Protect USA Act of 2025 vs Corporate Sustainability Due Diligence Directive

Recent legislative initiatives in the United States reflect concerns over the extraterritorial implications of Directive (EU) 2024/1760 on corporate sustainability due diligence (CSDDD). One such initiative consists of a bill titled Prevent Regulatory Overreach from Turning Essential Companies into Targets Act of 2025 (Protect USA Act of 2025), introduced in the US Senate by Senator Bill Hagerty.

The bill seeks to counteract the impact of foreign sustainability regulations — like the CSDDD — on US entities deemed essential to national interests, and could also extend to other foreign frameworks with similar features.

To this end, Section 4 contemplates a prohibition on compliance with foreign due diligence regulations that impose sustainability and human rights obligations; these are seen as potentially conflicting with US laws and priorities. While generally prohibitive, the bill introduces a limited form of flexibility by allowing affected businesses to request an exemption from the President in cases of particular hardship.

Section 5 adds that no adverse action may be taken against an entity covered by the bill for action or inaction concerning a foreign sustainability regulation. This provision is particularly interesting, though its scope remains ambiguous — whether it aims to limit jurisdiction or simply regulate substantive conduct is unclear, and the wording appears to blend the two.

Further, the bill states that no judgment issued by a foreign court against an entity considered vital to US national interests — if related to a foreign sustainability due diligence regulation — will be recognized in the United State Federal or State courts, unless expressly authorized by an act of Congress.

The proposed Act would also empower affected entities to seek relief through private civil actions. In such cases, the plaintiff may obtain equitable or declaratory relief, compensation for payments made under the contested foreign rules, punitive damages (up to a capped amount), reimbursement of litigation costs and other appropriate remedies. It is unclear, however, whether this provision merely provides a substantive right to compensation or functions as a jurisdictional ground (if not both things).

Finally, the bill establishes sanctions for violations, including civil penalties of up to $1 million and the potential exclusion from federal procurement opportunities for a period of up to three years.

Overall, the PROTECT USA Act may be seen as a form of blocking statute — a legislative shield aimed at neutralizing the effects of foreign rules. The EU’s Blocking Statute (Regulation (EC) No 2271/96) sought to protect EU operators from the extraterritorial impact of US sanctions; the bill appears poised to use similar instruments to defend US from the expanding reach of EU sustainability legislation.

The bill has been read twice and referred to the US Senate Committee on Foreign Relations.

While the bill currently stands as a Republican-led initiative, it is beginning to attract broader support, particularly from officials in US States who have voiced opposition to the extraterritorial reach of the CSDDD (a letter expressing this view is available here).

US businesses, for their part, have expressed significant concerns regarding both the CSDDD and the PROTECT USA Act. In 2023, the US Chamber of Commerce has criticised the extraterritorial reach of the CSDDD, arguing that it imposes complex and burdensome obligations on US companies operating in the EU. They directive’s requirements, the Chamber contended, could lead to excessive legal risks, including potential litigation in EU Member States, and undermine US regulatory authority by subjecting US firms to European policy preferences

But apprehensions have been raised in early reactions, like the ones available here and here, about the PROTECT USA Act, as well. The act’s prohibitions could place companies in a difficult position, forcing them to choose between violating US law or facing penalties in the EU for non-compliance with the CSDDD. Additionally, there are concerns that the act could strain transatlantic trade relations and complicate the legal landscape for multinational corporations.