EU Policy Update for January 2016
Digital Single Market Policy
On December 7, 2015, the European institutions reached a political agreement on the EU Network and Information Security Directive (“NIS Directive”). Among other things, the NIS Directive imposes two key obligations on companies that provide essential services in the energy, transport, banking, financial market infrastructure, health, and water supply sectors: (i) to take measures to manage cyber risks posed to their networks and information systems; and (ii) to report major security incidents to the competent authorities. Lighter reporting requirements will apply to “Internet service providers” such as providers of online/e-commerce marketplaces, cloud computing services, and search engines. The text is set to be formally adopted in the spring.
On December 9, 2015, the European Commission put forward a proposal to allow Europeans to take their online content subscriptions with them when they travel, and published a Communication to modernize EU copyright rules. The proposal imposes an obligation on providers of online content to enable subscribers to access and use the service when temporarily present in another Member State. The proposal is the first step of the EU copyright framework review, which will involve multiple legislative proposals and policy initiatives over the next six months. The proposal will now go to the European Parliament and Council for consideration.
On December 15, 2015, the EU institutions agreed on the text of the new EU data protection law, known as the General Data Protection Regulation (“GDPR”). The GDPR replaces the existing data protection framework and makes major changes to the current order, including by enhancing existing legal requirements, creating a multitude of new rules - such as rules allowing data controllers to process personal data and implementing a “right to be forgotten” - and setting out stiff penalties where organizations fail to comply. The GDPR will apply directly in all Member States two years after the Council and European Parliament formally approve the text (expected in the coming months).
Energy and Climate Change Policy
On December 12, 2015, 195 countries came together in Paris and made a global commitment to tackle climate change. Specifically, governments have agreed to a long-term goal of keeping the increase in global average temperature “well below 2°C” above pre-industrial levels with an additional effort to limit the increase to 1.5°C. This agreement relies on each country to identify those measures it will take to address greenhouse gas emissions, eliminating the often controversial distinction between developed and developing countries. Additionally, the text includes enhanced transparency and review provisions to reinforce the emissions reduction commitments. Overall, governments and business view it as a major accomplishment.
Internal Market and Financial Services Policies
As part of the Capital Markets Union Action Plan, on November 30, 2015, the European Commission proposed an overhaul of the prospectus rules, which allow companies to raise money on public markets or by means of a public offer with potential investors. The proposal will make several changes to the current Prospectus Directive, including: exempting smaller capital raising; creating a lighter prospectus for SMEs; simplifying (and shortening) the prospectus template; and creating a single access point for all EU prospectuses. The proposal will now go the European Parliament and Council for consideration.
On December 2, 2015, the Committee of Permanent Representatives of Member States to the EU (“Coreper”) approved an agreement on the development of a securitization market in Europe. This framework for securitization - the process by which a lender refinances a set of loans or assets by converting them into securities - is the first step in developing a fully functioning Capital Markets Union by the end of 2019. The Coreper agreement covers two draft regulations: one setting rules on securitizations and establishing criteria to define simple, transparent and standardized (“STS”) products, and the other amending Regulation 575/2013 on bank capital requirements. The agreement comes only nine weeks after the Commission made its proposal; it will enable the Dutch Presidency (which began January 1, 2016) to start talks with the European Parliament. For the Council press release, see here.
On December 7, 2015, the Commission published the “Aviation Strategy for Europe” package, which includes: a package of requests to negotiate EU-level comprehensive air transport agreements with third countries; new guidelines on foreign ownership; a proposal for a revision of the Aviation Safety Regulation (including on use of drones); a Communication on the competitiveness of the EU aviation sector; and additional guidance (to be produced) on labor law in aviation. The success of the package will depend, to a certain extent, on the degree of cooperation the Commission receives. In particular, many key initiatives under this aviation package will require the cooperation of third countries (bilateral aviation agreements), Member States (Single European Skies, a mandate for bilateral negotiations) or the Civil Aviation Authorities (drone initiatives).
On December 8, 2015, the Council of Ministers adopted a Directive on transparency rules on cross-border tax rulings. The Directive, one of a number of initiatives aimed at preventing corporate tax avoidance, will require Member States to automatically exchange information on advance cross-border tax rulings and pricing arrangements. Additionally, the Directive enables the Commission to establish a secure central directory, accessible to all Member States. The initiative follows the October 6 Council political agreement and the October 27 Parliament opinion and builds on OECD developments on tax base erosion and profit sharing (as approved by the G20 leaders in November). The new rules will be applied from January 1, 2017.
At the December 17-18, 2015 meeting, the European Council held a political exchange of views on the UK plans for an in/out referendum, more commonly referred to as “Brexit.” The UK had hoped this meeting would be a breakthrough in these negotiations, but the members of the European Council merely agreed to find “mutually satisfactory solutions” at the meeting on February 18-19, 2016. The Council conclusions can be found here.
Life Sciences and Healthcare Policies
On December 3, 2015, the Commission issued a Report on trans-fats in foods and in the overall diet of the EU population. In the report, the Commission analyzes approaches that could be taken at the EU level, including mandatory labelling, a legal limit on trans-fat content, and voluntary agreements at Member State level. Within its assessment, the Commission states that a legal limit on industrial trans-fat content would be the most effective measure in balancing public health, consumer protection, and uniformity across the EU. As next steps, the Commission will launch a public consultation and carry out an impact assessment in the context of a legal limit on trans-fat content in foods. For the full Report, see here.
On December 16, 2015, the General Court issued a judgment in Sweden v Commission (Case T-521/14), where it found that the Commission had failed to act in accordance with Article 265 TFEU by failing to adopt measures concerning the specification of scientific criteria for the determination of endocrine-disrupting properties as required by Article 5(3) of the Biocidal Products Regulation (see here). The General Court found that the Commission failed to act because Article 5(3) of the Regulation imposed on the Commission a clear, precise and unconditional obligation to adopt a delegated act defining the criteria for endocrine-disrupting properties by December 13, 2013.
In response to complaints from Sweden and Denmark, the Commission denied neglecting its duty to act because it was in the process of elaborating the criteria through an impact assessment. The Court considered that this argument did not justify the Commission’s delay in adopting a delegated act: first, Article 5(3) of the Regulation did not require such assessment; and second, even if the impact assessment were required, this would have no effect on the obligation under Article 5(3) of the Regulation to lay down delegated acts by December 13, 2013. As there was no ambiguity in the terms in Article 5(3) of the Biocidal Products Regulation, nor did the legislature amend or repeal the obligation, the Court held that the Commission failed to act in accordance with Article 265 TFEU.
On December 17, 2015, after a year and a half of discussions, the French National Assembly adopted a new Act reforming French health law (“Projet de loi de modernisation de notre système de santé”). Among others, the Act introduces group actions for health-related cases; adopts plain packaging for tobacco products and imposes enhanced transparency requirements on tobacco companies; creates new and simplified nutrition logos for consumers (on a voluntary basis); and opens access to healthcare data through a new National System of Healthcare Data, which will gather and centralize data from private and public hospitals, social security, and other research and scientific institutes. The opposition in the Senate (Les Républicains) has since referred the Act to the Constitutional Council for review prior to its publication.
Trade Policy and Sanctions
On November 29, 2015, leaders from the EU and Turkey met in Brussels to discuss the Syrian refugee crisis. Following the meeting, the leaders announced a “joint action plan” comprising: (i) a €3 billion commitment from the EU to help Turkey manage Syrian refugees at home; (ii) a promise to “reenergize” the accession negotiation; and (iii) a provisional roadmap for the elimination of the visa requirement for Turkish citizens to enter the Schengen area “if the benchmarks are fulfilled.” The agreement will be reviewed at least once a month. For the joint statement, see here.
On December 14, 2015, the Board of the European Bank for Reconstruction and Development (“EBRD”) approved a request by Chinese authorities for China to become a shareholder in the bank. In its announcement, the EBRD expressed interest in joint projects with the Beijing-based Asian Infrastructure Investment Bank. For the ERBD press release, see here.
On December 15-19, 2015, the WTO’s Tenth Ministerial Conference was held in Nairobi, Kenya. WTO members concluded the “Nairobi Package”, a set of trade initiatives that encompasses six Ministerial Decisions on agriculture, including a legally-binding Decision that would eliminate current (and prevent future) subsidies for farm exports. The Package also includes various decisions designed to benefit the least developed countries (“LDCs”), including a Ministerial Decision on cotton, preferential rules of origin for LDCs, and preferential treatment for LDC service providers.
On December 16, 2015, the EU and 23 WTO members - including the U.S. and China - concluded a trade deal that eliminates customs duties on more than 200 high-tech products. The deal extends the 1996 Information Technology Agreement to cover €1.3 trillion in global trade. The covered products include semi-conductors, medical equipment, game consoles and GPS devices, but do not include TVs, certain monitors and non-digital car radios. For the Commission press release, see here.
On December 21, 2015, the Council of Ministers prolonged EU economic sanctions against Russia until July 31, 2016. The EU initially imposed sanctions against Russia in July 2014 in response to Russia’s infringement of Ukrainian sovereignty. The sanctions target certain exchanges with Russia in the financial, energy and defense sectors. The Council’s prolongation of the sanctions comes as a reaction to the incomplete implementation of the Minsk agreements, i.e. the formal ceasefire foreseen to take place by December 31, 2015. The timing of the extension of the sanctions is significant in that the trade part of the EU-Ukraine Association Agreement came into effect on January 1, 2016.