The Swiss Finance Council has co-signed a letter on proposed Corporate Sustainability Due Diligence Directive (CSDDD), highlighting our concerns related to the extraterritorial application of the CSDDD to financial institutions headquartered outside the EU and proposing a more proportionate approach that takes account of the specificities of the financial sector while maintaining a level playing field in the EU.
The proposed CSDDD will impact non-EU financial institutions active in the EU, requiring them to comply with the due diligence obligations at consolidated level throughout their global business operations and value chains. The proposal is therefore expected to cover business activities that do not have any connection with the EU, e.g. a loan from a non-EU bank to a non-EU business with activities exclusively outside the EU, which often represent the majority of the business activities of non-EU financial institutions.
International financial institutions operate in and are subject to multi-jurisdictional legal and regulatory environments and are already complying with environmental and human rights due diligence obligations in other jurisdictions. Requiring non-EU financial institutions operating globally to comply with the CSDDD requirements throughout the entire group, will not only represent a disproportionate burden for non-EU financial institutions active in the EU, but it will also raise enforcement challenges and has the potential to conflict with similar third country obligations. We believe that the CSDDD will be most effective where it works alongside and recognises existing legislation in other jurisdictions, without duplicating or conflicting with it.
For this reason, we believe it is essential to guarantee a risk-based and proportionate approach that limits the unintended effects of the extraterritorial application of the CSDDD and that is in line with the established practices on the application of law to multinational financial institutions. In this regard, we propose to limit the CSDDD’s scope of application for third country financial institutions to EU entities at the highest level of EU consolidation and the business of EU branches.
