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PPGA Events, Brexit, Digital Single Market: EU Policy Update for September 2016

1. EU PPGA Events

On September 8, in Washington D.C., there will be a luncheon discussion with Lord Francis Maude, formerly the UK’s Minister of State for Trade and Investment (and previously Minister for the Cabinet Office) under the Cameron government, and Ambassador Stuart Eizenstat, former U.S. Ambassador to the European Union. Following the British people’s historic June 23 vote to leave the European Union, Lord Maude and Ambassador Eizenstat will outline the implications of Brexit for the UK, the EU, and international stakeholders.

On September 13, in London, there will be a Brexit discussion evening and drinks reception with Jonathan Faull, most recently Director-General of the Task Force for strategic issues related to the UK Referendum at the European Commission. Mr. Faull will speak about his experience of the negotiations before the referendum, the mechanics of Brexit and its impact on the EU / British business landscape. Mr. Faull has an extensive career at the European Commission, having been Spokesman and Director General for Press and Communication (2000–2003), Director General for Justice, Freedom and Security (formerly Justice and Home Affairs) (2003–2010), and Director-General of DG Financial Stability, Financial Services and Capital Markets Union (2014 - 2015).

2. Brexit and the EU’s Response

EU leaders are conducting a rapid round of diplomacy in preparation for an “informal meeting” of 27 member states (without the UK) in Bratislava on September 16 (see the Council website here). The most active leader has been Angela Merkel, who met more than half of her fellow EU heads of government over August. There was a meeting of the three (remaining) “big” EU countries in Italy, which was also a way for the two others to show their support for Matteo Renzi, who has to fight a “constitutional” referendum in late October on which his premiership depends. They reaffirmed their commitment to the European project and the need for European cooperation—see the German embassy to Paris’ press release here. Angela Merkel also met her three Baltic colleagues, the four members of the so-called “Visegrad group” (Poland, Hungary, the Czech Republic and Slovakia) and others.

This European tour will be followed in early September by visits to all EU capitals by the President of the European Council Donald Tusk, who is responsible for preparing the Bratislava “informal meeting” of the 27 heads of state. No clear agenda has been set at this stage, but the summit will certainly cover “internal and external” European security: the protection of external borders, the fight against terrorism and the development of the European Defense Agency. The deepening of the Eurozone is also likely to be on the agenda, though little major progress is expected there.

Meanwhile, over the Channel, figures in Whitehall suggest the UK may delay triggering exit negotiations under article 50 of the EU Treaty until after French and German elections in Q4 2017. On August 10, London mayor Sadiq Khan wrote an editorial in the Independent newspaper (see here) suggesting such a delay was in order, and calling for the UK to retain single market access. However, senior “Brexiteers” in the ruling Conservative party have reacted strongly, with Iain Duncan Smith, a former cabinet minister, writing a column in the Sun  on August 20 urging a speedy resolution. The August 31 Cabinet meeting at Chequers, the Prime Minister’s official country residence, gave little clarification on the Government’s plans—see the Prime Minister’s statement here. Theresa May will be under pressure when Parliament reconvenes in September to set out a timeline for beginning exit negotiations.

The UK Treasury has committed to underwriting various aspects of funding awarded by the European Commission to UK based Horizon 2020 recipients, farmers and other businesses—see the press release here. all structural and investment fund projects, including agricultural and environmental schemes, signed before the Chancellor’s Autumn Statement will be underwritten; CAP payments will be guaranteed to 2020; and all funding awarded directly to UK based recipients by the European Commission on a competitive basis (such as under Horizon 2020) whilst the UK is a Member State will be funded until completion, regardless of whether the project window expands beyond the UK’s departure from the EU. This move followed press reports that UK based research institutions were struggling to attract European partners .

3. Tech and Digital Single Market Policies

On August 30, 2016, the European Commission has concluded that Ireland granted undue State Aid of up to €13 billion ($14.5 billion) to Apple . Following a two year investigation, the Commission concluded that Ireland granted illegal tax benefits to Apple, which enabled it to pay substantially less tax than other businesses since 1991. A spokeswoman for the U.S. Treasury Department said “retroactive tax assessments by the commission are unfair, contrary to well-established legal principles, and call into question the tax rules of individual Member States.” Both Apple and the Irish government have stated that they will appeal the decision. However some elements of the Irish government do not want to appeal the decision.

On the same day, BEREC published the final version of its Net Neutrality guidelines. The Guidelines provide guidance for National Regulatory Authorities to take into account when implementing the Telecoms Single Market Regulation on open internet access. Telecoms companies will only be able to offer “specialized services”—such as live broadcasting IPTV services with specific quality requirements, or connectivity for driverless cars, real-time remote health services and high-quality voice calling on mobile networks—over dedicated network capacity if it is “objectively necessary,” and only if it does not negatively affect internet quality. BEREC also clarified its position on zero-rating: commercial practices such as zero-rating are not prohibited per se; and practices will be assessed on a case by case basis according to criteria set out in the new guidelines.

We understand that the Article 29 Working Group announced their plans to release guidance on aspects of the GDPR by the end of the year. In particular, they plan to introduce guidance on Data Protection Officers, Data Protection Impact Assessments (DPIA), certifications and portability.

4. Energy and Climate Change Policy

The European Commission recently published Guidance on Compliance Criteria on Environmental Claims in relation to goods and services marketed in the EU. This supplements existing EU and Member State guidance , and is broadly similar to the U.S. Federal Trade Commission’s Green Guides .

The guidance was drawn up by the European Multi-Stakeholder Dialogue on Environmental Claims, an informal group of representatives of the European Commission, Member State enforcement authorities, industry associations, and environmental and consumer NGOs. The Guidance interprets and applies the principles of the of Unfair Commercial Practices Directive, to environmental claims on goods and services marketed to consumers. Although not binding, the new Guidance is likely to become a reference standard for Member State enforcement authorities and advertising self-regulatory bodies when they scrutinize environmental claims; and will be useful for manufacturers, service providers, and traders intending to make such claims. For further details, see  here.

5. Internal Market and Financial Services Policies

On August 13 the European Commission adopted an Implementing Regulation establishing a list of “critical” benchmarks for the financial markets and consumer contracts. This will enable supervisors to deploy certain provisions of the Benchmarks Regulation (EU 2016/1011) in advance of its entry into application in 2018. EURIBOR (Euro Interbank Offered Rate) is the first benchmark to be included in the list. The Commission will review and update this list regularly and will eventually include other benchmarks that fulfil the criteria to be deemed “critical.” This will ensure that supervisors are in a position to allow the continuation of critical benchmarks where their cessation would have a severe adverse impact on market participants and undermine the functioning and integrity of markets. In particular, classifying EURIBOR as a “critical” benchmark will empower supervisors in requesting data contributions from banks, if they deem it necessary to ensure the benchmark’s representativeness.

6. Life Sciences and Healthcare Policies

On August 3, the European Medicines Agency (“EMA”) published the results of a pilot project on the early marketing authorisation of drugs. Under the Adaptive Pathways approach, a medicine is first authorised in a small patient population that is likely to benefit most from the medicine, then additional evidence is gathered leading to progressive licensing adaptations to extend or restrict the previously authorised indications of the medicine. The pilot identified a need for greater involvement by patient groups in selecting drug candidates, and to incorporate real-world evidence such as patient registries into the process. The EMA would also like to see greater input from health technology assessment (“HTA”) bodies and other national agencies on the feasibility of pricing and reimbursement strategies for these drugs. It describes adaptive licensing as “a developing concept that will be refined as more medicines are considered.” Although the pilot has ended, proposals can still be submitted by drug sponsors, and the EMA has published new guidance for companies considering the adaptive approach. EMA will hold a workshop to discuss its findings on December 8. The report also attracted criticism, for instance from the German HTA body IQWIG.

On August 15, the European Centre for Disease Prevention and Control (“ECDC”) released an expert opinion on whole genome sequencing (“WGS”) for public health surveillance. The ECDC detailed the obstacles to adopting WGS on a pan-European basis and proposed several initiatives to mitigate these difficulties. Over the next five years, the ECDC hopes to help “establish standards and manage systems enabling the EU-wide use of WGS as the method of choice for typing of microbial pathogens, replacing other methods.”

The European Commission issued updated guidelines for determining whether standalone software should be considered a medical device or an in vitro diagnostic medical device (MEDDEV 2.1/6) falling under Directive 98/79/EC—see the updated guidance document here, and the Directive here. In essence, if the software does not perform an action on data, or performs an action limited to storage, archival, communication, “simple search” or lossless compression, it is not a medical device. Software for the benefit of individual patients likewise does not fall under the medical device tests. For further details, see Covington’s blog post here.

7. Trade Policy and Sanctions

While TTIP negotiations have accelerated over the summer, political opposition continues to increase. TTIP negotiators continued to work during the August recess and have made sensible progress: the European Commission spokesman stated on August 29 that the “talks are now, indeed, entering a crucial stage, as we have proposals for almost all chapters on the table and a good sense [of] the outline of the future agreement.” This was confirmed by U.S. Trade Representative Michael Froman’s spokesman. These comments were made after ministers from two major EU members had asked for the cessation of the talks: Germany’s Economy minister Sigmar Gabriel said in an interview (see here, in German) on August 28 that the talks had “de facto failed”; and the French Trade Minister Matthias Fekl in a radio interview (see here, on AFP) on August 29 that “there is no more political support in France” for TTIP, and that “France calls for an end to these negotiations.” This assertion was later nuanced by president Hollande, who said what could not be achieved is an agreement before the end of the Obama administration.

Sigmar Gabriel’s radical statement on TTIP has to be interpreted in the context of a political debate in Germany over the ratification of CETA, the trade deal between the EU and Canada—see, for example, coverage here. In order to convince his Social Democratic party to ratify CETA, Gabriel is said to have “offered” his support to blocking TTIP. The ratification process for CETA is expected to encounter difficulties in several countries, where it is seen as a first step towards accepting an agreement with the United States. The European Commission, however, is determined to secure provisional implementation before the EU-Canada summit on October 27. In the meantime, Canada has appointed a special envoy, Pierre Pettigrew, a former Foreign and Trade Minister, to help steer work on CETA ratification in Europe—see the Canadian government’s press release here.

Work continued in August on setting up new EU anti-dumping and anti-subsidy instruments, as agreed at the end of July by the College of Commissioners. The purpose is to prepare for the consequences of an extension to China of WTO Market Economy Status at the end of this year. As noted by commissioner Malmström, “some provisions of China’s Protocol of Accession to the World Trade Organization (WTO) that influence the way dumping is calculated will expire in December” and the EU wants to be sure this will not cause excessive market distortion.

© 2019 Covington & Burling LLP

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About this Author

Sebastian Vos, Covington, international trade lawyer
Partner

Sebastian Vos is co-chair of the firm’s public policy practice, and heads up its European division. He has extensive experience in the European Union and advises clients as they navigate and manage today’s global regulatory and policy challenges. 

Mr. Vos provides clients with strategic public policy, regulatory, and communications advice on a range of competition, trade, transactional and sectoral issues. Mr. Vos has particular expertise in advising companies in the technology, financial services, energy and transport sectors.

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Karel Kovanda, Covington Burling, Regulatory and public policy lawyer
Senior Advisor

Ambassador Karel Kovanda is a senior public policy advisor in Covington’s EU Public Policy Practice Group. A former diplomat and non-lawyer, Ambassador Kovanda has a wealth of experience, having held extensive diplomatic and private sector positions.

From 2005 to 2010, Ambassador Kovanda worked as Deputy Director-General of Relex (now the European External Action Service) in the European Commission. He was responsible inter alia for relationships with non-EU OECD countries, human rights and international organizations. In 2007, he chaired the Kimberley Process (combating "blood diamonds") and for a number of years co-chaired the EU-Japan Regulatory Reform Dialogue.

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Peter Balas, Covington Burling, Regulatory and public policy attorney
Senior Advisor

Ambassador Péter Balás, a non-lawyer, is a senior policy advisor and member of Covington’s Public Policy team. He draws on over 40 years of experience in the field of European and international politics and trade to advise clients on policy related issues.

Most recently, Ambassador Balás held the positions of Deputy Director General, DG Trade to the European Commission (2005-2014) and Head of the Support Group for the Ukraine in the European Commission (2014-2015). He was previously Ambassador and Permanent Representative of Hungary to the World Trade Organisation...

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Carl Bildt, Regulatory and public policy attorney, Covington Burling
Senior Advisor

Carl Bildt, Former Prime Minister of Sweden, draws on his extensive political experience to advise clients as a non-lawyer member of the firm’s global Public Policy and Government Affairs practice. Mr. Bildt returned to government office as Sweden’s Minister for Foreign Affairs from 2006 to 2014.

As Prime Minister of Sweden from 1991 to 1994, Mr. Bildt led the government that negotiated and signed Sweden’s accession to the European Union, reformed and liberalized the Swedish economy, and modernized its welfare system. After leaving office, he played a key role as...

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Jean De Ruyt, Covington Burling, Regulatory attorney
Senior Advisor

Ambassador Jean De Ruyt is a senior public policy advisor in Covington’s EU public policy team.  Ambassador De Ruyt, a non-lawyer, is among the most experienced diplomats in Europe.  Most recently, he served as the Permanent Representative of Belgium to the European Union and was chair of the Committee of Permanent Representatives during the 2010 Belgian Presidency of the Council.

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