The Federal Election Commission (FEC) officially dipped its toes into the ongoing national debate around artificial intelligence (AI) regulation, publishing a Federal Register notice seeking comment on a petition submitted by Public Citizen to initiate a rulemaking to clarify that the Federal Election Campaign Act (FECA) prohibits deceptive AI-generated campaign advertisements.  The Commission unanimously approved publication of the petition at its August 10 meeting

The public is being asked to comment on whether the FEC should initiate a formal rulemaking to specify that using false AI-generated content, sometimes called “deepfakes,” in campaign ads would violate FECA’s prohibition on fraudulent misrepresentation of campaign authority (52 U.S.C. § 30124).  Currently, there are no AI-specific FEC regulations or guidance governing campaign ads or fundraising.

The decision to seek comment on the petition follows the FEC’s June deadlock on an earlier petition from Public Citizen. FEC Republicans, led by Commissioner Allen Dickerson, argued that the FEC has no authority to address AI-generated or “deepfake” campaign ads under FECA, and should not make rules without further guidance from Congress.  

However, the decision to seek public comment does not mean that the Commission will ultimately issue a proposed rulemaking, much less adopt new AI-specific rules.  The Commission remains divided on whether it has the statutory authority to address AI issues at all.  In voting to advance the petition in June, Democratic FEC Chair Dara Lindenbaum indicated she was “skeptical” that the FEC has existing authority to regulate AI, but supported publishing the petition in the hope of receiving helpful comments on the issue.  At the August 10 meeting, Commissioner Dickerson, despite voting to publish the petition, reiterated his view that this remains an issue for Congress and noted “serious First Amendment concerns lurking in the background of this effort.”

Partisan divisions in Congress also mean an expansion of the Commission’s authority to encompass AI-generated ads is unlikely to become law anytime soon.  In May, Rep. Yvette Clark (D-NY) introduced the REAL Political Advertisements Act legislation to give the FEC authority to regulate the use of AI in campaign ads.  Senators Amy Klobuchar (D-MN), Cory Booker (D-NJ), and Michael Bennet (D-CO) have also introduced a Senate companion bill.  No Republican Members of Congress have yet cosponsored either bill, nor did any congressional Republicans join 27 of their House and Senate colleagues on a July letter to the FEC urging it to move forward with the rulemaking petition.

The FEC will accept public comments on whether to initiate a rulemaking process until October 16, 2023.  

Introduction

In early 2023, two final judgments in three related intellectual property matters were made public by the Supreme People’s Court of China (the “SPC”).[1] These judgments represent a significant development in the protection and enforcement of intellectual property rights (“IPRs”) in China, with particular implications for foreign-invested enterprises. This article provides a brief review of these high-profile cases and offers recommendations for foreign companies navigating the commercial landscape in China.

The Cases: A Brief Overview

Golden-Elephant Sincerity (“GES”), a foreign-invested chemical company, holds proprietary rights to trade secrets and two patents concerning the production of melamine.[2] In April 2014, it was revealed that Shandong Hualu-Hengsheng Chemical Co., Ltd. (“SHH”) was involved in developing a melamine production line that was strikingly similar to GES’s own design. Mingda Yin, GES’s former chief engineer, was implicated in the unauthorized transfer of confidential information to SHH, raising serious legal and ethical concerns.

Subsequent investigations revealed that Mingda Yin may have provided GES’s confidential information to two additional companies responsible for the design and/or engineering of SHH’s production line, Ningbo Fareast Chemical Group Co., Ltd. and Ningbo AT&M Environmental & Chemical Engineering Design Co., Ltd.

GES, along with other plaintiffs, filed a series of civil lawsuits against the alleged infringers for patent infringement and misappropriation of trade secrets.[3] While the lower courts’ judgments were not entirely favorable to GES, the cases were then appealed to the SPC, and the SPC overruled the judgments of the lower courts and granted enhanced remedies in support of all of the plaintiffs’ requests.

Continue Reading Landmark Judgments in Chinese Intellectual Property Law: Implications and Strategic Considerations for Foreign-Invested Enterprises

Updated August 8, 2023.  Originally posted May 1, 2023.

Last week, comment deadlines were announced for a Federal Communications Commission (“FCC”) Order and Notice of Proposed Rulemaking (“NPRM”) that could have significant compliance implications for all holders of international Section 214 authority (i.e., authorization to provide telecommunications services from points in the U.S. to points abroad).  The rule changes on which the FCC seeks comment are far-reaching and, if adopted as written, could result in significant future compliance burdens, both for entities holding international Section 214 authority, as well as the parties holding ownership interests in these entities.  Comments on these rule changes are due Thursday, August 31, with reply comments due October 2.

Adopted in April, the FCC’s item proposing the new rules also includes an Order requiring all holders of international Section 214 authority to respond to a one-time information request concerning their foreign ownership. Although last week’s Federal Register publication sets a comment deadline for the proposed rules, the reporting deadline for the one-time information request has not yet been established.  However, because the FCC has fulfilled its statutory obligations regarding the new information collection presented by the one-time reporting requirement, carriers — as well as entities holding an ownership interest in these carriers — should prepare for the announcement of the reporting deadline.

The FCC’s latest actions underscore the agency’s ongoing desire to closely scrutinize foreign ownership and involvement in telecommunications carriers serving the U.S. market, as well as to play a more active role in cybersecurity policy. These developments should be of interest to any carrier that serves the U.S. market and any financial or strategic investor focused on the telecommunications space, as well as other parties interested in national security developments affecting telecommunications infrastructure.

Proposed Rule Changes for International Section 214 Authority

The FCC’s proposed changes to its regulation of international Section 214 authorizations generally concern additional compliance, disclosure, and reporting requirements. The FCC’s proposed rule changes are far-reaching, but the most notable of the proposals concern the following:

Continue Reading Comments Due August 31 on FCC’s Proposal to Step Up Review of Foreign Ownership in Telecom Carriers and Establish Cybersecurity Requirements

Germany’s hospital system is reported to be of high quality but is also very expensive by international standards. Hospitals and healthcare payers such as health insurances are exposed to increasing economic constraints. One particular point of criticism is, for example, the current system of Diagnosis Related Group (DRG)-based fees.

Patient treatments are compensated based on the DRGs which effectively leads to a lump-sum payment system per diagnosis (with certain exemptions). This system has pros and cons. As a downside, it is reported to create incentives for over-treatments to generate DRG-based fees per patient.

At the same time, many hospitals in Germany are at risk of closure and insolvency due to financial challenges. The German federal states have thus asked the federal government for financial support to finance the restructuring of the hospital system and prevent hospitals from bankruptcy.

German federal and state governments have been discussing an intended hospital reform for months. Provided that no additional money flows into the healthcare system, the principle for this reform is “outpatient care before inpatient care”. The financial volume incentive shall therefore be minimised and a concentration on larger hospitals and medical institutions shall optimise or at least improve the current structures and quality of medical care in Germany. This shall also be accompanied by a reduction of the general number of hospitals in Germany.

On 10 July 2023, the key objectives of the envisaged hospital reform plans (Eckpunktepapier: Krankenhausreform) have been agreed on: (1) Ensuring security of supply (in particular public responsibility for ensuring the provision of healthcare, so-called “Daseinsvorsorge”), (2) securing and increasing the quality of treatment, and (3) reducing bureaucracy. Particularly, this is to be reflected in the following key measures:

Continue Reading Germany plans significant hospital reform with broad impact on life sciences companies

This note provides highlights of the UK’s recently released and remarkably sweeping Energy Security Bill.  If enacted, the Bill will have profound impacts on energy investments and the pace and scope of the energy transition in the UK.  Before detailing the Bill, some political context may be useful.

The Uxbridge Surprise

Boris Johnson’s resignation as the Conservative MP for Uxbridge triggered a by-election, which Labour had been expected to win.  In the event, however, the Conservatives unexpectedly prevailed by effectively turning the campaign for the Uxbridge seat into a referendum on the popularity of extending London’s Ultra-Low Emissions Zone (ULEZ) – ironically initially proposed by Johnson in 2015 when he was still Mayor of London.

This victory may have led some in the Conservative Party to perceive a chink in Labour’s apparently impregnable opinion poll lead.  Focusing on the energy transition as a factor in the cost-of-living crisis creates a clear political divide between the two parties.  That conclusion which may lie behind recent announcements of policy reviews of car controls in inner cities; and pressure from Conservative members and MPs to drop commitments to ban the sale of hydrocarbon-powered cars by 2030, to phase-out gas boilers by 2035 and to impose energy efficiency targets on landlords.

However, given that, at the same time, we have seen the PM commit to substantial long-term investment in the UK’s first at-scale CCUS project in Aberdeen and the long-awaited and ambitious Energy Security Bill being laid before Parliament, it is fair to say that the UK’s energy policy signals are mixed.

North Sea Oil and Gas Exploration to Continue

On 31 June, PM Sunak announced that his government would award over new 100 oil and gas licences for North Sea oil and gas exploitation under the current 33rd licensing round, (with a commitment to undertake future licensing rounds).  The Energy Minister, Grant Shapps, stated he wanted to “max out” the UK’s remaining reserves of North Sea oil and gas.

The IEA and the UN have argued that no new exploration and development of oil and gas fields should occur if the world is to limit global temperature rises to 1.5C above pre-industrial levels.  Since Labour has aligned its policy on new oil and gas with this position (pledging to ban drilling for new oil and gas projects in the North Sea, whilst allowing existing wells to remain operational), Sunak’s announcement and Shapps’ determination have created a clear policy divide between the two parties.

Armistice in the ‘War on Cars’?

Building on the ULEZ victory, the PM declared himself to be ‘on the side of the car-driver’ and announced a review of low-traffic neighbourhood (LTN) initiatives, including – according to some reports – restrictions on councils’ ability to impose 20mph speed limits, or install bus gates.

Although the PM did renew his commitment to the 2030 deadline for ending the sale of new petrol and diesel cars, that position is already under pressure, with 70% of Conservative Party members and a growing number of Tory MPs and peers reportedly opposing the ban. On 1 August, the Business Secretary told Cabinet colleagues that the Government’s EV targets risked damaging investment in Britain and 30 Conservative MPs signed up to the five pledges of the influential newspaper The Sun on Net Zero – one of which is the postponement of the 2030 ban.

Although Labour’s candidate in Uxbridge distanced himself from the UKEZ policy (and appeared to receive support in doing so from the Labour Leader), it is the poster-child of the Labour Mayor of London. 

Carbon Markets in Turmoil

In June the UK government offered more UK ETS allowances than expected as part of an overall reduction in the Scheme’s emissions cap – in the process making it cheaper for industry to emit greenhouse gases. The Government also announced that it would make 53.5m tonnes of extra allowances — about half a year’s worth of UK emissions covered by the scheme — available between 2024 and 2027 and would exclude domestic shipping from the Scheme until 2026 (two years later than the EU). These developments pushed carbon prices to trade at a steep discount compared with those in Europe – (nearly 40 % below the EU at £47 a tonne in the UK compared with £75.86 in the EU).

Although the change has pushed UK power prices below those on the continental mainland, given the centrality of the UK’s Carbon Market to its Net-Zero plans, the lower price could encourage power generators to burn more gas, whilst having a negative impact on efforts to attract the green investments needed to reduce carbon emissions by expanding renewable energy.

CCUS Ascending

However, in contradistinction to these apparently weaker-emission policy positions, the PM also used his trip to Aberdeen to confirm that the Acorn carbon capture and storage project in north-east Scotland, and Viking in the Humber had been chosen as the third and fourth CCUS clusters in the UK, to be supported by Government funding as a crucial part of the UK’s net zero strategy.  Critics note that although CCUS can be used to support net-zero ambitions, it also favors continued fossil fuel-powered electricity generation.

Energy Security Bill

Meanwhile, in the background, the Government presented its long-awaited UK’s Energy Security Bill (ESB) to Parliament on 6 July. This is an ambitious and complex piece of legislation – more than 300 pages long with 243 clauses and 19 Schedules.  If it passes serenely through Parliament, it could be in force by September.

It is a critical piece of legislation for the UK’s energy transition, including provisions to support energy efficiency, low carbon hydrogen, CCUS and nuclear fusion, as well as laying the foundations for structural regulatory reforms to electricity and heat networks. It also contains provisions affecting upstream oil and gas, electricity networks, fuel sector resilience and energy system governance. And it contains significant new regulator and Government powers which will re-shape the energy sector in the UK.

In response to concerns that the current remit of the UK electricity market Regulator (Ofgem) holds back the development of new wind turbines, cables and other measure, the Bill significantly expands the Regulator’s powers and responsibilities and places it under a legal obligation to assist the UK’s progress towards net-zero. This change will help empower Ofgem to oversee the enormous transformation of the UK’s energy sector required to reach net-zero including by developing flexible retail markets to manage the increasing greater proportion of the UK’s electricity generation which will come from intermittent renewable sources.

Key elements of the Bill include:

  • Increased power to Ofgem

The Bill moves responsibility for energy code governance to newly-created code managers, which will be directly accountable to Ofgem. And gives the Competition & Markets Authority (CMA) power to assess whether a merger between energy network companies would substantially prejudice Ofgem’s price control-setting functions.

  • Heat networks

The Bill also gives Ofgem the power to monitor and intervene in the heat network market. It gives the government powers to introduce heat network zoning as well as price regulations. And it introduces measures allowing developers to access powers equivalent to other utilities such as electricity and gas to scale up heat network infrastructure.

  • Competition in onshore electricity networks

The Bill introduces new enabling powers for Ofgem to tender network projects identified under a new Centralised Strategic Network Plan for delivery by third parties, beyond the existing network owners.

  • Greenhouse gas removal in the UK

The Bill allows for new greenhouse gas removal (GGR) methods to count towards UK carbon budgets and launches a consultation on business models for GGRs.

  • Funding regime for CCUS networks

The Bill creates a basis for a CCUS regulatory regime in the UK. It appoints Ofgem as the regulator and creates a methodology for the provision of financial assistance to network operators and early projects. And creates the basis for decommissioning and insolvency regimes.

  • Financial support for hydrogen and industrial carbon capture (ICC)

The Bill creates the powers which underpin low carbon hydrogen and ICC business models (including to offer hydrogen and carbon capture contracts to projects; organise allocation rounds and establish a hydrogen levy to fund financial support for hydrogen production from 2025).

  • Trials of hydrogen heating

The Bill provides the powers required for full gas grid conversion to 100% hydrogen, including powers for a trial hydrogen village by 2025.

  • Low-Carbon Heat Scheme

The Bill introduces a scheme which will set targets for “scheme participants” in terms of the energy efficiency or carbon intensity of the equipment they supply.

  • New energy market arrangements

The Bill extends the UK energy price cap beyond 2023 and enables the inclusion of smaller suppliers in the energy company obligation (ECO) scheme.

  • Independent System Operator and Planner

The Bill creates a new public body to consolidate operation and planning functions across a range of existing and future power systems into a single institution with operational independence from government to promote efficiency and reduced costs for energy consumers.

  • Enabling multi-purpose interconnectors (MPIs)

The Bill redefines licensable activity under the Electricity Act 1989 as part of the wider Offshore Transmission Network Review, allowing for the operation of MPIs, defined as interconnectors that transmit electricity between the UK and a third country or territory; an offshore generation station and a substation; or between two or more substations. 

  • Delivering a smarter electricity system

The Bill defines electricity storage as a distinct sub-set of generation. It extends powers under the Energy Act 2008 to modify energy licences and codes to enable smart meter roll-out, and provides powers to set requirements for energy smart appliances.

  • Ensuring fuel resilience

The Bill gives the government additional oversight and powers to protect supplies from critical fuel infrastructure sites.

  • Promoting responsible oil and gas investments

The Bill expands the powers of the North Sea Transitional Authority (NSTA) to identify and prevent undesirable changes of ownership and control.

  • New Powers for Offshore Petroleum Regulator for Environment and Decommissioning (OPRED)

The Bill provides for secondary legislation to ensure that the offshore oil and gas environmental regime remains effective. It gives OPRED the power to make legislative changes to cover offshore hydrogen operations; and offshore gas unloading and storage and enables the Government to recover more of the costs associated with regulating offshore oil and gas decommissioning activities from the industry.

  • Incentivising nuclear energy infrastructure

The Bill simplifies nuclear decommissioning and third-party liability regime to align with international standards. It sets out the regulatory regime governing a UK-based geological disposal facility and exempts fusion energy facilities from nuclear site licensing requirements.

  • Improving the energy performance of buildings

The Bill provides the government with a power to amend the assessment, certification, and publication of the energy certificates regime.

Conclusion

With the Conservatives consistently trailing Labour by 20-plus points in polls, the unexpected victory in Uxbridge has given Tory election strategists pause for thought. There is a section of UK society that traditionally votes Conservative for whom rolling back (or slowing down) the implementation of green policies would be popular. And it is tempting to conclude from the Government position on ULEZ and its shift in stance on LTN that Conservative strategists have made the assessment that this is its path to electoral victory next year.

As noted above, the PM has (so far) continued to support the 2030 date for the ban on new petrol and diesel cars.  This position may be explained by concerns that uncertainty about the date could deter EV investment in the UK (cf Tata’s recent announcement of a battery gigafactory in Somerset).  However, in the face of growing opposition in the Conservative Party; concerns that the UK’s electricity infrastructure is not yet capable of supporting a wholesale switch to EV in the short to medium term; and a series of newspaper reports warning that Chinese-produced EVs could be switched off, paralysing UK roads, there are signs of a tentative softening in the official stance with Ministers beginning to emphasise 2035 (the date for the end of the sale of new hybrid vehicles), rather than 2030.

The ambition of the significant changes to the UK’s energy system foreseen in the Government’s own ESB, suggest that if the Government is seeking to water down its green commitments in response to pressure from inside the Conservative Party, it may choose to focus those changes in areas where there is political capital to be made.  Being ‘on the side of the motorist’ plays well with the electorate, especially during a cost-of-living crisis – PM Sunak hinted at this policy shift when he commented that ‘ordinary people’ must not bear the cost of compulsory green initiatives, and that the path to net zero must be “proportional and pragmatic”.

Whilst the shifting position on cars may be explained by short-term politics (the Uxbridge effect), it is also clearly part of an emerging longer term dynamic.  Current record global temperatures, ice-cap melt, wildfires and flooding have demonstrated that the energy transition is urgent and imperative.  But there is also a dawning realisation that the enormous economic cost and physical disruption to individuals and society of pushing ahead with that transition carries an increasingly significant political risk.  

Whereas the US and the EU benefit from broad-based taxpayer-funded subsidy regimes – the Inflation Reduction Act and the Green Industrial Plan respectively – the absence of an equivalent regime in the UK means that the cost burden of the energy transition in the UK is likely to fall more heavily and directly on the UK energy consumer.  This distinction seems destined to sharply test the UK’s political willingness to endure short-term financial (and electoral) pain for more nebulous, distant, difficult to grasp and yet necessary, environmental gain.

On July 18, 2023, Federal Communications Commission (FCC) Chairwoman Jessica Rosenworcel announced that she has circulated a proposal to the FCC’s commissioners to create “a voluntary cybersecurity labeling program that would provide consumers with clear information about the security of their Internet-enabled devices.”

According to the text of her announcement (the proposal itself is not yet available), the proposal “seeks input on issues including the scope of devices for sale in the U.S. that should be eligible for inclusion in the labeling program, who should oversee and manage the program, how to develop the security standards that could apply to different types of devices, how to demonstrate compliance with those security standards, how to safeguard the cybersecurity label against unauthorized use, and how to educate consumers about the program.” 

Chairwoman Rosenworcel also announced a proposed U.S. Cyber Trust Mark logo, which would appear on packaging of products that meet cybersecurity criteria developed by the National Institute of Standards and Technology, alongside a QR code that consumers can scan for more information about the product. If the FCC adopts the proposal after a public comment period, the agency estimates that the new program “could be up and running by late 2024.”

In a new strategy published on July 11, the European Commission has identified Web 4.0 and virtual worlds—often also referred to as the metaverse—as having the potential to transform the ways in which EU citizens live, work and interact.  The EU’s strategy consists of ten action points addressing four themes drawn from the Digital Decade policy programme and the Commission’s Connectivity package: (1) People and Skills; (2) Business; (3) Government (i.e., public services and projects); and (4) Governance.

The European Commission’s strategy indicates that it is unlikely to propose new regulation in the short to medium-term: indeed, European Competition Commissioner Margarethe Vestager has recently warned against jumping to regulation of virtual worlds as the “first sort of safety pad.” Instead, the Commission views its framework of current and upcoming digital technology-related legislation (including the GDPR, the Digital Services Act, the Digital Markets Act and the proposed Markets in Crypto-Assets Regulation) to be applicable to Web 4.0 and virtual worlds in a “robust” and “future-oriented” manner. 

What Are Virtual Worlds and Web 4.0?

The Commission defines virtual worlds as being “persistent, immersive environments, based on technologies including 3D and extended reality (XR), which make it possible to blend physical and digital worlds in realtime, for a variety of purposes.”  It considers Web 4.0 to be the “fourth generation of the World Wide Web,” which will feature “advanced artificial and ambient intelligence, the internet of things, trusted blockchain transactions, virtual worlds and XR capabilities.”  These will enable digital and real objects to integrate and communicate with each other to “seamlessly blen[d] the physical and digital worlds.”  According to Internal Market Commissioner Thierry Breton, the EU will “connect virtual world developers with industry users, invest in the uptake and scale-up of new technologies, and give people the tools and the skills to safely and confidently use virtual worlds.”  The EU is keen to ensure that it establishes itself as a leader in Web 4.0 and virtual worlds, and that the emerging metaverse reflects EU values, principles, and fundamental rights. The strategy is the latest in a series of metaverse-related EU initiatives and announcements.

Continue Reading European Commission Publishes New Strategy on Virtual Worlds

On Sunday, July 16, Russian President Vladimir Putin signed a decree putting shares of Danone Russia JSC, owned by French yogurt maker Danone, and of Baltika Brewing Company, owned by Danish brewer Carlsberg A/S, under “temporary management.”

The Kremlin has since reportedly appointed Yakub Zakriev, deputy prime minister and agriculture minister of Chechnya, as head of the Danone business.[1] Mr. Zakriev has been described as a close ally of Ramzan Kadyrov, the notorious leader of the Chechen Republic, and himself a close ally of President Putin.[2] Meanwhile, Taimuraz Bolloev, a longtime friend of Putin, has been installed as director of Carlsberg’s Baltika business.[3]

These recent seizures follow a decree Putin signed in April, laying the groundwork to expropriate, damage, or otherwise impair the investments of companies from “unfriendly” countries—including the U.S., UK, Canada, all EU member states, Japan, Singapore, and South Korea.[4] This is the second time Russia has used the decree to seize assets. Previously, Russia took control of utilities owned by Finland’s Fortum Oyj and Germany’s Uniper SE.[5]

These Russian actions demonstrate the significant risks for foreign companies that continue to operate in Russia and signal further potential asset seizures, including the possible transfer of foreign assets to regime-friendly owners. Russia’s measures appear to constitute uncompensated expropriations, for which investors could seek redress under Russia’s network of bilateral investment treaties (BITs).[6]

In prior Covington alerts, we have discussed how foreign investors in Russia can protect their investments from Russian retaliatory measures by ensuring that they have access to international arbitration, including through BITs. We also have highlighted certain key protections available under BITs that may provide recourse to foreign investors affected by Russia’s recent measures. In this alert, we focus on those protections under Russian BITs of most direct relevance to foreign investors whose assets have been expropriated or that have had the management of that investment obstructed by Russia’s actions, present and future.

Key Protections in Russian BITs

Russia has BITs in force with over 60 countries, including many EU members (such as Austria, Belgium, Bulgaria, the Czech Republic, Denmark, Finland, France, Germany, Greece, Hungary, Lithuania, Italy, Luxembourg, the Netherlands, Romania, Slovakia, Spain, and Sweden) and countries such as Canada, Japan, Korea, Switzerland, the UK, and Ukraine. There is no BIT between Russia and the United States, but U.S. companies may nonetheless benefit from BIT protection if they hold their investments in Russia through a third country that does have a Russian BIT.

In its BITs, Russia has committed to, among other things, treat investors from the relevant countries in a fair and equitable manner, not to discriminate against such investors on the basis of nationality, not to expropriate their investments except under certain conditions and upon payment of adequate compensation, and to guarantee their right to freely transfer payments related to their investments out of Russia. All of these protections are relevant in the present context.

Continue Reading Protecting Against Russia’s Asset Seizures: Investment Treaties May Provide a Remedy for Foreign Investors

Two speeches by the EU Commission President, Ursula Von de Leyen in March and April 2023, set out the EU’s policy towards China. In late April, the UK Foreign Secretary set out the UK’s emerging strategy and on the same day earlier this month, a UK Government Committee released a report which heavily criticized the UK’s dealings with China and the German Government released its long-awaited (and much-redrafted) China Strategy. 

This blog looks at similarities between the three approaches and what conclusions we might draw about the implications.

EU China Strategy

The EU first labelled China a systemic rival in 2019.  Since then, the European Commission has promoted the idea of “de-risking” the bloc’s most sensitive economic sectors to limit their dependence on China.

In a powerful speech in March 2023 Commission President Ursula Von der Leyen set out the need for the EU to develop its China Strategy.  The new strategy was needed because of what she described as the hardening of China’s overall strategic posture, matched by human rights abuses at home and an increasingly assertive stance in Asia. She was careful to note that the EU’s position on China would depend on how China interacts with ‘Putin’s war’ and how China meets international human rights obligations.  President Von der Leyen labelled as deliberate Chinese policies of disinformation and economic and trade coercion, saying they were used to target ‘countries to ensure they comply and conform’.

The tone of President Von der Leyen’s speech was set against the EU’s assessment that a newly assertive China was moving from an era of ‘reform and opening’ to one of ‘security and control’ whose purpose was ‘a systemic change of the international order [to place] China at its centre’.  In her speech, The Commission President noted that ‘all companies in China…are…obliged … to assist state intelligence-gathering operations and to keep it secret’. President Von der Leyen concluded that Chinese focus on military, tech and economic security would increasingly trump the appeal of free markets and open trade.

However, President Von de Leyen made clear that the EU did not seek to ‘cut economic, societal, political or scientific ties’, but rather to ‘rebalance the relationship on the basis of transparency, predictability and reciprocity.’ Using language reminiscent of President Macron’s call for the EU to seek greater ‘strategic autonomy’, President Von der Leyen argued that the new relationship would require the EU’s economy and industry to be more competitive and resilient in the cyber and maritime, space and digital, defence, innovation, health, digital and clean-tech sectors. President Von der Leyen pointed to the Net-Zero Industry and the Critical Raw Materials Acts as examples of the EU’s determination to respond to Chinese domination of these critical sectors.

Continue Reading China and Europe: De-Risking the Relationship

This quarterly update summarizes key legislative and regulatory developments in the second quarter of 2023 related to key technologies and related topics, including Artificial Intelligence (“AI”), the Internet of Things (“IoT”), connected and automated vehicles (“CAVs”), data privacy and cybersecurity, and online teen safety.

Artificial Intelligence

AI continued to be an area of significant interest of both lawmakers and regulators throughout the second quarter of 2023.  Members of Congress continue to grapple with ways to address risks posed by AI and have held hearings, made public statements, and introduced legislation to regulate AI.  Notably, Senator Chuck Schumer (D-NY) revealed his “SAFE Innovation framework” for AI legislation.  The framework reflects five principles for AI – security, accountability, foundations, explainability, and innovation – and is summarized here.  There were also a number of AI legislative proposals introduced this quarter.  Some proposals, like the National AI Commission Act (H.R. 4223) and Digital Platform Commission Act (S. 1671), propose the creation of an agency or commission to review and regulate AI tools and systems.  Other proposals focus on mandating disclosures of AI systems.  For example, the AI Disclosure Act of 2023 (H.R. 3831) would require generative AI systems to include a specific disclaimer on any outputs generated, and the REAL Political Advertisements Act (S. 1596) would require political advertisements to include a statement within the contents of the advertisement if generative AI was used to generate any image or video footage.  Additionally, Congress convened hearings to explore AI regulation this quarter, including a Senate Judiciary Committee Hearing in May titled “Oversight of A.I.: Rules for Artificial Intelligence.”

There also were several federal Executive Branch and regulatory developments focused on AI in the second quarter of 2023, including, for example:

  • White House:  The White House issued a number of updates on AI this quarter, including the Office of Science and Technology Policy’s strategic plan focused on federal AI research and development, discussed in greater detail here.  The White House also requested comments on the use of automated tools in the workplace, including a request for feedback on tools to surveil, monitor, evaluate, and manage workers, described here.
  • CFPB:  The Consumer Financial Protection Bureau (“CFPB”) issued a spotlight on the adoption and use of chatbots by financial institutions.
  • FTC:  The Federal Trade Commission (“FTC”) continued to issue guidance on AI, such as guidance expressing the FTC’s view that dark patterns extend to AI, that generative AI poses competition concerns, and that tools claiming to spot AI-generated content must make accurate disclosures of their abilities and limitations.
  • HHS Office of National Coordinator for Health IT:  This quarter, the Department of Health and Human Services (“HHS”) released a proposed rule related to certified health IT that enables or interfaces with “predictive decision support interventions” (“DSIs”) that incorporate AI and machine learning technologies.  The proposed rule would require the disclosure of certain information about predictive DSIs to enable users to evaluate DSI quality and whether and how to rely on the DSI recommendations, including a description of the development and validation of the DSI.  Developers of certified health IT would also be required to implement risk management practices for predictive DSIs and make summary information about these practices publicly available.
Continue Reading U.S. Tech Legislative & Regulatory Update – Second Quarter 2023