In this editorial, we will not write about Brexit. Just because the unpredictability is too significant. And yes - the clock is still ticking - while speculations about a delay of votes and Brexit overall are increasing. There might even be a new referendum and Brexit might just not happen after all. But no – we are not going to write about Brexit. We are also suffering from Brexit fatigue.

While a train is running from Pyongyang to Hanoi, the EU-Japan trade agreement has entered into force, and considerable progress had been made on the EU-Singapore trade agreements. The entry into force of the former is a fine achievement for all parties involved. At the same time, the trade talks between the UK and Japan are complicated and progressing at a slow pace, a good indication that concluding a bilateral agreement (UK-Japan), that is as beneficial as an EU-Japan one, is not a given.

Furthermore, the so-called “trilogue process” between the Council, Commission and Parliament reached an agreement on the EU copyrights reform, with the final vote in plenary session scheduled for the end of March. Our colleague, Alexis Fierens, will provide the latest update on what was agreed and why copyrights holders and the creative industries can be satisfied, whereas the tech companies and internet platforms have to start thinking of how to comply with the new rules.

Also of great interest is the adoption of a new list of 23 third countries with weak anti-money laundering and terrorist financing regimes, which has aroused significant political commotion this month between the Commission and the Member States. The fight against money laundering and terrorist financing is a priority for the Juncker Commission. The adoption of the Fourth (in force since June 2015) and the Fifth Anti-Money Laundering Directives (in force since 9 July 2018) has considerably strengthened the EU regulatory framework.

And then, of course, some good Brussels bubble gossip: As promised in our last newsletter, we will share some more information about the upcoming European elections.

Enjoy this edition of EU Impact!

Retail

First-ever EU rules to stop unfair trading practices of online platforms

On 13 February 2019, the EU institutions agreed on new legislation seeking to increase the fairness, predictability and transparency of online platforms' trading practices. The Regulation on fairness and transparency for business users of online intermediation services sets out new rules for companies depending on online platforms to access the EU consumer market.

The new rules will apply to around 7000 online platform intermediaries and search engines, including major global companies (such as Google Play, Apple App Store, Facebook, and Amazon Marketplace) as well as start-ups operating in the EU, and with significant negotiating power over small companies doing business via these platforms.

The new Regulation will provide for the following:

  • Ban on unfair practices - Platforms will no longer be allowed to suspend or terminate a vendor's account without clear reasons and ways to appeal. Terms and conditions must be provided in plain and intelligible language and any change shall be notified at least 15 days in advance
  • Transparency - Marketplaces and search engines will be required to reveal the parameters used to rank goods and services on their site, and indicate any advantages given to own products
  • Dispute resolution - Platforms must establish an internal complaint-handling system and facilitate conflict resolution through mediators. Associations will be able to sue platforms in the case of non-compliance

The rules will apply 12 months after adoption and publication. A dedicated Online Platform Observatory has been established to monitor implementation.

Financial Services

Debate on new EU money laundering blacklist

Aiming to further step up its fight against money laundering and terrorist financing, the European Commission adopted an updated list of 23 third countries with strategic deficiencies in their anti-money laundering and counter-terrorist financing frameworks. Banks and other entities regulated by EU anti-money laundering rules and conducting financial operations related to the respective high-risk countries will be subject to new due diligence requirements. On 28 February, however, the EU Member States, all of which will need to approve the Commission's list, almost unanimously indicated opposition, now requiring the Commission to revise, in collaboration with the Member States.

Based on the methodology presented in the Fifth Anti-Money Laundering Directive in force since July 2018, the Commission included the following countries in the new list, 16 of which were already listed previously: Afghanistan, American Samoa, The Bahamas, Botswana, Guam, North Korea, Ethiopia, Ghana, Iran, Iraq, Libya, Nigeria, Panama, Pakistan, Puerto Rico, Samoa, Saudi Arabia, Sri Lanka, Syria, Trinidad and Tobago, Tunisia, US Virgin Islands and Yemen.

In order to enter into force, Parliament (which is supportive) and Member States will need to give their approval to the Commission's Delegated Regulation. The current blocking of the list's publication is being led by the UK, France, Germany and the Netherlands, who argue that the list had not been compiled in a "transparent and credible process". The list also caused resentment of the Saudi and US governments due to the inclusion of Saudi Arabia and four US territories. Member States are wary of the Commission's charting politically sensitive territory, potentially risking negative consequences for Member States' bilateral relations.

Trade

Entry into force of EU-Japan trade agreement and progress on EU-Singapore trade agreements

On 1 February, the EU-Japan Economic Partnership Agreement (EPA) entered into force, having created the world's largest open trade zone. Annual EU-Japan trade is expected to increase by EUR 36 billion. The EPA will strengthen EU exporters and investors in Japan, while aiming to safeguard EU standards. Key elements of the EPA include:

  • Elimination of customs duties on 90 percent of EU exports to Japan upon entry into force (97 percent after full implementation). The agreement will eliminate or sharply reduce duties on agriculture and food products of major EU interest (e.g. beef, wine and cheese), The EPA will fully abolish tariffs on industrial and wood products, and eliminate the majority of tariffs on fisheries
  • Non-tariff barriers - The agreement aims at aligning EU and Japanese technical requirements and certifications regarding motor vehicles, medical devices and other products, to facilitate EU companies' access to the Japanese market
  • Trade in services - The EPA aims to facilitate EU companies' provision of services to Japan, including in telecommunications, transport and financial services
  • Other provisions concern i.a. public procurement, investment, Intellectual Property Rights, and data protection

Moreover, on 13 February, the European Parliament approved the EU-Singapore Trade and Investment Protection agreements. The Trade Agreement will enter into force following conclusion of Singapore's internal procedures. The Investment Protection Agreement will first need to be ratified by all EU Member States.

IPT

Legal Affairs Committee approves final text of the new EU Copyright Directive

On 26 February, the JURI Committee approved the final text that was agreed upon in the long-awaited and decisive trilogue meeting of 13 February regarding the new Directive on Copyright in the Digital Single Market.

In September 2016, the proposal for this Copyright Directive had been put forward by the European Commission and has since then been the subject of thorough discussion both within and outside the EU Institutions, especially in respect of its controversial articles 11 and 13.

Whereas the final text of the link tax of article 11 is in line with the latest expectations, the initial disagreement between France and Germany regarding the scope of article 13 now resulted in a more stringent approach towards the filtering obligation. The compromise, in summary, consists of the obligation of installing a filter that, however, excludes new online content sharing service providers whose services:

  1. have been available to the public in the EU for less than three years; and
  2. have an annual turnover below EUR 10 million; and
  3. have fewer than five million unique monthly visitors

In addition, all online content sharing service providers shall demonstrate that they have undertaken "best efforts" to obtain licenses from the relevant rights holders. Non-compliance may result in direct liability for copyright infringements.

The final vote in the Parliament's plenary session is scheduled to take place at the end of March. However, undoubtedly, the debate will continue…

Artificial Intelligence in the EU: Next steps, including rules for sharing public sector data

On 18 February 2019, the Member States adopted conclusions welcoming the EU and Member States' Coordinated Plan on Artificial Intelligence (AI), calling for "stronger development, deployment and uptake […] in all economic sectors". Stressing the crucial importance of AI for EU businesses, public institutions and consumers, the conclusions highlight the need to:

  • Increase investments
  • Foster skills and education; and
  • Facilitate collaboration amongst industry and academia

The Member States instruct the Commission to ensure that all existing or new AI-related legislation be fit for this purpose, particularly regarding challenges related to safety, privacy and liability.

As part of the same effort to boost AI development and uptake - with data being a main motor of digital innovation - EU negotiators provisionally agreed on revised legislation aiming to make public sector data widely and freely available.

The new Directive on Open Data and Public Sector Information will facilitate the access to new markets for SMEs and start-ups providing data-based products and services. Following formal adoption by Parliament and Member States, the legislation will be implemented in the Member States over the next two years.

Amongst the next steps in this field, Member States are asked to set out national AI strategies by mid-2019. The final version of the much-anticipated AI ethics guidelines, produced by an EU expert group and taking into account the feedback from more than 500 stakeholders (predominantly companies), is scheduled to be published by March.

Special section - 2019 European elections

Major shifts expected in EU politics

With less than 100 days left until the European elections on 23-26 May 2019, and discussions on potential implications for society and business intensifying, our team of EU policy and regulatory specialists based at the heart of the EU would like to share with our readers insights into the key developments to prepare for:

  • Disruption of mainstream politics - While the rule of traditional party politics has been waning in the Member States for several years, this transformation will now also take place at the EU level. Citizens in Europe's post-industrial society identify less with the established parties founded on religious or class identities, increasingly turning towards anti-establishment parties, including the radical right and left, as well as emerging new centrist movements
  • Radical right to form significant minority - Albeit significant gains projected for the radical right (14%), claims that nationalists will rapidly take over the EU do not hold. The Christian Democrats and Social Democrats are expected to retain by far the largest share of seats (318 of 705, assuming that Brexit would still take place beforehand), despite both groups' likely devastating losses, and their combined expected loss of the absolute majority
  • Impact on EU decision-making - Greater fragmentation in the next Parliament will unsettle power balances and forge flexible party alliances, decreasing legislative efficiency. Pro-EU forces will need to reinforce collaboration to prevent the potential blocking of policy-making processes and other substantial (and potentially negative) impact on EU policies, including budgetary decisions
  • Institutional changes - Speculations about expected changes in the EU leadership (particularly within Commission and Council) are currently still speculative, despite names being floated and lead candidates' nominations having been announced. In any case, the discussion on the allocation of top jobs represents an EU-wide power play involving fierce party politics (with conservatives, social democrats, and liberals in the lead) and calls for regional balance (particularly between the East and West). The rise of populism will clearly impact the composition of the next Commission, as each EU government will put forward their preferred candidate for one portfolio