Dear Readers,

Welcome to our latest edition of “EU Impact”.

At the moment that we publish this issue, the date of 29 March 2019 has passed. That date is probably one of the most quoted dates in the history of mankind. And what happened on that date? Nothing. Just another day in the European Union; outside it is cold and blizzards are blazing. Inside, a cosy place with logs sizzling in the fireplace and 28 family members together for a festive meal and inspiring conversations. One of the nephews is sitting at the table with his coat on, ready to leave. But it is cold outside and there is nowhere to go to.

This month, the campaigns for the European elections started to take shape in all earnest. And it is not surprising that it was French President Macron who took centre stage with his views on Europe, smartly translated into all the European languages. A vision of Europe is warmly welcome. I would say “any” vision on Europe is welcome, in order to have a debate on ways and means through which we collectively can move this great continent forward. A debate should address also the uncomfortable and pressing issues such as populism and nationalistic tendencies. Not very often before in the history of the European Union (leaving Brexit aside) have certain Member States been put under serious scrutiny for failing to respect European Law and values. And elections in the Netherlands (for the Dutch Senate) also produced a bumper result for a right-wing populist party. At the same time, the awareness that the populist movements have no plan, except for a merely destructive approach towards the establishment, is rising, and more common sense seems to enter the political salons around the European Union.

On that note: Welcome to this issue of “EU Impact”, where we focus on the upcoming European elections, but also on various developments relevant for business and consumers. It is interesting to see that, after two and a half years of negotiations and unprecedented public attention, the European Parliament adopted the controversial EU Copyright Reform. This creates a big plus for the creative industries, writers and content providers, while this regulatory re-balancing will create some challenges for the big tech companies to which they will need to adapt, not only in this case, but also moving forward. On the horizon appears the next challenge for big-tech: a wave of regulations on artificial intelligence and the use of data.

Also worthwhile is the new EU “whistleblower” protection package and – finally - the new Solvency II implementing rules to help insurers invest in equity and private debt to provide long-term capital financing.

Happy reading!

MAJOR EU DEVELOPMENTS

French President calls for European renewal

On 4 March 2019, French President Emmanuel Macron called for a "European renewal" in an open letter to the "Citizens of Europe", published simultaneously in key European newspapers. Pointing to Brexit as the main symbol, Macron warned that Europe (a) has never been as essential since the Second World War and (b) has never been in such danger. Against this background, the French President highlighted the forthcoming European elections as "decisive for the future of our continent".

To defend the EU's values and counter the spread of nationalist-populist movements, Macron i.a. put forward the following proposals:

  • Freedom - Creating an EU agency to prevent cyber-attacks and elections manipulation; banning the foreign funding of political parties; establishing EU rules to counter online hate
  • Protection - Increasing cooperation in migration, asylum, security and defence policy; introducing penalties for companies compromising environmental, data protection, fair payment or tax standards; adopting European preference in strategic industries and public procurement
  • Progress - Introducing an EU-wide social shield, including a minimum wage; emitting zero carbon by 2050 and halving pesticides by 2025; establishing a food safety force and an independent scientific assessment of hazardous substances; regulating digital giants; strengthening innovation.

Macron's proposal to take this forward in dialogue with all segments of society obtained support in several EU countries, but triggered skeptical responses from Germany and the Czech Republic. The new German leader of the conservatives, Annegret Kramp-Karrenbauer, opposed the Europeanisation of social systems and sovereign debt. Czech Prime Minister Andrej Babiš framed Macron's proposals as "divorced from reality".

TRANSPORT

New EU rules for the deployment of clean, connected and automated mobility

As part of the EU's ambition to modernise mobility, the European Commission, based on the ITS Directive, this month adopted new rules to facilitate the deployment of clean, connected and automated mobility across the EU. The Commission's Delegated Act aims to provide legal certainty to manufacturers, road operators and other stakeholders, allowing the putting in place of Cooperative Intelligent Transport Systems (C-ITS) in the EU, while retaining openness to other emerging technologies.

C-ITS is a new technology connecting vehicles, drivers and traffic managers, enabling the sharing and use of information in real time. The specifications adopted set out the basic legal requirements to provide for interoperability between different cooperative systems, including vehicles and infrastructure, which exchange messages via one secure, open network.

The Act will enter into force two months after its publication in the Official Journal, if not opposed by the European Parliament or the Council, It is expected that as of this year, vehicles, traffic signs and highways will be provided with the technology required to send standardised messages to other traffic participants with a view to increasing road safety and traffic efficiency.

While the Commission regards these specifications as a key enabler for connected mobility, some industry stakeholders have been warning that the EU is relying on obsolete Wi-Fi technology and thus risks to decelerate the development of the new 5G technology, allowing the US and China a competitive edge over Europe in this field.

FINANCIAL SERVICES

New Solvency II implementing rules to help insurers invest in equity and private debt

On 8 March 2019, the European Commission adopted new rules aiming to help insurers invest in equity and private debt, in order to provide long-term financing to small- and medium-sized enterprises (SMEs) and other companies. Seeking to make investments in the real economy more attractive to insurers, the Delegated Regulation amends the EU's "Solvency II" risk-based prudential rules for the insurance industry (including life insurance, non-life insurance and reinsurance), allowing insurers to hold less capital for such investments. The objective of the new rules is to facilitate private sector investments, in line with the goals of the EU's Capital Markets Union, particularly by increasing the share of insurers' investments in the real economy.

The Delegated Regulation brings about the following additional changes to the Solvency II implementing rules for insurers:

  • The prudential rules applicable to insurers have been better brought in line with those covering the banking sector
  • The calculation of capital requirements has been further simplified
  • Principles and standard parameters have been updated to better account for trends in risk management and the latest data, including in view of addressing financial hedging strategies

Following the adoption of the Delegated Regulation, the European Parliament and the Member States in the Council now have a three-month scrutiny period. Following this and previous amendments of the Solvency II implementing rules, the Solvency II Directive is scheduled to be fundamentally reviewed in 2020.

INTELLECTUAL PROPERTY AND TECHNOLOGY

European Parliament adopts EU Copyright Reform

Following two and a half years of negotiations and unprecedented public attention, the European Parliament adopted the controversial EU copyright reform in its plenary session on 26 March 2019.

The objective of the Directive on Copyright in the Digital Single Market is to adapt the existing EU copyright legislation of 2001 to respond to the rapid technological changes that significantly affect the production, distribution and monetisation of protected works and content in the copyrights industry.

The two issues that have attracted the most attention from the business community and the wider public are:

  • Article 15: new press publishers' right (Article 11 in the original European Commission proposal)
  • Article 17: monitoring and filtering obligations on platforms providing access to user-uploaded content (Article 13 in the original European Commission proposal)

If EU Member States formally adopt the new legislation, as they are currently scheduled to do on 9 April 2019, the new Directive will be published in the Official Journal of the EU and will enter into force 20 days later. Member States will then have 24 months to implement the new rules (i.e. by spring 2021).

Nevertheless, although unlikely, the Council could still at this stage reject the proposal or certain articles thereof. In order for the draft Directive to be rejected, it would require the votes of 13 Member States or those of a number of Member States representing 35 percent of the EU's population.

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CROSS-SECTORAL

New EU-wide rules on whistleblower protection

On 11 March 2019, representatives of the European Parliament and the Member States reached a provisional agreement to establish a legal framework to protect whistleblowers across the EU. The draft Directive on the protection of persons reporting on breaches of Union law was put forward by the European Commission in April 2018, against the background of recent scandals unveiled by whistleblowers.

The new rules cover:

  • Reporting procedures and obligations for employers - Safe channels will be introduced for reporting within organisations and vis-à-vis public authorities
  • Reporting channels - Whistleblowers should first report internally, if a breach can be effectively addressed at this level without risking retaliation, or report to the authorities. If this does not trigger appropriate action, has no prospect, or in cases of danger to the public interest, whistleblowers may disclose publicly, including to the media
  • Prevention of retaliation - The rules will protect whistleblowers against dismissal, demotion and other forms of retaliation, including protection in court. National authorities will need to give notice to citizens on procedures and protection

The framework covers a (non-exhaustive) range of sectors, including anti-money laundering and corporate taxation, data protection, protection of EU financial interests, food and product safety, and environmental protection.

The final plenary vote is scheduled for 17 April 2019. Following formal adoption by the Member States, the legislation will enter into force twenty days after publication in the EU's Official Journal. Member States will need to transpose the Directive by 15 May 2021.

SPECIAL SECTION - 2019 EUROPEAN ELECTIONS MONITOR

Potential UK participation and post-election timeline

Less than two months before the European Parliament elections on 23-26 May 2019, a question that lately topped the headlines is whether the UK might participate in the elections, despite the original withdrawal data of 29 March. EU leaders, meanwhile, granted a new timeline to the UK due to the country's internal disunity (i.e. withdrawal on 12 April without the British Parliament's agreement to the Withdrawal Deal, or on 22 May with its agreement). It is, however, not precluded that the UK might request to further delay Brexit, which would require participation in the elections - associated by many in the EU-27 with the danger to consume further resources and distract from key policy issues.

As regards the expected impact of the elections on the business community, it is important to note that the current Parliament's legislative work will end on 18 April, with the inaugural plenary session of the new Parliament convening on 2 July. In the remaining plenary sessions on 3-4 and 15-18 April, Parliament will take final votes to finalise key files.

As from mid-July, Parliament will elect the next European Commission President from candidates nominated by the EU Governments (likely, but not necessarily by choosing the winning lead candidate from Parliament's political groups). The new Cabinet of Commissioners (one per Member State), each representing one portfolio, will be elected in mid-October. The allocation of portfolios will significantly impact the developments in the specific sectors over the next five-year term.

EU REGULATORY, TRADE AND GOVERNMENT AFFAIRS

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