certain net turnover in the European Union by the company that is to be regulated by it. So, if there is an Indian corporation, which has a large turnover in the European Union, then the entire corporation with all its activities, to an extent, falls within the scope of the CSDDD. Now let’s think of a very specific example. Say this Indian corporation is building televisions, and a worker in the factory in India is getting injured because of some workplace safety problem. Then the problem is that according to Article 2 of the CSDDD, this case, even though it happened to an Indian worker in India as an employee of an Indian corporation, would still be covered by the CSDDD. That is where I take issue from the perspective of International Law. Because if we try to find some kind of genuine link between this specific tort that might have happened to this individual and the European Union, I think we will have a very hard time because we do not have a European national involved. Nothing happened on European soil. There’s just the turnover criterion. That’s why I think we run into a problem as long as we demand a genuine link. And that’s where the concept of universal jurisdiction comes into play for me.

When we are talking about universal jurisdiction, as you’ve rightly pointed out, we are usually talking about criminal law. Usually, we are talking about punishing particularly severe crimes against humanity. The entire idea behind universal jurisdiction is that in order to exercise it, you do not need a genuine link anymore. The idea is that some crimes are so grave that every state in the world is entitled to prosecute them, even without the genuine link. And I think that’s where the connection lies between the usually criminal law concept of universal jurisdiction and what the CSDDD does. Because the CSDDD also says, look, we want to improve and promote human rights, which is kind of a common good and in order to do so, we assume jurisdiction over cases that have at best, a very tenuous connection to Europe. And so, the question I was asking myself in this paper is, “Does every case that falls within the CSDDD actually fulfil the criteria for universal jurisdiction?” My personal answer to this question was “No, it does not.” Because if we look a bit more closely at the cases covered by the CSDDD, then we find references to a vast catalogue of different human rights. In particular, we find references to the two big UN covenants, which cover lots and lots of human rights, which are all of course important. But I wouldn’t say they are necessarily comparable to crimes against humanity if they are violated. I say if we want to keep the canon of universal jurisdiction narrow, and I think there are good reasons to do that, we must be very careful in applying the CSDDD to these purely third country cases. And so, there are a few cases where I would be willing to say that the CSDDD should apply. For example, if corporations engage in slavery, in these very grave cases, I think it would be acceptable. Even then, I think the EU jurisdiction should be subsidiary to the jurisdiction of the territorial state. So as long as the territorial state provides an effective remedy, I think that should take precedence. But in these cases, I would be willing to say that we can work with universal jurisdiction, but in most other cases, I think it’s very difficult. That would be my answer.

Devang Pandey: Thank you, Professor. Just supplementing similar lines, since your article was published, the Omnibus I Directive has deleted the EU-wide harmonised civil liability regime you analyzed, reverting liability to national law in each Member State. Does the international law overreach problem you identified dissolve along with the harmonised regime, or does it simply re-emerge in a more fragmented, and perhaps less defensible, form across twenty-seven separate national rules?

Anton Zimmermann: That is a very good question. I think it does in fact re-emerge in a more fragmented form, but I’m not entirely sure if I would say it’s necessarily more problematic and less defensible in that way. The Omnibus did remove most of the essential part of the civil liability regime, but if you look closer at the CSDDD, then there is still something left of Article 29, which mostly rules on civil liability. So, there are still a few rules left, for example, those on the statute of limitations for civil liability. It seems that the European legislature to an extent even assumes that the member states will still create some kind of civil liability regime for these human rights violations. I do think it is likely that at least some of the member states might introduce such a liability regime, even though I’m also sure that quite a few will be very reluctant to do so. Speaking of Germany, for example, we already do have a supply chain act in Germany. And when it was introduced, we had a very long discussion about whether or not it should contain a civil liability regime, and it was very controversial. But in the end, our legislature decided against it. In fact, for many national legislatures, it is something they do not perceive as particularly attractive. So, I would say it’s likely that some member states will introduce a civil liability regime, but not all. For those that actually introduce such a liability regime, I would say the problem will persist because if we look at International Law and the rules on jurisdiction, it doesn’t really care if excessive assertions of jurisdiction come from Brussels or if they come from Berlin or Paris or wherever. In a sense, I would say you might have some kind of fragmentation, and this fragmentation will bring about new problems, because one of the attractive features of the unified liability system for corporations was that there was one standard for corporations in the entire European Union. That might be dangerous because it can create liability, but it’s something you can work with. What can happen now is that you will have 27 different liability regimes in the European Union. So, in that sense, the problem has become more difficult. Legal certainty is also an issue here. But I would say from a purely international law perspective, national solutions are not necessarily less defensible than a European law solution.

Devang Pandey: Thank you, Professor. The original CSDDD liability provision was designed to function as an overriding mandatory provision under EU private international law. If individual Member States now legislate their own supply-chain liability rules independently, can those national rules still credibly claim that status against a third country law, such as India’s? Or does that characterization only hold when backed by EU-wide harmonization?

Anton Zimmermann: You are completely right that the overriding mandatory provision status is something that has gone now from this year’s CSDDD. I would, however, argue that member states can still opt to turn their own liability regimes, should they opt to introduce one, into overriding mandatory provisions. And I actually believe there are very important practical reasons to do so. If you look at the rules of private international law in the European Union, we will see that a civil liability regime from a European member state will almost never be applied if it is not an overriding mandatory provision. Because under the European Choice of Law Rules contained in Article 4 of the Rome II Regulation, courts are governed by the law of the country where the damage occurs. For example, if a certain damage occurs in India, then Indian law would apply even before a European court. And so, even if a member state of the European Union were to come up with some kind of beautiful liability regime, it would simply not be applicable to cases it is meant for. This can only be avoided if these provisions are turned into overriding mandatory provisions, because according to Article 16 of the Rome II Regulation, overriding mandatory provisions of the forum state apply even when the otherwise applicable law is not that of the forum. For that reason, I think it would be even a smart step by the member states should they choose to introduce a civil liability regime to turn it into an overriding mandatory provision. I would even argue that it is more defensible if the member states do that, because if we look at Article 16 of the Rome II Regulation, then we see that overriding mandatory provisions, according to Article 16 of the Rome II and Article 9 of the Rome I Regulation, are rules that are considered of particular importance in the forum state. Therefore, it was actually even problematic to an extent that the European Union started imposing overriding mandatory provisions on the member states. Now that this problem is gone, I think it could be even more easily possible for the member states to turn provisions into overriding mandatory provisions. In that sense, I think it would be quite possible.

Izzuddin Qassam: Thank you Professor. Coming to the next question. With the scope of the directive narrowed considerably now, both in the number of companies covered and the turnover thresholds involved, how many Indian exporters do you estimate remain realistically within the scope? Does that narrower pool of companies make the extraterritoriality concern you raised less pressing, or does it simply mean the same concern now applies to fewer and larger targets?

Anton Zimmermann: That is a very good question, and I actually looked that up in preparation for this interview. There is an NGO providing a lot of data on companies that are actually affected by the CSDDD. The result I came up with is that at the moment, there are 7 Indian corporate groups covered by the CSDDD, meaning those are directly covered by the CSDDD. But these corporate groups are fairly large. For example, and I am sure you will know a few of the names, there is Tata Steel and the Tata Consultancy Services Group. I think they do have a combined workforce of around 600,000 employees. Even though the number might seem small at first, these are very large corporations. On top of that, this number does, of course, not include all suppliers which will be covered indirectly by the CSDDD. The entire idea of the CSDDD is that certain large corporations have to take care of their entire supply chain, including indirect suppliers. Quite a few Indian corporations, which may be direct or indirect suppliers of European, American, or whatever corporations, will also have to abide by the rules set forth in the CSDDD, because their buyers will demand it of them. I think the practical relevance of the CSDDD, even after Omnibus, will be enormous. That is also why I think that the extraterritoriality concern that you have raised may be quantitatively a bit less pressing than it was before. But qualitatively, I would say there is not really a difference. The problem might be a bit smaller in scale, but not really in kind. That is what I would say about this change.

Izzuddin Qassam: Thank you, Professor. One of your pieces flags Article 29(3)(e) and its discovery mechanism as fundamentally foreign to most continental European civil procedure traditions. If the evidence needed for a claim sits with an Indian company that is not itself a party to the European proceedings, can a European court’s disclosure order meaningfully reach it? What happens practically when this newly introduced discovery tool meets India’s own considerably narrower rules on evidence production?

Anton Zimmermann: That is a great question, and that actually brings us back to the beginning of this interview. When we are talking about the taking of evidence in cross-border cases, we again have to address concerns of international law. And this time we are not looking at jurisdiction to prescribe, but we are looking at jurisdiction to enforce. Because actually taking evidence abroad is an exercise of sovereign authority by a Court. An EU Court cannot simply march to India and take evidence there. Instead, there needs to be some kind of basis in international law. The only accepted basis for enforcement jurisdiction is territoriality. No state can enforce its own laws outside its borders. To remedy this problem, there are a few conventions. The most important is probably the Hague Evidence Convention. But unfortunately, India, to my knowledge, is not a party of the Hague Evidence Convention. If evidence located in India needs to be taken in India, this will usually depend on India agreeing to provide judicial assistance. It seems quite plausible that India or an Indian court would protect its own public policy in that process. In other words, that would mean that Indian courts would only permit forms of evidence that an Indian court could itself order under Indian procedural law. For example, if the Indian understanding of disclosure is considerably narrower than that of the CSDDD, then that would mean that judicial assistance will only be granted to that extent. However, there is also an important possibility I would like to highlight that European courts would have, because a European court may, at least in principle, draw adverse inferences from a failure to cooperate with a court trying to obtain evidence. For example, if there is an Indian party to a procedure, and the court orders the Indian party to produce a certain evidence, and the Indian party refuses, then the European court cannot force the Indian party to disclose the evidence, but it can draw negative inferences from this refusal. To an extent, European courts, and that is not something only European courts do, but courts do generally have this kind of workaround when evidence is not brought to the court. Because of that, I would say there is a certain degree of difficulty, and it will be very hard to actually enforce evidence orders. But that does not mean that court proceedings in Europe will not be efficient.

Izzuddin Qassam: Thank you, Professor. Given the current state of the law, how would you now advise a claimant’s lawyer weighing whether to sue a European buyer in an EU court versus an Indian supplier in an Indian court? Is that a choice still primarily driven by which substantive liability standard is more favourable, or has it become almost entirely a question of which jurisdiction offers better procedural tools?

Anton Zimmermann: Thank you for that question. I think this is where private international law and, in particular, choice of law becomes particularly important. That is actually a field that has attracted a lot of attention recently in the field of business and human rights. Maybe you have heard that Giesela Rühl has just recently devoted her entire Hague Academy course to this subject. I will just attempt a brief answer to your question.

Let me start with the second part, the question whether or not it depends on which substantive liability regime is more favorable. The substantive liability standard will, at least at the moment, often not really be the decisive factor, because an Indian court and the EU court might ultimately end up applying the same substantive law to the case. Please correct me here if I am incorrect, but from what I have read, Indian courts still do apply the double actionability rule to torts, at least in some cases. In simplified terms, that means that conduct will only be actionable as a tort before Indian courts if it is actionable under Indian law as well. In a case concerning harm occurring in India, Indian substantive law will normally be applied by Indian courts. Surprisingly, the result may be very similar before a European court. Under the Rome II regulation, as I have already pointed out, the basic rule in Article 4 states that the applicable law is the law of the country in which the damage occurs. In the case concerning harm occurring in India, even a European court will apply the substantive standards of Indian law. This result would only be different if there was some kind of mandatory overriding provision, which we do not have at the moment. I would say that at the moment, the substantive liability standard is not the decisive factor because it is the same before both courts. That is why I think, at the moment, procedural considerations may very often be particularly important for claimants, because there are quite a few factors there. One is, for example, security for costs. So, before German courts, foreign claimants usually may have to provide some kind of security for the defendant’s litigation costs. Another is the general efficiency of the court system. If you need money, then you usually need it fast; so, you need a court system that is very efficient. Then also you need to look at the solvency of the defendant. If you have a big incident at a factory, then maybe one party may be more solvent than the other. That is another important consideration. Finally, one thing I feel has become more important in recent years is the strategic element of litigation. Particularly, NGOs are not just thinking about a certain amount of money that is to be paid to the claimant, but they also think about pressure from the public. That can be a reason to actually litigate in Europe, where lots of consumers are living. In that sense, I would say there are some procedural considerations that are important, but there are also a few considerations of public relations litigation.

Devang Pandey: Thank you, Professor. For our next question, you suggested that the CSDDD has implications for the current state of multilateralism. Is unilaterally conditioning market access on regulatory compliance, which is sometimes described as the “Brussels effect,” a genuine, if unconventional, contribution to multilateralism, or is that simply the wrong label for one bloc exporting its own regulatory preferences? And you, of course, referred to it in the conversation so far as well, but a slightly more hard-line question would be, does the EU’s own retreat via Omnibus suggest a loss of confidence in that strategy?

Anton Zimmermann: Thank you for this particularly thorny question. But I think it is nonetheless very important. To start with the second part of the question, I think the reasons for Omnibus are very complex. The official reason, as you might have read, is that the EU wants to simplify the regulation. That may be true in part, but I am sure it is not entirely true. If we look at the new civil liability provision, for me personally, it is more difficult to understand now than it was before, irrespective of whether or not you are generally in favour of a civil liability provision. Many actually assume that the EU has simply budged to pressure from businesses, but also to pressure from some EU member states that feared for their economies. There has always been a rather large group of EU member states that were against the CSDDD in its rather strict form. I believe it is mostly internal pressure actually that has led to the Omnibus directive, and not necessarily a loss of confidence in the “Brussels effect” overall. If we look at the broader implications for multilateralism, I think these are particularly interesting. Because the CSDDD and its unilateral extraterritorial style of regulation is not an isolated case. We do have many others in the European Union that function in a very similar fashion. We do have the deforestation regulation, we do have the carbon border adjustment mechanism, and of course, we do have the data protection regulation. All of these, to an extent, regulate extraterritorially based on market access. Hannah Buxbaum, in a recent paper, has quite aptly qualified this kind of unilateralism as a new paradigm of EU regulation. I think an important point she also raises in her paper is that this new kind of unilateralism by the European Union is very much different from unilateralism from other countries like the United States, particularly because it does look very benign if you just look at it briefly. Because what does the European Union do? The European Union is trying to protect the climate. The European Union is trying to protect human rights. These are all goals. I think we can all say that we want more human rights protection; we want more climate protection. But what we might overlook due to all these very attractive goals, is the mechanism behind it. And the mechanism behind it is basically that the EU says, we think human rights should be pursued in this particular fashion, climate should be protected in this way, and we do not really care if other countries have a different opinion of this. In that sense, I would say that what the European Union does and what produces the so-called “Brussels effect,” which basically means that if you are talking about the de facto Brussels effect, corporations simply adopt the EU approach worldwide because it is easier for them, or if we are talking about the de jure Brussels effect, foreign legislators also adopt the European system. In both of these cases, we are not talking about classic multilateralism, because multilateralism, in my opinion, must entail that there is some kind of consensual decision making. In these cases, it is basically just budging to the market power of the European Union. I would be hesitant to call this multilateralism.

However, I also see that the European Union is in kind of a dilemma situation here. Because one thing we know about multilateralism is that it is very cumbersome, it is very slow, and very often it produces very disappointing results, especially in areas where time is of the essence. I think climate change would be the obvious example here; it is quite understandable that the European Union might have run out of patience. And so, in a sense, I can see why the European Union thinks that these unilateral steps are necessary for the common good. But at the same time, what I would hope for the future is a bit more awareness of long-term institutional prices of this kind of behaviour. We must always be aware that whenever we make unilateral rules, they are displacing multilateral processes. In the long run, these unilateral laws, even though they might pursue very valid goals, might erode multilateral institutions and their work. That is where I would place the CSDDD and the entire crisis of multilateralism.

Devang Pandey: Thank you, Professor. As we move towards the end of our conversation, we move towards slightly more at home questions. Having taught at the National Law University of Delhi, you have some familiarity with the Indian regulatory landscape. Do either of India’s existing tools, mandatory CSR spending under the Companies Act or SEBI’s BRSR disclosure framework, bear any structural resemblance to CSDDD attempts? Or is the combination of due diligence with civil liability simply a different species of regulation altogether?

Anton Zimmermann: Thank you for that question. I think it is very important, even particularly for European lawyers, to always be mindful of approaches in different countries. If I am correctly informed, under the Companies Act, it is required that large companies in India spend 2% of the average net profit from the last three years on certain CSR activities. That is an idea that we have also discussed in Europe. Thus far, it has not gained too much traction. And I think there is a reason for that, because the approach of the CSDDD is pretty different. The CSDDD is a bit more precise in addressing specific problems created by the company itself. It doesn’t say what we want from you as a corporation is that you spend money on good causes, but we want you to improve the specific conditions you are creating yourself. And I think this particular approach is a bit more sensible for a Global North country. If you think about it, it might be a bit odd if we, as the Global North country, would say, it is fine by us if you violate human rights in your supply chain, as long as you do something good in your home country. I think because of the different conditions, it makes sense for Global North corporations to be obliged to actually improve conditions where they produce the products. Because of that, I think the CSDDD might be more suitable for Europe, whereas I can easily imagine that the CSR regime in India is more suitable for it. I don’t really think there is one better or one worse approach. I think based on the surrounding conditions, each has its merits.

When we are talking about SEBI or the BRSR, I will first have to say that I am not an expert in that field. But I think that the approach it has is somewhat different from the European law. In European law, we also do have a directive, the Corporate Sustainability Reporting Directive, which at first glance looks very similar, because both basically build reporting standards for large corporations that also include sustainability and human rights standards. But from what I understand, the BRSR is more of a catalogue of certain questions or indicators that companies have to report on. Whereas the CSRD approach is a bit more flexible, because it is built around the concept of materiality. So, companies must themselves investigate which potential impacts and risks are material, and then they have to report those. I feel the approaches are similar in the sense that both provide strict reporting regimes, but the way they go about it is fairly different. Interestingly, the approaches in India and Europe are fairly different, but I think that both approaches might work in their respective surroundings.

Shauryaveer Chaudhry: Thank you for that, sir. If you were advising the general counsel of a large Indian exporter today, what is the single development in the post-Omnibus text that they should be watching more closely? And conversely, what would you tell them now that they can safely deprioritize compared to how you might have answered in 2024?

Anton Zimmermann: That is a very, very good and very difficult question. What I would watch closely are developments in the risk-based architecture of the due diligence obligations. Because now, Articles 8 and 9 of the CSDDD allow companies to prioritise certain particularly likely and severe impacts. If a company correctly prioritises certain impacts then it will be able to avoid sanctions, even if it doesn’t address certain less severe impacts. I think what is very difficult to say at this point, and that is why I think it should be watched closely, is what actually constitutes legitimate prioritisation and what is non-compliance with the CSDDD regime. I think only time will tell what the supervisory authorities for the CSDDD make of that. That is why I think this is an area that companies must watch closely at this point.

In terms of de-prioritization, as much as it pains me to say, I think the climate transition plan is something that can be deprioritized under the CSDDD, because the former Article 22 of the CSDDD used to require a very elaborate climate transition plan from corporations. In 2024, the directive required a detailed climate transition plan with time-bound targets, and companies had to take into account scope one, two, and three emissions. It was fairly elaborate, and now it has been completely deleted from the CSDDD. That does not mean that climate protection is no longer important to European law. There are other regulations that deal with climate related questions. But if you are solely referring to the CSDDD, then I would say that is something that has been more or less entirely taken out of the directive.

Shauryaveer Chaudhry: Thank you so much for that. With this question, we conclude the podcast. Thank you so much for joining us today. It has genuinely been a pleasure, and we have learned a lot from you. I know I have, and I am sure I speak for Izzuddin and Devang when I say that.

Anton Zimmermann: Thanks for having me.