In the early hours of Friday, 13 May, the European Parliament and the Council of the EU reached provisional political agreement on a new framework EU cybersecurity law, known as “NIS2”. This new law, which will replace the existing NIS Directive (which was agreed around the same time as GDPR, see here) aims to strengthen EU-wide cybersecurity protection across a broader range of sectors, including the pharmaceutical sector, medical device manufacturing, and the food sector.

We set out background on NIS2 in prior blog posts (e.g., in relation to the original proposal in late 2020, see here, and more recently when the Council of the EU adopted an updated version in December 2021). Whilst we are still waiting for the provisionally agreed text to be released, a few points are worth mentioning from this latest agreement:

  • Clearer delineation of scope. NIS2 will only apply to entities that meet certain size thresholds in the prescribed sectors, namely
    • “essential entities” meaning those operating in the following sectors: energy; transport; banking; financial market infrastructures; health (including the manufacture of pharmaceutical products); drinking water; waste water; digital infrastructure (internet exchange points; DNS providers; TLD name registries; cloud computing service providers; data centre service providers; content delivery networks; trust service providers; and public electronic communications networks and electronic communications services); public administration; and space; and
    • “important entities”, meaning those operating in the following sectors: postal and courier services; waste management; chemicals; food; manufacturing of medical devices, computers and electronics, machinery equipment, motor vehicles; and digital providers (online market places, online search engines, and social networking service platforms).

The indications are that NIS2 will only apply to entities that have over 250 employees and turnover of more than €10 million. These thresholds will help entities identify at an early stage whether they are one of the more than one hundred thousand entities expected to be subject to the new law.

  • Fines. The Parliament and Council reportedly have agreed on the maximum level of fines that can be imposed under NIS2. The maximum fine of 2% of annual turnover or €10 million for “essential” entities (such as those operating in the cloud computing, energy, health, or banking sectors) has been retained. However, the agreed maximum fine for “important” entities (digital providers such as search engines, online marketplaces and social networks, and entities active in sectors such as production and distribution of chemicals and food production) that breach their obligations has been reduced to 1.4% of the total worldwide turnover in the previous financial year of the undertaking to which the entity belongs, or €7 million, whichever is greater. (The Commission’s original proposal set out a maximum fine of 2% of annual turnover for these entities.) The level of the fines is intended to roughly equate to the typical amount demanded by ransomware attackers.
  • Reduced reporting obligations. The co-legislators announced that they have “streamlined” reporting obligations to avoid over-reporting and to reduce the burden on covered entities (and regulators). For example, a simplified notification procedure is intended to make it clear to whom entities should report incidents. And the process of notification apparently also is to be made simple through the use of clear interfaces supported by strong underlying technology.
  • Reporting timelines. The European Parliament successfully argued for a staggered reporting timeline: entities will have 24 hours to file an initial report of an incident, but must follow up with a more detailed report within 72 hours of the incident that sets out more details, including in relation to indicators of compromise.
  • Alignment with other EU legislation. The co-legislators have amended the text so as to align with sector-specific legislation such as the Regulation on digital operational resilience in the financial sector (DORA), and the Directive on the resilience of critical entities. This is intended to help to ease companies’ compliance burden across overlapping pieces of EU legislation.

The next step in the legislative process is formal approval of the European Parliament and the Council of the EU. Once implemented, Member States will have 21 months to transpose NIS2 into national law. Going forward, it can be expected that NIS2 will be reviewed within three or four years of its implementation. With NIS2 now agreed, attention is likely to turn to the European Commission’s proposal for a Cyber Resilience Act. This proposal is pitched as an Act that builds on the baseline requirements set out by NIS2 and the Cybersecurity Act, and will primarily establish cybersecurity requirements for digital products, such as sensors, cameras, network devices, routers and mobile devices, as well as services that are necessary for these products to perform their functions. The proposal for a Cyber Resilience Act is currently undergoing public consultation, with stakeholders and the general public able to provide feedback until 25 May. A full text of the proposal is expected in the Autumn.

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Photo of Mark Young Mark Young

Mark Young, an experienced tech regulatory lawyer, advises major global companies on their most challenging data privacy compliance matters and investigations.

Mark also leads on EMEA cybersecurity matters at the firm. He advises on evolving cyber-related regulations, and helps clients respond to…

Mark Young, an experienced tech regulatory lawyer, advises major global companies on their most challenging data privacy compliance matters and investigations.

Mark also leads on EMEA cybersecurity matters at the firm. He advises on evolving cyber-related regulations, and helps clients respond to incidents, including personal data breaches, IP and trade secret theft, ransomware, insider threats, and state-sponsored attacks.

Mark has been recognized in Chambers UK for several years as “a trusted adviser – practical, results-oriented and an expert in the field;” “fast, thorough and responsive;” “extremely pragmatic in advice on risk;” and having “great insight into the regulators.”

Drawing on over 15 years of experience advising global companies on a variety of tech regulatory matters, Mark specializes in:

  • Advising on potential exposure under GDPR and international data privacy laws in relation to innovative products and services that involve cutting-edge technology (e.g., AI, biometric data, Internet-enabled devices, etc.).
  • Providing practical guidance on novel uses of personal data, responding to individuals exercising rights, and data transfers, including advising on Binding Corporate Rules (BCRs) and compliance challenges following Brexit and Schrems II.
    Helping clients respond to investigations by data protection regulators in the UK, EU and globally, and advising on potential follow-on litigation risks.
  • GDPR and international data privacy compliance for life sciences companies in relation to:
    clinical trials and pharmacovigilance;

    • digital health products and services; and
    • marketing programs.
    • International conflict of law issues relating to white collar investigations and data privacy compliance.
  • Cybersecurity issues, including:
    • best practices to protect business-critical information and comply with national and sector-specific regulation;
      preparing for and responding to cyber-based attacks and internal threats to networks and information, including training for board members;
    • supervising technical investigations; advising on PR, engagement with law enforcement and government agencies, notification obligations and other legal risks; and representing clients before regulators around the world; and
    • advising on emerging regulations, including during the legislative process.
  • Advising clients on risks and potential liabilities in relation to corporate transactions, especially involving companies that process significant volumes of personal data (e.g., in the adtech, digital identity/anti-fraud, and social network sectors.)
  • Providing strategic advice and advocacy on a range of EU technology law reform issues including data privacy, cybersecurity, ecommerce, eID and trust services, and software-related proposals.
  • Representing clients in connection with references to the Court of Justice of the EU.
Tomos Griffiths

Tomos Griffiths is a Trainee who attended Durham University