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5 min read Supply Chain Due Diligence & Liability

Climate Litigation Exposure for Latin American Companies with European Links

European NGOs are now bypassing local jurisdictions to sue Latin American companies in European courts. Discover how cross-border climate litigation triggers contract freezes, capital flight, and how to legally shield your P&L.
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Climate Litigation Exposure for Latin American Companies with European Links
Cross-Border Litigation Matrix

A European commercial relationship does not automatically give every European court jurisdiction over a Latin American company.

Climate-related claims can still create material exposure, but the pathway depends on the defendant, forum, applicable law, corporate structure, alleged conduct, location of harm, contract and procedural rules. The existence of a sustainability regulation does not by itself establish jurisdiction, liability or damages.

For boards and CFOs, the correct response is not to assume either immunity or inevitable litigation. It is to identify the plausible pathways through which a claim, investigation or contractual dispute could arise and determine whether the company has the evidence to respond.

Any cross-border climate claim requires specialist analysis of at least five questions.

1. Who is the defendant?

The defendant may be:

  • the Latin American operating company;
  • an EU parent, subsidiary, importer or distributor;
  • directors or officers under applicable national law;
  • multiple entities within the same corporate or supply-chain structure.

The legal position changes depending on which entity made the decision, statement or contractual commitment.

2. Which court may hear the claim?

Within the EU, jurisdiction is governed by Regulation (EU) No 1215/2012 in cases within its scope. The general rule connects jurisdiction to the defendant’s domicile, with additional rules for contracts and torts.

Where a defendant is not domiciled in an EU Member State, national jurisdiction rules may become relevant, subject to the regulation’s specific provisions and other applicable instruments.

This means a Latin American company is not exposed merely because a European buyer exists. The facts and procedural basis must support the forum.

3. Which law applies?

Regulation (EC) No 864/2007 addresses the law applicable to non-contractual obligations within its scope. It contains specific treatment for environmental damage and other connecting rules.

Contract claims may be governed by the law selected in the agreement or by applicable conflict-of-law rules. Consumer, securities, competition, company and national environmental law can create different analyses.

Jurisdiction and applicable law are separate questions. A court may have jurisdiction but apply another jurisdiction’s substantive law.

The claim may concern:

  • alleged environmental damage;
  • misleading environmental statements;
  • failure to perform a contractual obligation;
  • disclosure inconsistency;
  • company-law oversight;
  • due-diligence obligations;
  • consumer-protection or product claims;
  • failure to remediate a known risk.

Each pathway requires its own elements, evidence and defence.

5. Can causation and damage be established?

A claimant generally needs a legally recognised basis for responsibility, causation and damage under the applicable law. Climate-related causation can be technically and legally complex. It should not be reduced to an assumption that filing a claim automatically produces liability, contract suspension, divestment or capital flight.

CSDDD after the 2026 reform

The Corporate Sustainability Due Diligence Directive is relevant but should be described precisely.

After Directive (EU) 2026/470, direct scope is concentrated on companies above the revised size and turnover thresholds. Member States must transpose the relevant measures by 26 July 2028, and the due-diligence obligations apply from 26 July 2029.

The amended directive sets a maximum pecuniary penalty cap of 3% of net worldwide turnover. Civil liability remains implemented through national law, including the right to full compensation where the applicable conditions are met.

CSDDD does not create one automatic forum, liability result or director claim for every non-EU supplier. A supplier may nevertheless become relevant evidence in a claim involving an in-scope EU group, contractual relationship or alleged harm.

Plausible exposure pathways

EU group or subsidiary litigation

An EU entity may be challenged regarding its own decisions, disclosures or due-diligence process. Information about a Latin American subsidiary or supplier can become part of the factual record.

Contract and procurement disputes

Contracts may contain environmental representations, data-delivery obligations, audit rights, warranties, indemnities, remediation duties and termination provisions. A dispute can arise if the buyer alleges that the supplier’s evidence was incomplete or inconsistent.

Greenwashing and disclosure claims

Public environmental claims can be examined under consumer-protection, advertising, securities or national law. Directive (EU) 2024/825 strengthens EU consumer protections against misleading environmental claims from 27 September 2026 through national implementation.

Environmental damage claims

Where alleged conduct or damage has cross-border elements, jurisdiction and applicable-law analysis becomes central. Company-specific counsel is required.

Regulatory investigation

An authority may request information or investigate an EU economic operator. The Latin American company may become a source of evidence without being the direct regulated entity.

The evidence architecture

A defensible file should not be created only after a claim is threatened.

Corporate and decision records

Record which entity made the decision, which legal and technical advice it received, what alternatives were considered and how the risk was escalated.

Claims register

Maintain an inventory of material public and contractual environmental claims. For each claim, identify scope, methodology, evidence, approval, limitations, review date and responsible owner.

Supply-chain evidence

Connect supplier representations to products, facilities, periods, transactions and supporting records. Record uncertainty and exceptions rather than converting them into unsupported certainty.

Contract map

Identify governing law, dispute forum, representations, audit rights, notification duties, indemnities, insurance requirements and remediation provisions.

Incident and remediation file

When a potential impact is identified, preserve investigation steps, evidence, decisions, stakeholder engagement, remediation and verification of closure.

Disclosure consistency

Board reports, sustainability statements, marketing, buyer questionnaires and financing documents should not make materially inconsistent claims about the same risk or control.

Litigation readiness is not a guarantee

Good evidence may help counsel evaluate a claim, preserve legal positions and reduce reconstruction time. It does not guarantee dismissal, prevent jurisdiction, prove absence of harm or make the company “litigation-proof.”

Legal privilege also does not arise automatically because a document concerns risk. Counsel should define privilege, preservation and investigation protocols for the relevant jurisdictions.

Financial scenario planning

CFOs can model cross-border dispute exposure through scenarios that separately estimate:

  • external legal and expert cost;
  • management time and investigation cost;
  • contract revenue affected;
  • operational remediation;
  • insurance retention and coverage uncertainty;
  • disclosure correction;
  • financing or covenant review;
  • probability-weighted outcomes.

The model should not assume automatic divestment, valuation collapse or contract termination. Those are possible commercial events only where the facts and counterparties support them.

Villanova ESG position

Villanova ESG helps structure the operational and supplier evidence needed for an executive review of EU-facing risk. The work can support counsel, finance, procurement and governance teams by clarifying data ownership, claims, contracts and documentation gaps.

It is not legal representation and does not determine jurisdiction, applicable law, liability or litigation strategy.

Official source trail

Important qualification

This article is an executive risk overview, not legal advice. Cross-border jurisdiction, applicable law, standing, causation, liability, privilege and remedies require advice from qualified counsel in the relevant jurisdictions.

For an evidence-gap review supporting legal and executive analysis, contact Villanova ESG at contact@villanovaesg.com.

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