The Week Ahead in the European Parliament – December 2, 2016

Summary

The coming week is a political group week, i.e., the week during which political parties hold internal meetings to discuss their position and strategy, and also prepare the next plenary to be held on December 12-15, 2016, in Strasbourg.

In view of the Maltese presidency of the Council of the EU that starts in January 2017, the Conference of Presidents (including the Parliament President, Martin Schulz, and the political group leaders) will travel to Malta to meet the Maltese President, Marie-Louise Coleiro Preca, and Prime Minister, Joseph Muscat.

Although legislative activity is limited during political group weeks, a few interesting hearings and votes will take place.

On Monday, the Committee of Inquiry into Emission Measurements in the Automotive Sector (“EMIS”) will hold a presentation of the study on the differences existing between EU and U.S. legislation in the field of car emissions. The study has been prepared by the European Commission at the request of the EMIS Committee. The study draws a comparative analysis between the EU and the U.S. in various fields, such as emission standards (including their implementation and enforcement), and the regime applicable for banning the use of defeat devices. See the full study here. Continue Reading

Re-Opening NAFTA: Consequences for U.S. Businesses

President-elect Donald Trump made trade policy a key issue in his campaign and has declared his interest in either withdrawing from or renegotiating the North American Free Trade Agreement (NAFTA). Government officials from Mexico and Canada have publicly stated that their respective governments are open to renegotiating the treaty. As a result, companies that do business in Mexico or Canada or engage in cross-border transactions with those countries are likely to confront significant new challenges and uncertainty in the next few months.

Any renegotiation could lead to an increase in U.S. tariffs on imports from Mexico and Canada, which could increase to the levels applied to other members of the World Trade Organization (WTO). There may also be parallel increases in Mexican and Canadian tariffs on imports from the United States. Such shifts would threaten Mexico’s maquiladora industry in particular, which depends upon the tariff-free movement of inputs and finished products to and from the United States. Renegotiation also could affect U.S. firms that supply goods and services to the Mexican and Canadian governments and place in doubt bilateral arrangements facilitating the movement of U.S. workers and executives across the Mexico and Canada borders. Such a dramatic move, moreover, might be a precursor to unilateral U.S. trade measures. U.S. presidents, for example, have significant authority to impose tariffs against foreign trade practices.

What the Trump Administration’s policy priorities would be in any renegotiation are not clear, but changes in tariffs and the protection of U.S. jobs may be at the top of that list. It would not be surprising if President-elect Trump were to wield the threat of withdrawal as a source of leverage in any talks, and perhaps also seek to impose punitive tariffs against imports from Mexico and/or Canada. Any unilateral actions, of course, could prompt Mexico and Canada to retaliate in kind, such that these bilateral relationships deteriorate and market uncertainty increases.

If a Trump Administration goes so far as to withdraw unilaterally from the trade pact, that would also have the consequence of removing the protection that NAFTA’s Investment Chapter provides to the investments of U.S. investors in Mexico and Canada.

The Investment Chapter of NAFTA grants U.S. investors with investments in Mexico and Canada several substantive rights. For instance, Mexico and Canada must grant fair and equitable treatment to the investments of U.S. investors, must refrain from adopting arbitrary measures that may affect those investments, and must not expropriate those investments unless certain conditions are met, including the payment of compensation. The Investment Chapter also allows U.S. investors to seek damages in an international arbitration proceeding if any of those rights are violated. These substantive and procedural protections would no longer be available to U.S. investors if the United States were to withdraw from NAFTA. For those investors who believe Mexico or Canada has violated NAFTA, as long as a party notifies its intention to file a claim while NAFTA remains in force, its ability to seek redress in an arbitration related to that dispute will be preserved, even after any U.S. withdrawal has occurred.

Companies with significant investments in Mexico and Canada would be wise to consider how a withdrawal from, or fundamental changes to, NAFTA might impact their businesses going forward. Reopening NAFTA negotiations could present risks as well as opportunities for those on both sides of the border.

Use of the Congressional Review Act in the 115th Congress to Overturn Obama Administration Regulations

In just five short weeks, the 115th Congress will convene in Washington.  Now that Republicans control majorities in both houses and the White House, Republican leaders hope to use the Congressional Review Act (CRA) to overturn regulations issued by the Obama Administration over the past few months.  According to a recent Congressional Research Service review, over 100 regulations are potential targets for Congressional disapproval under the CRA, including:

  • The Department of Labor’s new overtime rule requiring employers to pay overtime to employees making less than $47,000 per year
  • FDA regulations governing serving sizes and nutrition labeling
  • Department of Agriculture regulations on nutrition standards for food served in schools
  •  Department of Health and Human Services regulations setting new performance standards for Head Start
  •  EPA regulations setting standards of performance for municipal landfills
  •  Treasury Department and Commodities Futures Trading Commission regulations governing covered swap entities, including margin and capital requirements
  •  Department of Labor regulations requiring paid sick leave for federal contractors
  •  Securities and Exchange Commission regulations requiring resource extraction issuers to disclose payments made to governments for the commercial development of oil, natural gas, or minerals
  •  Department of Transportation/Federal Aviation Administration regulations regarding the use of small unmanned aircraft (“drones”).

The Congressional Review Act

The CRA provides expedited procedures by which Congress may disapprove an administrative “rule” by enacting a joint resolution of disapproval.  A “rule” is broadly defined by reference to the Administrative Procedure Act and includes regulations issued by both executive branch departments and agencies (such as the Department of Labor), and independent agencies and commissions (such as the Federal Communications Commission or the Federal Trade Commission).  Before a regulation can take effect, the issuing agency must report the regulation to Congress. After the report is made, Congress generally has 60 days to introduce and pass a joint resolution of disapproval under the CRA’s special procedures, but the counting of the 60 days differs depending on whether the joint resolution is being introduced or considered and whether consideration is taking place in the Senate or the House of Representatives.

When rules are submitted to Congress within 60 days of a sine die adjournment of Congress, such as at the end of the second session of a given Congress, then the 60 days clock “resets” at the beginning of the new session.  Thus, for rules reported to Congress within 60 legislative days of the end of the 114th Congress, members of the 115th Congress will have the full 60 days to introduce and consider joint disapproval resolutions.  The “reset” period begins on the 15th day of the new session.  Because the CRA relies on legislative days—which are determined differently in each chamber—rather than calendar days, rules reported to Congress as early as mid-May 2016 may be eligible for congressional disapproval.  The parliamentarian of each house determines the actual cutoff date for CRA disapproval of a given rule.

If a joint resolution of disapproval is timely enacted with respect to a particular regulation, then the regulation will not take effect — or, if the regulation already has gone into effect, it will be treated as if it had never gone into effect. Moreover, the regulation may not be reissued in substantially the same form, nor may a new regulation that is substantially the same be issued, unless it is specifically authorized by subsequently enacted legislation. The CRA may be used only to disapprove a regulation in its entirety, and the rejection of each given rule requires its own resolution of disapproval (although some members of Congress have proposed legislation that would permit Congress to disapprove of regulations in larger blocks).

The primary advantage of using the CRA to invalidate an undesirable regulation is its expedited procedures, particularly in the Senate.  For example, if a joint resolution of disapproval is introduced in the Senate, and the jurisdictional committee fails to report it to the full Senate within a specified period, a petition of 30 senators may place the joint resolution on the Senate’s calendar.  In addition, Senate consideration of the joint resolution is not subject to filibuster, and debate is limited.  Once debate begins, the Senate may not move on to the consideration of other business until the joint resolution is disposed of.  Enactment of a joint resolution of disapproval under the CRA requires a majority vote in each chamber of Congress and signature by the president.

The CRA has been used successfully only once. In November 2000, the outgoing Clinton administration issued final ergonomics regulations.  In that same month, the Republican Party gained control of both chambers of Congress and the presidency.  In March 2001, the Republican Congress used the procedures under the CRA to cancel the ergonomics regulations.  The current political conditions are ripe for further such uses.

What’s Next?

President-Elect Trump campaigned on a promise to roll back countless Obama Administration regulations, and just last week proposed “formulat[ing] a rule that says that for every one new regulation, two old regulations must be eliminated.”  Although repeal of most regulations would require new rounds of notice-and-comment rulemaking, Republicans who support undoing the previous administration’s rules may rush to end the 114th Congress early in order to maximize the number of existing or soon-to-take-effect rules subject to the CRA in the new Congress.

The new Republican Congress and the Trump Administration are also expected to use traditional legislation to rollback a number of Obama initiatives, including the Affordable Care Act (“Obamacare”) and its attendant regulations, dozens of Dodd-Frank Wall Street Reform and Consumer Protection Act regulations, the Department of Labor’s fiduciary rule for retirement plan advisors, and others.  However, unlike regulations subject to the CRA, these rules are subject to filibuster by Senate Democrats.

The Republican leadership in both houses of the incoming 115th Congress are enthusiastic about rolling back Obama Administration rules and regulations, and have promised to use all tools at their disposal to accomplish that goal.

The strong likelihood that Congressional Republicans and President-Elect Trump will use the CRA to undo Obama Administration regulations should be of interest to companies who support or oppose the regulatory initiatives listed above, or any other regulations that may face Congressional scrutiny early in the new Congress.

Electoral volatility – the case of France

The surprising victory of Francois Fillon

Since 27 November, the favorite to become the next French President in the Spring 2017 election is Francois Fillon, someone nobody a month ago would have given any serious chance to get to the limelight. He received more than 2/3 of the votes in the second round of the ‘primary’ organized by the party of the Right, ‘Les Républicains’ to select their candidate for the presidency.

The election of the president of France happens in two rounds with a two weeks interval. In the first round all candidates having raised a basic support can participate; in the second only the two frontrunners compete. The collapse of president Hollande‘s socialist party makes it almost certain now that the two will be Fillon and Marine Le Pen, the candidate of the extreme right ‘Front National’, who is forecast to gain some 30 % of the votes in the first round.

Selecting the leader who could beat Marine Le Pen was thus the main challenge of the Right’s primary. The stakes indeed go well beyond internal French politics. Not only is Marine Le Pen’s party racist, anti-Semitic and ferociously anti-immigrant, she is also aggressively Eurosceptic. She even promised a referendum on the withdrawal of France from the European Union. After the Brexit referendum, she posted: “Victory to liberty! As I have been demanding for many years, we now need the same referendum in France and EU countries.” Continue Reading

The Week Ahead in the European Parliament

Monday, November 28, 2016

Summary

This week is an interesting week in the European Parliament, a Brussels-based “mini-Plenary”, with a mixture of committee meetings and votes in plenary session.

Following the agreement reached between the Parliament and the Council of the EU on November 17, the Parliament will vote on the compromise for the 2017 Budget on Thursday. The Parliament negotiated the Budget up, to pay programs aimed at fostering employment for youngsters, student mobility and SMEs.

The Parliament will also address data privacy, as a vote on the “Umbrella Agreement” will take place in plenary on Thursday December 1. The Umbrella Agreement is a proposal for Council Decision that covers the transfer of personal data between the EU and the US for law enforcement purposes, including in case of criminal prosecutions and terrorism. The Council Decision must be adopted following the consent procedure. Various Members of the European Parliament tabled amendments to refuse the parliamentary consent required to adopt the Council Decision. However, the amendments will have to be subject to a vote on Thursday. See here for the amendments tabled by the Parliament and here for the initial proposal. Continue Reading

Private-Sector Opportunities – and Challenges – in the new $38.8 billion U.S.-Israel Military Assistance Package

Uncertainty surrounding the policies of the new administration is felt across industries. In particular, U.S. and Israeli defense industries are anxious for details of a ten-year, $38.8 billion military assistance package that was signed in Washington this past September. Whether the terms of the aid package are upended entirely or left mostly unchanged by the current incoming administration will have far reaching consequences on future U.S. and Israeli government procurement.

As discussed in this post, since 2007, U.S. and Israeli defense contractors have become accustomed to navigating the terms of an FY2009-FY2018 assistance program. The new 10-year package, however, presents new, unchartered challenges, for which industry will have to prepare and adapt. To do so effectively, companies will want to (i) glean more specific details regarding the terms of the new aid package, especially in light of changing administrations (ii) work towards increasing their eligibility for defense funding by adapting structurally, either through approved M&A activity or B2B cooperation between U.S. and Israeli companies, and, finally, (iii) engage with experts, policy makers and regulators, to ensure their plans align with any current or future compliance constraints.

What is clear, the changing landscape presents challenges and opportunities for both U.S. and Israeli defense contractors. Continue Reading

This Week in Congress – November 28, 2016

Three weeks remain on the schedule for the 114th Congress and three unfinished priorities remain on the to-do list. Before the close of the lame duck session, each chamber is expected to take action on a Fiscal Year (FY) 2017 funding mechanism to keep the government funded beyond the December 9 expiration of the current continuing resolution, the annual defense authorization bill, and a bipartisan measure to increase medical innovation and make reforms to the mental health system.

The stopgap funding measure is perhaps the biggest hurdle for members to complete this month, capping off a year-long battle over the annual appropriations process and funding levels for FY 2017. Despite the support of many Republican members to enact an omnibus bill or several smaller, so-called minibus bills to complete the months-long work by appropriators on individual FY 2017 2017 bills, House Republican leadership has indicated, in consultation with the President-elect, to pursue another short-term stopgap bill to continue current funding levels through March 31, 2017. This approach will require Congress to agree on a funding bill in early 2017 through the end of the fiscal year, September 30. The move is designed to leave any new funding decisions to the new session of Republican-controlled Congress and the new administration. Legislative language has not yet been formally introduced, and the outgoing administration has so far abstained from threatening a veto of another short-term funding bill, even though the President has indicated his support for a bill that provides funding through September 30. There appears to be little appetite among members in both parties, however, to stay in Washington, DC for another down-to-the-wire appropriations battle.

While the details for a spending bill are settled, House and Senate leaders are also finalizing the 21st Century Cures Act, legislation to invest greater resources in medical innovation and speed up the process by which the Food and Drug Administration (FDA) approves new drugs and devices. The bipartisan measure had been held up over disputes on how to pay for the initiatives included in the bill. While significantly lower than the initial levels included in the House-passed bill, the compromise legislation is reported to provide an additional $4.8 billion in funding over 10 years to the National Institutes of Health. The bill also authorizes an additional $1 billion over two years beyond the recently enacted Comprehensive Addiction and Recovery Act to address opioid abuse, an epidemic affecting a wide range of constituencies for members in both chambers. Press reports indicate a bipartisan and long-negotiated mental health reform bill sponsored in the House by Rep. Tim Murphy (R-PA) and Senate legislation sponsored by Chris Murphy (D-CT) and Bill Cassidy (R-LA) will also be included in the 21st Century Cures package. As with the innovation measure, the legislation may not be as sweeping as the versions initially drafted, but it provides some much-needed reforms to the nation’s mental health system by focusing programs and resources on psychiatric care for patients and families most in need of services. The measure is also expected to establish a new position of assistant secretary for mental health in the Department of Health and Human Services, along with a chief medical officer. The summary of provisions in the legislation is based on media reports, because legislative text has not yet been released.

The conference report to the FY 2017 National Defense Authorization Act is another item considered a “must do” during the lame duck session, and it may be ready to see action as early as this week. Press reports indicate that leaders from the House and Senate Armed Services Committees have negotiated through several major differences between their two versions of the annual defense spending blueprint. One of the biggest disparities was the gap between funding levels, which reached $18 billion after the House shifted funding for overseas contingency operations (OCO) to boost defense spending above statutory budget caps. The new compromise conference report that was negotiated through the fall is allegedly set to include an additional $9 billion in funding for OCO and readiness shortfalls and covers the $5.8 billion supplemental request sent by the President to Congress in November. Reports indicate that House and Senate leaders have also been able to work out several controversial policy provisions that previously prompted a veto threat from the White House, though it is unclear whether the changes will be enough to assuage the Administration’s concerns.

As negotiations continue on the three major priority items discussed above, both the House and Senate will work on moving several other bills this week.

The Senate is scheduled to return to legislative business on Monday, November 28. The next vote is scheduled for Tuesday morning on passage of a bill regarding the use of technology to deliver health care in rural areas (S. 2873).

On the other side of the Capitol, the House is scheduled to return to legislative business on Tuesday, November 29, when members will consider 16 bills under suspension of the rules. The suspension package includes seven bills reported out of the House Veterans Affairs Committee, including H.R. 5458, the Veterans TRICARE Choice Act of 2016, legislation that would allow veterans who participate in the TRICARE benefit program to contribute to health savings accounts.

Members will take up an additional 13 bills under suspension of the rules on Wednesday, including several U.S. Postal Service facility designations and other items reported out of the House Oversight and Government Reform Committee and three measures reported by the Financial Services Committee.

The House is also expected to consider H.R. 6392, the Systemic Risk Designation Improvement Act of 2016. This legislation would amend the Dodd-Frank law to alter the process by which federal regulators determine which bank holding companies should be designated as systemically important financial institutions (SIFIs). The bill would require an assessment based on risk, rather than by asset size. Consideration of H.R. 6392 will be subject to a rule.

One event of note taking place off the floor this week is the Democratic leadership elections in the House of Representatives for the 115th Congress. The elections were scheduled prior to the Thanksgiving holiday, but postponed until this Wednesday. Current House Minority Leader Nancy Pelosi is being challenged by Rep. Tim Ryan (D-OH), who is seeking to inject more youthful leadership into the congressional party that lost many seats between 2010 and 2014 and picked up only six seats in November, a dramatic underperformance from what had been expected. The debate is not just about age, but is also about the direction of the Democratic Party. Leader Pelosi is from San Francisco and has been an aggressive culture warrior for the left; Rep. Ryan is from Ohio, and is seeking to reclaim for the Democratic Party the support of the working class, which has recently become increasingly Republican. Leader Pelosi recently announced she was expanding the ranks of members in the Leadership, and she remains expected to receive substantial support from the conference to maintain her post for the next two years. Nonetheless, the fight for the future of the party will be taking shape in this debate.

The hearing schedule in both chambers remains light due to the winding down of the legislative session. Of note is a Senate Foreign Relations Committee hearing on Tuesday looking at Iranian support for terrorism and a Wednesday Senate Commerce Subcommittee hearing on Artificial Intelligence. The full schedule of hearings for the week ahead is included below:

Continue Reading

Guidelines for Interacting with President-Elect Trump’s Transition Team

Over the next nine weeks, the Trump Presidential Transition team will formulate policy and staffing recommendations for the new administration. This alert gives a broad overview of the Transition and the laws that regulate interactions with Transition team members on issues related to appointments and policy recommendations. Persons interested in this topic may also wish to view our alert on the presidential appointee vetting process.

The Week Ahead in the European Parliament – November 15, 2016

Summary

This week will feature a mixture of Committee meetings, and political group meetings, as parties prepare their positions for Plenary in Strasbourg next week. In terms of the legislative agenda, it is relatively quiet, as much energy will be focused by Parliamentarians on their work in political groups.

In informal talks known as conciliation, the Council and Parliament will seek to negotiate a compromise on the 2017 EU Budget, with the Commission acting as a facilitator. MEPs continue to press for increased funds to tackle the migration crisis, and provide economic stimulus in the Union, whilst the Council will push for savings. One of the major points of contention is over whether money allocated to development can be used to mitigate the current refugee crisis the EU faces. In late October, the Parliament voted a resolution to reverse all of the Council’s proposed cuts in the draft budget and “strongly questioned” whether the funds available for projects in third countries were sufficient given the current refugee crisis. MEPs suggested that an increase of almost half a billion euros to the EU’s external spending, which Continue Reading

Privacy and Data Security in the Trump Administration

Privacy and data security issues were prominent in the campaign. Allegations were even made that Russia was behind the DNC hack.

Despite it being front and center in the campaign, cyber security did not generate specific policies from the Trump campaign. One thing Donald Trump did promise was a top to bottom review of US cyber defense and security led by government, law enforcement, and private sector experts.  He also committed to establishing a Justice Department task force to coordinate responses to cyber attacks and a cyber review team to audit existing government IT systems.

Another area on which the President-elect spoke was the need to clamp down on the theft of US intellectual property, especially by foreign nations and competitors. Tools already exist to do that, of course: Economic Espionage Act of 1996.  Congress, which earlier this year enacted the Defend Trade Secrets Act, is likely to respond favorably to any additional resources or authorities the new administration might seek for this purpose.

Related to cyber security were Mr. Trump’s comments on encryption during Apple’s dispute with the Justice Department in the wake of the San Bernardino terrorist attack. Trump sided strongly with law enforcement, and we can expect Congress to return to the subject of encryption in the coming session.  Whether anything happens legislatively is uncertain, and some in Congress want to await the pending report of the National Academy of Science on encryption, which will remain a highly contentious issue.  Still, Candidate Trump’s comments show where he stands.  One wildcard in the debate may be how weakened is FBI Director Jim Comey, who has been leading the charge on encryption issues for law enforcement.

Also due for legislative consideration in 2017 is the renewal of section 702 surveillance authority under the FISA Amendments Act, which is due to sunset at the end of the year. Trump is likely to take a much more pro-surveillance position than either the current administration or Secretary Clinton might have taken.  Privacy advocates in both parties are likely to press for changes in the law, but at this point the odds would be against them.

Either on its own or in conjunction with the section 702 debate, Congress is likely to return to consideration of ECPA reform. The House passed the E-mail Privacy Act unanimously this Congress, but it stalled in the Senate due to privacy groups’ opposition to an amendment sought by Senator Cornyn.  The must-pass section 702 legislation is likely to provide a vehicle for e-mail privacy and related ECPA reform legislation if it does not move on its own.

Also in the mix on these issues is consideration of legislation clarifying and modernizing how domestic law enforcement accesses data across national borders. Legislation addressing that issue enjoys prominent support in Congress and may well get taken up in conjunction with ECPA reform or get lumped in with that in the context of section 702 renewal.

And the House Judiciary Committee is already moving ahead with a hearing scheduled to consider protecting geolocation data, setting up another area of dispute between law enforcement and privacy advocates.

Also in the mix legislatively will be proposals on how firms deal with data breaches and theft of information. The recently disclosed hack of Yahoo and the DNC hack have again raised the profile of data breach issues.  While there is consensus that something should be done, disagreement remains on the details, including whether a federal law should preempt state data breach laws.  There is little reason to expect that the disagreements can be bridged or that legislation will in fact move forward.

Finally and briefly, among other issues that Congress is likely to look at, though on which a legislative solution is unlikely are:

1) how to address distributed denial of service attacks, and the inter-related topic of the growth of the Internet of Things, on which several committees have already scheduled hearings in the wake of the recent significant DDOS attack. At this stage, Congress is likely to seek to continue to build its level of understanding of the issues here rather than act on anything;

2) how to address the recruitment of terrorists and the spread of violent extremism through social media; and

3) the implementation of last year’s Cybersecurity Information Sharing Act by the Department of Homeland Security.

One final point: the key players on these issues are likely to remain the same. One possible change would have Senate Judiciary ranking member Pat Leahy, just reelected, move to become ranking member of the Appropriations Committee, which could open the door for Senator Feinstein to become ranking member of the Judiciary Committee.  She would be more sympathetic to law enforcement and less aligned with the privacy advocates than Senator Leahy has been.  However, her move might allow tech-friendly Senator Mark Warner to become vice chairman of the Intelligence Committee, of which Senator Richard Burr will remain as chairman after his reelection.

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