EU's 'Omnibus' green rollback likely to hit legal challenge, experts warn

The EU’s efforts to roll back green reporting and due diligence rules adopted by the previous commission are moving fast.

And last week's draft proposals from both member states and the European Parliament show broad political alignment, making a deal to water down the laws likely later this year.

But there's likely to be trouble ahead. Because the so-called Omnibus simplification package is being rushed through without an impact assessment, the EU's push to slash reporting obligations may soon be challenged in court, leading to “years of legal uncertainty where no one really knows what the law says.” 

So says David Frydlinger, a partner at Cirio, one of Sweden’s leading commercial law firms, in an interview with EUobserver.

He recently co-authored a legal analysis of the Omnibus package, and concluded that “the commission hasn’t done its legal homework,” he told EUobserver in an interview. 

One area of concern is that under EU law, once a certain level of protection has been achieved, any rollback must be justified as proportionate and necessary.

But proportionality checks have been skipped. “Scrapping protection against forced labour and child exploitation without proving less dramatic measures are ineffective would trigger legal challenges from progressive member states and NGOs immediately,” he said.

The Omnibus hasn’t even officially been adopted, but there are already signs that some may be preparing to do just that. 

Spain and Denmark have already voiced concerns. And a group of eight NGOs and trade unions recently filed a complaint with the European Ombudsman, arguing the process disregards environmental and human rights protections.

The Omnibus is meant to help EU businesses. But “if challenged in the court, parts of the Omnibus could be annulled,” said Frydlinger. The ensuing legal chaos "would only harm EU competitiveness, as well as the people and climate goals Europe claims to protect.”

What is the Omnibus about?

The proposed omnibus changes target three interlinked EU Green Deal laws: the Corporate Sustainability Reporting Directive (CSRD), the Corporate Sustainability Due Diligence Directive (CSDDD), and the EU’s green taxonomy regulation.

Together, they form a kind of operating system for aligning European business with the bloc’s climate, human rights and biodiversity targets.

All three laws have already been adopted. But the commission’s new Omnibus proposals would roll back many of these requirements by shrinking their scope or delaying their entry into force.

For example, under current rules, the CSRD would apply to companies bigger than 250 employees by 2029. The commission now wants to limit it to firms with more than 1,000 employees reducing the scope by some 80 percent. Some member states and lawmakers want to go even further. 

Swedish centre-right European People's Party MEP Jörgen Warborn, who leads the file in parliament, said he wants to roll back the CSDDD and CSRD to apply only to firms with over 3,000 employees, while French president Emmanuel Macron wants to completely abolish the CSDDD. 

Either way, reducing the scope to firms with over 3,000 employees, “would actually have similar effects” to scrapping the regulation outright, professor Andreas Rasche told EUobserver, because only a small fraction of Europe’s 33 million companies are that big. 

Legal risk

All this talk about cutting red tape abstracts why these regulations are there in the first place, and why it's not simply a matter of less is more. 

“What the commission and Mr Warnborn call ‘red tape’ is in fact legislated protection of rights recognised in the EU Charter and the European Convention,” said Frydlinger. 

“Changing such a law isn’t forbidden, but you can’t roll back protections without separate tests of necessity and proportionality and no such analyses have been published," he said. 

The legal principle underpinning this is one of ‘non-regression’. Repealing parts of the reporting and due diligence laws without showing that milder alternatives could work therefore carries the “highest risk” of being challenged in court, Frydlinger said. 

“I find it very unlikely the EU Court of Justice wouldn’t apply a full proportionality test,” if the law is weakened to quite the degree Macon or Warnborn envision, he added.

But that’s not the only point where the Omnibus’ legality is doubtful. 

Due diligence rules currently apply across entire supply chains, but the commission wants to limit them to direct suppliers only. 

That would exclude exactly the parts of the chain where the worst human rights and environmental abuses often occur — such as informal cobalt mines, smallholder farms, or garment factories like Rana Plaza, the Bangladeshi plant that collapsed in 2013 which resulted in 1,100 deaths and sparked the political push that resulted in the CSDDD over a decade later. 

The commission admits that the Omnibus would “partially diminish" the positive effects of the CSDDD on human rights.

And as Frydlinger pointed out, “courts can’t ignore it when authorities admit to weakening human rights protections without demonstrating that it is necessary or proportional.”

Another legal risk emerges from deleting the original requirement for companies to adopt and implement a transition plan. That obligation has now been softened to merely outlining intended actions. 

Most member states support this shift, but it may not withstand legal scrutiny.

Frydlinger pointed to the KlimaSeniorinnen ruling, where European court judges found Switzerland had violated the right to private life by failing to combat climate change.

This implies that states also have a duty to implement climate measures, not just announce their intention. 

Even the proposed and already adopted delay of implementation deadlines until 2029 may raise legal red flags because if compliance is “genuinely impossible, why would delay help,” he said. “Courts may see that as political convenience rather than genuine necessity.”

“We could see years of uncertainty,” Frydlinger said. “Businesses won’t know what rules apply, while courts and companies argue over who’s liable for what.

Repeating past mistakes

If challenged, the Omnibus proposals could suffer the same fate as other poorly prepared EU laws — like the Data Retention Directive or the US personal data transfer mechanisms  — both of which were struck down in the EU top court for breaching fundamental rights.

In all three cases, the court found that the commission had failed to ensure proper legal safeguards — a warning, Frydlinger said, that could just as easily apply to the current green deregulation drive.

“We could see years of uncertainty,” Frydlinger said. “Businesses won’t know what rules apply, while courts and companies argue over who’s liable for what.”

One particularly fraught area are commission plans to water down civil liability provisions for damages caused by companies. 

The EU’s CSDDD, which came into force in July 2024, created a “single, predictable legal standard for corporate accountability across the bloc,” professor Geert van Calster recently wrote in a separate report that reinforces Frydlinger’s argument.

But the commission in its Omnibus has dropped plans for a harmonised EU rulebook, leaving enforcement to national courts.

Member states have yet to agree, so it is currently unclear what will happen to this part of the supply chain regulation. But scrapping these provisions, van Calster wrote, exposes companies to over 200 national and global regimes, another recent legal paper found.

“The Omnibus would leave companies in the EU exposed to litigation based on non-EU law even when complying with the CS3D,” he concluded.  “The Omnibus proposal neither delivers harmonisation nor simplification, but instead significantly increases divergence, complexity and uncertainty.”

Europe’s legal problem = vagueness 

Frydlinger makes clear he agrees that the standards need simplification, but “simpler policies don’t necessarily make for simpler rules.”

“The problem isn’t that reporting and due diligence requirements are too burdensome; they’re just unclear,” he adds. The current system runs on too many ill-defined terms and concepts.

Companies for example are told to report on “material” impact on the environment and take “appropriate measures” to prevent adverse human rights impacts — but there’s no clear standard for what those terms actually mean in practice.

This uncertainty leads to overuse of consultants (who also lack clear guidance) and excessive reporting driven by fear of legal risk, which in turn increases costs and harms competitiveness.

Rolling back the rules to apply only to the biggest companies won’t solve the issue. 

Part of Frydlinger's fix would be to clarify all rules by anchoring them in two basic duties: prevent harm when you can ('duty to act'), and share information people need ('duty to inform').

Instead of the vague instruction to “take appropriate measures” when harm is “material,” companies could follow a clear proportionality test.

Think of it like a flowchart: Can I prevent the harm? At what cost? Do I have the capacity? If yes, then the duty applies.

“We think the rules can and should be improved,” he said. “But the Omnibus is doing it the wrong way, and it will create a lot of legal uncertainty.”

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