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Your Guide to the Proposal for the Cybersecurity Act 2: security of ICT supply chains (16 February 2026)

Mon, 16 Feb 2026 08:31:33 GMT

On 20 January 2026, the European Commission published a Proposal for a Regulation of the European Parliament and of the Council on the European Union Agency for Cybersecurity (ENISA), the European cybersecurity certification framework, and ICT supply chain security and repealing Regulation (EU) 2019/881 (“ The Cybersecurity Act 2 ”).

The Cybersecurity Act 2 covers three key areas: 1) rules and organisation matters relating to ENISA; 2) the creation of European cybersecurity certification schemes to ensure an adequate cybersecurity level for ICT products, ICT services, ICT processes, managed security services and the cybersecurity posture of EU entities; and 3) rules relating to a trusted ICT supply chain framework.

This Guide focuses on the trusted ICT supply chain framework and its potential impact on businesses. All references to Articles below refer to the Cybersecurity Act 2 unless stated otherwise. As this is only a proposal, the final obligations may differ.

Trusted ICT supply chain framework

The trusted ICT supply chain framework will offer a security mechanism at the EU level to tackle non-technical risks in sectors of high criticality and other critical sectors as referred to in Annex I and Annex II to the Directive (EU) 2022/2555 on measures for a high common level of cybersecurity across the Union (“ NIS2 Directive ”). Non-technical risks are defined as the “ likelihood of the supplier being subject to influence by a third country with the potential to cause loss or disruption of the service provided or to compromise the product manufactured by an entity or to lead to exfiltration of data, including for the purposes of espionage or revenue generation ”. (Article 2(42))

The framework aims to protect critical sectors from third-country influence by identifying key ICT assets in critical ICT supply chains and imposing mitigation measures where necessary.

Security risk assessments

The European Commission or a group of three or more EU Member States may request the NIS Cooperation Group to conduct an EU coordinated security risk assessment. In the event of a significant cyber threat, the European Commission may conduct a security risk assessment taking into account the consultation with the EU Member States. (Articles 99(1) and 99(3)) The security risk assessment will encompass the proposed identification of key ICT assets, main threat actors, risks and vulnerabilities impacting such assets. It will also formulate risk scenarios and suggest mitigation measures. (Articles 99(1) and 99(3)(b))

Identification of key ICT assets

Where security risk assessments identify significant cybersecurity risks in relation to an ICT supply chain, the European Commission may adopt implementing acts identifying key ICT assets used by sectors of high criticality and other critical sectors under the NIS2 Directive to manufacture products or provide services (Article 102).

Mitigation measures in the ICT supply chain

The European Commission may adopt implementing acts prohibiting certain types of entities in sectors of high criticality and other critical sectors from using, installing or integrating ICT components from high-risk suppliers in key ICT assets. (Article 103). A similar prohibition exists for providers of mobile, fixed and satellite electronic communications networks (Article 111(1)).

The European Commission may oblige certain entities in sectors of high criticality and other critical sectors to implement mitigating measures in their ICT supply chain especially in relation to key ICT assets. These may include transparency requirements, prohibition on the transfer of data to third countries, audits, restrictions on contractual relations and diversification of ICT components supply. (Article 103(2)).

Identification of high-risk suppliers and consequences of the listing

The European Commission will establish lists of high-risk suppliers that could be subject to mitigation measures provided above. In assessing suppliers, the European Commission will investigate the place of establishment as well as the ownership and control structure. (Article 104(4)).

Listing may result in, amongst others, exclusion from EU public procurement procedures and EU funding programmes.

Designation of third countries posing cybersecurity concerns

The European Commission may designate third countries posing cybersecurity concerns to ICT supply chains. In doing so, it will take into account, amongst others, laws and practices in such third country that require entities in their jurisdiction to inform the authorities of software or hardware vulnerabilities before such vulnerabilities are known to have been exploited, substantiated information concerning incidents of threat actors controlled from such third country or conducting its operations from that third country to implement malicious cyber activities. (Articles 100(1) and 100(2))

Entities established in or controlled by entities from the designated third country may request for an exemption from being subject to the prohibitions imposed on entities from sectors of high criticality and other critical sectors on the use, installation or integration of its ICT components in key ICT assets and from being subject to the prohibition on participation in public procurement procedures. (Article 105(1))

Penalties

Violation of the prohibition to use, install or integrate ICT components from high-risk suppliers could result in a fine of a maximum of 7% of the total worldwide annual turnover in the preceding financial year. Violation of mitigation measures could result in a fine of a maximum of 1-2% of the total worldwide annual turnover in the preceding financial year, depending on the measure concerned.

How it may impact businesses

Companies operating in sectors of high criticality and other critical sectors may face disruption in their ICT supply chain and increased costs if suppliers are listed as high-risk and/or the sourcing countries are designated, particularly where alternative ICT components are limited. In some cases, product or service redesign may be required.

Subject to the final text, companies should consider mapping in-scope suppliers, reviewing contractual arrangements, and assessing data transfer and remote data processing practices to prepare mitigation strategies and compliance processes.

ICT components suppliers from third countries may face restrictions on access to the EU market if listed as high-risk. Although the right to be heard and exemption procedure exist, the process may be time-consuming.

The operational implications are likely to follow three main lines:

Supplier risk exposure : companies active in critical sectors will need to factor jurisdictional and ownership risk into vendor selection and supply-chain design.
Compliance integration : ICT due diligence will extend beyond technical assurance and certification into governance, legal-environment and control-structure assessments.
Supervisory enforcement : mitigation obligations adopted through implementing acts will feed into national oversight, with associated compliance and liability consequences (likely to lead to enforcement divergence).

In this sense, the trusted ICT supply chain framework illustrates how EU cybersecurity regulation is becoming structurally intertwined with questions of resilience, strategic autonomy and security of supply, a trajectory that is likely to shape both legislative negotiations and downstream compliance practice.

Next steps in the legislative process and indicative adoption timing

The Cybersecurity Act 2 is in the ordinary legislative procedure. As of early February 2026, the file has formally entered the Parliament’s preparatory phase, with technical examination ongoing in the Council. Adoption is currently expected in late 2026 or in 2027.

Trusted ICT supply chain framework – positioning within the Cybersecurity Act 2

The trusted ICT supply chain framework introduced in the Cybersecurity Act 2 adds a distinctly geopolitical and security-policy layer to EU cybersecurity law. Whilst the original Cybersecurity Act focused primarily on technical assurance and certification, the revision moves into risk governance linked to third-country exposure, supplier influence and systemic dependency in critical sectors.

From a legal-policy perspective, the framework reflects a wider evolution in EU digital legislation: cybersecurity risk is no longer treated solely as a technical or resilience question, but increasingly as a matter of economic security and systemic dependency management.

The developing regime around high-risk supplier identification is particularly illustrative of this shift. Whilst the detailed listing mechanics and consequences are still being shaped legislatively, the EU’s approach makes clear that participation in sensitive ICT ecosystems may become contingent on security, governance and jurisdictional risk considerations, not only on technical performance or certification status.

More broadly, the framework signals that EU cybersecurity law is moving closer to the EU’s wider economic security agenda. Legislative instruments are increasingly designed to manage exposure to external influence, strategic dependencies and systemic vulnerabilities across critical sectors.

For information on how the Cybersecurity Act 2 could impact your business or economic operators in your country, please contact Yapa Thepkanjana at yapa.thepkanjana@acquislp.eu and Patrick Mascott at patrick.mascott@acquislp.eu.

EU Anti-Coercion Instrument - ACQUIS

Tue, 20 Jan 2026 11:11:01 GMT

EU–US trade tensions and the anti-coercion instrument: a new risk scenario for economic operators

On 18 January 2026, transatlantic trade relations took a volatile turn. After U.S. President Donald Trump threatened steep new tariffs on certain European goods, in an attempt to pressure EU allies during a geopolitical dispute over Greenland, European leaders swiftly condemned what they viewed as an act of economic coercion. French President Emmanuel Macron even urged the EU to activate its brand-new Anti-Coercion Instrument (“ ACI ”) for the first time, underscoring the gravity of the situation. EU officials are now openly discussing countermeasures, signaling, in President Macron’s words, that Europe “will not be blackmailed” [1] .

The EU’s new anti-coercion instrument: purpose and legal basis

The ACI is the European Union’s latest trade-defence tool, created specifically to deter and counter economic coercion by non-EU countries [2] . Established by Regulation (EU) 2023/2675 [3] , which entered into force on 27 December 2023, the instrument was prompted by recent cases of countries using trade or investment restrictions to influence EU policy choices or interfere with the EU’s sovereign decision-making [4] . The ACI was conceived in response to concrete instances of economic coercion, most notably China’s trade restrictions targeting Lithuania in 2021 following Lithuania’s decision to deepen relations with Taiwan [5] .

The legal basis for the ACI is Article 207 of the Treaty on the Functioning of the EU, which empowers the Union to act in the realm of common commercial policy (i.e. trade measures). The ACI’s objectives also align with Article 21 of the Treaty on European Union, which calls on the EU to uphold its interests and values in external action, including respect for international law. In essence, the ACI gives the EU a unified option, often described as a “big bazooka”, to defend itself and its Member States against economic blackmail, with the primary goal of deterrence [6] .

How the ACI works and when it can be activated?

Activation of the ACI follows a structured process. First, the European Commission examines the situation (on its own initiative or after a complaint) to determine if a third country’s actions amount to economic coercion. If the facts warrant it, the Commission will formally propose a decision, and the Council of the EU (by qualified majority) swiftly determines that the EU or a Member State is indeed facing coercion. Once such a determination is made, the Commission engages with the offending country to try to resolve the issue through dialogue (for example, negotiations, mediation, or other diplomatic avenues). Only if these good-faith efforts fail to halt the coercion by a set deadline would the EU resort to response measures under the ACI framework.

Even then, the instrument is wielded carefully: any countermeasures must adhere to international law (treating them as lawful countermeasures to the other side’s unlawful pressure) and are calibrated based on objective criteria such as effectiveness and minimizing collateral damage to European interests.

Potential countermeasures and impact on EU businesses

If the ACI is deployed against the U.S. in this case, EU countermeasures could span a wide range of economic sectors. The regulation explicitly empowers the Commission to impose restrictions on access to the EU market and other economic disadvantages for the third country. In practice, this means the EU can choose from an extensive menu of options, such as: increased tariffs or quotas on U.S. goods, limits on or blocking trade services and foreign direct investment from the U.S., exclusion of U.S. firms from public procurement contracts, restrictions related to financial markets, suspension of certain intellectual property rights, or even export controls on sensitive items. These measures can be general or targeted: for instance, they might single out specific industries, companies, or products where U.S. economic interests are most exposed in Europe. The aim would be to pressure Washington to back down by hitting politically sensitive U.S. exports and investments, while avoiding undue harm to EU businesses and consumers. Indeed, the Commission is required to consult stakeholders and Member States to tailor any response measures, seeking to protect European supply chains and keep costs for EU operators as low as possible.

Activating the ACI does not itself impose any obligations on private companies. However, businesses should be alert to the potential knock-on effects of any ACI countermeasures if the situation escalates. New tariffs or import restrictions could raise costs for importers or exporters of affected goods. Service providers might face new barriers or competition shifts if transatlantic digital or financial services are curbed. Companies that partner with U.S. firms (for example, in government procurement, tech, or aerospace projects) could see eligibility rules change if U.S. bidders are restricted.

An unusual test case: ACI against a major economic partner

President Trump’s tariff gambit puts the EU’s brand-new Anti-Coercion tool to an unprecedented test. While the ACI was primarily designed with other scenarios and other geopolitical players in mind, it was likely not anticipated that its first potential use would involve the United States, a major economic partner and the world’s largest economy.

Deploying the ACI against the United States would carry a significant risk of escalation, which explains why EU leaders have so far adopted a cautious tone. While there is broad political consensus that the EU should not accept economic coercion, several Member States have emphasised that any response must remain measured and proportionate (particularly Germany, whose economy is structurally more exposed to transatlantic trade [7] ).

Nevertheless, the fact that the EU is openly considering the ACI signals a new assertiveness in Europe’s trade policy. It serves notice that even the U.S. could face countermeasures under this framework if it were to follow through on coercive tariffs. For businesses across Europe, this development is a reminder of how quickly trade policy risks can materialize. The activation (or even just the threat of activation) of the ACI in this context is highly unusual, but it demonstrates the EU’s resolve to protect its Member States’ sovereign choices. Should the EU formally trigger the ACI process, companies would be well advised to stay informed on the specific measures proposed and assess their exposure. While hoping that cooler heads prevail and the ACI’s big stick remains sheathed, European operators should be prepared for potential fallout across sectors (from agriculture to tech to finance) as the EU and U.S. navigate this delicate episode. The coming weeks will indicate whether diplomatic engagement is sufficient, or whether the EU’s new trade-defence instrument will see its first concrete application in a transatlantic context.

[1] See multiple press coverage, notably https://www.politico.eu/article/macron-to-urge-eu-to-use-trade-bazooka-in-response-to-trumps-tariffs/

[2] Protecting against coercion - Trade and Economic Security

[3] Regulation 2023/2675 on the protection of the European Union and its Member States from economic coercion.

[4] European Commission, Proposal for a Regulation on the protection of the Union and its Member States from economic coercion by third countries, COM(2021) 775 final.

[5] See multiple press coverage, notably China-Lithuania Tensions Boil Over Taiwan - Jamestown

[6] See the Q&A regarding the Anti-Coercion Instrument - Trade and Economic Security , Question 1.

[7] See notably https://www.politico.eu/article/berlin-and-paris-to-negotiate-joint-response-to-trumps-tariff-threat-germanys-merz/

Your Guide to CBAM: Implications for EU importers and non-EU producers (12 January 2026)

Tue, 13 Jan 2026 13:29:52 GMT

Your Guide to CBAM: Implications for EU importers and non-EU producers (12 January 2026)

The EU’s Carbon Border Adjustment Mechanism (“CBAM”) has entered its definitive phase, fundamentally reshaping the regulatory framework governing imports of carbon-intensive goods into the European Union (“EU”). CBAM was established by Regulation (EU) 2023/956 of the European Parliament and of the Council of 10 May 2023 establishing a carbon border adjustment mechanism (“Regulation (EU) 2023/956”) and constitutes a central pillar of the EU’s climate policy under the European Green Deal. Its objectives are to prevent carbon leakage, incentivise decarbonisation in third countries, and ensure fair competition with EU producers subject to the EU Emissions Trading System (“ETS”). Unless otherwise stated, all references to Articles and Annexes below are to Regulation (EU) 2023/956.

Timeline and recent simplifications

CBAM entered into force on 17 May 2023. There was a transitional period from 1 October 2023 until 31 December 2025 during which EU importer’s obligations were limited to reporting requirements. The definitive CBAM regime, under which financial obligations, including the purchase and surrender of CBAM certificates come into effect, applies from 1 January 2026 (Articles 32-35).

In October 2025, the EU adopted targeted amendments aimed at simplifying the implementation of CBAM. In particular, a single de minimis mass-based threshold of 50 tonnes of CBAM-covered goods per importer per calendar year was introduced. Importers below this threshold are exempt from CBAM obligations. However, this exemption does not apply to imports of electricity or hydrogen, which remain fully subject to CBAM regardless of volume (Article 2a).

Products covered and possible future expansion

CBAM currently applies to imports of goods listed in Annex I from six sectors namely:

cement;

iron and steel;

aluminium;

fertilisers;

electricity; and

hydrogen.

On 17 December 2025, the European Commission proposed an expansion of the list of goods subject to CBAM, to include approximately 180 specific steel- and aluminium-intensive downstream products, such as industrial supply-chain components used in heavy machinery, as well as certain household goods as from 2028. Additional anti-circumvention measures to enhance CBAM effectiveness were also proposed by the European Commission, including targeted additional reporting obligations and requirements to provide additional evidence where there is a high risk of abusive practices.

Key legal obligations

EU importers must:

apply for and obtain the status of “authorised CBAM declarant” before importing CBAM-covered goods where:

imports exceed 50 tonnes per calendar year; or
any quantity of electricity or hydrogen is imported (Article 5).

Under certain conditions, an indirect customs representative may act as an authorised CBAM declarant for an EU importer and will be subject to the obligations under Regulation (EU) 2023/956 applicable to that EU importer:

calculate and declare embedded greenhouse gas emissions. The first annual CBAM declaration must be submitted in 2027 for the calendar year 2026, and must be submitted by 30 September of each year for the preceding calendar year. (Articles 6 and 7) If applicable, the declared total embedded emissions must be verified by an accredited verifier (Article 8);

maintain records of information required for the calculation of embedded emissions, including, if applicable, any reduction in the number of CBAM certificates claimed due to carbon price paid in a third country, for four years after the calendar year in which the CBAM declaration was submitted (Articles 7(5) and 9 and Annex V); and

purchase and surrender CBAM certificates corresponding to declared emissions. EU Importers must surrender CBAM certificates via the CBAM registry by 30 September of each year, starting for the first time in 2027 for the year 2026. EU Member States will sell CBAM certificates through a common central platform as from 1 February 2027 (Articles 20 and 22).

Non-EU producers, whilst not directly subject to CBAM obligations, are essential to effective CBAM compliance in practice. They must calculate embedded emissions using EU-prescribed methodologies and provide accurate, complete and verifiable emissions data to EU importers.

Suggested actions for business operators

EU importers should:

identify whether imported goods fall within Annex I and the relevant CN codes;
determine whether imports exceed the 50-tonne threshold or involve electricity or hydrogen, triggering mandatory CBAM authorisation;
apply for CBAM authorisation via the CBAM Registry (Article 5(3));
engage suppliers early to secure CBAM-compliant and verifiable emissions data;
establish internal processes for reporting, record-keeping, and financial planning relating to CBAM certificate costs; and
closely monitor CBAM-related developments, including legislative amendments and any potential future extension of scope under Regulation (EU) 2023/956.

Non-EU producers should:

identify EU-bound products within the CBAM scope;
implement systems to measure and document embedded emissions in line with EU rules;
ensure emissions data are verifiable; and
assess decarbonisation measures to reduce CBAM exposure and maintain EU market access.

For more information on how CBAM could impact your business or economic operators in your country, please contact Yapa Thepkanjana at yapa.thepkanjana@acquislp.eu .

Yapa Thepkanjana joins the Team

Tue, 06 Jan 2026 10:32:46 GMT

ACQUIS New Team Member

Acquis is pleased to welcome Yapa Thepkanjana, who joins the firm with extensive experience in EU regulatory law.

Yapa advises on a wide range of EU regulatory matters, including sustainability and ESG regulation, digital regulation, pharmaceuticals, food and consumer products, and international trade. Based in Brussels, she has supported clients in navigating complex regulatory frameworks and assessing the impact of EU law on market access and compliance strategies. She has also assisted clients in crafting and implementing advocacy strategies, including engagement vis-à-vis EU institutions, EU Member State authorities, and Thai authorities.

She has trained and practised at leading international law firms in Brussels and has also gained in-house experience, giving her a practical, commercially focused approach to EU regulatory and advocacy advice.

Yapa holds an LL.M. in Corporate Governance and Practice from Stanford Law School, where she was a Jean Monnet EU Law Research Fellow and published academic research on EU regulatory and sustainability law. Yapa is admitted to practise in England & Wales, Ireland, New York, the District of Columbia, and Brussels (E List).

Acquis is delighted to welcome Yapa and looks forward to her contribution to the firm’s EU regulatory practice.

Associate (Lawyer) – EU sanctions and export control (Belgian qualified)

erik@ter-bank.be (Erik De Boeck) — Mon, 03 Feb 2025 16:47:18 GMT

Location: Brussels Belgium

Responsibilities:

Advise clients on compliance with EU sanctions regulations and export control requirements.
Advise and represent clients before the Belgian and EU Courts and collaborating with counsel representing clients in other EU Member States.
Assist in the development and implementation of compliance programs for clients.
Stay abreast of changes in EU sanctions and export control laws and regulations and Belgian procedural law.
Collaborate with senior lawyers to provide strategic legal advice to clients.

Qualifications and experience:

Law degree and admitted to practice law in Belgium.
2-4 years Practical experience in EU sanctions and export control law.
Proven knowledge and experience in Belgian procedural and commercial law.
Prior experience in EU institutions (EU Commission, Council, CJEU) in the field of sanctions would be a distinct plus.
Excellent research, analytical, and drafting skills.
Effective communication and interpersonal skills.
Ability to work collaboratively in a team and independently.

Compensation and benefits:

We offer a competitive remuneration and benefits package based on experience, and performance, combined with the opportunity to work on cutting edge-legal matters and cases in the field of sanctions and export control in a multinational team, with excellent training and growth opportunities.

How to Apply: Interested candidates should submit a resume, cover letter, and transcripts to info@acquislp.eu. Please include "Associate – EU Sanctions and export control " in the subject line of the application form. The application deadline is 20 February 2025 but early applications may be contacted on a rolling basis.

ACQUIS is an equal opportunity employer. We encourage applications from candidates of all backgrounds.

European Commission-designate Hearings: Key Takeaways on Trade, Sanctions, Digital and Enlargement Policy

Thu, 14 Nov 2024 10:30:00 GMT

Insights From Commissioner-designate hearings on the Future of EU Policy:

Trade, Sanctions, Digital, and Enlargement

The confirmation of the new European Commissioners by the European Parliament (EP) has been postponed due to disagreements between the two largest political groups, the S&D and EPP. Despite the delay, all Commissioner-designates have presented their views and priorities on key issues within their respective portfolios. In general, all the Commissioner-designates were fully aligned with their Mission Letters that they received from Commission President-elect Ursula von der Leyen. They all made systematic reference to the Draghi Report on competitiveness and innovation and stressed the EU's priority to comply with and enforce the core values of the EU, including democracy, human rights, the rule of law and international law.

In this briefing, we have summarized the most significant takeaways from the hearings, focusing on the EU’s evolving trade, sanctions, digital, and enlargement policies for the next five years. Since these policy areas often overlap across portfolios, the insights provided are drawn from multiple hearings.

Trade Policy

Commissioner-designates shared a common perspective that the EU’s core trade priorities lie in finalising Free Trade Agreements (FTA) with key regions, such as Mercosur, India and Thailand, as well as modernising existing agreements with Mexico and Australia. Maroš Šefčovič, the Commissioner-designate for Trade and Economic Security, underscored the importance of strengthening EU trade defence mechanisms to combat economic coercion, promoting a level playing field, and integrating environmental standards into trade practices. Similarly, Wopke Hoekstra, the Commissioner-designate for Climate, Net Zero, and Clean Growth, highlighted the need to align trade policies with climate goals to ensure sustainable growth.

Together with Valdis Dombrovskis, the Commissioner-designate for Economy and Productivity, Šefčovič stressed the urgency of reinforcing EU trade defence mechanisms to counter rising global competition and economic pressures. Both nominees advocated for a free and fair trade framework, rejecting the weaponisation of trade, including measures such as economic coercion and unilateral restrictions, citing China's recent rare earth export limitations as an example. Šefčovič also emphasized the importance of diversifying Foreign Direct Investment (FDI) and integrating trade with climate policy to support sustainable economic growth.

Addressing the issue of critical raw materials, Šefčovič proposed the establishment of a new EU Raw Materials Agency—drawing inspiration from Japan—to secure reliable global access to these resources. Additionally, he suggested creating a new EU Customs Authority to streamline trade processes while balancing openness with enhanced security measures.

Sanctions Policy

The enforcement and circumvention of EU sanctions, particularly those targeting Russia, emerged as a central theme during the hearings. Michael McGrath, the Commissioner-designate for Democracy, Justice, and the Rule of Law, Kaja Kallas the High Representative for Foreign Affairs and Security Policy and Vice-President of the European Commission, and Maroš Šefčovic all reiterated the importance of coordinated sanctions to uphold EU values and international law. emphasized the critical role of coordinated sanctions in upholding EU values and international law. Discussions included plans to operationalize the Anti-Money Laundering Authority (AMLA) to bolster financial oversight and prevent sanctions violations. Additionally, some nominees advocated for leveraging sanctions as a tool to enforce environmental standards, underscoring the need for coordinated actions against non-compliant entities.

Kaja Kallas reaffirmed the EU’s commitment to enforcing existing sanctions against Russia, signaling that further measures could be introduced in 2025. To address sanctions circumvention, she proposed stricter oversight of EU companies and suggested repurposing frozen Russian assets for Ukraine’s reconstruction, emphasizing that such actions align with international law.

Kallas also expressed concerns about China’s role in supporting Russia, particularly regarding sanctions evasion, and stressed the importance of close coordination with the United States. The Commissioner-designates further acknowledged the need to address sanctions circumvention by non-EU countries, indicating that future sanctions could expand beyond Russia to include Belarus and entities involved in violations in the West Bank.

Digital Policy

Commissioner-designates emphasised that digital transformation remains a cornerstone of the EU’s strategy to boost competitiveness, resilience, and security. Ekaterina Zaharieva, Commissioner-designate for Startups, Research, and Innovation, and Maria Luís Albuquerque, Commissioner-designate for Financial Services and the Savings and Investments Union, highlighted the critical need for investments in emerging technologies such as AI, blockchain, and cybersecurity to drive innovation and regulatory progress. Finalising the Capital Markets Union and expanding digital finance infrastructure were noted as essential steps toward fostering a strong and competitive digital economy. Digital sovereignty emerged as a cross-cutting priority, with nominees like Kaja Kallas advocating for robust cybersecurity measures and reducing dependencies on foreign technologies.

Maria Luís Albuquerque underscored the EU’s ambition to integrate AI into digital and sustainable finance, particularly within initiatives like the Capital Markets Union and the evolving EU Banking Union. She characterized AI as both a catalyst for innovation in financial services and a technology requiring diligent oversight to mitigate risks related to security, data protection, and regulatory compliance. Albuquerque also introduced the concept of a “Savings and Investment Union,” potentially supervised by the European Central Bank (ECB), where AI could enhance operational efficiency and strengthen oversight mechanisms. This approach aims to align digital innovation with financial sustainability and governance.

Enlargement

Marta Kos, the Commissioner-designate for Enlargement, Dubravka Šuica, the Commissioner-designate for the Mediterranean, and Kaja Kallas all stressed that EU enlargement remains a “geostrategic priority” and reaffirmed the commitment to a merit-based approach for candidate countries.

The nominees identified Montenegro and Albania as the most likely candidates for EU accession by 2026–2027, with other countries, including Ukraine, projected to join closer to 2030. They emphasized that measurable progress in areas such as good governance, anti-corruption efforts, and reform implementation will be critical for advancing along the accession path. Kos and Kallas also acknowledged the institutional challenges posed by enlargement, particularly in light of the EU’s already strained decision-making process. Both hinted at the necessity of Treaty reforms, including the potential adoption of Qualified Majority Voting (QMV), to facilitate more efficient consensus-building on future accessions.

Q&A with Coline Cauvin: Banks and other FIs must continuously refine their compliance measures to effectively detect and prevent any potential breaches.

Tue, 15 Oct 2024 08:45:00 GMT

Coline Cauvin joined ACQUIS as a Senior Associate in March 2024, strengthening our sanctions & compliance practice and presence in Paris. She further diversifies our sanctions and export control capabilities by bringing substantial expertise in advising financial institutions and international clients on compliance and enforcement-related matters.

You previously worked at a Big4 law firm in Paris, what were the main factors behind your decision to join ACQUIS?

Coline: Joining ACQUIS felt like the perfect step forward in my career, especially given my focus on international sanctions law. I was drawn to Acquis’s reputation as a boutique firm that excels in this niche field. My decision was also influenced by the opportunity to grow within a firm that is also engaged in EU regulatory affairs and policy advisory. The firm’s Brussels headquarters offers proximity to the heart of EU policy- and decision-makers, providing an invaluable strategic advantage for staying ahead in the rapidly evolving sanctions landscape.

With ACQUIS, I can also leverage my French and US (New York) dual qualifications offering comprehensive advice on complex projects involving both EU and US sanctions matters. The chance to contribute to ACQUIS’s mission of providing expert guidance on the complexities of sanctions while also advancing my professional development made joining the firm an ideal choice.

You regularly advise financial institutions on sanctions compliance issues. In your opinion, what are the main challenges faced by the financial sector in this field?

Coline: Sanctions regulations are evolving rapidly and increasingly intricate, often changing with little warning to sectoral players. This creates significant challenges for financial institutions, particularly when it comes to designing and maintaining effective sanctions compliance programs and screening systems that can keep up with these changes. The importance of reliable, up-to-date data is essential for monitoring transactions and ensuring compliance.

Through my experience assisting banking clients during regulatory controls by French supervisory authorities, I have witnessed firsthand the stringent expectations they have for compliance programs. Enforcement authorities are increasingly focused on scrutinizing underlying transactions, not just asset freezes. As the primary gatekeepers of sanctions compliance, financial institutions are expected to perform additional controls and enhance their due diligence to spot sanctions breaches by other industries, including sanctions circumvention. This heightened responsibility means that banks and other FIs must continuously refine their compliance measures to effectively detect and prevent any potential breaches.

What are the specifics of French sanctions enforcement and how does it compare with the rest of the EU?

Coline: French sanctions enforcement is particularly centralised, which makes it stand out compared to a more fragmented regulatory landscape in other EU Member States. The French Treasury (Direction Générale du Trésor, or DGT) is at the forefront, ensuring that compliance with both French and EU sanctions is strictly observed. In addition, most recently, the French customs authorities have also been stepping up their enforcement efforts, as seen in their shutdown of a sanctions circumvention operation in May 2024 [1] . This shows a growing trend toward more active enforcement across different agencies.

In addition to the DGT, the Autorité de Contrôle Prudentiel et de Résolution (ACPR) plays a critical role, especially in overseeing financial institutions (FIs). The ACPR conducts investigations and can take enforcement actions if it finds that a financial institution’s asset freeze compliance program is not strong enough, even if no breach of asset freeze measures has occurred yet. Additionally, the ACPR, along with the DGT, have issued important guidelines on asset freezes that the financial industry must adhere to.

While France’s enforcement system is more centralized than in other EU Member States, other authorities like the customs and the ACPR are increasingly proactive in their respective areas. This also creates challenges for businesses operating across multiple EU jurisdictions, as they need to navigate the different regulatory actors and, sometimes, their varying interpretations and requirements.

As a dual-qualified lawyer, you advise clients on EU and US sanctions matters. How do you see the future of US and EU sanctions?

Coline: Looking ahead, I think sanctions will become even more targeted and sophisticated, focusing on specific sectors and individuals. This will create new challenges for businesses, especially those that must navigate both US and EU regulations, which are sometimes aligned but not identical.

The recent sanctions on Russia have demonstrated an unprecedented level of coordination between the US and the EU, along with the G7, setting a new standard for coordination and collaboration – see, for instance, the recently issued G7 Industry Guidance as a point in case. In the future, this approach could lead to more effective and synchronised measures, allowing businesses to adopt a more holistic approach to sanctions compliance and export controls.

Additionally, while this unified approach has worked regarding Russia sanctions, it may not extend as smoothly to other countries like, for instance, China. While we have seen increasing tensions and the potential for more targeted economic security measures, the EU and the US might have different interests and views. Having worked extensively on both EU and international sanctions, I feel well-prepared to guide clients through this increasingly complex landscape. As sanctions regulations continue to evolve, I’m excited to support clients navigating these changes and ensure they remain compliant while achieving their business goals.

[1] CP-Lutte_contournement_sanctions_prises_encontre_Russie.pdf (douane.gouv.fr)

Do you have any questions related to the above-discussed topics?
Contact Coline for guidance .

Client Alert: EU General Court Judgments in Cases T-635/22 and T-644/22

Mon, 16 Sep 2024 12:20:58 GMT

The General Court of the Court of Justice of the European Union delivered judgements recently in two significant sanctions cases. The judgments can be appealed within two months to the Court of Justice (on points of law only).

We provide below a summary of the cases and the points of the judgements:

EU General Court Judgment in Case-494/22 – NSD v Council

Today, the EU General Court issued a judgment dismissing the action brought by the Russian Nasional Settlement Depository (NSD) against its inclusion in the EU sanctions list.

The General Court of the EU upheld the restrictive measures imposed by the EU Council against NSD in June 2022 for its key role in Russia’s financial system, thus providing material support to the Russian government. NSD sought to annul its inclusion in the sanctions list, but the Court found that NSD failed to prove the Council’s decision was unlawful.

In its judgment, the General Court found that NSD has failed to demonstrate that the Council erred in finding that NSD was a systemically important financial institution playing an essential role in the functioning of Russia’s financial system. The Court emphasised the importance of NSD’s financial services to the Russian Government and Central Bank, and its broader contribution to Russia’s financial system, thus enabling the government’s war against Ukraine.

As regards NSD’s argument that the restrictive measures imposed on it entailed the freezing of funds and economic resources belonging to its customers – some of whom are not subject to those measures – and, therefore, the infringement of their right to property, the General Court concluded that NSD cannot rely, in its action for annulment, on a right to property held by persons other than itself.

§However, the Court pointed out that the national competent authorities must ensure compliance with the EU Charter of Fundamental Rights when addressing requests for asset release, and that NSD’s customers can seek legal recourse in national courts for property rights infringements.

It is reported that NSD holds around EUR 197 billion in immobilized assets at Euroclear. Today’s judgment is significant in providing additional legal backing to the ongoing initiatives on the future use of such assets to generate proceeds for Ukraine, similar to actions taken with Russian central bank assets.

The judgment is available here .

EU General Court Judgment in Cases T-635/22 - Fridman and Others v Council and T-644/22 - Timchenko and Timchenko v Council

The General Court ruled today that the Council of the European Union (the Council) can impose reporting and cooperation obligations on Russian-sanctioned individuals and entities to enforce asset-freezing measures.

On 21 July 2022 the Council adopted a regulation requiring sanctioned persons to the national authorities of the Member States all the funds and other assets held by them in those Member States.

A group of sanctioned individuals (Elena Timchenko, Gennady Timchenko, Mikhail Fridman, Petr Aven and German Khan) challenged the legality of this reporting obligation before the EU General Court, submitting that, since those obligations are not laid down in a decision taken by the Council in the field of the EU’s common foreign and security policy (CFSP), they cannot be regarded as measures necessary for the implementation of such a decision.

They also argued that the abovementioned Council regulation amounts to a misuse of powers since the adoption of the reporting obligations in question should fall within the implementing powers of the Member States as it pertains to the national competencies of the Member States in the area of criminal law.

However, the General Court dismissed their actions appeal, stating that “the need for action to counteract legal and financial arrangements facilitating the circumvention of restrictive measures justifies such obligations”.

The General Court recalled that EU law permits the adoption of regulations by the Council to implement or give effect to sanctions to ensure their uniform application in all Member States. The measures provided for by EU law are not limited to obligations not to act and the Council was entitled to adopt reporting and cooperation obligations, even though they were not expressly provided for in the decision to which they relate.

In its judgment, the General Court also expressed the view that the Council “did not act in the stead of the Member States” in deciding how the sanctions should be implemented and what penalties should apply in their territory. The Court stated that on the contrary, the national authorities retain their power to decide whether the offence of participation in circumvention activities and the penalties attached thereto are to be of a criminal, civil or administrative nature.

The judgments are available here (T-635/22) and  here (T644/22) .

Digital Policy Update: Council reveals priorities for the next legislative cycle

Thu, 06 Jun 2024 11:52:11 GMT

The European Union (EU) has been at the forefront of the global push towards digital transformation, adopting a plethora of digital regulations aimed at fostering innovation, ensuring economic growth and competitiveness, and safeguarding fundamental rights.

As we move into the next legislative cycle, the EU Council – under the leadership of the Belgian presidency – has outlined its main priorities in digital policy, emphasizing among others the importance of effective implementation, the need for a European approach to digital technologies, and alignment with sustainable objectives.

Prioritizing Digital Transformation

Digital transformation is a key driver of innovation, economic growth, and sustainability within the EU. But as Belgian Deputy Prime Minister Petra de Sutter stated, it must be balanced to ensure that this transformation benefits all citizens: “[it] must be grounded on a safe, inclusive, sustainable, and human-centric approach – one that upholds democracy and human rights”. Ms de Sutter highlighted the importance of every European citizen having the opportunity to develop essential digital skills and participate actively in the online world.

Mathieu Michel, Belgium’s Secretary of State for digitisation, meanwhile called for a “common European approach to innovative digital technologies striking the right balance between innovation, regulatory burden, and protection of the Union’s economic security”. He also emphasised digital skills and digital infrastructure as key components to achieving this digital transition.

Key Priorities for the Legislative Cycle

The Council has identified several main priorities for the upcoming legislative cycle:

Effective Implementation of Digital Regulations: The primary focus is on the “effective, coherent and efficient implementation” of recently adopted digital laws with minimal administrative burden for both public and private sectors. This includes laws such as the AI Act, Digital Services Act (DSA) and the Digital Markets Act (DMA), which aim to create a safer and more open digital space in the EU.
Common European Approach: The Council advocates for a unified approach to innovative digital technologies as a crucial element for enhancing the EU’s competitiveness and protecting its economic security. This approach must balance innovation with regulatory measures to ensure a dynamic and open economy.
Digital and Green Transition: The Council emphasizes the synergy between digital transformation and the green transition, advocating for ambitious sustainability objectives. This aligns with the EU’s broader goals of achieving climate neutrality and promoting sustainable development, as well as reducing their dependence on foreign fossil fuel imports.
Building Digital Skills and Bridging the Digital Divide: The Council explicitly refers to the importance of attracting and retaining a digitally skilled workforce, with a particular focus on increasing women’s participation in the tech sector. Bridging the digital divide is critical to ensuring that all citizens can benefit from digital advancements. This also means increasing the number of cybersecurity professionals in the EU. There is already a severe lack of cybersecurity professionals to meet the current demand, and with the demand set to increase exponentially in the coming years, a tangible strategy will need to be employed. The Council fails to outline how this will be achieved.
Ensuring Secure and Resilient Infrastructure: The need for secure and resilient digital infrastructure across the EU is paramount. This includes enhancing cybersecurity measures and ensuring the reliability of digital services, but also reducing dependencies on external chip manufacturers and investing in chip-producing technologies and companies with the EU.
International Dimension and Digital Partnerships: Strengthening digital partnerships and digital trade agreements is vital for the EU to play a proactive role globally in digital transformation and governance. The Council calls for a coordinated approach to enhance the EU’s influence in international digital policy. Using its influence to promote a rights-based approach to digital policy globally will help facilitate these partnerships without compromising the EU’s stated values.

Challenges and Opportunities

Implementing these digital regulations presents both challenges and opportunities. The complexity of harmonizing regulations across Member States, ensuring compliance, and adapting to rapid technological changes are significant hurdles. However, successful implementation can further strengthen the position of the EU as a global leader in digital innovation, providing a robust framework that other regions may follow.

By prioritizing effective implementation, the EU hopes to ensure that its digital policies not only foster economic growth but also uphold the values of democracy, human rights, and sustainability, ultimately benefiting all its citizens.

The EU’s digital strategy aims to create a digital environment that fosters innovation, protects citizens’ rights, and ensures economic security. As the EU navigates the next legislative cycle, the focus on implementing these digital regulations will be crucial in achieving these goals and driving forward the digital transformation agenda.

The Belgian Presidency has made clear its ambitions and focus on implementing the digital transition. However, with Hungary next in line for the Presidency, it is unclear what the focus will be under their stewardship and whether digital transformation will still be a priority.

Policy Briefing: Council Approves Two Directives on Sanctions Violation Criminalisation and Asset Recovery and Confiscation

Thu, 25 Apr 2024 14:40:59 GMT

On 12 April 2024, the Council adopted two key directives enhancing sanctions enforcement and implementation across the EU.

The first directive on sanctions violations criminalisation (Directive (EU) 2018/1673) establishes an EU-wide definition of sanctions violation as a crime, setting minimum administrative and criminal penalties, while the second directive on asset recovery and confiscation lays down the minimum standards for tracing, identifying, freezing, confiscating, and managing criminal assets, applicable to various crimes, including EU sanctions violations.

In our latest policy update, we provide an overview of the EU legislative process related to these directives, the most important measures they introduce, and outline key next steps regarding their implementation.

Background & Context

Following Russia’s full-scale invasion of Ukraine in February 2022, the EU imposed an unprecedented array of sectoral and individual sanctions against Russian individuals and entities. However, the implementation and the enforcement of these sanctions have posed great challenges for Member States, and for National Competent Authorities (NCAs).

As of date, EU sanctions regulations mandate Member States to enforce penalties deemed “effective, proportionate, and dissuasive” for infractions of restrictive measures and enforcement is mostly left in the hands of NCAs.

While most of the Member States (including France, the Netherlands and Cyprus) treat sanctions violations as criminal offenses, two countries (Estonia and Slovakia) still consider them administrative offenses, and fourteen countries (including Germany, Austria and Belgium) allow for categorization depending on severity. Prison sentences and maximum fines for the violation of restrictive measures also vary widely from one Member State to another. This inconsistent framework has triggered the need for the harmonization at EU level brought forward by the new directive.

Regarding asset freeze and recovery in the EU, the high number of individuals and entities sanctioned in the past two years has put a strain on NCAs to trace and identify the assets belonging to listed persons. The 2018 adoption of the regulation concerning mutual recognition of freezing and confiscation orders laid the foundation for cross-border asset recovery within the EU, facilitating the freezing and confiscation of criminal assets across Member States. Building upon this framework, the new directive establishes minimum standards and aims to enhance the effectiveness of asset recovery efforts and strengthen enforcement measures across the EU.

Below we outline the key measures introduced by the above-described EU directives.

Directive On the Definition of Criminal Offences and Penalties for the Violation of Union Restrictive Measures

The main elements of the EU Directive on Sanctions Violation Criminalization are the following:

Definition of Criminal Offenses: Deliberate breaches of EU restrictive measures are defined as criminal offenses. Such breaches include making funds available to sanctioned individuals and entities, failing to freeze assets of designated parties, enabling designated parties to enter or transit through EU territory, engaging in sanctioned transactions with third states, trading in sanctioned goods or services, conducting sanctioned financial transactions, circumventing EU restrictions, failing by a designated party to disclose funds to NCAs, and violating conditions of authorizations granted by NCAs. Incitement, aiding, and abetting also constitute offenses, while offenses committed with “serious negligence,” particularly those related to military or dual-use items listed by the EU, are criminalized as well.
Exemptions: Some breaches involving values under €10,000 are not defined as criminal offenses. These actions include making funds available to sanctioned parties, failing to freeze their assets, circumventing restrictions, transacting with third states, providing sanctioned services, or breaching conditions of an NCA-granted authorization for specific goods, services, or transactions.
Criminal Penalties for Natural Persons: The penalties introduced by the directive include imprisonment and fines, with specified minimum terms for serious offenses (e.g., a minimum of five years for severe violations involving substantial amounts or values).
Penalties for Legal Persons: Penalties for legal persons include both criminal and non-criminal fines. The fines are substantial, with a minimum level set at either a percentage of the legal person’s total worldwide turnover (up to 5%) or fixed amounts (up to EUR 40 million), depending on the severity of the offense.
Aggravating and Mitigating Circumstances: Circumstances that can aggravate (organised crimes, forging documents), or mitigate (cooperation with authorities) the penalties for offenses have also been defined by the directive.
Jurisdiction and Enforcement: Member States must establish jurisdiction over these offenses, including cases with cross-border elements. They are also expected to equip their authorities with effective tools for investigating violations, similar to those used against organized crime, and to collect and share statistical data on offenses to monitor and adjust enforcement practices as necessary.
Protection for Whistleblowers: Provides for the protection of individuals reporting violations of EU sanctions.
EU-Level Cooperation: Enhances the collaborative role of EU bodies in enforcing Union restrictive measures together with Member States’s NCAs. The Commission is expected to coordinate implementation and data exchange, Eurojust and Europol will support cross-border investigations and prosecutions, while the European Public Prosecutor’s Office (EPPO) will prosecute crimes affecting the EU’s financial interests.

Directive on Asset Recovery and Confiscation

The key provisions of the Directive are the following:

Tracing and Identification: The Directive establishes procedures for the tracing, identification, freezing, confiscation, and management of assets connected to a wide range of crimes, include the violation of EU sanctions.
Freezing and Confiscation: Authorizes the freezing and confiscation of assets derived from criminal activities.
Asset Recovery Offices: Mandates the establishment of asset recovery offices in Member States to facilitate cross-border cooperation and asset management.
Asset Management: Requires the management of frozen and confiscated assets to preserve their value until they can be legally disposed of.
Cross-Border Cooperation: Enhances the mechanisms for cross-border cooperation among Member States and with third countries to improve the tracing, freezing, and confiscation of assets.
Legal Framework: Updates and expands the existing legal framework to cover a wider range of crimes and integrates new procedures for asset recovery.
Victims’ Rights: Ensures that victims’ rights to compensation and restitution are considered in asset recovery processes.
Use of Confiscated Assets: Encourages Member States to use confiscated assets for social or public interest purposes, enhancing the societal impact of confiscation measures.

How the Directives will change the existing EU policy framework?

Once implemented by Member States, the directive on the criminalisation of sanctions violation will ensure that offences are met with appropriate and harmonized penalties across the EU, while enhancing the investigative powers of NCAs, and improving supranational collaboration and the prosecution of cross-border offences.

The rules on asset recovery and confiscation measures will also contribute to the effective implementation of EU sanctions, as they will apply to sanctions violations offences which will be harmoniously criminalized across EU Member States, and boost NCAs’ capacities to trace and identify the criminal assets of sanctioned parties.

Next Steps

Both Directives will enter into force on the twentieth day following their publication in the Official Journal of the EU.

To incorporate the provisions into their national legislation, Member States will have 12 months for the Directive on criminalisation of sanctions violations, and 30 months for the Directive on asset recovery and confiscation.

EU & US Sanctions Alert: new and expected measures for the 2nd anniversary of the war in Ukraine and Alexei Navalny’s death

Mon, 26 Feb 2024 15:49:17 GMT

Last Friday, the European Union (EU) and the United States (US) imposed further sanctions against Russia, marking the second anniversary of its invasion of Ukraine and in retaliation to the death of Kremlin critic Alexei Navalny.

These measures were followed by a G7 statement issued on Saturday 24 February, in which the G7 nations committed to continue imposing sanctions on Russia and targeting those involved in sanctions evasion.

Below is a breakdown of the latest sanctions updates by jurisdiction and the specific measures imposed:

I. EU Sanctions Update

Adopted Measures

Last week, the Council of the EU adopted its 13th sanctions package against Russia and Member States reportedly reached a political agreement on the renewal of individual designations:

Overview of the EU’s 13th Sanctions Package against Russia:

The package was formally adopted on 23 February, focusing on individual designations without introducing new trade restrictions or sectoral measures.
105 individuals and 88 entities have been sanctioned, targeting Russian military sector executives, defence and government officials, regional governors, and companies engaged in military operations.
27 military and tech firms from Russia, China, Kazakhstan, Serbia, India, Sri Lanka, Thailand, and Turkey, have been added to the list of those supporting Russia’s military and industrial complex, and are now facing import restrictions on dual-use goods and technologies.
The United Kingdom has been added to the list of partner countries applying restrictive measures on imports of iron and steel from Russia.

Renewal of Individual Designations:

A political agreement has been reached on the extension of targeted sanctions for another six months from 15 March 2024.
The delisting of a small number of individuals is currently under consideration, including Yandex founder Arkady Volozh, former Sistema executive Sergey Mndoiants, and Slovak businessman Jozef Hambalek.
Despite Hungary’s reported efforts to advocate for the removal of Alisher Usmanov, Moshe Kantor, and Nikita Mazepin, they are expected to remain on the EU’s sanctions list.

Expected Measures

It has also been reported last week that the EU will impose new sanctions against Russia, and that the initial work on the EU’s 14th sanctions package has already started:

EU to impose sanctions after the death of Alexei Navalny

Russian opposition leader Alexei Navalny died on 19 February, and in a press release the Council of the EU stated “the EU will spare no efforts to hold Russia’s political leadership and authorities to account, in close coordination with our partners; and impose further costs for their actions, including through sanctions”.

EU’s High Representative Josep Borrell indicated that the new sanctions will include asset freezes and travel bans against people or entities suspected of involvement in Navalny’s death, without specifying the exact timeline for these possible sanctions. He also suggested renaming the EU’s human rights sanctions regime in Navalny’s honour.

EU’s 14th Sanctions Package against Russia

The EU is reportedly already working on its 14th sanctions package against Russia, which might include new trade restrictions as well, in addition to individual designations.

II. US Sanctions Update

The US also adopted a significant set of sanctions against Russia on the anniversary of the war, and in part as a response to the death of Alexei Navalny. The sanctions, imposed by the Treasury, the State Department, and the Commerce Department, target over 600 people and entities, including officials involved in the death of Alexei Navalny.

Overview of the latest US sanctions against Russia:

Individual sanctions targeted over 500 people and entities in response to the war’s anniversary and Alexei Navalny’s death.
Measures focus on state-owned Russian entities, entities in third countries involved in sanction circumvention, and the military and industrial sectors including gold, pipe, and aluminium producers.
The US introduced sanctions against the National Payment Card System “Mir”, leading tanker group Sovcomflot, and various Russian financial institutions including SPB Bank.
New trade restrictions have been imposed on entities from Russia, China, Turkey, the UAE, Kyrgyzstan, India, and South Korea, for supporting Russia’s war effort in Ukraine.
Energy capabilities have also been targeted by sanctioning companies involved in Liquefied Natural Gas (LNG) projects.
Companies involved in weapons manufacturing, the nuclear sector, and military cooperation with North Korea and Iran have also been sanctioned.

Commission Proposes New FDI Regulation

Mon, 12 Feb 2024 16:11:08 GMT

On 24 January, as part of its Economic Security Package, the European Commission presented five initiatives to strengthen the economic security of the European Union (EU) amid rising geopolitical tensions and technological disruptions.

The five initiatives presented by the Commission are the following:

Council Recommendation on Research Security;
White Paper on options for enhancing support for research and development involving technologies with Dual-Use potential;
Proposal for a new regulation on the screening of foreign investment;
White Paper on Export Controls;
White Paper on Outbound Investments.

In this briefing, we outline the main elements of the Commission’s proposal for a new regulation on the screening of foreign investment. Key measures include mandatory screening in all Member States, revisions of the sectoral scope, as well as rules aimed at capturing foreign-backed transactions realized through EU vehicles.

We look at the EU’s existing foreign direct investment (FDI) screening regulation and showcase how the proposed measures would change the regulation and allow the EU to reach shifting policy objectives.

FDI screening in the EU since 2019

The EU has one of the world’s most open investment regimes, making it an attractive destination for foreign investment. In 2019, the EU adopted a foreign direct investment (FDI) screening regulation addressing security and public order risks arising from foreign entities attempting to gain significant influence or control over European companies crucial to the Member States’ strategic interests. Such risks encompass the impacts foreign investments could have on critical EU technologies, infrastructure, inputs, sensitive information, and even media freedom, while also scrutinizing investors potentially influenced by foreign governments or subject to sanctions.

Given the EU’s interconnected market, a technology deemed critical in one Member State can hold equal significance for neighbouring countries or the EU at large. Hence, the FDI screening framework, designed to complement national mechanisms, is applied to investments that may pose a threat to the public order or security across multiple Member States. This regulation mandates both individual Member States and the Commission to collaboratively assess and determine the potential risks associated with specific foreign acquisitions, ensuring a coordinated response to safeguard collective interests.

Since its inception, the regulation has facilitated the scrutiny of over a thousand transactions, predominantly in sectors critical to national and EU-wide security and public order such as energy, aerospace, defence, semiconductors, healthcare, data processing and storage, communications, transport, and cybersecurity.

The Commission’s proposal for a new FDI regulation

In January 2024, the Commission submitted a legislative proposal for a new and improved framework for the screening of foreign investments into the EU, seeking to address the shortcomings of the current framework such as insufficient cooperation between national screening authorities and substantial disparities between screening mechanisms across the EU.

The key new measures included in the Commission’s proposal are the following:

The obligation for all Member States to have an FDI mechanism in place (currently, 22 out of 27 have one). Said mechanisms should have minimum standards including screening potentially critical transactions before they are completed, having transparent rules and procedures, protecting confidential information, performing annual reporting, and allowing for recourse against decisions.
Screening EU investments controlled by third-country individuals or entities, requiring Member States to scrutinize both inbound and intra-EU investments by EU subsidiaries of foreign firms.
Setting a mandatory sectoral baseline for Member States to screen foreign investments, with flexibility for additional scrutiny based on national security needs.
Enhancing cooperation and information exchange between Member States and the Commission, allowing for meetings to discuss investments and mandating notification of final decisions, beyond the original requirement of considering comments from others.
Broadening the definition of sensitive investments to include foreign investments in EU companies operating in vital sectors like semiconductors, AI, critical medicines, and military or dual-use items, as well as those participating in EU initiatives like the European Defence Fund, Space Regulation, and Horizon Europe.
Including screening for greenfield investments, where a foreign investor or their EU subsidiary establishes new facilities or ventures within the bloc. This was included to prevent enduring direct connections formed between the foreign investors and these new enterprises.
Implementing an own-initiative procedure (OIP) that enables the Commission or a Member State to independently initiate a review of unnotified foreign investments in another EU jurisdiction, potentially impacting the security or public order of Member States. This procedure can be activated post-completion of the FDI with a 15-month deadline.

The European Economic Security Strategy

The Draft Regulation on FDI screening, unveiled as part of a quintet of initiatives by the Commission in January 2024, marks a significant step in advancing European economic security. This move is in sync with the European Economic Security Strategy outlined in June 2023 by the European Commission and High Representative for Foreign Affairs Josep Borrell, focusing on four critical risk areas: supply chains, security of critical infrastructure (both physical and cyber), preventing technology leakage, and the weaponization of economic dependencies.

Set against a backdrop of escalating geopolitical tensions, notably in Ukraine and the Middle East, these measures underscore the urgency of mitigating risks and reducing the EU’s reliance on detrimental external dependencies. The comprehensive strategy aims to improve the EU’s economic resilience by maintaining trade, investment, and research openness, enhancing mechanisms for risk assessment in both inbound and outbound investments, improving coordination in export controls, and fostering the development and secure research of dual-use technologies.

If adopted, the new FDI framework is anticipated to significantly influence sectors such as solar and wind energy, electric vehicles, and semiconductor technology, particularly addressing concerns over foreign, notably Chinese, investments in these areas.

Anticipated response of Member States

The introduction of new FDI requirements may encounter resistance from Member States. To reach the desired level of harmonization, a majority of Member States will need to significantly overhaul their existing national screening frameworks. Additionally, some may view the enhanced screening obligations as an undue burden, potentially deterring investment. FDI screening is regarded by many Member States as a crucial aspect of their strategic autonomy, with some hesitant to cede greater control to the European Commission or other Member States, fearing a loss of national interest oversight. This reluctance could manifest in the invocation of Article 346 TFEU to safeguard their “national security sovereignty” against the Commission’s influence.

The response of Member States to these new mandates, particularly those that have only recently updated their screening mechanisms (like Ireland and Bulgaria) in alignment with the existing EU FDI Screening Regulation, remains uncertain due to the extensive reforms and resources required.

Next steps

The Commission’s proposal for a new FDI regulation will have to follow the ordinary legislative procedure, with scrutiny from both the European Parliament (EP) and the Council of the EU. The upcoming EP elections in June 2024, and the current focus of the Belgian Council Presidency to finalize ongoing legislative proposals before the end of its mandate will most certainly delay the legislative process. For now, the appointment of lead draftspersons and allocation of the proposal to the relevant committee is scheduled for September 2024 once the new Parliament is in place.

The new FDI regulation is currently expected to become effective in 2026. Once adopted, it will start applying 15 months after publication in the Official Journal of the EU to give Member States sufficient time to adapt their national screening mechanisms.

Commission Publishes White Paper on Export Controls

Tue, 30 Jan 2024 16:15:26 GMT

Introduction & Background

The five initiatives presented by the Commission are the following:

Council Recommendation on Research Security;
White Paper on options for enhancing support for research and development involving technologies with Dual-Use potential;
Proposal for a new regulation on the screening of foreign investment;
White Paper on Export Controls;
White Paper on Outbound Investments.
In this briefing, we outline the main elements of the White Paper on export controls, which was adopted in response to the Communication adopted by the Commission and the High Representative (“HRVP”) on a European Economic Security Strategy on 20 June 2023.

The Communication from June 2023 called for more rapid and coordinated action at the EU level in the field of dual-use export controls and advocated for making full use of the possibilities offered by the EU’s Dual-Use Regulation (Regulation (EU) 2021/821).

To address these issues, the white paper presents several proposals to foster both uniform and effective controls across the EU and to open a discussion with Member States, the European Parliament (EP), and stakeholders, including the business community, on the evaluation of the functioning of the Dual-Use Regulation and the ability of the current framework to meet effectively the EU’s present and future security needs.

The white paper emphasizes the need to fully implement the EU’s dual-use regulation, providing the urgent need for more dynamic and unified actions at the EU level regarding dual-use export controls.

The main elements of the Commission’s White Paper on Export Controls

Concerning the Dual-Use Regulation of the EU, the white paper highlights that it “significantly revised EU dual-use rules in 2021. That revision takes into account rapid technological developments and the increasing militarisation of emerging technologies, ensures more effective implementation and increases coordination between EU Member States’ national export control authorities as well as with the European Commission”.

The Commission acknowledges that the Dual-User Regulation was instrumental in swiftly imposing sanctions and export controls against Russia, after its full-scale invasion of Ukraine. In this respect, the regulation has greatly enhanced coordination among Member States and improved information sharing with the Commission.

One of the main achievements of the Dual-Use Regulation was elevating the coordination between national export controls at the EU level. This mechanism outlined a process which starts with the Commission publishing an annual “EU compilation of national control lists,” after which Member States decide whether to authorize or deny the export of items introduced by other Member States and listed in these compilations.

The first half of 2023 saw several Member States adopt national control lists aiming to restrict the export of critical technologies outside the Union, initiating the use of this new coordination mechanism.

However, the white paper also points out that “since the adoption of the Dual-Use Regulation, the global context for export controls has fundamentally changed” and that these changes highlight the “need for the EU to have a system of export controls that can deliver fast and in a uniform manner”. Hence, further progress must be made in leveraging export control mechanisms to their fullest capacity. The EU lacks uniform legal provisions to implement standardized export controls across member states.

The White Paper underlines the following main challenges related to export controls:

In a chapter dedicated to ‘recent developments in the field of export controls’ the Commission outlined the limits of the current Export Control framework, which are the following:

Multilateral Export Control Regimes are subject to disagreements among their members, and difficulties in swiftly responding to technological advancements and implementing new controls. Such regimes are sensitive to geopolitical tensions, as Russia’s influence in multilateral regimes like the Wassenaar Arrangement, where decisions require consensus, has further complicated matters. The introduction of new export controls is predominantly driven by individual member states within these regimes, without a unified EU stance.
Unilateral Export Control Regimes established by third countries, such as the US and China, have extraterritorial impacts that challenge the EU’s ability to export technologies and dual-use items.
The proliferation of national controls within the EU in 2023 underscores the need for more coherent and effective measures. The current framework’s lack of transparency and insufficient consultation processes have led to complications, such as unpredictable supply chain impacts and strained relations with third countries. There is also uncertainty regarding the adoption of controls listed in the Compilation of national control lists by other member states. Furthermore, national export controls applied by one member state do not extend to intra-EU trade, potentially allowing for indirect export of controlled items to third countries.

Proposed Responses of the Commission

To achieve a more rapid and coordinated action at the EU level in export controls and to mitigate risks posed by the multiplication of national controls by Member States, the Commission proposes several responses, including:

Ensuring the continuation and the strengthening of uniform controls in the EU: To expand the EU list of dual-use items with items that have not to include those items that were not adopted by the multilateral export control regimes due to the blockage by certain members (in particular Russia), the Commission proposes a targeted proposal to introduce such controls in the list set out in Annex I of the regulation.
Establishing an export policy forum: In light of the geopolitical challenges, the Commission suggests establishing a forum for political coordination between Member States and the Commission, to foster common EU positions, take account of the single market dimension of export control developments, and prepare and coordinate action at international level.
Better coordination of new National Control lists: To improve the coordination of Member States’ control lists, the Commission intends to adopt a Recommendation, which would require Member States to notify each other and the Commission about any new National Control List before adoption; and would allow Member States to comment on the envisaged list, and raise concerns based on national security matters.
Advancing the evaluation of the EU Dual-Use regulation: The Commission proposes advancing the evaluation of the dual-use regulation to the first quarter of 2025, instead of the originally planned 2026-2028. This evaluation, supported by a comprehensive study in 2024 and consultations with member states and stakeholders, will aim to address and rectify identified shortcomings.

EU Council and the EP Reach Political Agreement on Anti-Money Laundering and Countering the Financing of Terrorism Package

Thu, 25 Jan 2024 09:24:29 GMT

On 17 January, the Council of the European Union (EU) and the European Parliament (EP) reached a provisional agreement on a new legislative package that aims to strengthen EU rules on money laundering (AML) and terrorist financing activities (CFT).

The Commission presented its AML/CFT legislative package on 20 July 2021, aiming to establish a new EU anti-money laundering authority (AMLA), recast the regulation on transfers of funds for crypto-assets transparency and traceability, and include regulations and directives on AML mechanisms and requirements for the private sector.

The agreed package includes a new Regulation setting forth a single AML and CFT rulebook (AMLR) and the sixth AML Directive. With these legislative changes and the establishment of the AMLA, the EU is on the verge of significantly reforming its AML and CTF frameworks.

Key Elements of the Political Agreement

The key elements of the package include harmonising rules, expanding the scope of obliged entities, enhancing due diligence measures, and setting cash payment limits, with which the EU seeks to mitigate risks of financial crimes through the established financial system.

The main elements of the political agreement – which is yet to be finalised in the coming weeks – reached between the Council and the Parliament are the following:

Comprehensive Harmonization: The new AML regulation will harmonise rules across EU Member States, closing potential loopholes that criminals exploit to launder illicit funds and/or finance terrorism through the financial system.
Obliged Entities Expansion: The regulation broadens the spectrum of obliged entities to include most of the crypto sector, compelling all crypto-asset service providers (CASPs) to perform due diligence on their customers and report suspicious activities. Other sectors included by this broadened scope are traders of luxury goods (such as precious metals and stones, luxury cars, yachts, artwork etc.) and the football sector, for both clubs and agents (though Member States will enjoy certain flexibility in the case of low-risk entities).
Enhanced Due Diligence Measures: The regulation introduces specific enhanced due diligence measures for cross-border correspondent relationships for CASPs. Enhanced scrutiny will also apply to business relationships with very wealthy (high net-worth) individuals involving large asset handling.
Cash Payment Limitations: An EU-wide maximum limit of €10,000 will be set for cash payments to hamper the laundering of dirty money. Obliged entities must identify and verify the identity of persons involved in occasional cash transactions between €3,000 and €10,000.
Beneficial Ownership Transparency: The new framework aims to make the rules on beneficial ownership more harmonized and transparent, setting the beneficial ownership threshold at 25% and clarifying rules applicable to multi-layered ownership and control structures. The agreement also makes clear that beneficial ownership is based on two components: ownership and control. It also establishes a registration requirement for beneficial ownership of all foreign entities owning real estate, applying retroactively until 1 January 2014.
High-Risk Third Countries: Enhanced due diligence measures will be mandatory for transactions and business relationships involving high-risk third countries identified as a threat to the EU’s internal market integrity. This assessment will be carried out on the Financial Action Task Force listings (FATF), and high-risk levels will merit the application of additional specific EU or national countermeasures.

FIU’s Enhanced Role

Already established financial intelligence units (FIUs) in the Member States will have immediate and direct access to financial, administrative, and law enforcement information, enhancing their ability to prevent, report, and combat money laundering and terrorist financing. FUIs will continue to circulate information to their respective competent authorities. When making decisions, FIUs must apply and consider fundamental rights and will have the ability to suspend or withhold consent to a transaction.

Supervisory Measures

The agreement mandates effective supervision of all obliged entities within Member States’ territories. Supervisors will report instances of suspicions to FIUs and adopt a risk-based approach in their operations. New supervisory measures for the non-financial sector (so-called supervisory colleges) will also be introduced.

Risk Assessment

Both the EU and Member States will conduct risk assessments at their respective levels, with the Commission making recommendations to Member States based on these assessments.

Next Steps

To complete the overhaul of the EU’s AML package, the EU needs to decide on the location of the AMLA. So far, nine Member States have submitted applications to host the institution, and the final decision is scheduled to be made jointly by the EP and the Council by 30 January 2024.

With respect to the political agreement, the finalized texts of the agreement will be presented to Member States representatives and the EP for approval, before formal adoption and publication.

Client Alert: First CBAM Quarterly Reporting Period ends on January 31

Mon, 15 Jan 2024 09:34:59 GMT

Summary

On 1 October 2023, the European Union’s (EU) Carbon Border Adjustment Mechanism (CBAM) entered into the transitional phase, with the first reporting period covering carbon-intense goods imported during the period 1 October 2023 to 31 December 2023, ending on 31 January 2024.

CBAM reporting declarants, businesses active in the cement, fertiliser, iron & steel, aluminium, electricity, and hydrogen sectors must file their first quarterly CBAM reports to comply with the respective EU regulations.

The quarterly CBAM reporting must include:

quantities of CBAM goods imported, specified per country of origin per production site where the goods are produced;
embedded direct greenhouse gas emissions;
the carbon price due in the country of origin.

The CBAM represents a crucial component of the EU’s Green Deal which aims to set the bloc’s economy on the path to a green transition. The CBAM imposes significant compliance and reporting obligations on businesses involved in the import of selected goods into the EU. These reporting obligations – which will concern more industries from 2026 and 2030 will cover all products that fall under the scope of the EU ETS – signal the start of a stricter approach of the EU towards harmonising trade relations and environmental sustainability. The CBAM quarterly reporting obligation remains in place until the end of 2025.

This article provides an overview of the CBAM, and its implications for businesses, and outlines the new reporting requirements that were introduced with the transitional phase.

Background of CBAM

Introduced as part of the EU’s initiatives to achieve carbon neutrality by 2050, the CBAM serves as a key instrument to prevent carbon leakage and promote a global green transition. Its primary objective is to level the playing field for European industries by imposing a carbon cost on imports of certain goods from outside the EU. This mechanism ensures that ambitious climate policies in Europe do not lead to ‘carbon leakage’, whereby companies transfer production to countries with less stringent emissions constraints in order to circumvent strict EU constraints. It targets sectors with particularly high carbon emissions such as cement, fertilizers, iron and steel, electricity, hydrogen and aluminium.

The CBAM is designed to complement the EU’s Emissions Trading System (ETS), to ensure that climate costs are reflected in the price of imports, just as they are for products produced within the EU in order to level the playing field for the EU industry.

CBAM Reporting in General

Under the CBAM, certain importers are required to report greenhouse gas emissions associated with the production of their goods. This reporting is critical for the EU to assess the carbon footprint of imported products and align them with the EU’s overall environmental goals. The reporting process involves calculating the direct and indirect emissions associated with the production of imported goods, which is based on specific guidelines provided by the EU, which aim to standardize the reporting process and ensure fairness and transparency.

Corporations will have three different options for reporting until the end of 2024, with either:

full reporting based on the incoming methodology (EU method),
reporting on an equivalent method (three options), or
reporting based on default reference values (only possible until July 2024).

From January 2025, all reporting must occur following the EU method and estimates can only be used for complex goods if these estimations represent less than 20% of the total embedded emissions. The European Commission has set up a CBAM transitional registry for importers, available to businesses through the National Competent Authority (NCA) of the Member State in which the importer is established.

Reporting obligations under the transitional phase of CBAM

The transitional phase of the CBAM started on 1 October 2023, which aims to help businesses to prepare for the next stages of the CBAM, when a carbon price will be applied to imports based on data gathered after the filing of the initial reporting. In this phase, Importers must familiarize themselves with the reporting guidelines and ensure they are capable of accurately tracking and reporting emissions data. This means that importers of the relevant products into the EU will need to start keeping detailed records of the emissions associated with their products.

In addition, as the first quarterly reporting period of the transitional phase will end on 31 January, importers active in the cement, fertiliser, iron & steel, aluminium, electricity, and hydrogen sectors must file their first quarterly CBAM reports to comply with the respective EU regulations. The quarterly reports must include (i) quantities of CBAM goods imported, specified per country of origin per production site where the goods are produced; (ii) embedded direct greenhouse gas emissions; and (iii) carbon price due in the country of origin.

Non-compliance could result in penalties and could impact the ability to import into the EU market.

The CBAM underscores the importance for companies engaged in importing specified goods into the EU to understand and prepare for the CBAM reporting requirements. It is not just a regulatory compliance issue but also a step towards a global transition that recognizes and attempts to mitigate the environmental costs of production and trade.

Reach out to us at info@acquislp.eu to learn more about CBAM and other EU regulatory and compliance matters.

Belgium Assumes the Presidency of the Council

Fri, 05 Jan 2024 09:56:39 GMT

As of 1 January 2024, Belgium commenced its six-month tenure as the rotating president of the Council of the European Union, adopting the theme “Protect, Strengthen, Prepare.” The Belgian presidency, which succeeds Spain and precedes Hungary faces a packed agenda and will be cut short by the imminent European Parliament elections scheduled for 6-9 June. The Belgian Presidency will face operational challenges on its domestic front, as the country will also conduct its legislative elections on 9 June.

This period of leadership arrives during a critical time marked by various global challenges, including Russia’s war against Ukraine, the persistent conflict in the Middle East, the EU’s upcoming accession talks, the aftermath of the pandemic, and a widespread energy crisis.

In the first half of its mandate, the Belgian presidency will aim to expedite critical legislative files. These include the Anti-Money Laundering (AML) package, policies fostering clean technologies, the new Migration Pact, revisions to the Schengen Border Code, updates to the Economic Governance package, and a review of the Multiannual Financial Framework, alongside substantial support for Ukraine.

From April 2024, the presidency will shift to a “prospective phase,” focusing on broader policy discussions and setting the stage for the incoming Commission’s priorities. Belgium has outlined six primary objectives in its programme:

Upholding the rule of law within the EU and in candidate countries, emphasizing democracy and judicial independence, particularly in negotiations with Ukraine and Moldova. The presidency intends to draft conclusions on EU enlargement and internal reform processes coherent with the bloc’s external policies. It is worth mentioning that the EU is considering internal reforms such as the use of QMV in new areas.
Enhancing competitiveness through technological advancement, economic security, and reduced dependencies. This includes discussions on artificial intelligence and a potential energy partnership with Norway, alongside plans to formulate a strategic EU agenda.
Continuing the Green Deal efforts , focusing on sustainable energies and water management. Anticipated actions include a 2040-50 action plan and the formal adoption of the Euro 7 vehicle emission regulations. The presidency will also collaborate on initiatives like the Hydrogen Bank under the REPowerEU framework.
Strengthening the social and health agenda , with a focus on social dialogue and the first implementation of the Social Convergence Framework.
Addressing security concerns , including counter-terrorism efforts, combating organized crime, and tackling disinformation and radicalism online. The presidency will also launch the “European Ports Alliance” to combat drug trafficking and is expected to present a European Defence Investment Strategy.
Promoting a global Europe , resilient and autonomous, focusing on a rules-based trading system and high-quality healthcare services and products.

Key figures of the Belgian government will lead the presidency, including Willem van de Voorde, Belgium’s Permanent Representative to the EU; Prime Minister Alexander de Croo; Foreign Affairs Minister Hadja Lahbib; Theodora Gentzis, President of the FPS Foreign Affairs; and Hendrik Van de Velde, General Coordinator of the Presidency.

The Next presidency

The Belgian presidency will be succeeded by Hungary in June 2024, which assumes the role under controversial circumstances, given its position towards Russia and ongoing rule of law issues, which places additional pressure on Belgium to close key dossiers in its term.

EU agrees on Criminalizing Sanctions Violations

Fri, 22 Dec 2023 10:01:57 GMT

In response to the challenges posed by global conflicts, particularly Russia’s war with Ukraine, the Council of the EU and European Parliament (EP) have made a landmark agreement to criminalize the violation of EU sanctions across Member States. This agreement marks one of the most significant achievements of the EU’s commitment to uphold a unified and strengthened foreign policy and security measures through enhanced legal mechanisms.

The new EU legislation introduces criminal offences and penalties specifically targeting the circumvention or violation of EU sanctions. Though the majority of the Member States have been regulating sanctions violations as criminal offences, this directive represents a strategic move to ensure that individuals and entities that defy EU sanctions face the same legal repercussions across the bloc.

Key Provisions of the Directive:

Defining Criminal Offenses: The directive requires Member States to domestically categorize certain actions as criminal offenses. These include assisting individuals under EU restrictive measures to evade travel bans, trading in sanctioned goods, engaging in transactions with entities under EU sanctions, and providing financial services or conducting financial activities that are prohibited or restricted by the EU.
Expanding the Scope of Offenses: Additionally, the directive broadens the scope of punishable offenses to include incitement, aiding, and abetting these crimes. Notably, trading in war materials is criminalized not only when done intentionally but also in cases of serious negligence. However, the exact way negligence will be assessed is yet to be clarified.
Implementing Dissuasive Penalties: Member states are required to ensure that violations of EU sanctions are met with effective, proportionate, and dissuasive criminal penalties. In cases of intentional violations, the maximum penalty must include a prison sentence. The directive sets a baseline for punishment, requiring crimes under this directive to be punishable by a minimum of one year of imprisonment, or a minimum of five years, depending on the severity of the offense. Member states retain the discretion to impose even harsher sentences.
Liability of Legal Persons: A significant aspect of the directive is its applicability to legal persons (such as companies). Companies can be held liable for offenses committed for their benefit by individuals in leading positions. Sanctions for legal entities include the disqualification from business activities and the withdrawal of permits and authorizations to pursue their economic activities.
Enhanced Enforcement Measures: The directive calls for member states to intensify efforts to ensure compliance with EU sanctions. This includes establishing a limitation period that allows for effective law enforcement. EU countries must also take measures to freeze and confiscate proceeds resulting from sanctions violations.

Next Steps

The provisional agreement is now set to be presented to the Member States’ representatives (Coreper) for approval, after which, the text will undergo formal adoption by both the Council and the EP in 2024.

Background

Restrictive measures are a vital component of the EU’s foreign and security policy toolbox, typically including asset freezes, travel bans, and import/export restrictions. The enforcement of these sanctions traditionally falls under the purview of Member States, leading to varying types and levels of penalties due to differences in national systems. Prior to the agreement, Member States were not obligated to criminalize violations, often resorting to administrative sanctions instead. In response to the need for more uniform and stringent enforcement of sanctions, especially in light of recent geopolitical tensions, the European Commission proposed this directive on 5 December 2022.

EU adopts 12th Sanctions Package against Russia

Wed, 20 Dec 2023 10:07:35 GMT

On 18 December, the EU published its 12th sanctions package against Russia, which overall aims to extend the scope of existing export and import restrictions, rather than creating new measures (as in the case of previous packages) while strengthening efforts to limit circumvention.

The package also contains various new measures, including a new listing criterion, a comprehensive import ban on Russian diamonds, various new export and import restrictions, and measures to enforce the oil price, while it imposed individual designations over 140 additional individuals and entities.

The final version of the package is considerably weaker than the Commission’s original proposal, for instance, the sale of older tankers to Russian entities or for usage in Russia, particularly to those that might circumvent the G7’s oil price cap, was not adopted. Instead of the initial requirement for Member States to pre-approve all transfers of funds out of the EU made by Russian-owned entities, now only transactions exceeding a certain value need to be reported. Moreover, the “No-Russia” clause, which was initially applicable to a wide array of dual-use goods, has been revised to focus primarily on weaponry.

It is expected that additional restrictive measures will be imposed by the EU in February, marking the second anniversary of the war in Ukraine.

Key Measures of the 12th Package

I. Trade Measures

Diamond Ban

The import ban on Russian diamonds (import, purchase, or transfer) applies to diamonds originating in Russia, diamonds exported from Russia, diamonds transiting Russia, and Russian diamonds when processed in third countries.

A direct ban will apply to non-industrial natural and synthetic diamonds and diamond jewellery, as of 1 January 2024, and an indirect import ban on Russian diamonds processed in third countries (cut or polished), including jewellery incorporating diamonds, will be phased in progressively as of 1 March 2024 and be completed by 1 September 2024. A traceability mechanism for the effective enforcement of the measures will also be implemented.

“No-Russia” clause

EU exporters will have to contractually prohibit re-exportation to Russia and re-exportation for use in Russia of particularly sensitive goods and technology, including aviation goods, jet fuel, firearms, and goods on the Common High Priority list. When selling, supplying, transferring, or exporting to a third country (except partner countries) EU operators will have to include a clause prohibiting the re-export to Russia.

Extended transit ban

The transit ban currently applies to dual-use goods and technologies exported from the EU to third countries via the territory of Russia and has been extended to cover all battlefield goods.

Import-export control

29 new entities have been added to the list of those directly supporting Russia’s military and industrial complex. They will be subject to tighter export restrictions concerning dual-use goods and technologies.

Export bans

The items subject to export restrictions have been expanded to include chemicals, lithium batteries, thermostats, DC motors, servomotors for unmanned aerial vehicles (UA V), machine tools, and machinery parts. Export bans are imposed in the industrial sector as well, including construction-related goods, processed steel, copper, and aluminium goods, lasers, and batteries.

Import bans

New import bans target raw materials for steel production, processed aluminium products, and other metal goods, including pig iron and spiegeleisen, copper wires, aluminium wires, foil, tubes, and pipes. Liquefied propane (LPG) is also subject to an import ban with a 12-month transitional period.

A prohibition on providing software for the management of enterprises and software for industrial design and manufacture has also been included.

II. Listings & Derogations

Individual listings

More than 140 additional individuals and entities have been sanctioned as part of the 12th package, including firms predominantly active in Russia’s military, defence, and IT industry and other key economic sectors. The sanctions also hit political figures including organizers of the illegal “elections” in Ukraine’s Russia-occupied territories, perpetrators of forced “re-education” of Ukrainian children, and those disseminating disinformation/propaganda supporting Russia’s war against Ukraine.

New listing criteria

A new listing criterion targets persons who benefit from the forced transfer of ownership or control over Russian subsidiaries of EU companies.

Keeping deceased persons listed

The package introduces a possibility to keep deceased persons on the asset freeze list, to prevent the resources being used to finance the war.

Obligations on asset-tracing

Tighter obligation for Member States to proactively trace assets of listed persons, to prevent and detect instances of breach or circumvention of sanctions.

New derogations

Exemptions to import restrictions on personal use items , such as personal hygiene items, clothing worn by travellers or contained in their luggage, and cars with a diplomatic vehicle registration plate to enter the EU. Member States can also authorize the entry of cars if they are not for sale and are driven for strictly personal use.

Derogation for the release of frozen funds in cases where a Member State decides, for the public interest, to seize assets from a listed party. Additionally, it allows for the provision of funds and economic resources to the same listed parties to pay compensation, on the condition that this compensation remains frozen.

Derogations for newly listed insurance companies allow compensations for damages to be paid, as well as a derogation for the purchase, import, or transport of agricultural and food products.

Derogation allows the sale of EU companies owned by certain listed individuals or entities.

Derogation from the asset freeze and the restriction on providing resources to allow the sale or utilization of shares in a company based in Russia, in cases where a legal entity from the EU has been forced by the Russian Government to transfer ownership or control of that company.

III. Other Measures

Reporting requirement for transfer of funds outside the EU

A notification requirement has been introduced for the transfer of funds outside the EU by any entity established in the EU that is owned by more than 40% or controlled by Russians or entities established in Russia.

Price cap enforcement

Tighter compliance rules to implement the oil price cap are introduced such as a strengthened information-sharing mechanism allowing better identification of vessels and entities carrying out ship-to-ship transfers and AIS manipulations while transporting Russian crude oil and petroleum products.

A new notification rule is introduced for the sale of tankers to any third country to make more transparent their sale and export, in particular in the case of second-hand carriers that could be used to evade the import ban on Russian crude or petroleum products and the G7 Price Cap.

Asset-tracing reporting

Member States are now subject to tighter obligations to proactively trace assets of listed persons, and to prevent sanctions circumvention. They are also obliged to designate the national authorities competent to identify and trace those assets.

Ban on crypto-asset management

A new ban prohibits Russian nationals from owning, controlling, or holding any posts on the governing bodies of the entities providing crypto-asset wallet, account, or custody services to Russian persons and residents.

EU agrees on the reform of the Court of Justice

Thu, 14 Dec 2023 11:03:46 GMT

In a significant step towards enhancing the efficiency of its judicial system, the Spanish Presidency of the Council and the European Parliament (EP) have reached a provisional agreement on reforming the Statute of the Court of Justice of the European Union (CJEU). This agreement, between the Council presidency and representatives of the EP, is in the context of a growing number of complex and sensitive cases being brought before the EU courts.

This reform proposal, initially put forward by the Court of Justice in December 2022, was negotiated with the participation of the Court of Justice, and the also European Commission.

The reform of the Statute of the Court of Justice marks a pivotal moment in the EU’s ongoing efforts to modernize and streamline its judicial process, reflecting a commitment to upholding a robust and effective administration of justice.

Key Provisions of the approved agreement on the reform

Efficiency in Judicial Management

The reform leverages a prior judicial reform that increased the number of judges in the General Court, aiming to enhance the management of judicial work at the Court of Justice of the EU.

Changes in Preliminary Rulings

A significant aspect of the reform is the transfer of jurisdiction over preliminary rulings to the General Court in certain areas. However, the Court of Justice will maintain jurisdiction over questions of principle, including the interpretation of the Treaties and the Charter of Fundamental Rights.

Areas, where the General Court will have jurisdiction, include the common system of value-added tax, excise duties, the Customs Code, the tariff classification of goods under the Combined Nomenclature and others related to transportation services and environmental schemes.

“One-Stop-Shop” Mechanism

The reform introduces a streamlined process where national judges will continue to direct requests for preliminary rulings to the Court of Justice, which will then forward relevant questions to the General Court. This mechanism aims to simplify the procedural aspects of cases.

Procedural Guarantees

The reform ensures that procedural guarantees at the General Court are aligned with those at the Court of Justice. This includes appointing judges as Advocates-General for opinions on preliminary questions and creating a chamber of intermediate size at the General Court for specific preliminary ruling requests.

Limiting Appeals

Extending the 2019 filtering mechanism appeals to the Court of Justice will be limited. Cases previously considered by an independent board of appeal and the General Court will only proceed to the Court of Justice if they present significant issues concerning the unity, consistency, or development of EU law.

Transparency Measures

In a move to increase transparency, written submissions in preliminary ruling requests will be made public post-judgment, barring objections from concerned parties. This measure aims to bolster accountability and trust in the EU legal system.

The reform also aims to improve transparency in preliminary ruling cases by publishing written submissions post-judgment, unless objected to by an involved party, thereby increasing accountability and trust in the EU legal system and by extension the EU.

Next Steps and Background

The provisional agreement now awaits endorsement by both the Council and the Parliament while afterwards, the formal adoption will occur following a legal-linguistic review.

EU agrees on AI Act and sets the first rules for AI in the world

Wed, 13 Dec 2023 11:08:53 GMT

Following almost 3 years of work and a 3-day ‘marathon’ trilogue consultations, negotiators of the Council presidency and the European Parliament (EP) have reached a provisional agreement on the world’s first comprehensive artificial intelligence (AI) law, known as the AI Act.

The AI Act, which was originally presented in April 2021 by the European Commission, fits into the EU’s “rights-driven” regulatory agenda and aims to balance protecting fundamental rights and stimulating investment and innovation in AI in the EU. The act achieves this by following a ‘risk-based’ approach, applying stricter rules for the higher-risk applications and use cases of AI.

As the first legislative proposal of its kind in the world, EU leaders hope that the AI Act will leverage the so-called Brussels effect and set global standards for AI regulation while promoting the EU’s approach to tech regulation across the globe.

The main elements of the provisional agreement are the following:

Definition of AI

The regulation took all the main elements from a recently revised OECD definition of AI, and with minor differences in language defines it as “a machine-based system that, for explicit or implicit objectives, infers, from the input it receives, how to generate outputs such as predictions, content, recommendations, or decisions that can influence physical or virtual environments”.

Classification of AI systems

Applications that have been banned due to the threat they pose to democracy and citizens’ rights include biometric categorization based on sensitive characteristics, scraping of facial images for recognition databases, emotion recognition in workplaces and educational bodies, social scoring based on personal characteristics and AI systems that manipulate human behaviour or exploit vulnerabilities.

High-risk AI systems such as those for vehicles, education, voting systems, critical infrastructure, emotion recognition, biometric identification, law enforcement applications, public bodies etc., face several obligations. Some of the most important requirements are fundamental rights impact assessment and conformity assessments, registration in the public EU database, implementation of risk management and quality management systems, data governance, transparency, human oversight, accuracy, robustness, and cybersecurity.

Law enforcement exceptions

Exceptions for law enforcement have been established at the insistence of Member States, including the use of real-time biometric identification systems in public spaces subject to strict conditions (judicial authorization and specific crime lists).

General-purpose AI systems and foundation models

General-purpose AI systems that can be used for different purposes are subject to less significant obligations than high-risk systems, including transparency requirements, such as technical documentation, training data summaries, copyright and IP safeguards. Some additional requirements for high-impact models with systemic risks are model evaluations, risk assessments, adversarial testing and incident reporting. For generative AI systems, such as chatbots, users must be informed when interacting with AI and AI-generated content must be labelled and detectable. Models above a certain threshold of computing power will automatically be categorised as “systemic”. The provisional agreement also addresses the specific cases of general-purpose AI (GPAI) systems.

After intense debates between the Council and the EP, the provisional agreement sets specific rules for foundation models, “large systems capable of competently perform a wide range of distinctive tasks, such as generating video, text, images, conversing in lateral language, computing, or generating computer code”. The agreements created stricter rules for ‘high-impact’ foundation models, “which are foundation models trained with large amounts of data and with advanced complexity, capabilities, and performance well above the average”. Most importantly, foundation models must comply with certain transparency obligations before their commercialisation starts.

Governance

The AI Act has assigned the enforcement and supervision of the most advanced AI models to a new AI Office within the Commission. The AI office will rely on the support of a scientific panel of independent experts, advising specifically on GPAI models and contributing to the development of methodologies for evaluating the capabilities of foundation models, advising on the designation and the emergence of high-impact foundation models, and monitoring possible material safety risks related to foundation models.

The AI Board will comprise Member States’ representatives and will serve as a coordination platform and an advisory body to the Commission and will give an important role to Member States in the implementation of the regulation, including the design of codes of practice for foundation models. An advisory forum for a wide range of stakeholders, including industry representatives, SMEs, start-ups, civil society, and academia, will provide technical expertise to the AI Board.

Sandboxes

The provisional agreement promotes sandboxes and real-world testing for AI development, and it also requires foundation models and generative AI systems to provide all the necessary information to comply with the AI Act’s obligations to downstream providers that create an application falling in the high-risk category. This should streamline requirements for SMEs piggybacking on these models, as well as fuel innovation.

Penalties

There will be fines of up to 7% of global annual turnover (GAT) or €35 million for violations of the AI Act, up to 3% of GAT or €15 million for the majority of other violations, up to 1.5% of GAT or €7.5 million for supplying incorrect information. For SMEs and startups, fines will be capped to not disproportionately hurt smaller companies.

Enforcement

Enforcement will be shared between Member States and EU authorities. An EU AI Office and AI Board will be established at the EU level to oversee national authorities’ enforcement and to coordinate policy at the EU level. Market surveillance authorities at the national level will enforce the AI Act in their respective countries. Any individual can make complaints about non-compliance, giving some potential redress to EU citizens.

Open-source software

Free and open-source software will be excluded from the scope of the legislation unless they are deemed high-risk systems, prohibited applications or a system with risks of causing manipulation.

Next steps

Formal adoption

Discussions focusing on the finalisation of the details of the regulation will continue at the technical level, and foreseeably the Belgian presidency of the Council will submit the final text to Coreper ambassadors for approval. The final act is expected to be adopted in early 2024.

Implementation

The implementation for most provisions will be two years after the enactment of the AI Act, with a shorter period of 6-months for certain requirements like high-risk AI systems and governance infrastructure and training.

Reaching an agreement on such a consequential piece of legislation is a major achievement by the EU, led by the Spanish presidency, which was able to close this dossier despite fierce debates and last-minute position changes. With this agreement, the EU has become the first actor to formally regulate AI in the world, and to develop a future-proof rulebook on this technology. Hopes are high among EU legislators that the Brussels effect will again take hold in the realm of AI, cementing the EU as a global regulatory trend-setter.

There will likely be significant opportunities in the legal and policy arenas starting in the coming months, with various AI companies of all sizes looking to explore how to be compliant with the relevant obligations under the AI Act.

Policy Recap: EU Informal Summit in Granada

Wed, 25 Oct 2023 10:12:28 GMT

On October 6th, an informal EU Summit convened in Granada under the EU Spanish Presidency.

This Summit followed a series of significant diplomatic engagements and policy developments. In preparation, the EU Council and EU Commission held meetings with leaders from pre-Accession Countries in the Western Balkans and countries from Eastern Europe, including Bulgaria, Croatia, Romania, Moldova, and Ukraine. Notably, the EU’s Foreign Affairs Ministers held a historic meeting in Kyiv. Additionally, the NATO-Ukraine Council met, and the European Political Community of 47 EU and non-EU leaders gathered in Granada. After the Granada Summit, EU Leaders will convene formally on October 26-27 in Brussels to continue discussions on pressing matters.

On the Summit’s agenda, three primary issues were addressed:

EU Security: The discussion highlighted the increased need for the EU to bolster its sovereignty and protect its people and economy, especially in the face of events like the ongoing war in Ukraine and the global pandemic. A focus on defense readiness, technological advancements, military mobility, and resilience against cyber and hybrid threats is at the forefront. The EU seeks to work closely with the U.S. on these matters.
Green and Digital Transitions: The Summit recognized the urgency of addressing environmental risks, climate change, and geopolitical tensions. The EU is committed to driving its green and digital transitions, emphasizing energy and resource efficiency, circularity, research, decarbonization, and resilience to natural disasters. The goal is to build a more cohesive, innovation-driven, competitive, and interconnected Single Market.
Supply Chains and Trade: The importance of diversifying EU supply chains and enhancing partnership, trade, and investment agreements was emphasized. The EU aims to promote sustainable development and net-zero emissions while focusing on global trade’s reinvigoration, with the WTO playing a central role.

Enlargement & Migration

In the context of EU Enlargement and migration policies, the Summit underscored the strategic importance of both processes for peace, security, and prosperity in the region. The EU called for candidate countries to intensify their reform efforts, particularly concerning the rule of law.

However, a consensus was not achieved on the issue of EU migration and asylum rules, signalling the need for further work and compromise. The European Council will continue discussions on these topics in the coming months, leading to the adoption of a new Strategic Agenda in 2024.

Foreign Affairs

At the margins of the Summit, Council President Charles Michel, German Chancellor Scholz and French President Macron met with Prime Minister of Armenia Nikol Pashinyan. The EU side underlined its unwavering support for the independence, sovereignty, territorial integrity and inviolability of the borders of Armenia. EU leaders also expressed their support for the strengthening of EU-Armenia relations, they agreed on the need to provide additional humanitarian assistance to Armenia and they remain committed to all efforts directed towards the normalisation of relations between Armenia and Azerbaijan.

Transatlantic Policy Dialogue: Recap of the 2023 EU-US Summit

Mon, 23 Oct 2023 10:15:55 GMT

On 20 October, the US and EU and held their first joint summit since June 2021. During the summit, leaders of the US and the EU, including US President Joe Biden, Council President Charles Michel, and European Commission President Ursula Von der Leyen discussed a wide range of topics and issued a joint statement.

They emphasized their commitment to transatlantic cooperation, addressed security and defence matters, and discussed their stance on international issues. The summit highlighted their shared concerns about Ukraine and the Middle East, as well as issues such as trade disputes, climate change, and technology cooperation.

The parties discussed various aspects of their relationship, including trade, sustainable development, climate change, and the digital economy. While there were no concrete commitments on some issues, they agreed to continue cooperation on these matters in the future. The summit also underlined the importance of a rules-based global trade approach and tackling misinformation.

The summit has also put a spotlight on key differences between EU leaders, as Council President Charles Michele had a bilateral meeting with US President Joe Biden, while Commission President Ursula von der Leyen has reportedly opted to join President Biden for a separate walk-through the Rose Garden.

Security Cooperation: pressing matters and shared concerns

One of the key topics addressed at the summit was security cooperation. With respect to the unfolding war in the Middle East, both parties have condemned Hamas terrorist attacks and backed Israel’s right to respond, albeit in accordance with human rights.

They also expressed full support for Ukraine’s Peace Formula and reiterated their position that any peace deal must respect Ukrainian independence, sovereignty, and territorial integrity, as well as the principles in the United Nations Charter. Both the EU and US repeated their commitment to support Ukraine “for as long as it takes to defend its sovereignty and territorial integrity” and highlighted the “strategic importance of its EU accession process”. The joint statement from the summit also accused and condemned Russia for blocking food exports and attacking grain facilities in Ukraine, contributing to food insecurity. The statement also recommitted to enforcing sanctions and export control measures on Russia.

The summit broadened the EU accession topic to include Moldova and Georgia while pushing for de-escalation in renewed conflicts between Serbia and Kosovo, and Armenia and Azerbaijan.

In relation to Africa, the summit’s statement affirms the desire for a “thriving, peaceful, democratic, and resilient Africa” and welcomed the African Union as a permanent member of the G20. The statement also reaffirmed commitments to tackling security challenges in the Sahel and North Africa.

The summit addressed the EU-US relationship with the Indo-Pacific, calling for enhanced cooperation to support the values of democracy, rule of law, human rights, and international law in the region. They specifically mention issues of maritime domain awareness, connectivity, foreign information manipulation and interference, cyber cooperation and more. The joint statement also offered “unwavering support” to ASEAN, and committed to cooperating with them in the region. The summit also reaffirmed the partnership with Pacific Island countries and the importance of supporting their priorities, while respecting international law, as reflected in the United Nations Convention on the Law of the Sea (UNCLOS).

Unsurprisingly, China was high on the agenda during the summit. Both parties repeated the importance of building “constructive and stable relations with China”, particularly on issues of climate and biodiversity, vulnerable countries’ debt and financing needs, global health and macroeconomic stability. There was a focus on de-risking, diversifying and addressing vulnerabilities in EU and US supply chains, as well as protecting certain crucial technologies that could threaten global peace and security, without suppressing trade and investment. The statement also mentions addressing challenges “posed by non-market policies and practices”, without mentioning China by name, or how these challenges will be addressed. The summit made clear that concerns remained over the situation in the East and South China Seas, and that both transatlantic counterparts oppose unilateral attempts to change the status quo by force. Although both the US and EU confirmed there was no change to the one China policy, they underscored the importance of peace and stability across the Taiwan Strait. They also stated that there were still concerns about human rights and forced labour in China, and called on China to respect its previous commitments to Hong Kong. Finally, the joint statement requested China exert its influence on Russia to bring an end to the war in Ukraine.

The summit addressed increasing cooperation on security and defence between the US and EU, citing NATO as the backbone of this collaboration, but also referring to the Administrative Arrangement between the United States Department of Defense and the European Defence Agency. The high-level discussions also spoke to the importance of the Sustainable Development Goals (SDGs), and working with emerging economies and developing countries to achieve core development needs by stepping up “efforts to deliver substantial contributions”.

The summit highlighted the important role of private capital mobilization in terms of investing in quality infrastructure in low- and middle-income countries by 2027. They specifically mention the Trans-African Corridor and the India-Middle East-Europe Corridor as building blocks for further regional cooperation on inclusive and sustainable economic growth. Additionally, the US and EU will continue to promote digital inclusion, trustworthy information, communication technology and services supply chains around the world.

Sustainability and environment: no clear commitments

In the joint statement, there was significant attention given to cooperation on climate change and environmental issues, but no tangible commitments of note. The statement refers to implementing the Paris Agreement for example, which is a non-binding voluntary agreement that has not resulted in significant shifts in energy policy thus far. There are calls for continued investment, research and cooperation to maximize clean energy deployment. Climate change and biodiversity loss were also on the agenda, with seemingly few concrete developments on these fronts, apart from calls to cooperate on such issues at a global level.

Trade disputes: stocktaking and potential WTO reforms

The summit did however, address some of the outstanding trade disputes that have been plaguing the EU-US relationship in recent years, though it seems they did not resolve these disputes, with a statement from the summit claiming that leaders “took stock of progress made on the global arrangement on sustainable steel and aluminium and on a targeted critical minerals agreement”.

EU and US representatives discussed the importance of a global rules-based trade approach, with reforming the WTO a crucial measure highlighted during the summit. There was also a reference to the Global Agreement on Sustainable Steel and Aluminum to address non-market excess capacity and emissions intensity of the steel and aluminium industries, including to promote undistorted trade. The statement then clarifies the need for progress on these objectives in the coming months, demonstrating the lack of agreement on these crucial trade issues that could result in further disagreements, and subsequent tariffs in the coming months, if no resolution is found.

Technological cooperation: ethical approaches to AI, and high-cybersecurity standards

At this summit, participants also addressed the digitalisation of the global economy, as well as the growing geopolitical force that is Artificial Intelligence (AI). Both parties confirmed their intentions to support ethical approaches to AI while supporting and harnessing the technology’s massive potential. There was an additional reference to coordinate and promote high cybersecurity standards to protect businesses and consumers, with a Joint CyberSafe Products Action Plan. The importance of the US-EU Trade and Technology Council (TTC) was also highlighted in terms of leading cooperation and negotiations on trade and technology matters.

Economic resilience and security: strengthening the transatlantic marketplace and relationship

The post-summit statement reaffirmed the pledge of both parties to strengthen the transatlantic marketplace and relationship. The EU and US recommitted to cooperation on trade and technology matters, with particular emphasis on “mutually beneficial resilience and sustainability of our supply chains” and on “technologies that underpin the transition to a climate-neutral economy”. The issue of misinformation was also raised, with references to threats posed to “democratic values, processes, and stability”, and the need for cooperation to mitigate these threats. Finally, there were commitments to facilitate “visa-free travel between all EU Member States and the United States”, as well as increased and easier academic exchanges.

Client Alert: EU’s Carbon Border Adjustment Mechanism (CBAM)

Tue, 03 Oct 2023 10:19:20 GMT

Effective October 1, 2023, the transitional phase for the Carbon Border Adjustment Mechanism (CBAM) is now underway. Notably, the initial reporting deadline for importers is set for January 31, 2024. This is a significant milestone for firms importing certain products into the EU.

CBAM is a new mechanism under the EU Green Deal framework. It mandates that EU importers pay an adjustment for emissions generated during the production of specific carbon-intensive items in non-EU countries. This adjustment aims to ensure that goods imported into the EU are subject to carbon pricing that is similar to what domestic EU industries face under the EU Emissions Trading System.

It covers a number of specific products in some of the most carbon-intensive sectors listed under Annex I of the Regulation (EU) 2023/955, such as iron, steel, cement, fertilisers, aluminium, electricity and hydrogen.

CBAM requires both importers based in the EU and exporters outside the EU to account for the carbon emissions associated with the production of those goods.

To achieve CBAM compliance, importers typically need to:

purchase CBAM certificates or emission allowances; and

prepare and submit regular reports detailing the emissions associated with their imported goods to the relevant EU authorities.

Exporters, on the other hand, need to:

implement carbon accounting to determine the carbon emissions associated with their production processes based on specific methodologies;
independently verify embedded emissions; and
explore ways to reduce the carbon footprint of their products to minimize CBAM-related costs.

From 1 October 2023, businesses importing products within the CBAM scope must adhere to a quarterly reporting mechanism. The transitional phase runs from 1 October 2023 until 31 December 2025, during which only reporting obligations, without other obligations (such as buying certificates), will apply. This report will require a comprehensive array of data, including product master data, transactional details, and supplier information.

Within this framework, importers are obliged to report various details, including the type of goods as identified by their CN code, the quantity of imported goods, the direct and indirect emissions embedded in them, the country where a carbon price is due, the country of origin of imported goods, the identity and location of the installations where the goods were produced and other information as defined in the implementing regulation.

The report is to be submitted to the CBAM Transitional Registry, overseen by the European Commission. This electronic database features a trader portal for the submission of quarterly CBAM reports and it is accessible to both local competent authorities and the Commission. Non-compliance with CBAM reporting obligation or inaccuracies in the CBAM reports incur penalties, established by each EU Member State, ranging between EUR 10 and EUR 50 per ton of unreported or misreported embedded emissions. The penalty shall increase in accordance with the European index of consumer prices

ICJ holds first arguments in the case Ukraine v. Russia

Thu, 21 Sep 2023 14:23:11 GMT

Yesterday, the International Court of Justice (ICJ or Court), the principal judicial organ of the United Nations (UN) held the first round of oral arguments in the case Ukraine v. Russia (state responsibility), with the very first statements by Russian representatives in this case, namely statements on the preliminary objections to the Court’s competence in this case.

This dispute is particularly important as (1) it is the first time the Russian representative has taken the stand in the hearings held by the ICJ after Russia’s full-scale invasion of Ukraine, and (2) it touches upon the interpretation, application, and enforcement of the 1948 Convention on the Prevention and Punishment of the Crime of Genocide (the “ Genocide Convention ”), namely the interpretation of the notion of “ genocide ” and (3) would constitute “a clear finding from the principal judicial organ of the United Nations that Russia should be held responsible as a state and that it may be ordered to pay reparations”.

The hearings, set to be held until the 27 September, will not delve into the merits of the case and are instead focused on legal arguments about jurisdiction.

Ukraine’s argumentation:

In a lawsuit filed on 26 February 2022 against the Russian Federation with the UN International Court of Justice (“ ICJ ”), Ukraine demands that Russia be held accountable for distorting the concept of “ genocide ” relating to the actions that occurred in the Luhansk and Donetsk oblasts of Ukraine:

It denies that such genocide has occurred insofar as there is no factual basis for the existence of genocide in the Luhansk and Donetsk oblasts, and Russia has advanced no evidence to substantiate its allegation;
It states that it submitted the Application “to establish that Russia has no lawful basis to take action in and against Ukraine for the purpose of preventing and punishing any purported genocide”;
It accuses the Russian Federation of “planning acts of genocide in Ukraine” and contends that Russia “is intentionally killing and inflicting serious injury on members of the Ukrainian nationality” – the actus reus of genocide under Article II of the Genocide Convention.

Russia’s argumentation:

Russia claims that the court has no jurisdiction over the case, as Ukraine’s ‘creative argument’ would not be in the convention scope and calls on the judges to dismiss the case, insofar as:

Ukraine insists no genocide acts occurred;
the Genocide Convention governs neither the use of force between States nor the recognition of States and applies only if a genocide occurred, so the subject of Ukraine’s claim and request falls outside the Convention insofar as the “pretext” of Ukraine to bring the claim is based on the “allegedly abuse of the Genocide Convention” by Russian Federation.
According to the longstanding ICJ’s caselaw, if there was no genocide, there cannot be a violation of the Genocide Convention; and
the ‘military operation’ was not legally based on the Genocide Convention, but on Article 51 of the UN Charter – on exercising the right of self-defence in the event of armed attack – and customary international law.
It accuses Ukraine of acts of genocide against ethnic Russia the Kyiev regime of “neo-nazi”.

Other procedural matters:

Court’s jurisdiction

The ICJ will establish whether it has jurisdiction or not. This question was already partially and prima facie established during its initial injunction in March 2022 in which hearings Russia did not participate.

The issue lies in the fact that neither Ukraine nor Russia have made a declaration accepting the ICJ’s compulsory jurisdiction under Article 36 of the ICJ’s statute. Therefore, the ICJ’s competence in the Ukraine case derives solely from the Genocide Convention, which both Russia and Ukraine have ratified. It obliges state parties to prevent and punish genocide and gives the Court jurisdiction over disputes between parties relating to ‘interpretation, application or fulfilment’ of the Convention.

The Court’s decision of 16 March 2022 considered that there is sufficient evidence for Ukraine to invoke the compromissory clause in Article IX of the Convention, which attributes jurisdiction to the ICJ for disputes arising under the Convention. Some noteworthy arguments of the Court to support its preliminary decision are as follows: in discharging its duty to prevent genocide, every State may only act within the limits permitted by international law; the Court is not in possession of evidence substantiating the genocide allegations of the Russian Federation; the Court is ‘doubtful’ that the Convention authorizes unilateral use of force in the territory of another State.

State interventions

A total of 32 states joined the case with their interventions. They will also take part in the court hearing. On June 5, 2023, the ICJ passed an Order confirming that the interventions of the 32 states are acceptable.

This is an unprecedented number of participating states in history: 34 of the 193 UN members, that is, almost 20 percent, are taking part in the trial. The big absent is the United States whose request was rejected on a technicality by the ICJ.

What is next?

The hearings will be held in two rounds: Russia’s representatives will speak again on September 25, and Ukraine’s team will have the floor on September 19 and 27.

The European Commission launches an anti-subsidy investigation on Chinese e-vehicles

Thu, 21 Sep 2023 10:22:54 GMT

“The Commission is launching an anti-subsidy investigation into electric vehicles coming from China” announced the President of the European Commission (the “Commission”), Ursula von der Leyen at her annual State of the European Union speech on 13 September 2023.

What is an anti-subsidy investigation?

The Commission’s DG Trade is launching an investigation into potential subsidies provided by the Chinese government to its domestic electric vehicle industry. This inquiry seeks to assess whether these subsidies are adversely impacting EU e-vehicle manufacturers in the European market.

Who probed the investigation?

In this case, the Commission appears to initiate the investigation on its own initiative (ex officio), and not on the basis of a complaint received by the EU industry. However, EU e-vehicle manufacturers and the French Government seem to have been advocating in favour of the investigation.

When will the anti-subsidy investigation be initiated?

The investigation will be officially launched once the Notice of Initiation (the “Notice”) is published in the Official Journal of the EU. This Notice will specify the precise product under investigation and outline the rights and responsibilities of all involved parties in the process. Deadlines will start running from the day of the publication of the Notice.

How will this investigation concern EU and Chinese electric vehicle manufacturers?

Following the publication of the Notice, a comprehensive questionnaire will be distributed to Chinese exporters, relevant authorities in China, EU producers, importers, and users. In cases a large number of companies comes forward, the Commission will select a representative sample, typically focusing on the largest ones. The deadline for responses to the questionnaire usually spans 37 days from the Commission’s determination of the sample. Subsequently, the Commission will carry out on-site verifications to validate the information provided.

Preparation Alert:

Both EU and Chinese electric vehicle manufacturers must be ready to provide the Commission with precise financial and production data within strict deadlines in writing and on-site. Compliance with these requirements is crucial to avoid being subject to excessive duties due to non-cooperation with the Commission.

Other interested parties, such as importers, users, trade associations and governments are also expected to contribute to the investigation by filling out questionnaires, submitting written comments or requesting hearings throughout the investigation. Their valuable insights and input have the potential to influence the final outcome.

How long could it take?

The Commission will conclude its investigation within 13 months from the publication of the Notice in the Official Journal of the EU. While provisional duties can be imposed sooner, they must be in place no later than eight months from the investigation’s initiation. It’s worth noting that in some cases, duties can be retroactively imposed, but only if the Commission deems it necessary to mandate the registration of imports.

What happens if the Commission determines that subsidies to Chinese electric vehicle producers distort the EU internal market?

In the event that the Commission determines that subsidies to Chinese electric vehicle producers are disrupting the internal market, countervailing measures will be imposed. These measures will involve the imposition of supplementary duties at the border. This is done to counteract the adverse impact of the subsidies and restore fair competition in the EU market. Initially, countervailing measures are put in place for a period of five years. It’s important to note that these measures are subject to potential extensions, often renewed for an additional five-year term.

EU General Court maintains Russian sanctions except for one case

Mon, 18 Sep 2023 07:36:51 GMT

Last week, the General Court of the EU (“ Court ”) released a set of seven significant judgments concerning the EU’s restrictive measures (sanctions) against Russia.[1] The Court has partially dismissed sanctions imposed by the Council of the EU against Alexander Shulgin, while it has maintained sanctions in the six other cases.

The judgments are particularly important as they concern individual sanctions that the EU imposed after Russia’s full-scale invasion of Ukraine, and they touch upon important aspects within the EU sanctions legal framework, including the definition of a “leading businessperson”, the notion of “association” with a listed person, and various procedural and evidentiary matters. Below is a summary of the decisions and the arguments developed by the Court.

“Leading businessperson” criterion[1]

The term “leading” implies both the notions of “importance” and “influence”

The Court considered that the notion of “leading businessperson” should be understood as referring to “importance” and “influence”, noting that there was no requirement for an additional link either to the Russian Government or to the invasion of Ukraine.

The Court highlighted four factors to be taken into account, namely:

professional status;
importance of economic activities (of the person concerned and that of the company);
extent of capital holdings; and
functions within one or more companies.

Importantly, the Court also referred to being at the top of the ranking of the richest businessmen in Russia as a self-sufficient determining factor.

Participation at the meeting in the Kremlin on 24 February 2022

Presence at the meeting in the Kremlin on 24 February 2022 can be taken into consideration to determine that a person is a “leading businessperson”, but it is not sufficient in itself.

Resignation from executive roles

Unsurprisingly, the Court confirmed that resignations which occurred after the listing cannot be taken into consideration.

However, the Court also confirmed that the Council cannot solely rely on a past position to justify a listing (or a re-listing)[2]. Sufficient evidence demonstrating that the person can still be considered a leading businessperson must be provided by the Council, including links with their previous company and the ability to influence it.

The notion of “control” over the company is irrelevant

The Court consistently rejected claims based on the absence of control exercised by the applicant over relevant Russian companies, noting that this argument has no basis in the wording of the criterion.

At the same time, the Court in several cases indicated lower significance to the existence of shareholding as such, putting more weight on the persons’ managerial function within the company.

Identification of the sector

When identifying sectors relevant to the criterion, the Court took a wide approach: the Court considered not only the specific activities of a company but also those of its customers and counterparties.

Definition of “substantial” source of revenue

The Court simply clarified that the revenues in question should be ‘significant’ and ‘not negligible’. The Court importantly considered both direct revenues and indirect revenues, such as those derived from taxes paid by consumers on goods and services, including VAT.

Several sectors were considered to be providing a substantial source of revenue (e.g. oil and gas, e-commerce, others).

Association with a leading businessperson

The Court confirmed that the notion of ‘association’ requires a connection through common interest, which does not necessarily entail relationships by means of economic activities. It also noted, in line with previous jurisprudence, that family ties are not in themselves sufficient.

Other procedural and evidentiary matters

The probative value of the evidence produced by the Council

The Court was generally satisfied with the evidence provided by the Council, reaffirming that the Council can rely on publicly available sources. It was also highlighted that when the Council relied on information from a company’s website, the applicant could not complain that it was not up to date.

References:

[1] Judgement of 6 September 2023, Shulgin v Council, T-364/22, EU:T:2023:503; Judgement of 6 September 2023, Timchenko v Council, T-361/22, EU:T:2023:502; Judgement of 6 September 2023, Khudaverdyan v Council, T-335/22, EU:T:2023:500; Judgement of 6 September 2023, Pumpyanskiy v Council, T-291/22,EU:T:2023:499; Judgement of 6 September 2023, Pumpyanskaya v Council, T-272/22,:EU:T:2023:491; Judgement of 6 September 2023, Pumpyanskiy v Council, T-270/22, EU:T:2023:490; Judgement of 6 September 2023, Timchenko v Council, T-252/22, EU:T:2023:496.

[2] Criterion (g): “leading businesspersons involved in economic sectors providing a substantial source of revenue to the Government of the Russian Federation, which is responsible for the annexation of Crimea and the destabilisation of Ukraine”

[3] The Russian sanctions regime is kept under constant review and must be reviewed every 6 months: this renewal is commonly referred to as ‘re-listing’.

EU adopts 11th Sanctions Package against Russia

Mon, 24 Jul 2023 09:17:06 GMT

On 23 June, the EU published its latest package of restrictive measures against Russia, which includes a new anti-circumvention tool that aims to stop third countries and companies from circumventing existing EU sanctions and imposes a transit ban via Russia on additional goods and technology, which might aid Russia’s military or security sectors. As part of the package, the EU has listed an additional 104 Russian individuals and entities, plus added 87 new entities to the list of those directly supporting Russia’s military and industrial complex, including entities registered in Russia, China, Uzbekistan, the United Arab Emirates, Syria, and Armenia.

The 11th package represents a significant milestone in EU sanctions efforts, as it empowers Member States to – unanimously and as a last resort – punish third countries assisting Russia in circumvention with trade restrictions. Consequently, the package has undergone a long negotiation period, as the Commission introduced its original proposal on 5 May. The negotiations centred around the issue of blacklisted Hungarian and Greek companies by Ukraine, and several Member States’ apprehensions regarding reactions from third countries to the anti-circumvention tool.

Key Measures of the 11th Sanctions Package

I. Trade Measures

Anti-circumvention tool

The provisions of the 11th package enable the EU to restrict the sale, supply, transfer, or export of specified sanctioned goods and technology to certain third countries whose jurisdictions are at continued and particularly high risk of circumvention. This should only be invoked as a last resort and unanimously by Member States, and prior to the restrictions the EU needs to diplomatically engage third countries and introduce individual measures against third-country operators.

Extended transit ban

The EU has extended the prohibition of transit via Russia for certain sensitive goods and technology (e.g., advanced, aviation-related materials) which might contribute to Russia’s military and technological enhancement or its defence and security sectors.

Import-export control

The Council added 87 entities to the list of entities supporting Russia’s military complex, subjecting them to tighter export restrictions. The expanded list includes entities from third countries, such as Iranian drone manufacturers, businesses evading trade restrictions, and Russian entities involved in producing electronic components.

II. Listings & Derogations

Individual listings

The Council has sanctioned 71 individuals and 33 entities as part of the package, including businesspersons, propagandists, as well as Russian IT companies providing critical technology to Russian intelligence, banks operating in the occupied territories, and entities working with the Russian armed forces.

New listing grounds

New listing grounds for persons and businesses circumventing or “otherwise significantly frustrating” EU sanctions have been introduced, which can be applied to third-country operators as well. It is not clear at the moment, what activities could qualify as “significantly frustrating”, therefore it will be necessary to monitor how the practice of the Council on sanctions imposed under this criterion will develop[1].

Entities in the Russian IT sector with licenses administered by the FSB or by the Russian Military of Industry and Trade can also be sanctioned under the new listing criterion[2].

New derogations

Derogation for EU holders of depository receipt on Russian securities: There is a new exemption for EU holders of depositary receipts of Russian shares, allowing them to apply until 25 September for permission to receive the proceeds from the unwinding of these depositary receipts and the sale of the Russian underlying securities in Russia.

Derogation for firewalls: A new derogation allowing for the setting-up, certification or evaluation of a firewall that removes the control exercised by a listed person over the assets of a non-listed EU entity which the listed person owns or controls has also been introduced. This derogation applies both to the individual asset freeze and to the services ban.

Derogation for divestment: A new derogation has been introduced for certain listed entities to allow for divestment from Russian companies and the disposal of certain types of securities.

Derogation from the services ban: A new temporary derogation from the professional service’s ban, with the aim of further facilitating divestment from the Russian market by EU operators, has also been introduced. As part of this derogation, legal service providers are allowed to provide services that are necessary for Russian companies to sell their European subsidiaries.

III. Other measures

· Ban on transferring IP rights

A new provision includes the prohibition to sell, license, transfer or refer IP rights and trade secrets used in connection with restricted goods to prevent the sanctioned goods from being manufactured outside the EU.

· Prohibition to transfer securities

To avoid circumvention of the prohibition on providing transferable securities to persons in Russia, the 11th package extended that prohibition to financial instruments denominated in any currency, issued after 6 August 2023.

Broadcasting

The suspension of broadcasting licences has been extended to five additional media outlets (RT Balkan, Oriental Review, Tsargrad, New Eastern Outlook and Katehon).

Transport via EU roads and ports

A prohibition to transport goods into the EU by road to trailers and semi-trailers registered in Russia has been introduced. Access to EU ports and locks to vessels engaging in ship-to-ship transfers is prohibited if national authorities deem that there is a risk of circumvention.

· Import ban on Russian oil by pipeline

The temporary derogation granted to Germany and Poland for the supply of crude oil by pipeline from Russia through has been terminated. The import of oil which originates in Kazakhstan or another third country and is transiting through Russia via the Druzhba oil pipeline is not prohibited.

[1] In the 11th package, only one company was sanctioned under this criterion (CJSC SPS) which was engaged in the supply of semiconductors from the EU.

[2] As part of the 11th package, several Russian companies have been listed under this criterion (NTTS VULKAN LLC, OKENIT JSC, Echelon JSC, etc.).

The Brussels Effect meets AI: What to Expect from the EU’s AI Act?

Sun, 23 Jul 2023 09:15:56 GMT

People are often fascinated by the journey of discovering individual identity. At some point in your life, you’ve probably taken a personality test, figured out your astrological sign, or taken an online quiz to figure out what flavor of Doritos you are. All of these try to tell us who we are and where we belong in the world.

As the development of artificial intelligence (AI) continues to accelerate, governments around the world are under increasing pressure to regulate the technology. The most tangible legislative proposal on the topic so far is the draft AI Act of the European Union (EU), a landmark proposal which is on track to be adopted by the end of 2023 or early 2024. This article summarises the current state of play of the EU negotiations and the likely direction of the legislative proposal.

Key provisions of the draft AI Act

The EU’s draft legislation aims to foster AI development and innovation and mitigate potential risks in a responsible manner. It seeks to lay out a regulatory framework that builds trust with the EU citizenry and sets out explicit guidelines for AI-related activities for the public and private sectors. This approach is already attracting global attention and will likely inform other countries’ approaches to AI regulation – though it is yet to be seen how strong the so-called ‘Brussels effect’ will be in the AI domain.

One of the core elements of the legislative proposal is that it classifies AI systems into four risk categories:

The first category (unacceptable risk) is banned outright and includes systems like social scoring that manipulate social behaviour in ways that may be harmful to human rights and development.
The second category (high-risk) includes data governance issues, human oversight, law enforcement uses, and usage related to critical infrastructures, and essential private and public services.
The third category (limited risk) includes AI systems such as chatbots (e.g., ChatGPT) and imposes transparency and disclosure requirements on them.
The fourth risk category (minimal or no risk) is afforded near unlimited use of AI, so long as the technology remains classified as minimal risk.

The AI Act allows fluidity in the classification and re-classification of given activities in respective risk categories, enabling the legislation to adapt to the evolving landscape of AI systems. Furthermore, it establishes a European Artificial Intelligence Board to facilitate EU Member States’ adherence to the incoming regulations. However, it remains to be seen what enforcement capabilities this board will possess.

Legislative process: EP adds amendments, and negotiations to follow

On 11 May 2023, the IMCO and LIBE committees of the European Parliament (EP) adopted a draft report on the legislation, which includes significant amendments, compared to the original proposal. The draft report includes a ban on predictive policing, a number of additions to the list of stand-alone AI categorised as high-risk and a strong and inclusive role for the new AI Office. The EP committees have also pushed for a stronger alignment with the EU’s GDPR framework, as well as the introduction of specific provisions related to general purpose Artificial Intelligence.

This draft negotiating mandate needs to be endorsed by the whole EP which is expected to happen at the plenary session between 12-15 June. As the next step, negotiations between the EP and the Council will start.

A balancing act?

Proponents of the draft legislation argue that it is an essential tool in promoting the safe use and development of AI and that it will eventually boost public trust in AI systems. Critics on the other hand have warned that the AI Act will stifle innovation, particularly the robust regulations on high-risk categories. With other major players in AI yet to propose concrete legislation, others have voiced concerns that the AI Act will create a lagging effect for developers.

Such considerations are represented in the EU negotiations: the EP so far has endorsed stricter provisions, while Member States like France have stated that the EP’s position could harm the EU’s ability to compete with the US or China. Sam Altman, the CEO of OpenAI (the developer of ChatGPT) has recently toured Europe and paid visits to various Member States (including France, Spain, Germany, and Poland) and pledged to comply with EU rules and to establish a European headquarter in a Member State.

The EU’s AI Act will likely influence regulatory and policy approaches across the globe as it sets a legal framework for regulating AI and provides a case study that can aid other countries’ decisions on how to regulate AI. In an increasingly interconnected world, even if the EU’s approach fails to gain widespread adoption, it could serve as a steadfast and enduring benchmark for regulatory frameworks in AI.

EU approves 10th package of sanctions against Russia

Sat, 22 Jul 2023 09:11:52 GMT

On 25 February, the EU adopted its latest package of restrictive measures against Russia, which contains new listings plus trade and financial sanctions, including further export bans worth more than €11 billion.

Slightly after the start of Ukraine’s official commemorations of its first year at war, EU Member States have adopted the 10th package of sanctions against Russia, introducing new listings and import and export restrictions, and measures facilitating the divestment of EU companies from the Russian market. Nevertheless, several discussion items have been left out, such as the planned sectoral sanctions on the diamond and nuclear industries and the proposals for a sanction circumvention “watchdog”, and to introduce fines for failure to implement reporting obligations.

New Financial Sanctions

The 10th package adds 121 individuals and entities to the sanction list, including government and military officials, weapons manufacturers, media outlets and executives, financial institutions, and three Russian banks (Alfa Bank, Rosbank, Tinkoff).

Measures Targeting Divestment

To facilitate the divestment from the Russian market by EU operators, the package extends the exemption from the prohibition to enter any transactions with certain Russian state-owned entities if it is necessary for the wind-down of a joint venture. Also, the ban on certain services (accounting, tax, etc.) may be authorised until 31 December 2023 for the exclusive benefit of the legal persons, entities or bodies resulting from the divestment.

New Trade Control Measures

Specialised vehicles, machine parts, targeted construction goods, and engine spare parts are now subject to a new export ban on electronics and industrial goods. The list of restricted items contributing to Russia’s military and technological development includes new components found in weapons systems such as rare earth materials, electronic integrated circuits, and thermal cameras. Furthermore, export restrictions on entities supporting the Russian military have also been tightened and the list includes 96 additional entities. New import bans covering EU imports worth almost € 1.3 billion have also been introduced on high-revenue goods, such as asphalt and synthetic rubber.

Circumvention and Enforcement

The transit of technology and dual-use goods through Russia has been prohibited to avoid the circumvention of the export ban. Moreover, reporting obligations have been strengthened for funds and resources belonging to listed entities and assets pertaining to the Central Bank of Russia. Aircraft operators must also notify national authorities of all non-scheduled flights.

Restrictions on Russian Nationals

Russian nationals are now banned from holding positions in EU governing bodies and Member States’ critical infrastructure companies, and from booking gas storage facilities in the EU.

Exemptions and clarifications

New exemptions to trade restrictions have been introduced, including an import quota on synthetic rubber that was subject to disagreements between Member States. Rules are also provided on the release of goods that had already been presented to customs authorities when they became subject to sanctions.

Broadcasting

RT Arabic and Sputnik Arabic have been added to the existing media ban.

acquislp

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Yapa Thepkanjana joins the Team

ACQUIS New Team Member

Associate (Lawyer) – EU sanctions and export control (Belgian qualified)

Responsibilities:

Qualifications and experience:

Compensation and benefits:

European Commission-designate Hearings: Key Takeaways on Trade, Sanctions, Digital and Enlargement Policy

Insights From Commissioner-designate hearings on the Future of EU Policy:

﻿ Trade, Sanctions, Digital, and Enlargement

Trade Policy

Sanctions Policy

Digital Policy

Enlargement

Q&A with Coline Cauvin: Banks and other FIs must continuously refine their compliance measures to effectively detect and prevent any potential breaches.

You previously worked at a Big4 law firm in Paris, what were the main factors behind your decision to join ACQUIS?

You regularly advise financial institutions on sanctions compliance issues. In your opinion, what are the main challenges faced by the financial sector in this field?

What are the specifics of French sanctions enforcement and how does it compare with the rest of the EU?

As a dual-qualified lawyer, you advise clients on EU and US sanctions matters. How do you see the future of US and EU sanctions?

Client Alert: EU General Court Judgments in Cases T-635/22 and T-644/22

EU General Court Judgment in Case-494/22 – NSD v Council

EU General Court Judgment in Cases T-635/22 - Fridman and Others v Council and T-644/22 - Timchenko and Timchenko v Council

Digital Policy Update: Council reveals priorities for the next legislative cycle

Prioritizing Digital Transformation

Key Priorities for the Legislative Cycle

Challenges and Opportunities

Policy Briefing: Council Approves Two Directives on Sanctions Violation Criminalisation and Asset Recovery and Confiscation

Background & Context

Directive On the Definition of Criminal Offences and Penalties for the Violation of Union Restrictive Measures

Directive on Asset Recovery and Confiscation

How the Directives will change the existing EU policy framework?

Next Steps

EU & US Sanctions Alert: new and expected measures for the 2nd anniversary of the war in Ukraine and Alexei Navalny’s death

I. EU Sanctions Update

Adopted Measures

II. US Sanctions Update

Commission Proposes New FDI Regulation

FDI screening in the EU since 2019

The Commission’s proposal for a new FDI regulation

The European Economic Security Strategy

Anticipated response of Member States

Next steps

Commission Publishes White Paper on Export Controls

Introduction & Background

The main elements of the Commission’s White Paper on Export Controls

Proposed Responses of the Commission

EU Council and the EP Reach Political Agreement on Anti-Money Laundering and Countering the Financing of Terrorism Package

Key Elements of the Political Agreement

FIU’s Enhanced Role

Supervisory Measures

Risk Assessment

Next Steps

Client Alert: First CBAM Quarterly Reporting Period ends on January 31

Summary

Background of CBAM

CBAM Reporting in General

Reporting obligations under the transitional phase of CBAM

Belgium Assumes the Presidency of the Council

The Next presidency

EU agrees on Criminalizing Sanctions Violations

Next Steps

Background

EU adopts 12th Sanctions Package against Russia

Key Measures of the 12th Package

I. Trade Measures

II. Listings & Derogations

III. Other Measures

EU agrees on the reform of the Court of Justice

Key Provisions of the approved agreement on the reform

Efficiency in Judicial Management

Next Steps and Background

EU agrees on AI Act and sets the first rules for AI in the world

Next steps

Policy Recap: EU Informal Summit in Granada

Enlargement & Migration

Foreign Affairs

Transatlantic Policy Dialogue: Recap of the 2023 EU-US Summit

Trade, Sanctions, Digital, and Enlargement

EU General Court Judgment in Case-494/22 – NSD v Council

EU General Court Judgment in Cases T-635/22 - Fridman and Others v Council and T-644/22 - Timchenko and Timchenko v Council