The Week Ahead in the European Parliament – May 18, 2018

Summary

Next week is a political group week in the European Parliament.  Members of the European Parliament (“MEPs”) will hold meetings with their respective political party to prepare the plenary session, to be held in Strasbourg from May 28 to 31.  However, there will also be a few interesting (committee) meetings.  The upcoming week also marks the start of the 365-day countdown to the next European elections, which will take place on 23 to 26 May, 2019.

As Monday is a public holiday in Belgium, the week starts on Tuesday.  It will start with a meeting between the European Parliament’s Conference of Presidents (composed of the President of the European Parliament, Antonio Tajani, and of the presidents of the various political groups) and Facebook’s CEO, Mark Zuckerberg.  This meeting will be held behind closed doors.  It is expected that the discussion will focus on the use of personal data of European Facebook users.  The meeting will be followed by a press briefing.

On Wednesday morning, Commissioner for Budget and Human Resources Oettinger will present the Commission’s Draft Budget for 2019 during the Committee on Budgets (“BUDG”) meeting.

On Thursday, the Committee on Employment and Social Affairs (“EMPL”) will meet with Commissioner Thyssen on the recent proposal to establish a European Labour Authority.

Also on Thursday, the Committee on Constitutional Affairs (“AFCO”) will discuss the consequences for the EU of the future relationship agreement with the United Kingdom, guided by presentations by experts who produced three research papers on the topic.  Please find two of the three research papers here and here; the third one is forthcoming.

On Friday 25 May, the European General Data Protection Regulation (“GDPR”) will come into force.

Meetings and Agenda

Monday, May 21, 2018

  • No meetings of note due to public holiday.

Tuesday, May 22, 2018

  • No meetings of note.

Wednesday, May 23, 2018

Committee on Budgets

11:00-12:30

  • Presentation of the Commission’s Draft Budget 2019 by Günther OETTINGER, Commissioner for Budget and Human Resources

Thursday, May 24, 2018

Joint meeting – Economic and Monetary Affairs and Constitutional Affairs

09:00-09:45

  • Discussion on amendments to the report “Amending Article 22 of the Statute of the European System of Central Banks and of the European Central Bank” (COD)
    • Co-rapporteurs: Gabriel Mato (EPP, ES) and Danuta Maria Hübner (EPP, PL).

Committee on Employment and Social Affairs

09:00-12:30

Debates

  • Exchange of views, as part of the structured dialogue, with Valdis DOMBROVSKIS (Vice President) and Marianne THYSSEN (Commissioner)
  • Exchange of views with Marianne THYSSEN (Commissioner) – Presentation of the legislative proposal establishing a European Labour Authority

Committee on Civil Liberties, Justice and Home Affairs

09:00-12:30

Debates

  • Appointment of the European Chief Prosecutor – presentation by the political groups and discussion with Ingeborg GRAESSLE (EPP, DE), Chair of the Committee on Budgetary Control (09.00-10.00)
  • “Towards a Comprehensive EU Protection System for Minorities”  – discussion on the study with Lina VOSYLIUTE from Centre for European Policy Studies (CEPS) (10.00-10.30)
  • Joint debate on opening of negotiations for an agreement between the EU and Jordan, Turkey, Lebanon, Israel, Tunisia, Morocco, Egypt and Algeria on the exchange of personal data between Europol and competent authorities of these countries for fighting serious crime and terrorism (INI), Claude MORAES (S&D, UK) – discussion on eight draft reports (10.30-11.00)
  • Joint debate on communication from the Commission and Council on adapting the common visa policy to new challenges and a report by Juan Fernando López AGUILAR (S&D, ES) establishing a Community Code on Visas (COD) (11.00-11.45)
  • Delegation to the European Union Agency for Law Enforcement Training (CEPOL), Budapest, Hungary, April 5-6, 2018 – discussion on draft mission report (11.45-12.00)

Votes (12.00-12.30)

  • Adequacy of the protection afforded by the EU-US Privacy Shield (RSP), rapporteur Claude MORAES (S&D, UK) – vote on draft resolution
  • Schengen – implementation of the remaining provisions of the Schengen acquis relating to the Schengen Information System in the Republic of Bulgaria and Romania (CNS), rapporteur Monica MACOVEI (ECR, RO)  – vote on draft report
  • Agreement between the EU and the Swiss Confederation and the EU and Iceland on supplementary rules in relation to the instrument for financial support for external borders and visa, as part of the Internal Security Fund, for the period 2014-2020 (NLE), rapporteur Claude MORAES (S&D, UK) (Swiss Confederation) and Anders PRIMDAHL VISTISEN (ECR, DK) (Iceland)  – vote on two draft reports
  • The European Public Prosecutor (EPPO) – vote on the candidate of the European Parliament to the panel referred to in Article 14(3) of the Council Regulation (EU) 2017/1939 of 12 October 2017 implementing enhanced cooperation on the establishment of the European Public Prosecutor’s Office

Committee on Constitutional Affairs

09:45-18:00

Debates

  • Withdrawal of the United Kingdom from the European Union (Article 50 TEU) – discussion on the future of EU-UK cooperation with European Council on Foreign Relations (ECFR) representatives Mark LEONARD, ECFR’s Director and Wolfgang ISCHINGER, Former German Ambassador to the UK (10.00-11.00)

Votes (11.00-11.30)

  • Role of cities in the institutional framework of the Union (INI) – vote on a draft report
    • Rapporteur: Kazimierz Michał Ujazdowski (NI, PL)

Workshop (14.30-16.00)

  • The consequences for the EU of the future relationship agreement with the United Kingdom – presentation by experts of three research papers commissioned by the Policy Department for Citizens’ Rights and Constitutional Affairs – draft programme will be available here

Friday, May 25, 2018

  • No meetings of note.

Project Finance Master Class: Addressing Africa’s Infrastructure Deficit

There are ample studies that quantify Africa’s infrastructure deficit in terms of projects and funding. The World Bank estimates $93 billion of annual upkeep investment is needed for projects and Ernst and Young estimates that there are some 800 projects, largely in the power and transportation sectors, that require approximately $700 billion in new investments.

Less well understood is the skills deficit on the continent that is an impediment to these projects being developed. In particular, African governments and state-owned entities have a critical role to play with project developers to ensure that contracts, studies and documents related to these projects are executed effectively and efficiently. On the other hand, outside developers, financial institutions, and other professional service firms need to better understand local regulations and challenges faced by governments across the continent.

Given this situation, a group of stakeholders have come together to develop strategies to address  these gaps. This effort is predicated on the notion that skills development and local knowledge are critical aspects of addressing Africa’s infrastructure deficit.

Covington & Burling LLP, Kaplan & Stratton, Fieldstone Africa, and USAID’s Power Africa Initiative are organizing a Project Finance Master Class in Nairobi, Kenya on June 4-6, 2018. The African Legal Support Facility of the African Development Bank is also supporting this initiative. Intended for African government ministries, regulators, and state-owned off-takers, project developers, and infrastructure companies, the master class seeks to strengthen the enabling environment for project finance transactions by providing important technical skills training and creating a platform for the exchange of best practices.

If you would like more information or would like to participate, please contact Kamala Murugesu of Covington at kmurugesu@cov.com.

This post can also be found on CovAfrica, the firm’s blog on legal, regulatory, political and economic developments in Africa.

The Week Ahead in the European Parliament – May 11, 2018

Summary

By contrast to last week, which was quieter in Brussels due to the Parliamentary recess and bank holidays, the week ahead will see a number of committee meetings and votes.

On Monday, the Committee on Employment and Social Affairs will discuss new challenges to the labor market and social security systems posed by digitalization and automation.

On Tuesday morning, rapporteur Jan Philipp Albrecht (Greens/EFA) will give a press conference on the General Data Protection Regulation (“GDPR”) from 11:00 to 11:30.  The GDPR will come into effect two weeks from now, on Friday May 25.  Throughout the day, there will be an Interparliamentary Committee meeting with national parliaments to take stock of the views of national parliaments and stakeholders on various issues presented by the GDPR, on the eve of its coming into force.

Also on Tuesday, the Committee on Budgetary Control meets to discuss the use of EU agricultural funds in Slovakia.  Later that day, the Special Committee on Pesticides will take expert evidence on the procedures for the authorization of pesticides for use in EU agriculture.  The Special Committee on Financial Crimes, Tax Evasion and Tax Avoidance will also hold a public hearing on harmful tax practices within the European Union and abroad.

On Wednesday, the Committee on Foreign Affairs votes on recommendations to the Council, Commission and European External Action Service on EU agreements with Azerbaijan and Armenia.  In the afternoon, it will hold a joint hearing with the Committee on International Trade on EU-U.S. relations.

The Committee on Environment, Public Health and Food Safety will consider draft reports on emission performance standards for passenger cars (accessible here), and the promotion of clean and energy-efficient road transport vehicles (accessible here).  They will also exchange views with the Commission on digestive cancers.

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The Congressional Agenda for May

Members of Congress return to Washington, D.C. this week for a three-week work period before the Memorial Day recess.  As with the congressional agenda in April, the Republican majority will work towards meeting deadlines on several priority items—Fiscal Year (FY) 2019 appropriations bills, the Farm Bill authorization (set to lapse in September), the Federal Aviation Administration (FAA) reauthorization (also expires in September), the FY 2019 National Defense Authorization Act (NDAA), and the Water Resources Development Act.

The Senate is still focusing much of its floor time confirming Executive Branch and judicial nominees, with six circuit court nominees scheduled for consideration early this week. Most controversial of the current batch of nominations is that of Gina Haspel to be CIA Director. A career CIA official, Haspel has been serving as Acting Director since the elevation of Mike Pompeo from the post to his current position as Secretary of State. Director Haspel’s nomination has run into considerable controversy, principally over her role implementing enhanced interrogation techniques at the Agency that are now under disfavor, and her potential role in the destruction of evidence of videotapes depicting one such practice — waterboarding. Her nomination is scheduled for a hearing in the Senate Intelligence Committee on Wednesday, and if the nomination clears Committee, is likely to face a close vote in the narrowly divided Senate. Senate Majority Leader Mitch McConnell (R-Ky.) has also pledged to continue to confirm President Trump’s judicial nominations as they are reported out of the Senate Judiciary Committee throughout the remainder of this year.  According to the Administrative Office of the U.S. Courts, the Senate has so far confirmed 33 of President Trump’s nominees for the federal courts in the 115th Congress, including Supreme Court Justice Neil Gorsuch and 15 appeals court judges.  Approving the six nominations under consideration this week would increase that number up to 21.  During a recent interview, Leader McConnell said his goal is “to confirm all the circuit and district court judges that come out of committee this calendar year.”

Also during this work period, the Senate is likely to take up a Congressional Review Act (CRA) resolution related to net neutrality.  Senate Democrats announced they plan to force a vote on a measure that would nullify the Federal Communications Commission’s (FCC’s) 2017 decision on net neutrality, which repealed 2015 regulations that prohibited broadband providers from blocking or slowing down traffic and preventing them from charging higher rates for faster speeds.  Sen. Ed Markey (D-Mass.) has introduced a resolution (S.J. Res 52) under the Congressional Review Act to reverse this action.  Consideration under the CRA would allow the Senate to move forward with a simple majority, as the measure is not subject to a filibuster.  Supporters have already secured the necessary 30 Senate signatures to discharge the resolution from committee and force a vote on the Senate floor.  Republican Sen. Susan Collins of Maine supports the measure, and particularly with the current absence of Sen. John McCain (R-AZ), who is undergoing cancer treatment, the measure provides the possibility of a rare win for the minority party in the Senate.  The measure is considered dead on arrival in the House, however, as Democrats do not have nearly enough support to force a vote on a resolution.

On the other side of the Capitol, the House is expected to take up its version of the Farm Bill during the second week of this legislative work session.  Advanced by the House Agriculture Committee on April 20, by a party-line 26-20 vote, the Agriculture and Nutrition Act of 2018 authorizes agricultural support and food assistance programs through 2023, and also contains some controversial reforms to the Supplemental Nutrition Assistance Program (SNAP), also commonly known as food stamps, conservation programs, and payment limits.  House Agriculture Committee Chairman Mike Conaway (R-Texas) is reportedly working to secure support for the measure from the entire GOP conference and trying to limit some of the amendments that may be offered during floor consideration that could jeopardize final passage.  Press reports indicate the Senate Agriculture Committee is readying its bill for committee consideration, although a draft has not yet been made public.  Senate Agriculture Committee members report that progress is being made and the process remains open and bipartisan, a stated priority for committee leaders, Chairman Pat Roberts (R-Kan.) and Ranking Member Debbie Stabenow (D-Mich.).  However inclusive the process may be in the Senate, this bill would have to be conferenced with any eventual House legislation, which is likely to lack Democratic support that would eventually be necessary in order for a conference report to secure the 60 votes necessary for Senate passage.

The House Armed Services Committee is scheduled to mark up its FY 2019 NDAA on May 9.  The annual authorization bill sets Department of Defense policy and authorizes spending levels for the year ahead.  The Armed Services subcommittees each marked up their portions of the NDAA last month, and a final bill was released on Friday, May 4.  The defense policy bill would authorize $717 billion in spending over the next fiscal year, a number that complies with the recent bipartisan budget agreement, with $616.7 billion provided for the Pentagon’s base budget, $22.1 billion for the Department of Energy’s defense programs and $300 million for other defense-related base budget items.  The measure also includes $69 billion for the Overseas Contingency Operations (OCO) account.  The Senate will also conduct NDAA work this month, as the subcommittees of the Senate Armed Services Committee will markup up their portions of the measure beginning on May 21.  Both committees are working to move their proposals through their respective chambers by early summer so that they can negotiate a final product that can be signed into law before the fiscal year ends on September 30.

House and Senate Transportation Committees are readying a long-term FAA reauthorization measure.  On April 27, the full House of Representatives passed a 5-year FAA reauthorization bill by a bipartisan 393-13 vote.  Senate Commerce, Science, and Transportation Committee Chairman John Thune (R-S.D.) steered a bill through the committee with his counterpart Senator Bill Nelson (D-Fla.) in 2017, but it has yet to be considered by the full Senate.  Chairman Thune had publicly indicated he would be willing to drop a controversial provision related to pilot training requirements, in order to move the bill in the Senate and go to conference with the House and negotiate a final product that can pass both chambers, and he is reportedly working on securing floor time for the measure as soon as this month.  Both Chairman Thune and House Transportation and Infrastructure Committee Chairman Bill Shuster (R-Penn.) have publicly stated their hope to complete a long-term reauthorization bill before the August recess.

Press reports indicate Chairman Shuster is concurrently working on WRDA legislation, a two-year reauthorization of numerous projects of the U.S. Army Corps of Engineers Civil Works Program, which includes flood protection, harbor and coastal dredging, and seaport improvement programs.  The Subcommittee on Water Resources and Environment has held hearings and policy discussions related to the reauthorization over the past few months, as has the Senate Environment and Public Works Committee, which also has jurisdiction over the program.  Chairmen of both committees have expressed their desire to complete a bill this year.

This month will also see further activity on FY 2019 appropriations bills in the House and Senate.  Newly-installed Senate Appropriations Committee Chairman Richard Shelby (R-Ala.), who took over the gavel last month after the retirement of Sen. Thad Cochran (R-Miss.), has pledged a return to “regular order” in the appropriations process following the two-year bipartisan budget agreement reached earlier this year and a veto threat from President Trump over the FY 2018 omnibus measure.  Chairman Shelby is prepared to move individual bills through the full committee beginning in May, readying them for floor consideration as early as June.  House Appropriations Chairman Rodney Frelinghuysen (R-N.J.) seems prepared to follow a similarly accelerated timeline, with the first full committee markup scheduled on Tuesday, May 8.  Both chambers appear committed to quick consideration of individual bills or “minibuses,” packaged in groups of three or four, which may be more palatable for the White House over a single massive spending bill.  However, both Appropriations Committee Chairmen have acknowledged it will be difficult to pass and conference all twelve bills through each chamber before the end of the fiscal year on September 30, which will likely mean a short-term continuing resolution will be necessary to fund the government into the lame duck session after the November midterms.

This article was originally published in Law360.

Competing in Africa: China, the European Union, and the United States

Given recent developments in the global economy, especially Brexit and the Trump administration’s “America First” policy, it is worth assessing how Africa’s three largest commercial partners—China, the European Union, and the United States—are likely to impact the region in the near future as it relates to trade and investment trends.

The China-in-Africa story may be increasingly familiar, but its complexity cannot be overstated. As China’s domestic growth began to surge at the end of the last century, demand for natural resources and job creation forced China to look for markets abroad. Africa was a willing partner, due to its abundance of commodities and need for infrastructure development.

CHINA – LEAPING AHEAD

China’s role on the African continent has been defined by the financing of more than 3,000, largely critical, infrastructure projects, according to the AidData Project. China has extended more than $86 billion in commercial loans to African governments and state-owned entities between 2000 and 2014, an average of about $6 billion a year. In 2015, at the sixth Forum on China-Africa Cooperation (FOCAC), President Xi Jinping pledged $60 billion in commercial loans to the region, which would increase lending to at least $20 billion a year if that pledge is fulfilled.

As a result, China has become the region’s largest creditor, accounting for 14 percent of sub-Saharan Africa’s total debt stock, according to Foresight Africa 2018. In Kenya, for example, the volume of Chinese loans to the government is six times larger than that of France, the country’s second-largest creditor. The FOCAC that will be held in Beijing later this year is likely to continue this trend of extending commercial loans for infrastructure projects.

While China’s level of foreign direct investment (FDI) is relatively low, accounting for just over 5 percent of total FDI inflows into the region in 2015, two-way trade has grown 40 times over the last 20 years and now exceeds $200 billion. More recently, there has been a surge in Chinese private investment combined with a continued, but more limited, state engagement. A 2017 McKinsey study reports that there are more than 10,000 Chinese-owned firms operating in Africa today, about a third of whom are involved in manufacturing. Notably, French academic Tierry Pairault points out that the overwhelming majority of these enterprises are small and micro businesses. McKinsey also reports that Chinese investment in Africa increasingly contributes to job creation, skills development, and the transfer of new technologies, practices more generally associated with Western business norms.

As China works to implement the Belt and Road Initiative, the largest public works program ever, the issue of China’s commercial loans and the subsequent debt incurred by African governments is likely to increase as a public policy concern. There is room to limit the negative consequences of these loans: China should consider transitioning toward a blended financing model, based on Western and Chinese sources of financing, for its support of Africa’s much-needed infrastructure projects. In addition, Africa would benefit if China were to more actively open tenders to international competition as opposed to tying commercial loans to the exclusive use of Chinese companies and materials on terms that are often opaque. A larger portion of grants, as opposed to a singular reliance on commercial loans, even at concessional rates, would be in Africa’s interest.

THE EUROPEAN UNION – BUILDING ON HISTORICAL ADVANTAGES

While the history of colonialism continues to haunt the Europeans—see the viral video of President Akufo-Addo declaring his intent to free Ghana from aid while sharing a stage with French President Macron—when it comes to doing business, language, local knowledge, and historical connections matter.

The launch of the Africa-EU Strategic Partnership and the first-ever summit between the 27 members of the EU and the 54 nations of Africa in 2007 seem to have hit a reset of sorts in the two regions’ relationship. Indeed, over the last decade, the EU has worked, with a large degree of success, to transition to a partnership model based on reciprocal trade. The fifth EU-Africa Summit took place in Abidjan in 2017 against a background in which two-way trade exceeds $300 billion. In association with the summit, the EU pledged to mobilize more than $54 billion in “sustainable” investment for Africa by 2020.

The EU is shoring up its commercial position in Africa through a web of free trade agreements, or Economic Partnership Agreements (EPAs), which Brussels is negotiating or has concluded with 40 African nations in sub-Saharan Africa. The EPAs provide European companies with preferential access to markets across the region and will liberalize about 80 percent of imports over 20 years. Progress on concluding the EPAs is not without its challenges. Not surprisingly, Nigeria contends that an EPA undermines its industrialization strategies, and Brexit detracts from the EU ability’s to negotiate as a common market.

A comprehensive EU trade strategy combined with a private sector that has historic ties to local markets sets the stage for continued growth and influence by European firms in the African market. In addition, the EU is well positioned to share lessons learned from its decades of experience with regional economic integration as, especially as the Continental Free Trade Agreement was signed by most African Union members in Kigali on March 21.

THE UNITED STATES – GLOBAL BRANDS, LAGGING SUPPORT

Since 2000, U.S.-African commercial relations have been based on the African Growth and Opportunity Act (AGOA), a non-reciprocal trade agreement that grants about 40 countries duty-free access for approximately 6,400 products to the U.S.

AGOA has had a mixed legacy, given its goal of growing Africa’s export markets rather than building two-way trade and investment partnerships. AGOA has helped integrate trade and investment into the U.S.-Africa policy dialogue and led to the creation of more than a million jobs, directly and indirectly, on the continent. However, only approximately 300 of the available product lines are utilized and a relatively small number of countries—principally South Africa, Lesotho, Kenya, Mauritius, and Ethiopia—have taken advantage of AGOA to establish a significant volume of non-oil exports to the U.S. At the same time, the EU’s assertive free trade strategy and China’s surge in trade and commercial loans have left the U.S. in need of a new commercial strategy.

In fact, the U.S. commercial engagement in Africa is waning: Over the last five years, U.S. exports to sub-Saharan Africa have averaged $19 billion. Two-way trade has fallen from a high of $100 billion in 2008 to $39 billion in 2017, largely due to U.S. energy self-sufficiency.

In addition, summits are central to setting government priorities, especially as it relates to trade and investment targets. While the Obama administration held the first-ever summit with African leaders in 2014, the EU has held five summits with Africa, and China is about to hold its seventh heads-of-state dialogue.

Indeed, the U.S. commercial impact in Africa should be more significant than it is. With $54 billion of FDI stock, the U.S. is the largest investor on the continent. There are an estimated 600 U.S. companies in South Africa and more across the continent, including some of the largest American companies. The U.S. business model is welcomed across the continent, given the general practice of U.S companies to hire and promote locally, invest socially and reject corruption, among other practices.

There are important building blocks that could enhance the U.S. commercial presence in the region.

Between 2005 and 2017, the U.S. Millennium Challenge Corporation (MCC) invested more than $6.5 billion in 14 sub-Saharan African countries through completed or ongoing compacts in infrastructure, health, education, and other sectors. These compacts are designed to drive investment into projects deemed too risky for the private sector, promote economic growth, and enhance regional economic integration in Africa. It is worth noting that MCC investments are grants that are implemented through open-tender bids. While a competitive tender model is a critical component of the agency’s commitment to international best practices, finding more ways to involve American companies should be a priority for the MCC.

USAID’s Power Africa initiative, in many respects, has become the flagship U.S. program on the continent. The program is addressing a critical need: About 600 million people on the continent do not have a reliable supply of electricity. Over the last four years, Power Africa has developed a transactional model, based on public and private partnerships, that has led to 80 projects valued at more than $14.5 billion that are now either online, under construction, or have reached financial close. More than a third of these transactions involve the U.S. private sector, and more than 10.6 million businesses and homes now have electricity as a result of this initiative.

Finally, last month, Congress introduced the BUILD Act, which would create the U.S. International Development Finance Corporation (IDFC) by integrating parts of USAID into the U.S. Overseas Private Investment Corporation (OPIC). The potentially transformative nature of this legislation is in the fact that the IDFC would have a $60 billion lending cap, double the amount that OPIC currently can lend, and could make equity investments up to 20 percent of the total equity of a project. This will make the U.S. more competitive with Chinese state-backed funds, which often take a similar equity position in their projects. Given that Africa comprises the largest share of OPIC’s investment portfolio (27 percent), or $6.2 billion, the proposed IDFC is likely to be a significant benefit to the U.S. commercial engagement in Africa.

The challenge for the Trump administration is to develop a coherent trade strategy for Africa that builds on AGOA, is based on reciprocity, and utilizes existing programs to enhance the U.S. commercial presence on the continent. Given President Trump’s alleged derogatory remarks about African nations and Secretary of State Rex Tillerson’s abrupt firing while on a visit to the continent, the administration has yet to show that Africa is a priority for the U.S. Fortunately, investing in Africa remains a priority for the U.S. Congress.

THE TREND LINES

China’s commercial presence on the continent will continue to grow, raising the principal concern that China’s significant role in addressing Africa’s infrastructure deficit could be offset by its contribution to a new, and ultimately unsustainable, African debt burden. The EU will work to implement its trade relationship, which will provide European companies competitive tariff advantages. In many respects, the U.S. Congress is driving U.S. policy toward Africa with its numerous and highly relevant legislative initiatives. However, until the executive branch provides diplomatic and policy leadership, the U.S.-Africa partnership will not fulfill its considerable potential.

Post contributed by guest blogger Joel Wiegert, Former State Department official who served in Angola, Tanzania, Ghana, and South Africa and is not affiliated with Covington & Burling LLP. This piece was also cross-posted on Brookings’ Africa in Focus blog.

This post can also be found on CovAfrica, the firm’s blog on legal, regulatory, political and economic developments in Africa.

Covington IoT Update: U.S. Legislative Roundup on IoT

As policymakers weigh the many policy implications associated with the Internet of Things (“IoT”), U.S. lawmakers have put forward a variety of proposals for studying—and regulating—IoT devices.  Although the likelihood of current proposals becoming law this term remain uncertain at best, existing legislative proposals provide important context and insight into the ways that lawmakers view IoT and the government’s role in fostering and regulating the technology.

Below, we summarize five draft bills in the U.S. that approach IoT from different perspectives—including seeking to develop IoT technologies, imposing contractual requirements on companies that provide IoT devices to the government, regulating specific security standards, and creating new resources for consumers to better understand the security and reliability of their IoT devices.

Developing Innovation and Growing the Internet of Things (“DIGIT”) Act

The DIGIT Act was introduced in the Senate (S. 88) and the House (H.R. 686) in January 2017 to foster the development of IoT technologies.  The Act was passed by the Senate in August 2017 on a voice vote, but has stalled in the House.  The measure would direct the Secretary of Commerce to convene a “working group of Federal stakeholders” to create recommendations and a report to Congress on IoT.  The working group would:

  • Identify any federal regulations, statutes, grant practices, budgetary or jurisdiction challenges, and other sector-specific policies that are inhibiting or could inhibit the development of IoT;
  • Consider policies or programs to improve federal agency coordination on IoT;
  • Consider any findings or recommendations made by a new steering committee (described below) and act to implement those recommendations where appropriate; and
  • Examine how federal agencies can benefit from, currently use, and are prepared to adopt IoT, including any additional security measures that may be needed for IoT adoption by the federal government.

The Act would also create a new steering committee of non-federal-government representatives, tasked with advising the working group about issues including the availability of adequate spectrum, international proceedings relating to IoT, and policies and programs affecting individual privacy and critical infrastructure protection.

The DIGIT Act also would require the Federal Communications Commission (“FCC”), in consultation with the National Telecommunications and Information Administration (“NTIA”), to issue a notice of inquiry seeking public comment on current and future spectrum needs relating to the IoT, including regulatory barriers to necessary spectrum, the role of licensed and unlicensed spectrum in the IoT, and whether adequate spectrum is currently available.

Internet of Things Cybersecurity Improvement Act of 2017

This bill focuses on IoT devices purchased by the U.S. Government—and mandates specific contractual provisions agencies are to include in any contract for such devices.  It was introduced in the Senate (S. 1691) in August 2017.

The measure requires the Director of the Office of Management and Budget (“OMB”) to issue guidelines with specific contractual clauses for each executive agency to require in contracts for the acquisition of internet-connected devices.  These contractual provisions would require:

  • Written certification by the contractor that the device:
  • does not contain any known security vulnerability or defect;
  • relies on software capable of being updated by the vendor;
  • uses only non-deprecated industry standard protocols for communication, encryption, and internet connection; and
  • does not contain fixed or hard-coded credentials used for remote administration.
  • Notification by the contractor to the purchasing agency of any known vulnerabilities or defects subsequently disclosed or discovered;
  • The device to be updated or replaced to allow for patches or repair;
  • The provision of repair or a replacement device in a timely manner with respect to any new vulnerability discovered (if it cannot be patched or remediated); and
  • The provision of information about how the device receives security updates, the timeline for ending security support, formal notice when security support has ceased, and other information recommended by the NTIA.

The bill provides exceptions for devices with limited data processing and functionality where security would be “unfeasible” or “economically impractical.”  In certain cases, it also allows agencies to rely on compliance with existing third-party or agency security standards in lieu of these requirements, when the other standards provide an equivalent level of security.

Securing the IoT Act of 2017

This measure, introduced in the House in March 2017 (H.R. 1324), is a targeted bill that would require the FCC to establish cybersecurity standards that radio frequency equipment must meet throughout its lifecycle (design, installation, and retirement) in order to be certified under the FCC’s technical standards for equipment authorization.

Cyber Shield Act of 2017

This consumer-focused bill, introduced in the House (H.R. 4163) and Senate (S. 2020) in October 2017, would create a voluntary labeling and “grading” system for IoT devices.  Specifically, it directs the Secretary of Commerce to establish a voluntary program to “identify and certify covered products with superior cybersecurity and data security through voluntary certification and labeling.”  Under this program, products may be given grades that “display the extent to which a product meets the industry-leading cybersecurity and data security benchmarks.”

As part of the program, the Secretary of Commerce is also directed to establish and maintain cybersecurity and data security benchmarks, by convening and consulting interested parties and federal agencies.

The IOT Consumer Tips to Improve Personal Security Act of 2017

This consumer-focused measure, introduced in the Senate in December 2017 (S. 2234) would require the Federal Trade Commission to develop cybersecurity resources for consumer education and awareness regarding the purchase and use of IoT devices.  These resources are to be technology-neutral and are to include guidance, best practices, and advice for consumers to protect against, mitigate, and recover from cybersecurity threats or security vulnerabilities.

 

EU Releases e-Evidence Proposal for Cross-Border Data Access

On April 17, 2018, the European Commission published the e-Evidence Initiative, long-awaited legislation that would create a new framework for European Union (“EU”) Member States to access content data and metadata (collectively “e-evidence”) across national borders.  The European Commission released the proposal less than one month after the United States created its own framework governing cross-border data access in enacting the Clarifying Lawful Overseas Use of Data (“CLOUD”) Act.  Like the CLOUD Act, the e-Evidence Initiative would provide new tools for law enforcement to obtain data stored across national borders for criminal investigations.  Importantly, too, the proposal would enable EU law enforcement authorities to obtain data directly from providers—including providers based outside the EU—and potentially regardless of which entity in the provider’s corporate structure has possession or custody over the data.

The e-Evidence Initiative includes two distinct measures: a proposed Regulation and a proposed Directive.

The Proposed Directive

The proposed Directive requires providers of certain online services to maintain a legal representative in the EU.  Specifically, it requires every such provider that either (1) is “established” in an EU Member State (e.g., through a subsidiary), or (2) has a “substantial connection” to at least one Member State (e.g., by virtue of a significant number of users there, or targeting its activities to users in Member State), to appoint a legal representative in at least one Member State.

The legal representative must have the capacity to process and fulfill orders from authorities in any Member State to preserve or produce electronic data for use in criminal proceedings—even orders from authorities in Member States in which the provider does not conduct business.  If the representative fails or is unable to comply with the order, both the legal representative and the provider it represents may be subject to sanctions.

The Proposed Regulation

The Regulation would create two new legal instruments: a European Production Order (“EPO”) and a European Preservation Order (“EPrO”).  Member State authorities could use these orders to compel the preservation or production, on a cross-border basis, of four data types: content data, transactional data, subscriber data, and access data.  A variety of technology companies would be covered by the Regulation, including electronic communications service providers, cloud providers, social networks, online marketplaces, hosting service providers, and providers of internet infrastructure such as IP address and domain name registries.  EPOs and EPrOs would only apply to stored data, however; they could not be used to intercept real-time communications.

Production Orders

The proposed Regulation would empower authorities in one Member State to use an EPO to directly compel a provider in a second Member State to disclose data.  EPOs would compel such disclosure regardless of where the data is stored—even if it is stored outside the EU.  The provider must respond to an EPO within 10 days, or within 6 hours where there is “imminent threat to life or physical integrity of a person or to a critical infrastructure,” subject to certain exceptions.  Authorities may issue an EPO for subscriber or access data for all criminal offenses, but for content or transactional data only for serious offenses (i.e., those with a minimum of a three-year sentence in the issuing Member State, or certain cyber and terrorism-related crimes).

The proposed Regulation includes an “enterprise exception” for EPOs: when authorities seek data that a provider holds on behalf of another company or entity, the EPO may only be addressed to the provider “where investigatory measures addressed to the company or the entity are not appropriate, in particular because they might jeopardise the investigation.”

Preservation Orders

Member State authorities could use an EPrO to directly compel a provider in a second Member State to preserve data (i.e., to prevent its deletion), regardless of where the data is stored.  Authorities could issue an EPrO for any of the four data types mentioned above, and for all criminal offenses.

Challenging Production and Preservation Orders

Providers may object to EPOs and EPrOs on a number of grounds.  For example, a provider may oppose an order if it was not issued by a proper issuing authority, if the provider cannot comply because of de facto impossibility, if the provider is not storing the data requested, if the request is not for services covered by the Regulation, or if it is apparent that the order “manifestly violates” the EU Charter of Fundamental Rights or is “manifestly abusive.”

In addition, the proposed Regulation establishes two mechanisms though which a provider could challenge an EPO based on a conflict between production obligations under the order and obligations under a third-country law (i.e., one other than an EU or Member State law).  First, the provider may refuse to comply with an EPO on the ground that disclosure would force it to violate a third-country law that either protects “the fundamental rights of the individuals concerned” or “the fundamental interests of the third country related to national security or defence.”  Where a provider raises such a challenge, issuing authorities can request review of the order by a Member State court.  If the court establishes that a conflict exists, the court must notify authorities in the third-party country; if that third-party country objects to execution of the order, the court must set it aside.

Second, a provider may refuse to comply with an order because it would force the provider to violate a third-country law that protects interests other than fundamental rights or national security and defense.  In such cases, the parties follow the same procedures as above, except that the court, rather than notifying the foreign authorities, conducts a multi-factor analysis to decide whether to enforce the order.

Global Implications

The e-Evidence Initiative would have a number of important policy consequences, not only for EU-based cloud customers, technology companies, and law enforcement authorities, but also for technology companies and cloud customers based outside of the Union.  By requiring providers within its scope to appoint a legal representative that can comply with Member State production and preservation orders, the Directive would give law enforcement authorities across the EU the ability to compel providers based outside the EU to produce data—potentially even regardless of which entity in the provider’s corporate group has possession or custody over the data.  This reading could result in a significant expansion of Member State jurisdiction over digital data held by service providers located outside the EU.

Changes Are Underway at the FTC As New Commissioners Are Sworn In

On Tuesday, Joseph Simons was sworn in as the new Chairman of the Federal Trade Commission.  The five-member Commission will soon be at full strength, as Simons is set to be joined by four other new FTC Commissioners, each of which were confirmed for seven-year terms by the Senate on April 26: Democrats Rebecca Kelly Slaughter and Rohit Chopra, and Republicans Noah Phillips and Christine Wilson.  Slaughter, Chopra, and Phillips are each expected to be sworn in this week, although Wilson will not take office until the Senate confirms Commissioner Ohlhausen’s nomination as a judge on the U.S. Court of Federal Claims.

The new Commissioners, with the exception of Slaughter, have backgrounds focusing more on competition and antitrust matters, as opposed to privacy and consumer protection.  As such, we will have to wait and see as to their views on privacy issues, and the FTC’s resulting priorities.

Simons comes to the FTC from private practice, but also previously served in antitrust positions at the FTC.  He most recently co-chaired the Antitrust Group at Paul, Weiss, Rifkind, Warton & Garrison LLP.  Simons previously served as the Director of the FTC’s Bureau of Competition from 2001 to 2003, and as the Associate Director for Mergers and the Assistant Director for Evaluation at the FTC in the 1980s.

Phillips joins the Commission from Capitol Hill.  He was most recently chief counsel to Senator John Cornyn (R-TX), with whom he has served since 2011.  Prior to that, he was an attorney in private practice in New York and Washington, D.C.  In a statement following Phillips’ nomination, Senator Cornyn noted that Phillips’ “extensive work on the Judiciary Committee will serve him well” in his new role as an FTC Commissioner.

Wilson, who is set to join Simons and Phillips as the third Republican FTC Commissioner, most recently served as the senior vice president for regulatory and international affairs at Delta Air Lines Inc.  Prior to that, Wilson was a partner at Kirkland & Ellis, where she focused on competition and antitrust law.  Like Simons, she has prior FTC experience, having served as chief of staff to FTC Chairman Timothy J. Muris during the George W. Bush administration.

Chopra is the only non-lawyer among the new FTC Commissioners, although he does have a consumer protection background and prior government experience.  Chopra joins the FTC from the Consumer Federation of America, and his biography there notes that he is “widely recognized for his expertise in consumer financial services and economic issues facing young people.”  In 2016, Chopra served as Special Adviser to the Secretary at the U.S. Department of Education.  He previously served as assistant director of the Consumer Financial Protection Bureau shortly after its founding in 2010, and was named as the agency’s first student loan ombudsman in 2011.

Slaughter most recently served as chief counsel to Senator Chuck Schumer (D-NY), with whom she has worked since 2009.  According to the White House statement announcing Slaughter’s nomination, she advised Senator Schumer on “legal, competition, telecom, privacy, consumer protection, and intellectual property matters, among other issues.”  Prior to her Capitol Hill experience, Slaughter was an associate attorney at a law firm in Washington, D.C.

While each of the new Commissioners has previously served in government, only Slaughter appears to have worked specifically on privacy issues.  Therefore, while it stands to reason that the newly reconstituted FTC will shift focus compared to the prior Democratic administration, it remains to be seen what the Commission’s priorities will be with respect to privacy regulation and enforcement.

 

House of Lords Select Committee publishes report on the future of AI in the UK

Reflecting evidence from 280 witnesses from the government, academia and industry, and nine months of investigation, the UK House of Lords Select Committee on Artificial Intelligence published its report “AI in the UK: ready, willing and able?” on April 16, 2018 (the Report). The Report considers the future of AI in the UK, from perceived opportunities to risks and challenges. In addition to scoping the legal and regulatory landscape, the Report considers the role of AI in a social and economic context, and proposes a set of ethical guidelines. This blog post sets out those ethical guidelines and summarises some of the key features of the Report.

Ethical AI

The ethical use of AI is central to the Report, with the five key principles for a cross-sector ethical AI code:

  1. Artificial intelligence should be developed for the common good and benefit of humanity.
  2. Artificial intelligence should operate on principles of intelligibility and fairness.
  3. Artificial intelligence should not be used to diminish the data rights or privacy of individuals, families or communities.
  4. All citizens have the right to be educated to enable them to flourish mentally, emotionally and economically alongside artificial intelligence.
  5. The autonomous power to hurt, destroy or deceive human beings should never be vested in artificial intelligence.

The Report suggest that, in the short-term, this AI code is more appropriate than legislation, even if the Committee does not rule out that regulation in the future.

Access to Data

One of the key concerns set out in the Report is that all companies should have “fair and reasonable access to data”. The Committee notes the possibility that the ‘Big Tech’ companies may use network effects to build up large proprietary datasets which are difficult to match. In response, the Committee suggests ethical, data protection and competition frameworks, including a review of the use of data by the Competition and Markets Authority.

Healthcare and AI

The Report notes that the current fragmented cooperation between the National Health Service (NHS) and AI developers risks undervaluing the wealth of information held by the NHS. To avoid this, the Report calls for a framework for sharing appropriately anonymised NHS data to be created. Patients should be made aware of the potential use of their data, and given the opportunity to opt-out. Recognised as elements pivotal to the use of AI in healthcare are the acceptance by the public of AI being used in their treatment, the use of patient data, the NHS being equipped to deploy new technology and AI-trained staff.

Criminal misuse of AI

A further concern set out is that AI could be used to cause harm, for example by facilitating cyber-attacks or data sabotage. The Report invites the UK Cabinet Office to address this risk in its Cyber Security Science & Technology Strategy, and urges further research on necessary protection mechanisms.

Other key take-aways

In addition to the ethical questions and competition concerns identified, the Report also addresses further issues that may shape the future of AI in the UK.

First, the Report recognises that legal liability and accountability requires clarification. In particular, referring to the potential for AI to cause harm in the event of a malfunction, underperformance or an erroneous decision, the Committee urges the UK Law Commission to ensure that these risks are adequately addressed.

Second, the Committee calls on industry to develop voluntary mechanisms to inform consumers when AI is used to make significant or sensitive decisions that affect them.

Third, the Report warns that the current focus on deep learning technologies may lead to under exploitation of other AI opportunities, and calls on the Government and universities to support diverse AI research.

Finally, the Report discusses increasing the number of visas available for people with valuable skills in AI-related areas, inclusion of the ethical design and use of AI technology in school curriculums, and retraining initiatives in the job market.

What to expect next

There is a lot of political and regulatory focus on AI, not only in the UK but throughout Europe and the world. The Report is just one piece in a larger puzzle. The European Commission’s Communication on “Artificial Intelligence for Europe”, will be addressed elsewhere on this blog, and French President Macron recently announced investments of nearly EUR 1.5 billion in AI technology by the end of 2022.

The UK Government will develop various policy initiatives and new legislation in response to the Report.

The Week Ahead in the European Parliament – April 27, 2018

Summary

Due to the bank holidays, next week will be a relatively calm week in the European Parliament.  However, there will be a mini plenary session and one committee meeting.

On Wednesday, Members of Parliament (“MEPs”) will debate various topics, including the Post-2020 budget proposal.  On March 14, MEPs adopted a resolution in which they emphasized that the post-2020 budget should be invested in new priorities such as Europe’s regions, as well as sustainable, modern farming.  This budget should also make up for any losses made by Brexit and its developments.  Commissioner Günther Oettinger will present the Commission’s proposal for the Multi-annual Financial Framework (“MFF”) beyond 2020 to the Committee on Budgets on Thursday.  See the March 14 parliamentary resolution here.

Also on Wednesday, the plenary will debate the Parliament’s own-initiative report on media pluralism and freedom in the EU.  The report has been prepared by the Committee on Civil Liberties, Justice and Home Affairs (“LIBE”).  The report seeks to enhance the working conditions of journalists, and especially their integrity and independence.  It calls on the Commission and the EU Member States to adopt appropriate measures to attain these objectives, including by ensuring net neutrality and addressing appropriately new challenges such as “fake news” and hate speech.  The report will be put to a vote on Thursday.  See the draft report here.

Thursday also marks World Press Freedom Day, for which the Parliament and the European Commission will hold a seminar on “The situation of media and freedom of expression in Turkey”.

Also on Thursday, MEPs will vote on a resolution on a global ban on animal testing for cosmetics.  Within EU borders, the sale of cosmetics tested on animals is no longer allowed since 2013.  However, other countries (about 80% worldwide) still allow the sale of animal-tested cosmetics.  The Parliament calls on the EU to play a leading role in proposing a diplomatic initiative that advocates for a worldwide ban on animal testing for cosmetics by 2023.  See the draft resolution here.

 

Meetings and Agenda

Monday, April 30, 2018

·         No meetings of note

 

Tuesday, May 1, 2018

·         No meetings of note

 

Wednesday, May 2, 2018

Plenary session

Debates

15:00 – 23:00

·         Resumption of session and order of business

·         Commission decision adopted on the MFF post-2020 package

·         Annual report on the control of the financial activities of the European Investment Bank for 2016

o   Rapporteur: Marco VALLI (EFDD, IT)

·         Annual report 2016 on the protection of EU’s financial interests – Fight against fraud

o   Rapporteur: Gilles PARGNEAUX (S&D, FR)

·         Cohesion policy and thematic objective ‘promoting sustainable transport and removing bottlenecks in key network infrastructures’

o   Rapporteur: Andrey NOVAKOV (EPP, BU)

·         Stalking crimes and victim protection in the EU

·         Protection of children in migration

·         A global ban on animal testing for cosmetics

·         Addressing farm safety in the EU

·         Current situation and future prospects for the sheep and goat sectors in the EU

o   Rapporteur: Esther HERRANZ GARCÍA (EPP, ES)

·         Media pluralism and media freedom in the European Union

o   Rapporteur: Barbara SPINELLI (GUE/NGL, IT)

 

Thursday, May 3, 2018

Plenary session

Debates

09:00 – 11:20

·         Debate with the Prime Minister of Belgium, Charles Michel, on the Future of Europe

Votes and explanation of votes

11:30 – 13:30

Debates

·         Protocol to the EU-Uzbekistan Partnership and Cooperation Agreement (accession of Croatia)

o   Rapporteur: Jozo RADOŠ (ALDE, HR)

·         EU-Korea Framework Agreement (accession of Croatia)

o   Rapporteur: Tokia SAÏFI (EPP, FR)

·         Subjecting the new psychoactive substance ADB-CHMINACA to control measures

o   Rapporteur: Maite PAGAZAURTUNDÚA RUIZ (ALDE, ES)

·         Subjecting the new psychoactive substance CUMYL-4CN-BINACA to control measures

o   Rapporteur: Maite PAGAZAURTUNDÚA RUIZ (ALDE, ES)

·         Mobilization of the European Globalization Adjustment Fund: application EGF/2017/010 BE/Caterpillar

o   Rapporteur: Eider GARDIAZABAL RUBIAL (S&D, ES)

·         Annual report 2016 on the protection of EU’s financial interests – Fight against fraud

o   Rapporteur: Gilles PARGNEAUX (S&D, FR)

·         European Parliament decision on the appointment of a member to the panel set up under Article 14(3) of Council Regulation (EU) 2017/1939 (EPPO Regulation)

·         Annual report on the control of the financial activities of the European Investment Bank for 2016

o   Rapporteur: Marco VALLI (EFDD, IT)

·         Cohesion policy and thematic objective ‘promoting sustainable transport and removing bottlenecks in key network infrastructures’

o   Rapporteur: Andrey NOVAKOV (EPP, BU)

·         Protection of children in migration

·         A global ban on animal testing for cosmetics

·         Current situation and future prospects for the sheep and goat sectors in the EU

o   Rapporteur: Esther HERRANZ GARCÍA (EPP, ES)

·         Media pluralism and media freedom in the European Union

o   Rapporteur: Barbara SPINELLI (GUE/NGL, IT)

Committee on Budgets

14:00 – 15:30

·         Commission proposals on the Multi-annual Financial Framework beyond 2020 and Own Resources – Presentation by Günther OETTINGER, Commissioner responsible for Budget and Human Resources

 
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