Brexit and the EU’s Response

On January 17, in a speech in Lancaster House to the British diplomatic corps, Prime Minister Theresa May presented her “plan for Britain”, which includes 12 “priorities” the UK government will defend in the Brexit negotiations.  The text of the speech can be found here.

May’s highly-anticipated speech came ahead of the UK Supreme Court’s January 24 ruling that the Prime Minister “cannot lawfully bypass MPs and peers by using the royal prerogative to trigger Article 50 of the Lisbon Treaty” to start the two-year process of negotiating Brexit.  The ruling affirmed a judgment of the High Court of England and Wales, which held that the UK Government did not have the power to trigger Article 50 without Parliament’s prior authority.  See the UK Supreme Court’s judgment here.  For Covington’s full analysis, please see the Alert on this topic here.

On February 2, the UK Government released a “Brexit White Paper”, outlining its broad aims for the negotiation with the other 27 EU Member States on its withdrawal from the Union.  Entitled “The United Kingdom’s exit from and new partnership with the European Union”, it broadly followed the 12 priorities outlined in the Prime Minister’s January 17 speech.  For fuller analysis, please see Covington’s Alert on this topic here.

In the interim, on January 27, Theresa May travelled to Washington, where she was the first world leader to visit President Trump after his inauguration.  During the joint press conference following Theresa May’s visit, the new American President did not hide his lack of enthusiasm for the European Union, which he labeled as “a consortium” that is more difficult to negotiate with than individual countries.  He also reiterated his support for Brexit.

On February 3, the EU heads of state and government met in Valletta, capital of the current rotating presidency of the EU.  This informal European Council meeting had a triple purpose:

  1. to address the urgent problem of controlling the arrival of migrants in the EU through Libya – on which they issued a declaration (see the European Council’s press release here);
  2. to assess what the EU reaction should be, two weeks into the new U.S. administration; and
  3. to prepare their March 25 meeting in Rome, which will celebrate the 60th anniversary of the signature of the Treaty of Rome.

The British Prime Minister attended the first two parts of the meeting, but not the third, which was the continuation of a reflexion launched in Bratislava after the Brexit referendum on the future of the EU after the UK’s withdrawal.

Tech and Digital Single Market Policies

On February 2, 2017, the European Commission formally opened three investigations into suspected anti-competitive practices related to consumer electronics, video games and hotel accommodation agreements (see the press release here).

In relation to consumer electronics manufacturers, the European Commission is investigating whether Asus, Denon & Marantz, Philips and Pioneer have breached EU competition rules by restricting the ability of online retailers to set their own prices for electronics products, such as household appliances, notebooks and hi-fi products.

In relation to video games, the Commission is investigating bilateral agreements concluded between Valve Corporation, owner of the Steam game distribution platform, and five PC video game publishers, Bandai Namco, Capcom, Focus Home, Koch Media and ZeniMax.

The Commission is also investigating agreements regarding hotel accommodation concluded between large European tour operators and certain hotels.  The Commission is examining whether the agreements contain clauses that discriminate between customers based on their nationality or country of residence.

As previously reported, on January 10, 2017, the European Commission published their proposal for a Regulation on Privacy and Electronic Communications (“ePrivacy Regulation”) and a “Communication on Building a European Data Economy” (see the Regulation here; the Communication here; the fact sheet here, and the press release here).

The new ePrivacy Regulation updates the 2009 ePrivacy Directive and ensures that it reflects the changes introduced by the new General Data Protection Regulation.  Among other things, the proposal addresses the rules of consent and obligations for the processing of communications data, access to data on a users’ device, the use of cookies, access to metadata, and spam and direct marketing communications.

The Council and Parliament will now review the draft Regulation.   The Commission hopes that it can be approved before the General Data Protection Regulation enters into force on May 25, 2018.

The Communication on Data Flows examines proven or potential barriers to the free movement of data and presents options to remove “unjustified and or disproportionate” data localization rules in the EU.  Significantly, however, the Commission has not proposed concrete legislative measures to prevent data localization at this stage.  The Communication also considers data liability, the portability of non-personal data, interoperability and standards.

Building on the principles established during the EU-U.S. Privacy Shield negotiations last year, the Commission also published a Communication outlining its strategic approach to international personal data transfers (“Exchanging and Protecting Personal Data in a Globalised World”, see here).  In 2017, the Commission will fast-track discussions on possible adequacy decisions that would allow for the free flow of personal data to countries with “essentially equivalent” data protection rules to those in the EU.  These decisions would affect, in particular, Japan and Korea, but also India or certain Latin American countries.

Finally, the Commission also proposed a new Regulation outlining data protection standards within the EU institutions and bodies, see here.

On January 12, European Parliament’s committee on Legal Affairs (“JURI”) adopted a report on “Civil law rules on robotics”, which considers the legal and economic consequences of the rise of robots and artificial intelligence devices (see the proposal here, and the Parliament’s procedural file here).

The report calls for working robots to be classified as “electronic persons” with a legal status similar to corporate entities so as to hold them “responsible for acts or omissions”.  If approved by the European Parliament plenary, this own-initiative report will be sent to the European Commission.  The Commission will then decide whether to regulate this area, on the basis of this report.

On the same day, January 12, 2017, the U.S. Federal Trade Commission (“FTC”) announced the adoption of a Swiss-U.S. Privacy Shield, to replace the existing Swiss-U.S. Safe Harbor Agreement (see the FTC’s press release here).  Companies have a three month grace period to transition from the old to the new regime.

Communication and Media Policies

The Commission, Council and Parliament reached an agreement during the early hours of February 1, 2017 to cap wholesale roaming mobile charges, the final element of a package to abolish roaming fees within the EU by June 15, 2017 (see the Commission’s press release here).  The three co-legislators agreed to cap the prices that mobile service providers charge one another when customers use their mobile phones in other EU Member States.  These wholesale prices for voice calls, SMS messages and mobile data will fall in June 2017, with a further staged reduction in the maximum wholesale price for mobile data every year to January 1, 2022, thereby allowing EU citizens to “roam like at home” – the stated objective of the Commission’s proposals.

On January 18, 2017, the Commission launched a public consultation for the review of the European Union Agency for Network and Information Security (“ENISA”, see the consultation here).  The consultation will remain open until April 12, 2017 and will seek views on the past performance of ENISA and on a possible overhaul of its mandate.

Looking ahead, we understand that, in May 2017, the European Commission may release an analysis of the work of ENISA, and will unveil plans to update the EU’s 2013 Cybersecurity Strategy.

Energy and Environment Policies

The European Parliament and the Council of the EU are currently considering the adoption of cadmium limits for CE marked inorganic fertilizers, as part of a Commission proposal for a Regulation on the marketing of CE marked fertilizing products from March 2016 (see here).  The proposed limit on cadmium would apply to CE marked fertilizers containing at least 5% phosphorus pentoxide (so-called “phosphate fertilizers”) and would be reduced progressively, from a maximum of 60 mg of cadmium per kilogram (“mg/kg”) at the date of application of the adopted Regulation, to 40 mg/kg after three years, and, subsequently, to 20 mg/kg after twelve years.  The limits would apply only to CE marked fertilizers that can be marketed across the EU/EEA.  Non-CE marked fertilizers would be subject to the rules of the Member States where they are marketed, which may also include cadmium restrictions.

The proposed cadmium limits for CE marked phosphate fertilizers are motivated by a concern over cadmium accumulation in the EU’s arable soil.  In its impact assessment on the proposal (see here), the Commission argued that, “[i]n extreme conditions (high fertiliser consumption, critical soil conditions) […] cadmium soil accumulation could still happen at a concentration of 20 mg Cd/kg P2O5.”  The Commission based this conclusion on two opinions from the Scientific Committee on Health and Environmental Risks of 2002 and 2015, (see here and here, respectively).

Europe’s fertilizer industry has strongly contested the proposed cadmium limits, as they will force it to procure phosphate rock with low cadmium content or adopt cadmium removal technologies on a large scale.  While phosphate rock with low cadmium content for the most part originates from Russia, Europe currently imports the majority of its phosphate rock from Morocco and Tunisia.  The alternative of large scale cadmium removal technologies may result in a price increase for fertilizers between 5% and 15%, according to the industry.

There is some support in the European Parliament for less stringent cadmium limits than the Commission proposes.  For example, in her draft, non-binding Opinion for the Environment Committee, MEP Elisabetta Gardini recommends keeping only the proposed cadmium limit of 60 mg/kg.  She argues that any further reduction in this limit is neither justified by the scientific data on cadmium accumulation, nor feasible with current decadmiation technology.

As a compromise, Malta, who currently holds the presidency of the Council, is proposing to keep the initial cadmium limit at 60 mg/kg, but to make the 20 mg/kg limit not binding.

The European Parliament and Council hope to reach an agreement to adopt the proposal during its first reading in accordance with the ordinary legislative procedure, by the end of the summer of 2017.

Internal Market and Financial Services Policies

On January 9, 2017, the European Central Bank’s Eurosystem initiated a 7-week market consultation on user requirements for TIPS (TARGET Instant Payment Settlement), a proposed centralized instant settlement service.  The settlements would occur in Central Bank money, and would co-exist with the current system based on clearing payments through Automated Clearing Houses (“ACHs”).  TIPS would encourage compliance with the SEPA Instant Credit Transfer scheme through its pan-European reach.  It does not intend to amend the conditions for access to Central Bank money, and the price per transaction would not surpass 1 euro cent.  A decision on whether to proceed with the service is expected in June 2017.  If successful, it would be operational by November 2018.  See further information on the purposes of the consultation and on how to contribute here.

On January 20, 2017, the Commission introduced an 8-week public consultation ahead of the Capital Markets Union (“CMU”) initiative’s mid-term review, scheduled for June 2017.  It is an opportunity for all stakeholders, private organizations and individuals alike, to provide feedback on the workings of the CMU and how these can be improved.

The CMU is a European Commission initiative to strengthen capital markets through the creation of a true single market for capital.  While the free movement of capital is already one of the four fundamental freedoms of the single market, the Commission considers that eliminating fragmentation within Europe’s capital markets would in turn drive investments, create jobs and bolster the economy.  In order to achieve this, the Commission introduced a 33-point CMU Action Plan in September 2015 to pave the way for the CMU.

The consultation will close on March 17, 2017.  The Commission’s online questionnaire can be found here, the consultation document here, the press release here, the fact sheet here, and further information on the Capital Markets Union here.

Life Sciences and Healthcare Policies

On January 27, the European Commission launched its public consultation on the “Commission Communication on a One Health Action Plan to support Member States in the fight against Antimicrobial Resistance” (“AMR”, see more information here, and the response form here).  The Commission seeks to obtain input from stakeholders to shape the content of the future Communication.  The public consultation focuses on three pillars.

For the first pillar, “Supporting Member States and Making the EU a Best Practice Region on AMR”, the Commission asks stakeholders to provide input on the helpfulness of proposed EU initiatives that could help Member States in fighting AMR.  Initiatives cover, for example, enhanced discussions on AMR between Member States in a dedicated network on AMR; peer-to-peer review of Member States’ national action plans on AMR; European Commission action to enhance the Member States’ awareness on AMR, including training programs for national authorities.  Stakeholders are also asked to provide comments on various surveillance initiatives aimed at improving the EU AMR surveillance system and at extending its scope.  They are asked to comment on proposed action to fight AMR, not only in animal and human medicine, but in the environment as a whole.

The second pillar, “Boosting Research, Development and Innovation”, touches on tackling barriers to the development of new antimicrobial medicines, including vaccines, diagnostic tests and alternative therapies.  Stakeholders are asked to provide their views on various initiatives relating to R&D, funding, and obstacles to bringing antimicrobials to patients in Europe.

The third pillar, “Shaping the Global Agenda on AMR”, focuses on initiatives the Commission should take to tackle AMR at the international level (including fostering bilateral partnerships; contributing to AMR capacity building in emerging countries; and enhanced cooperation and advocacy of EU AMR policies in international fora and with normative international organizations).

On January 24, the European Medicines Agency (“EMA”) and the European Food Safety Agency (“EFSA”) published their Joint Scientific Opinion on measures to reduce the need to use antimicrobial agents in animal husbandry in the European Union, and the resulting impacts on food safety.  Though published in January, the Opinion was adopted in December 2016.

The EMA and EFSA have analyzed the measures adopted throughout the EU to reduce the use of antimicrobials in animals.  These include setting national targets to reduce the use of antimicrobials, the development of alternatives to antimicrobials and use of alternative treatments (e.g., vaccines, probiotics and organic acids), and promoting the last-resort use of human antimicrobials for animals.

Both agencies conclude that those measures are not sufficient to fight AMR in animals.  They call for more actions – in particular, rethinking the livestock system, the introduction of new farming practices and systems that prevent the development and spread of diseases into farms. These would enable a reduction in the use of antimicrobials.  In addition, they recommend that AMR education programs be put into place for farmers and veterinarians.

The next steps include the publication of the EMA, EFSA and European Center for Disease Prevention and Control (“ECDC”) joint annual report on AMR in food, animals and humans in the EU, in February 2017; the publication of a joint report assessing the connection between the consumption of antimicrobials and bacterial resistance, by the end of July 2017; and the introduction of a proposal for a list of indicators enabling risk managers to monitor reductions in AMR, and the use of antimicrobials in humans, animals and food, by the end of 2017.  See the full report here, and the press release here.

On January 23, the EMA published a report on the success of conditional marketing authorization (“CMA”).  CMA is a one-year provisional authorization aimed at providing patients with unmet needs early access to drugs.  CMAs target drugs treating life threatening diseases, such as multi-drug resistant tuberculosis and HIV.  They are granted, in principle, when the public health benefit of drugs outweighs the risks of a market authorization that was awarded based on less comprehensive and complete data than usually required for a full market authorization.  CMA holders are obliged to perform further research to enhance their data, and are subject to an annual evaluation by the EMA’s Committee for Medicinal Products for Human Use (“CHMP”) of whether to extend the CMA, withdraw it or convert it into a full market authorization.

The report analyses data collected between 2006 and 2016.  The EMA stresses that 30 CMAs were granted during this period, none of which were revoked or suspended.  The EMA concludes that CMAs have a real and positive impact on patients who previously had no, or ineffectual treatments.

The EMA, however, proposes further actions for improvement.  In particular, the EMA recommends engaging additional stakeholders in the process, such as Health Technology Assessment (“HTA”) bodies, to enhance the collection and generation of data and facilitate the decision-making process. Other recommendations also aim to foster the development of comprehensive data and accelerate the authorization process by improving the early dialogue with the EMA, the prospective planning of CMAs, and the prospective studies to be performed by the CMA holder.  See the full report here, and the press release here.

Trade Policy and Sanctions

New Zealand Prime Minister Bill English visited Brussels in early January to discuss the launching of negotiations for a free trade agreement between New Zealand and the EU.  EU Commission President Jean-Claude Juncker said that these negotiations would be quicker than those with Canada, and “could be completed within two to three years”.  Access of New Zealand’s dairy products to the EU single market will be at the center of the talks.

The European Commission and the U.S. announced on January 13 the successful conclusion of negotiations for an Agreement between the EU and the U.S. on insurance and reinsurance.  This agreement was reached after more than 20 years of discussions, and covers prudential benefits that are granted on certain conditions for reinsurers and for reinsurance and insurance groups of the EU operating in the U.S. and vice versa, as well as exchanges of information between supervisors on both sides of the Atlantic.

On January 17, Trade Commissioner Cecilia Malmström and U.S. Trade Representative Michael Froman published a joint assessment of the progress made in the negotiations for a Transatlantic Trade and Investment Partnership (“TTIP”) since they started in July 2013.  According to Froman, the document is a “snapshot” of where the talks have arrived, “to give to President Trump’s administration”.

On the same day, the European Parliament’s International Trade Committee (“INTA”) approved the Comprehensive Economic and Trade Agreement between the EU and Canada (“CETA”) by 25 votes to 15, with one abstention.  The plenary vote is scheduled to take place in Strasburg in mid-February.

On January 27, the EU imposed anti-dumping tariffs ranging from 30.7% to 64.9% on imports of Chinese stainless steel tube and pipe fittings used in a wide array of industries, ranging from petrochemical and shipbuilding to food processing.  The Commission also imposed a duty ranging from 5.1% to 12.1% on imports of the same products from Taiwan.

During her visit in Washington on January 27, British Prime Minister Theresa May and American President Donald Trump signed a “UK-U.S. Trade Negotiation Agreement” which, according to the Prime Minister’s Office, would “pave the way for a formal free-trade deal to be signed as soon as possible” after the UK leaves the European Union.