Senator Introduces Legislation to Shield U.S. Businesses from the EU’s CSDDD

Key Takeaways:

• PROTECT USA Act: Senator Bill Hagerty introduced the PROTECT USA Act to prevent U.S. businesses from being forced to comply with EU regulations like the Corporate Sustainability Due Diligence Directive (CSDDD).
• CSDDD Impact: The CSDDD requires companies, including U.S. firms, to meet EU ESG standards, including a net-zero carbon target.
• Legal Protections: The bill allows U.S. businesses to seek relief from foreign regulations and pursue civil action in U.S. courts.
• Senator’s Statement: Hagerty stressed that U.S. companies should be governed by U.S. laws, not foreign regulations.

Deep Dive

Senator Bill Hagerty (R-TN), a member of the Senate Banking Committee, has introduced the Prevent Regulatory Overreach from Turning Essential Companies into Targets (PROTECT USA) Act of 2025. The bill is intended to protect U.S. businesses from the extraterritorial reach of European Union regulations, specifically the Corporate Sustainability Due Diligence Directive (CSDDD), which passed the European Parliament in April 2024.

The CSDDD requires companies to comply with the EU’s environmental and social governance (ESG) standards, including a net-zero carbon emissions target, even if they are not based in Europe. Under this directive, U.S. companies engaged in international business would face the obligation to align with these EU standards, which could present substantial challenges, especially when they go beyond U.S. domestic requirements.

Senator Hagerty’s bill aims to prevent U.S. businesses from being forced to comply with foreign laws like the CSDDD. It specifically bars U.S. entities from being required to follow these regulations and provides a legal pathway for companies to take action if they face penalties due to non-compliance. The bill also seeks to ensure that U.S. businesses are not penalized or face adverse actions from foreign regulators for non-compliance with these regulations.

“American companies should be governed by U.S. laws, not unaccountable lawmakers in foreign capitals. This legislation is intended to protect U.S. businesses from foreign regulations that could put them at a disadvantage or create unnecessary burdens,” Senator Hagerty said in a statement.

The PROTECT USA Act also includes provisions for businesses to request hardship relief from the President if they encounter significant challenges due to these regulations. It allows U.S. companies to seek civil action in U.S. courts if they are negatively impacted by the application of foreign sustainability due diligence laws.

This introduction follows Senator Hagerty’s previous efforts to address the reach of the CSDDD. In 2024, he and other lawmakers raised concerns over the extraterritorial impact of the directive, urging the U.S. government to resist its implementation. Hagerty’s new bill continues to focus on limiting the influence of foreign regulations on U.S. businesses, particularly those in industries that might struggle with the financial and operational burden of complying with the EU’s standards.

The CSDDD mandates companies to assess and address the environmental and social impacts of their operations and supply chains. The directive will apply to European companies as well as U.S. businesses operating in or engaging with EU markets, prompting concerns about the regulatory burdens placed on American firms.

As the bill moves through Congress, it will contribute to ongoing discussions about the balance between international regulatory cooperation and the protection of U.S. economic interests. With global sustainability standards gaining traction, lawmakers are likely to continue examining ways to protect U.S. businesses from foreign laws that could impose undue burdens.

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