Civil Liability in the EU Corporate Sustainability Due Diligence Directive Proposal: A Law and Economics Analysis

The EU Corporate Sustainability Due Diligence Direc- tive (CSDDD) proposal can be interpreted as an attempt to cope with the underdeterrence of negative external- ities on human rights and the environment depending on the strategic use of limited liability by corporate groups. This article reviews the civil liability proposals by the Commission, the European Parliament, and the Council from this law & economics perspective. The article finds that these liability rules fall short of mak- ing corporations internalize negative externalities by way of due diligence obligations in the group and the supply chains. It is relatively easy for companies that fail to carry out due diligence effectively to avoid the civil liability being considered by the EU legislature.