Europe’s Future: the Wind is Back in the EU’s Sails

The election in Germany, even if disappointing for the current coalition, allows the most respected European leader to remain Chancellor. She can continue to steer the European engine, with a new French counterpart, impatient to test his European agenda – as outlined in a speech in the Sorbonne on September 26.

Is this the light at the end of a long tunnel? The end of the somber decade which started with the financial crisis, then the crisis of the Eurozone, the mass migration of 2014/15, the referendum on Brexit in June 2016, and the unexpected result of the American election?

At the beginning of this year, electoral campaigns in Austria, the Netherlands and France as well as the political debate in Italy gave populist eurosceptic parties center stage, and many across the EU believed they might win a majority of the vote.

But they failed. Everywhere. Brexit, far from being divisive, brought the 27 closer together. President Trump’s unilateral moves boosted security and defense plans at the European level. In France, Emmanuel Macron was elected with an ambitious European agenda. Unexpected economic growth all over the continent (except in the UK) reinforces a return to self-confidence.

A Return to Euro optimism?

As European Commission President Jean Claude Juncker noted in his “State of the Union” address on September 13, “the wind is back in the EU’s sails”. And as always when the Union comes out of a crisis, new steps are now being envisaged in the EU’s integration process.

This does not mean that spectacular changes will come soon. The framework will remain the current treaties. The fundamental problem of the distance between the institutions and the citizens remains, as well as the fear of globalization they are accused of encouraging. But many weaknesses – shortcomings that preexisted the crisis or were brought to light by it – can now be dealt with.

This blog explores briefly the various fields in which this new “Euro-optimism” will be tested. Not surprisingly, the debate will continue to oppose, on the one hand, those who favor more cohesion and solidarity, and so want to reinforce the role of the Commission or facilitate decision making; and on the other, those who want governance to remain as much as possible in the hands of national governments.

The influence of the latter, which has prevented progress over the last ten years, might be reduced now that populist and nationalist voices have been (temporarily) silenced – though of course we shall have to see the outcome of Italian elections next year. However, some strong mistrust remains, notably between the “old” and “new” Member States, as well as between the North and the South. The return to economic growth should help mitigate these divergences.

The governance of the Monetary Union and the Eurozone

Most economists agree that the Eurozone needs further reform. A roadmap for reform has been articulated since 2011 by the presidents of the EU institutions. But, apart from the setting up of a “Banking Union”, the other elements of the reform were never really discussed, due to the diverging views between Germany and most other Member States over financial “solidarity”.

But these ideas continued to float in the air, and were revived recently by the President of the Commission and the French President.

Even on the campaign trail, Macron espoused the creation of a separate Eurozone budget. He now suggests that this could be funded through (harmonized) corporate taxes, and managed by a “Eurozone Finance Minister”. He has also mooted the creation of a Eurozone Parliament.

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The Week Ahead in the European Parliament – October 20, 2017


Strasbourg will be vibrant next week because the European Parliament will hold its plenary sitting.

Members of the European Parliament (“MEPs”) are not expected to vote on many items, however a number of interesting debates will take place.

On Monday, MEPs will discuss the upcoming report of the Committee on the Internal Market and Consumer Protection (“IMCO”) on the proposal for a Regulation on CE marked fertilizing products.  The proposal for a Regulation seeks to repeal the existing Fertilizers Regulation.  It introduces revised EU market access rules to incentivize the large-scale production of fertilizers in the EU from domestic organic or secondary raw materials with a view to reducing the EU’s dependence on imported substances, such as phosphate. The proposal also provides measures to address the issue of soil and food contamination. It also introduces harmonized cadmium limits for phosphate fertilizers to protect human health and reduce environmental risks.  See the proposal for a Regulation here, and the draft report here.

On Tuesday, MEPs will discuss the outcome of the European Summit, held on October 19 and 20, 2017, with Commission President Jean-Claude Juncker and Council President Donald Tusk.  During the European Council, the Heads of State discussed various topics, such as migration, EU external relations, Digital Europe, Defense, and Brexit.

On Thursday, MEPs will debate a motion for a resolution that has been prepared by the Committee on Legal Affairs (“JURI”) on the application of the Environmental Liability Directive (“ELD”).  The JURI Committee seeks to adapt the ELD to the rapid evolution of pollutants from industrial activities by extending the definition of environmental damage and extending the scope of the ELD to cover damage to the air, flora, fauna and landscape, as well as by identifying new activities for inclusion in the list of dangerous activities laid down in Annex III of the ELD.  See the motion for a resolution of the JURI Committee here.

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China Revises Proposals on Regulation of Commercial Encryption

In the past three weeks, China’s State Council and the State Cryptography Administration (“SCA”) issued two documents that reveal a major change in the regulatory regime governing commercial encryption products in China, potentially paving the way for the draft Encryption Law to establish a uniformed encryption regime. This development and its practical implications will be important to multinationals that manufacture, distribute, or use commercial encryption products in China.

On September 29, 2017, the State Council released the Decision on Removing a Batch of Administrative Approval Requirements (the “State Council Decision”) (official Chinese version available here), which removed some approval requirements for the manufacturing, sale, and use of commercial encryption products. On October 12, 2017, the SCA further released a notice (“Notice”) to instruct local Bureaus of Cryptography Administration (“BCA”) on the plan to implement the State Council Decision. (The official Chinese version can be found here.)

The State Council Decision and the Notice reveals a major change in the regulatory regime governing commercial encryption products in China, potentially paving the way for an Encryption Law that would establish a uniform encryption regime. (Our previous alert describing the draft Encryption Law can be found here.)

With the removal of the approval requirements imposed on entities that are manufacturing, distributing, and using commercial encryption products in China, the regime shifted away from regulating entities in the supply chain towards focusing on regulating the encryption products themselves, which potentially can provide a more level playing field for foreign (i.e., non- Chinese) companies manufacturing such products. This shift is largely aligned with the approach proposed by the draft Encryption Law and will reduce the burden currently imposed on users, including foreign-invested entities and foreign individuals located in China, that have had to apply for permits for their use of foreign-produced commercial encryption products.

Although the term “encryption product” has never been clearly defined, one of the regulations, the Administrative Rules on the Use of Commercial Encryption Products, provided a broad definition of “commercial encryption product,” which included “encryption technologies and products used for encryption protection or security certification information, not involving state secrets.” Some of the commonly used encryption products, such as Virtual Private Network (VPN) software, have been viewed as some as “commercial encryption products” and are subject to these regulations.

Key pieces of the existing regime include:

    • Approval of Manufacturers. Under the existing regulations, only manufacturers that are approved by SCA are allowed to manufacture commercial encryption products in China. Approved manufacturers must not manufacture unapproved encryption products. In practice, no foreign-invested companies have obtained SCA approval to manufacture commercial encryption products in China.
    • Approval of Distributors. Similar to manufacturers, only distributors that are approved by SCA can distribute commercial encryption products in China. Without such a license, any entity or individual may not sell commercial encryption products in China. Again, no foreign-invested companies have obtained such approval in the past.
    • Approval of Commercial Encryption Products. The existing regulations also require SCA approval for specific encryption products. Manufacturers must obtain a Product Model Certificate of Commercial Encryption Products before they can produce such products.

As a general rule, entities and individuals must use approved encryption products manufactured by approved manufacturers and distributed by approved distributors. The use of pre-approved domestic encryption products by either foreign or domestic entities or individuals does not require additional approval from SCA.

    • Import and Use Permits for Foreign-invested Entities and Individuals. For foreign entities (including foreign-invested entities) and individuals, the regulations offer an exception: such entities and individuals can apply to SCA to use foreign-produced commercial encryption products if they have a legitimate business need to do so, provided that the use of such products “would not be harmful to information security, the legitimate rights of other individuals and organizations, as well as China’s national security.”

If a foreign entity or individual would like to use a foreign-produced encryption hardware, it must apply for both a use permit and an import permit. If the foreign-produced product is software, no import permit is needed, but a use permit is still required.

The State Council Decision removed approval requirements for manufacturers and distributors of commercial encryption products, as well as the use permit requirement for foreign entities (including foreign-invested entities, such as Chinese subsidiaries of non-Chinese companies) and foreign individuals located in China.

The remaining approval requirements focus on: (i) the approval for commercial encryption products themselves to ensure the quality of the commercial encryption products; and (ii) the import permit requirement for the limited types of foreign-produced encryption hardware listed in a catalogue issued by the SCA and China’s General Administration of Customs.

The use of foreign-produced encryption software such as VPN software or off-the-shelf products that are not included in the catalogue will no longer be subject to any approval requirements.

SCA will, however, redirect its efforts, among other enforcement goals, towards:

  •  promoting national standards for encryption products;
  • improving the review process for the Product Model Certificate of Commercial Encryption Products;
  • controlling end users (and end-uses) for imported encryption hardware that is subject to the approval requirement; and
  • establishing a “blacklist” to name entities not in compliance with the encryption rules.

Given the rapidly evolving regulatory regime, multinationals that plan to manufacture, distribute, or use commercial encryption products in China should closely follow the developments.

Exchanging Commercial Information–A Risky Business

This case provides a stark lesson in competition compliance training: the infringement decision of the Competition and Markets Authority (“CMA”) was upheld against a company that, while it refused to join a cartel, still exchanged strategic commercial information with its competitors (while being recorded by the CMA…) 

The circumstances represent a timely reminder of the steps companies must take to properly distance themselves from anti-competitive behaviour with competitors. As the CMA puts it:

– The exchange of competitively sensitive confidential information (i.e. regarding prices or pricing strategy) with competitors, even at a single meeting, can amount to a breach of competition law with serious consequences;

– If approached to join a cartel, or to become involved in anti-competitive arrangements (i.e. co-ordination of pricing or market sharing) businesses must immediately, clearly and unequivocally reject the approach. It is not enough to refrain from the price-fixing or market-sharing: the business (through its representatives) must leave the meeting and clearly and explicitly refuse to take part; and

– Very importantly, the business must also decline to take part in any discussions involving the sharing of confidential and competitively-sensitive pricing information. 

The CMA’s infringement decision fined Balmoral £130,000 in December 2016, for the sharing of strategic commercial information on galvanized steel tanks (used to store water for sprinkler systems in large buildings). The conduct of the members in the related cartel was addressed in a separate infringement decision of the same date, and Balmoral assisted the CMA in its related criminal investigation. However, Balmoral appealed the CMA’s decision to the Competition Appeal Tribunal (“CAT”), reflecting its ‘deeply held sense of grievance at how it had been treated by the CMA’, a desire to repair its ‘unfairly and wrongly’ tarnished reputation, and the ‘inconsistent’ way in which the CMA approached its ‘credibility as a witness’.  

Ironically, Balmoral – a new entrant in the galvanized steel tanks market in the UK – had actually increased competition in the market outside a pre-existing cartel. Balmoral’s competitors were becoming increasingly frustrated by the competitive offers it was making, sometimes pushing prices down by as much as 20%. This upset the market dynamic that had been operating for years, enabling the incumbents to divide the market between them and keep prices high. Inviting Balmoral to meet, the cartel members had hoped to persuade Balmoral to join them by disclosing their market sharing system. However, Balmoral steadfastly refused to get involved. 

However, and unfortunately for Balmoral, there was a whistleblower at the meeting, as a result of which the CMA was making an audio-visual recording of the meeting and discussions. Consequently, despite Balmoral’s absolute refusal to join the cartel, the CMA built a case around its decision to remain at the meeting for over an hour after learning of the cartel, and sharing commercially sensitive information about its current and future pricing intentions (both for specific contracts for which the competitors should have been competing and pricing strategies for certain types of tank). The CMA found that this amounted to a restriction of competition by object in and of itself.  

Balmoral argued on appeal that the CMA was wrong to conclude that generic comments exchanged with competitors at a single meeting were capable of reducing uncertainty in an already transparent market, such that there was an insufficient degree of harm to competition for the purposes of an object infringement. However, the CAT upheld the CMA’s infringement decision. It explicitly recognized that the purpose of the meeting for the other cartelists was to get Balmoral to join, which differed from Balmoral’s own initial purpose. It found, however, that, by the end of the meeting, Balmoral’s objective was to stabilise prices towards the higher end of the bands being discussed. It also found that a one-off exchange of future pricing information in a market with few customers and few competitors has the ability to affect a material number of bids, especially where the information involved Balmoral indicating that it was not seeking to push prices down (despite not actually joining the cartel).


Developments in U.S. Iran Sanctions

Administration Also Revises Russia Sanctions, Terminates Most Sudan Sanctions

On October 13, President Trump announced that he would no longer certify to Congress that the suspension of U.S. sanctions against Iran pursuant to the Joint Comprehensive Plan of Action (“JCPOA”) is “appropriate and proportionate” to the steps that Iran has taken to terminate its illicit nuclear program. The President’s much-anticipated announcement does not mean that the United States is withdrawing from the JCPOA, nor does it automatically result in the re- imposition of any U.S. sanctions against Iran. Rather, the President’s announcement gives the Congress 60 days to introduce legislation to re-impose U.S. sanctions that could be considered under expedited procedures. Importantly, although President Trump did not call on Congress to re-impose the pre-JCPOA U.S. nuclear-related sanctions, he did threaten to terminate U.S. participation in the JCPOA in the future if Congress and U.S. allies do not take action to address perceived flaws in the agreement.

At the same time, the Trump Administration expanded sanctions against Iran’s Islamic Revolutionary Guard Corps (“IRGC”), and designated four additional entities for sanctions for their support of Iran’s weapons proliferation activities. Further, Senators Bob Corker and Tom Cotton announced that they would be introducing legislation to address perceived shortcomings in the JCPOA, consistent with President Trump’s request.

The developments of late last week follow several other recent changes in U.S. sanctions involving Russia and Sudan.

On September 29, the Trump Administration, as expected, revised key aspects of the U.S. sectoral sanctions against Russia relating to dealings in debt of certain parties operating in Russia’s financial services and energy sectors. The move was required by the Countering America’s Adversaries Through Sanctions Act (“CAATSA”) discussed in our alert of July 28, 2017.

Finally, on October 12, the Trump Administration terminated most U.S. sanctions against Sudan, which had been substantially suspended since January 2017 pursuant to an Executive Order that President Obama issued in the waning days of his Administration.

Failure to Make INARA Certification 

The Iran Nuclear Agreement Review Act of 2015 (“INARA”) requires that the President certify to Congress every 90 days that: (1) “Iran is transparently, verifiably, and fully implementing” the JCPOA; (2) Iran has not committed a material breach with respect to the JCPOA, or if it has committed a material breach, then it has cured that breach; (3) Iran has not taken any action that could significantly advance its nuclear weapons program; and (4) suspension of U.S. sanctions against Iran in connection with the JCPOA is “appropriate and proportionate” to the specific and verifiable measures taken by Iran with respect to terminating its illicit nuclear program and is “vital to the national security interests of the United States.”

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The German Competition Register – a new animal in the jungle of EU Member States’ competition laws

On 29 July 2017, the new German Competition Registry Act (Wettbewerbsregistergesetz – WRegG) became effective. Organisations offering public tenders worth EUR 30,000 or more will have to check the register to verify whether participating undertakings are excluded from public procurement because of past offences. The new register will be hosted by the Federal Cartel Office (Bundeskartellamt – BKartA) and has to be implemented by 2020 latest.

According to press reports (PaRR of 26 September 2017), a senior official of the BKartA, indicated that the BKartA is now planning a directive on the register’s standards and procedures.

Why is this noteworthy?

The competition register is a new animal in Germany’s legal jungle, though it would be unfair to say that it belongs purely to the competition law species. It is the first centralised, federal register listing undertakings that have been devoted to various law infringements, in particular financing of terrorism, corruption, money laundering, subsidy fraud, tax evasion etc. – but also including violations of competition law. Entries into the register may lead to exclusion from public procurement for 3 to 5 years.

Why the lawyerly maybe and why three to five years?

Because cartelists have a little privilege here: cartel offences are considered as non-mandatory ground for exclusion from public procurement (i.e. the tendering organisation has discretion whether it will disqualify a cartelist) and cartel-related entries will be deleted after three years. (Different than a couple of other offences, like financing of terrorism or corruption which will remain in the register for five years.) Regarding competition law infringements, the WRegG limits itself to decisions by German authorities – foreign infringement decisions, even by the EU Commission, will not be entered.

The idea of a register is not new but Germany did not succeed in establishing a register on the federal level for many years while procuring authorities had to rely in most cases on self-declarations of participating undertakings.

So what could a directive in addition to the WRegG bring?

It is hoped that it will bring clarity. While there are a couple of open questions on the procedural side that need to be solved, there is another animal roaming the jungle which has been pretty hard to catch by practitioners in the past: the possibility of self-cleaning.

Self-cleaning is not a new idea. In particular, Art. 57 of the EU Regulation 2014/24 on Public Procurement expressly requires authorities to take such measures into account. Now it is expressly laid down in sec. 125 of the German Competition Act (Gesetz gegen Wettbewerbsbeschränkungen – GWB) and sec. 8 WRegG.

So far, self-cleaning raised more questions than it provided solutions: there was no fixed guidance what an undertaking would have to do to clean itself and what would be the benchmark for sufficient cleaning measures. The fact that now the BKartA, as the authority imposing the cartel fine, will be the one to decide on effectiveness of self-cleaning measures may have led to some raised eyebrows.

However, the WRegG provides at least a framework – and leaves the details to the BKartA’s directive:

  • an application can be made before the three year-period has expired – so there are no minimum periods to remain in the register
  • the undertaking has to credibly show an interest in the premature deletion of its entry
  • the entry has to be deleted if the undertaking has proven that
    • it compensated or agreed to compensate any damage caused by its infringement
    • it fully cooperated with the investigating and procuring authorities in order to clear facts and circumstances which relate to the infringement and the damage caused
    • it implemented concrete technical, organisational and personnel-related means which are suitable to prevent future infringements.
  • the BKartA will investigate ex officio whether the conditions are met, meaning it can but it does not have to rely on what the undertaking is submitting. In particular, it may require the undertaking to submit the infringement decision, an expert opinion or other documents suitable to assess the self-cleaning measures. Furthermore, the BKartA may use its regular investigative powers laid down in sec. 57 and 59 GWB.

According to sec. 10 WRegG, certification systems ( “systems of independent bodies which are suitable to prove appropriate measures to prevent future infringements”) may be admitted by an additional governmental regulation. This means they cannot be established merely on the basis of the BKartA’s new directive but the directive may, once they are admitted, deal with their details. The legislation (BT Drs. 18/12051) remains silent on such possible details. Taking into account that the amongst compliance practitioners well-known line “there is no one-fits-all”, it remains to be seen to what extent certification of compliance programs may work out in practice.

While in international cartel cases, it may sound comforting that foreign infringement decisions are not entered into the register, the situation, at least for mandatory exclusionary grounds, may cause some headaches regarding the practical implementation of self-cleaning in international cases. According to sec. 123 (2) GWB, the procuring authorities have to take into account foreign sanctions in cases of mandatory exclusionary grounds, e.g. corruption, financing of terrorism, money laundering or fraud, and disqualify affected undertakings. Since the WRegG does not foresee that foreign judgments and decisions are entered into the register, they will not be subject to the self-cleaning procedure laid down in the WRegG (and its accompanying directive). The question remains open, under which conditions self-cleaning can be successfully implemented by undertakings that are subject to foreign decisions leading to exclusion from German public procurement.

In summary, the trip through the legal jungle remains murky, and the new directive by the BKartA may not answer all questions. On the other hand, it is likely that we will get a clearer view of some of our new animals soon.

Year of the Flood

Hurricane Harvey bombarded the Gulf Coast of the United States, leaving more than 250,000 people without power and causing substantial financial, physical, and emotional damage in its wake.  Though record-breaking, Harvey was not a singular event.  In 2017, severe rain events like Harvey have impacted many communities and businesses around the world.  Africa is no exception.

In the span of less than eight weeks, there were over 1,000 people killed in mudslides following torrential rains in Sierra Leone, 2,000 people displaced by floods in Uganda, more than 100,000 people fled their homes because of major flooding in Nigeria, and hundreds of homes destroyed and families displaced following storms in Niger and Sudan.

According to World Bank research severe weather events have cost an estimated $4.2 trillion between 1980 and 2014.  Experts indicate that at least some of the financial loss in 2017 could have been avoided by repairing faulty drain channels in Sierra Leone to effectively divert floodwaters, or redirecting attention to flood maps, which could have prevented construction in vulnerable floodplains surrounding Houston.

These disaster losses can impact a variety of industries including insurance, oil and gas, manufacturing, utilities, raw materials, and mining.  Knowing that other severe rain events can occur, the question is:  How can stakeholders manage the risk?

A tool businesses and communities can use is disaster risk management, which in many cases involves both disaster risk reduction (“DRR”) (prevention, preparedness, and mitigation) and humanitarian and development action (emergency response, relief, and reconstruction).

Below are three key instruments for businesses to understand when approaching disaster risk management in Africa:

Sendai Framework: Shared Responsibility

The Sendai Framework for Disaster Risk Reduction 2015-2030 (“Sendai”), and its predecessor, the Hyogo Framework, serve as a foundation for sustainable development and international cooperation regarding disaster risk management.

Sendai is a 15-year, voluntary, non-binding agreement which recognizes that the State has the primary role to reduce disaster risk but that responsibility should be shared with other stakeholders including local government and the private sector.

Adopted by the United Nations Member States at the 3rd U.N. World Conference for Disaster Risk Reduction in March 2015, and endorsed by the UN General Assembly, Sendai sets four priorities:

  1. Understanding disaster risk.
  2. Strengthening disaster risk governance to manage disaster risk.
  3. Investing in disaster risk reduction for resilience.
  4. Enhancing disaster preparedness for effective response and to “Build Back Better” in recovery, rehabilitation, and reconstruction.

The Framework also includes seven global targets which aim to reduce economic losses and critical infrastructure damage (Targets (c)-(d)), and increase the number of national and local DRR strategies and level of international cooperation (Targets (e)-(f)).

With a focus on enhancing infrastructure resilience, health and livelihoods, and the provision of adequate support to African countries to allow for the implementation of the framework (Sendai para. 43), Sendai highlights an opportunity for stakeholders in Africa to effect DRR mechanisms.

A global example of Sendai’s role in sustainable development includes the 2017 Cancun High Level Communiqué, where leaders committed to implement the Sendai Framework, in coherence with the Sustainable Development Goals, the Paris Agreement on Climate Change, the New Urban Agenda and other relevant instruments.

Africa’s Regional Platform: Sendai Plus Five

 The Africa Platform emerged from a November 25, 2016 meeting where Government Ministers, heads of delegation, and national disaster management agencies from forty seven African countries agreed on a strategic plan to align disaster risk reduction with global  priorities and targets to reduce disaster losses, based on the Sendai Framework.

The Africa Platform supplements Sendai by adopting five additional targets to augment action on disaster risk reduction.  These include:

  • Integration of DRR in school curricula.
  • Making DRR part of sustainable development planning.
  • Increasing domestic spending on DRR.
  • Expanding the number of countries testing their preparedness plans.
  • Increasing the number of partnerships for knowledge management.

Here, companies have the opportunity to partner in the knowledge management space and experience a renewed regional focus on DRR.

 UNISDR Checklist on Essentials for Business in DRR: Data Driven Decision-Making

Key provisions of the Five Essentials for Business in Disaster Risk Reduction include:

  • Promote and develop public-private partnerships for disaster risk reduction to analyze the root causes of continued non-resilient activity.
  • Leverage private sector expertise and strengths to advance disaster risk reduction and mitigation activities, including enhanced resilience and effective response.
  • Foster a collaborative exchange and dissemination of data: assessment, monitoring, prediction, forecasting and early warning purposes.
  • Support national and local risk assessments and socioeconomic cost-benefit analyses and capacity building.
  • Support the development and strengthening of national and local laws, regulations, policies, and programs.

As Former U.N. Secretary General Ban Ki Moon explained at the launch of UNISDR’s 2013 Global Assessment Report, “economic losses linked to disasters will continue to escalate, unless disaster risk management becomes a core part of business investment strategies.”

The instruments above demonstrate that governments, particularly those in Africa, have tools at their disposal when looking towards future disaster risk management. Shared responsibility, regional, and data driven decision-making targets provide guidance for investment and an opportunity for businesses to collaborate.

This has the potential to yield innovative sustainability initiatives, knowledge transfer, corporate social responsibility, and philanthropy, enabling the private sector to become a key driver of risk reduction.


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 – October 13, 2017


Next week will be a mixed political group and committee week in the European Parliament.  Members of the European Parliament (“MEPs”) will hold meetings with their respective political parties to prepare the plenary session, to be held from October 23 to 26, in Strasbourg.  A few committee meetings will also take place, focused on the treatment and transfer of personal data.

On Thursday, the Committee on Civil Liberties, Justice and Home Affairs (“LIBE”) is expected to vote on its draft report on the ePrivacy Regulation.  This proposal for a Regulation seeks to introduce data privacy rules to address new electronic means of communication, such as Skype or WhatsApp.  It also aims to regulate end-to-end encryption in digital communications, and unsolicited direct marketing sent via electronic communication means, such as SMS.  See the draft ePrivacy Regulation here, the draft report here, and amendments tabled to the report here, here and here.

On the same day, the LIBE Committee will also discuss with the Council Presidency the Court of Justice of the EU’s Opinion 1/15 on the draft Agreement between the EU and Canada on the transfer and use of Passenger Name Record (“PNR”).  The draft Agreement permits air carriers operating between the EU and Canada to transfer PNR data of all air passengers to the Canada Border Services Agency, where the data may be used, retained for up to 5 years, or transferred to other authorities and other third countries, for the purposes of ensuring public security and combating terrorism and serious transnational crime.  The Court held that certain provisions must be clarified and adapted in order to ensure that the Agreement complies with EU privacy rules.  Covington has written a more complete blogpost about Opinion 1/15 – see here.

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UK government: stronger steer on content of Modern Slavery Act statements

The U.K. government has provided updated and firmer guidance on the section 54 Modern Slavery Act transparency in supply chain reporting requirement (about which see more here). Organisations are now expected to publish transparency statements ‘at most’ six months after the organisation’s financial year end. Businesses are also encouraged to leave statements from previous years on their websites to enable investors, employees and other stakeholders to monitor progress.

As previously reported, a U.K. Bill would, if passed, see content of the statements mandated. The updated guidance states that relevant organisations ‘should aim‘ to (rather than ‘may’) cover certain information in its statement. Organisations are encouraged to “paint a detailed picture” of all the steps they have taken to address and remedy modern slavery, forced labour and human trafficking and are reminded that progress against prior years may be scrutinized by both stakeholders and civil society. The guidance provides detailed information about the type of activity that could be included under each suggested heading and why such information is recommended. For example, businesses may consider including information about:

  • Organisational policies — Such policies demonstrate commitment to the issue and ensure appropriate action is taken throughout the business. In drawing up organizational policies, businesses might consider questions such as:
    • What minimum labour standards are expected of the business, its subsidiaries and suppliers?
    • How does the business factor labour costs into production and sourcing costs? and
    • What due diligence will the company commit to conducting regarding its supply chain?
  • Due Diligence —  The guidance acknowledges that due diligence is an essential management tool to improve risk identification and long-term social, environmental and financial performance. Businesses might consider including details of their due diligence processes, including impact assessments, stakeholder engagement, risk management procedures and grievance mechanisms. Due diligence in relation to modern slavery should form part of a business’ “wider human rights due diligence process”, where possible.

We recently reported on the recommendations from the Joint Committee on Human Rights, which included the prospect of mandatory due diligence for U.K. businesses. The government’s updated guidance clearly recognises human rights due diligence as best practice.

Last week’s publication of the guidance coincided with the UN intergovernmental working group’s publication of draft content for a treaty on Transnational Corporations and Other Business Enterprises with Respect to Human Rights.

The draft content – due to be discussed during the third session of the working group at the end of October 2017 – indicates that member states may be required to take action (including legislating if necessary) to require private organisations to design, adopt and implement effective due diligence policies and processes, including codes of conduct, and to identify and address human rights impacts resulting from their activities. The draft also hints at the introduction of criminal legal liability for the acts of transnational corporations, including possible personal liability of directors and executives.

With the growing recognition that the UN Guiding Principles represent best practice for business, and a UN treaty potentially in the pipeline, mandatory due diligence seems increasingly likely. We will continue to track and report on further developments in this area.

California Gov. Brown Signs California DISCLOSE Act into Law

On Saturday, California Gov. Jerry Brown signed the California DISCLOSE Act, AB249, into law.  We posted a detailed analysis of the law when it passed the legislature, but the key points bear repeating as it will be of interest to anyone who gives or spends money in California elections.

The law requires that some form of “paid for by” statement appear on almost every advertisement.  It also requires that ballot measure ads and some outside candidate advertising carry prominent disclosures of the sponsor’s top funders.  Finally, the law alters the rules for “earmarked” contributions, with the goal of disclosing the real source of a group’s funds.  More controversially, it also allows undisclosed earmarks for certain small contributions of less than $500 per year.The new law takes effect on January 1, 2018, in time for the state’s 2018 gubernatorial and legislative elections and ballot measure campaigns.  Any person or organization planning to contribute to, or place advertisements in, California elections moving forward should carefully consider the changes in the law, and think about consulting with counsel on how those changes might impact their activity.