SUSTAINABILITY OBLIGATIONS ON HOLD: “STOP THE CLOCK” DIRECTIVE (2025/794/EU) PUBLISHED

On 16 April 2025, Directive (EU) 2025/794 was published in the Official Journal of the European Union. The text represents the first revision procedure introduced under the Omnibus I Package.

The directive, which will enter into force the day after its publication in the Official Journal, had been adopted without amendments on 14 April by both the European Parliament (under the urgent procedure) and the Council of the EU—reflecting a shared political will to provide greater legal certainty for businesses regarding sustainability reporting and due diligence obligations.

Commonly referred to as the “Stop the Clock” Directive, the measure postpones the deadlines for transposing and applying certain obligations set out under two key pieces of EU legislation:

• Directive (EU) 2022/2464 (Corporate Sustainability Reporting Directive – CSRD); and
• Directive (EU) 2024/1760 (Corporate Sustainability Due Diligence Directive – CSDDD),

which together form the legislative framework addressing sustainability, non-financial reporting obligations, and the duty of due diligence for companies operating within the EU.

Specifically, the Parliament and Council endorsed the Commission’s proposal to defer the following:

• two years, the application of CSRD reporting requirements for large companies which have not yet begun reporting, and for listed SMEs.

As a result, large companies with more than 250 employees will now be required to report for the first time on their environmental and social measures in 2028 (instead of 2026), referring to the previous financial year. Listed small and medium-sized enterprises will be required to report a year later.

• one year, the transposition deadline and the first phase of CSDDD application for large companies.

EU Member States will now have until 26 July 2027 to transpose the directive into national law. The one-year deferral will also apply to: EU-based companies with over 5,000 employees and a net worldwide turnover exceeding €1.5 billion, and to non-EU companies with turnover generated within the EU above the same threshold, which will now be required to comply with the rules from 2028, instead of 2027. The same timeline applies to EU companies with more than 3,000 employees and a net turnover above €900 million, and non-EU companies exceeding that threshold in turnover generated within the EU.

The directive also specifies that Member States are required to comply with its provisions by 31 December 2025, and to promptly inform the European Commission thereof.

It is worth noting that only the deadlines have been changed while the substance of the CSRD and CSDDD remains unchanged.

Background

In October 2024, the European Council called on all institutions to advance work in response to the challenges identified in the reports by Enrico Letta ("Much more than a market") and Mario Draghi ("The future of European competitiveness"). In the Budapest Declaration of 8 November 2024, it was specifically requested to launch a simplification revolution in order to ensure a clear, simple and smart regulatory framework for businesses and to drastically reduce administrative, regulatory and reporting burdens, particularly for SMEs.

On 26 February 2025, following the call from EU leaders, the Commission presented two packages: Omnibus I and Omnibus II, aimed at simplifying existing legislation in the areas of sustainability and investment, respectively.

The Commission proposed these omnibus packages to ease sustainability-related rules and promote the competitiveness of European businesses. The goal is to create a more favourable environment for investment, growth and the creation of quality jobs, without compromising the objectives of the Green Deal.

Specifically, the aim is to reduce administrative burdens by 25% (and by 35% for SMEs), by reviewing rules considered excessive, overlapping or disproportionate. The proposed changes concern key directives such as the CSRD, the CSDDD, the CBAM, and the InvestEU regulation. All of this is in line with the recommendations of the aforementioned reports and the European Competitiveness Compass.

Useful links for further information

• Council of the EU press release on 14/04/2025: link
• European Parliament press release on 03/04/2025: link
• Q&As on the Omnibus I and II Simplification Packages: link

A multilevel action in support of exporting companies

General Introduction

The tariff measures enacted by the United States have had a direct impact on a number of strategic European sectors. In particular, the following industries have been subjected to duties:

• automobiles and auto parts, facing tariffs up to 25 percent under Section 232;
• steel and aluminum products, with duties of 25 percent and 10 percent respectively;
• agri-food products (wines, cheeses, olive oil), subject to additional duties;
• manufactured goods, mechanical and electronic equipment.

The full list is available through  the Office of the U.S. Trade Representative (USTR) and is categorized by the customs classification (HS Code) and preferential origin of the product.

With the announcement by the U.S. administration  of new across-the-board tariffs on imports - including a 10 percent tariff on all imported goods and an additional 20 percent tariff on goods originating from the European Union - a new phase of systemic tension in international trade has begun. These measures, introduced under Section 301 of the Trade Act of 1974 and Section 232 of the Trade Expansion Act of 1962, reflect an increasingly  unilateral direction in U.S. trade policy.

This situation has been further exacerbated by the recent U.S. decision to notify its withdrawal from the World Trade Organization (WTO) under Article XVI:5 of the Marrakesh Agreement. This decision entails the end of U.S. adherence to multilateral trade obligations, renders the Dispute Settlement Mechanism (DSM) inapplicable to the United States and undermines  the multilateral framework for legal protection in trade.

Audit and preventive risk management

In response, European companies must promptly initiate an internal audit to assess tariff exposure and verify the legal robustness of their international trade agreements. The audit should include:

• analyzing the economic impact of duties on individual customs items;
• assessing the possibility of transferring the tariff burden;
• reviewing existing contractual clauses (hardship clauses, change in law, price revision);
• reclassifying customs origins and evaluating potential supply chain restructuring.

I. Public Enforcement – Institutional Action

1. At the level of the European Union:

The European Union has several regulatory tools at its disposal to respond to discriminatory or coercive measures by third countries:

• Regulation (EU) 2021/167 empowers the EU to adopt autonomous countermeasures in cases of violations of international obligations;
• Regulation (EU) 2023/2675 (anti-coercion instrument) enables the EU to address coercive practices through actions such as duties, exclusion from public procurement and other measures;
• Regulation (EU) 2022/2560 (FSR - Foreign Subsidies Regulation) allows the EU to counter the distorting effects of foreign subsidies in procurement and investment contexts.

These instruments can be activated following the collection of economic and legal evidence from businesses, in coordination with national authorities and with the political support of both the EU Parliament and the Council. Specifically, Article 13 of the ACI (Anti-Coercion Instrument) governs a particularly targeted information gathering mechanism involving, inter alia, businesses (Art.13.2 "For the purposes of paragraph 1, the Commission shall inform and consult stakeholders, in particular associations acting on behalf of Union economic operators and trade unions, that could be affected by potential Union response measures, and Member State’ authorities involved in the preparation or implementation of legislation that regulates the sectors that could be affected by those measures.").

II. Private Enforcement - Individual Protection

Businesses may bring jurisdictional actions against U.S. authorities:

• before the U.S. Court of International Trade (CIT), where they may challenge the legality of imposed duties under the Administrative Procedure Act and the Commerce Clause;
• before the U.S. International Trade Commission (USITC), by requesting sector-specific determinations regarding the impact of tariff measures;
• through class actions brought by affected importers or consortia.

Notable precedents include Transpacific Steel LLC v. United States (2020), where the ITC annulled duties due to a violation of the separation of powers, and Aluminum Association v. United States (2021), which addressed breaches of the APA.

In addition to domestic legal remedies, European companies may invoke international protection instruments, drawing on international trade and investment agreements (FTAs and IIAs), bilateral investment treaties (BITs) and the ICSID Convention of 1965. Although the Italy-U.S. BIT has been rescinded, some European companies may still rely on BITs still in force signed by EU member states, such as the Netherlands or Germany, thus benefiting from a “multilevel structure”. Moreover, it is possible that Italian economic operators have invested in the United States via companies incorporated in Canada or Mexico: they may be eligible to invokethe UMSCA agreement (in effect since 1 July 2023). Arbitration may be triggered in cases involving measures equivalent to indirect expropriation, breach of fair and equitable treatment (FET) standard or discriminatory actions.

Relevant precedents include:

• Metalclad v. Mexico: an environmental measure deemed equivalent to an expropriation;
• CMS v. Argentina: violation of the FET standard due to extraordinary regulatory measures;
• Occidental v. Ecuador: arbitrary revocation of an oil concession which was considered an act of expropriation.
• Vento Motorcycles Inc. v. Mexico (6 July 2020): a joint venture established in Mexico by U.S. investors and adversely affected by Mexican duties (the so-called trade-related measures) was found to be a protected investment under NAFTA (now replaced by the UMSCA).

Where an investment takes the form of a stable presence (e.g. joint venture, subsidiary, establishment), or involves an economic transaction of a certain duration (through corporate interests and contractual rights), arbitration offers an effective and complementary tool to administrative or jurisdictional remedies.

III. International Arbitration and Bilateral Treaties

1. Investor-State Arbitrations:

European companies with investments in the U.S. may resort to arbitration procedures based on bilateral treaties (BITs). While the 1983 Italy-US BIT was terminated in 2013, it provides a 10-year sunset clause that could still cover investments made prior to its termination. Certain BITs concluded by other EU member states (e.g., Netherlands, Germany) remain in force and may offer indirect access to ISDS protection.

Noteworthy ICSID precedents include Metalclad v. Mexico and CMS v. Argentina, which reaffirmed the principle that states can be held liable for measures equivalent to indirect expropriation or violation of the fair and equitable treatment (FET) standard.

IV. Systemic and administrative impacts

1. Impact on public administrations:

Contracting authorities may have to deal with price increases on goods subject to duties, requests for revised fees, or litigation. Additionally, they must reassess the eligibility of U.S. operators, who no longer meet the reciprocity requirements.

2. Foreign Subsidies Regulation (FSR):

Non-EU companies benefitting from government subsidies may face exclusion from procurement processes or scrutiny in merger transactions. The FSR represents a strategic enforcement tool in the current post-WTO landscape.

V. Customs classification and rules of origin

When a product originating in the EU is exported to the United States and subsequently undergoes processing, it is crucial to determine whether that processing is sufficient to alter the product’s customs origin. According to the principles of international customs law and the World Customs Organization (WCO) regulations, a change in origin occurs when a “substantial transformation” takes place, which implies a change in the customs heading at the HS code level (so-called “heading jump rule”).

If the processing carried out in the US qualifies as substantial:

• the final product may be considered to have US origin;
• this may affect its eligibility for tariff benefits upon reimportation into the EU (e.g., under preferential rules of origin);
• there is a risk of double taxation both upon entry into the U.S. and upon return to the EU, if no customs relief mechanism is available.

If, on the other hand, the processing is merely incidental (e.g., simple packaging or assembly), the product retains its EU origin. Therefore, companies must conduct documentary audits, obtain certificates of origin and carry out detailed technical assessments to prevent risks of disputes and double taxation.

Accurate determination of both the customs code (HS code) and the origin of goods is critical in determining duty liability. In the case of export to the US and subsequent processing, it is essential to determine whether such processing is sufficient to result in a change of origin. The absence of preferential post-processing agreements pose risks of double taxation and requires accurate traceability.

Conclusions

The erosion of the multilateral trade system and the adoption of discriminatory measures by the U.S. call for an integrated approach, based on internal audits, EU enforcement actions, contractual instruments and international arbitration procedures. Only through effective coordination among economic operators, public institutions and European authorities can the economic interests of both States and the EU as a whole be adequately protected.

This newsletter provides a selection of regulatory news and comments from our SPANISH legal experts on interesting policy developments, recent case law, and new regulatory directions of major industry practices. The aim is to provide an up-to-date tool for quick and easy consultation on the most current and important topics at a SPANISH level.

Tariffs on European wine imports in the U.S. market were set to rise by up to 200%, according to announcements from the White House. Some local farmers welcomed the news, believing it would boost demand for American products, while others opposed possible policies due to poor harvests caused by wildfires, droughts, and other crop damage.[1]

To put things in perspective, the 2025 OIVE Economic Report shows that the U.S. increased its wine imports to 1.226 billion liters, valued at $6.789 billion. Nearly 5.5% of U.S. imports (67.3 million liters) come from Spain. Notably, December 2024 saw the sharpest surge in imports due to uncertainty over potential tariffs.[2]

Major wine exporters like Spain, France, and Italy have pressured Brussels to prevent the U.S. from imposing these tariffs at all costs. Ultimately, the European Commission excluded bourbon from its list of products facing a 25% tariff, averting the 200% increase on the other side of the Atlantic.[3] The historic alliance is now forced to negotiate and ease tensions fueled by threats from one side and retaliatory measures from the other. However, on the global stage, the EU –and Spain in particular– has begun moving closer to the U.S.’s current rival, China, to diversify export partnerships and bypass U.S. tariffs.[4] As the European Commission's vicepresident Kaja Kallas warned: "Only China will benefit from a transatlantic trade war".

[1]      CNN Business, article by Samantha Delouya https://edition.cnn.com/2025/03/22/economy/tariff-eu-trade-war-california-wine/index.html

[2]      Interprofesional del Vino https://interprofesionaldelvino.es/informe-de-importaciones-de-vino-en-eeuu/

[3]      El Economista, article by Lidia Montes https://www.eleconomista.es/economia/noticias/13308014/04/25/bruselas-apunta-al-maiz-el-calzado-y-los-muebles-en-su-respuesta-arancelaria-a-trump.html

[4]      El Economista https://www.eleconomista.es/economia/noticias/13307985/04/25/se-afianza-la-relacion-entre-xi-jinping-y-sanchez-en-plena-guerra-arancelaria-china-pone-a-espana-a-la-vanguardia-de-sus-vinculos-europeos.html