The Week Ahead in the European Parliament – Friday, June 11, 2021


Next week will be a committee week in the European Parliament.  Members of the European Parliament (“MEPs”) will gather virtually and in person in Brussels.  Several interesting votes and debates are scheduled to take place.

On Monday, the Special Committee on Artificial Intelligence in a Digital Age (“AIDA”) will hold a public hearing together with the Committee on Agriculture and Rural Development (“AGRI”) on artificial intelligence in agriculture and food security.  The committees have invited a range of representatives from the agricultural industry, academia, and non-governmental organizations (“NGOs”).  The panel discussions will touch on how artificial intelligence can contribute to achieving food security and how future agriculture can be made more sustainable.  The hearing build on the reform proposals of the Common Agricultural Policy (“CAP”), which intends to increase the use of digital technology and uptake of more sustainable practices.  The program of the event is available here.

On the same day, the Committee on Foreign Affairs (“AFET”) will have an exchange of views on the decision of the Swiss Federal Council to terminate negotiations with the EU on the EU-Swiss Institutional Framework Agreement.  The draft agreement, which has been negotiated since 2014, intends to replace the numerous bilateral agreements, which currently regulate Swiss-EU relations.  However, the Swiss government has withdrawn support for the negotiated deal, citing the lack of agreement on state aid rules, salary protection, and the access of EU citizens to Swiss social security benefits as the main factors of concern.  The European Commission has stated that the modernization of the EU-Swiss relationship will not be possible without an overarching agreement.  Time is ticking, as eventually certain existing bilateral agreements will expire.  The Swiss government’s statement is available here (in German).  The European Commission’s statement here.

On Tuesday, MEPs of the Committee on Environment, Public Health and Food Safety (“ENVI”) will debate whether and how to repeal and replace the current Regulation on batteries and waste batteries.  Presented by the European Commission on December 10, 2020, the proposed Regulation aims to modernize the EU’s legislative framework for batteries.  The proposal takes into account the goals set out in the European Green Deal and intends to promote a circular economy for batteries; strengthen the internal market for them; and reduce their environmental impact.  The proposed Regulation also specifically deals with electric vehicles, in response to their anticipated increase over the next decade.  The proposed regulation is available here.

For the complete agenda and overview of the meetings, please see here.

China’s 14th Five-Year Plan (2021-2025): Spotlight on New Energy Vehicles (NEVs)

As discussed in our previous article on the topic, China’s new 14th Five-Year Plan is a vast document that outlines the country’s ambitious plans for the 2021-2025 period. Technology and the environment are two main themes of the plan, with several chapters dedicated to describing how China’s leaders hope to steer the country into an innovation-driven economy and pursue high-quality and sustainable development. New automobile technologies—new energy vehicles (“NEVs”) as well as intelligent connected vehicles (“ICVs”)—lie at the intersection of these two themes.

The next five years will be a critical period in policymaking and product adoption that will shape the trajectory of the world’s largest market for automobiles, so it is important that companies in or affected by Chinese policy for the new energy vehicle industry take note of the policy signals in the 14th Five-Year Plan along with those in the State Council’s important October 2020 blueprint for the development of the NEV industry through the year 2035. Further, with Chinese policy evolving quickly, it is critical to monitor local and sectoral policies and programs designed to implement the national plan. We have prepared this article to serve as a starting point for understanding these efforts. (See our piece focusing on semiconductor industry policies during the 14th Five-Year Plan period here.)

The new energy vehicle industry features prominently in multiple sections of the 14th Five-Year Plan. In one key section the plan includes NEVs on the list of “strategic emerging industries” and aims to increase the collective value-added of strategic emerging industries to more than 17% of GDP by 2025. Goals for strategic emerging industries include:

  • accelerating the innovation and application of key and core technologies;
  • enhancing government provision of factors of production;
  • developing strategic emerging industry clusters;
  • encouraging corporate mergers and reorganizations; and
  • financial support through industrial investment funds and financing guarantees.

Where the Action Is: Local and Sectoral Plans

Although the five-year plan’s targets and goals are high-level, ministries and local governments study it carefully when formulating their own plans and policies.   The way central and local officials implement these guidelines—e.g., via their own plans (some of them also called 14th five-year plans), policies, measures, and programs—will determine the actual opportunities and risks for foreign and domestic companies in the market. A small sampling of such efforts in the NEV area that stem from or coincide with the national 14th Five-Year Plan are listed below:

Central Government:

  • Stricter Quality Supervision and Higher Standards – According to the Xinhua News Agency, the Ministry of Industry and Information Technology (“MIIT”) plans to further strengthen the supervision of NEV quality; promote the integration of electric vehicle, intelligent networking, and other technologies; and raise industry standards according to market conditions, with a particular focus on user experience. On the ICV side, MIIT established an Intelligent Connected Vehicle Promotion Group (ICV-2035) to address major issues and accelerate industrial development.
  • MOST National Key R&D Program – In February 2021, the Ministry of Science and Technology (“MOST”) issued the Guidelines on Applying for Key Projects of New Energy Vehicles in 2021 (Draft for Comments). The Guidelines set out technologies of interest in the NEV space for participation in MOST’s National Key R&D Program . These technologies include, but are not limited to, all-solid-state lithium-metal battery technologies and all-climate battery technologies.

Sub-Central Governments:

  • Beijing 14th Five-Year Plan – Beijing’s plan for the 14th five-year period (2021-2025) includes efforts to promote electric and intelligent vehicles, optimize the layout of electric vehicle charging and battery swapping networks, and accelerate the planning and construction of hydrogen refueling stations. The goal is for Beijing to have 2 million NEVS on its streets by 2025. A separate document listing the Beijing government’s key tasks in 2021 (available here) mentions plans for a new energy intelligent vehicle industry cluster and production base to be established in Beijing’s Shunyi District, and states that NEVs will account for no less than 80% of newly added or replaced buses, taxis, delivery vehicles, and other public sector vehicles in 2021.
  • Shanghai 14th Five-Year Plan – Shanghai’s 14th-Five-Year Plan also aims to accelerate the development of the NEV industry, especially fuel cell vehicles, and form an industrial chain for key components. The plan requires that by 2025, NEV output value will account for 35% of Shanghai’s automobile manufacturing industry, and that all of the newly added or replaced buses, taxis, and other public sector vehicles will be NEVs. Jiading District, the traditional powerhouse of Shanghai’s automobile industry, has been designated as a home to new NEV and ICV industry clusters. Shanghai also aims to build an intelligent vehicle innovation development platform that will lead the nation in the ICV demonstration and pilot projects.
  • Guangdong Province Action Plan for the Development of the Automobile Industry for the 14th Five-Year Period – Guangdong Province, home to many automobile manufacturers, has announced a fairly comprehensive automobile industry development plan for the 2021-2025 period. In addition to general goals to develop the industry, the action plan sets out many numerical goals. For instance, it states that by 2025, automobile output in Guangdong should exceed 4.3 million per year, accounting for more than 16% of China’s overall automobile output, and including over 600,000 NEVs. The action plan also sets out key tasks and specific plans for this effort, and calls for strengthening organization and coordination, increasing policy support, improving financial support, promoting talent development and recruitment, and enhancing the role of industry associations.
  • Tianjin 14th Five-Year Plan – Tianjin’s plan for the 14th five-year period names several key sectors including NEVs and ICVs, and discusses ways of developing these key sectors by formulating a list of key technologies and carrying out research projects aimed at mastering them, especially those that currently require a high level of dependence on foreign countries. The plan designates the Binhai New Area to serve as a base for strategic emerging industry clusters.
  • Jiangsu Province 14th Five-Year Plan – Home to major cities such as Nanjing, Suzhou, and Wuxi, Jiangsu Province’s 14th Five-Year Plan focuses on cultivating industrial chains for 50 key industries and products, including AI, power batteries, NEV charging stations, and hydrogen fuel cell vehicles. The plan also states that Jiangsu will support cities like Wuxi in building national pilot areas for ICVs, installing electric vehicle charging infrastructure, and improving the arrangement of urban and intercity charging facility service networks.
  • Fujian Province 14th Five-Year Plan – Home to major cities such as Xiamen, Fuzhou, and Longyan, Fujian Province aims in its 14th Five-Year Plan to develop a full NEV industry chain and create well-known automobile brands. It also declares its intention to build the most competitive NEV industry base on the southeastern coast of China. Among other elements, the plan focuses on supporting the research and development of long-life and high-safety power batteries, promoting NEV purchases, and accelerating the construction of electric charging and hydrogen fueling infrastructure.
  • Shaanxi Province 14th Five-Year Plan – Shaanxi Province, home to the city of Xi’an, aims to build an NEV production base of national-level importance. Its strategy is to use key enterprises such as the Shaanxi Automobile Group Co., Ltd., BYD, and Shaanxi FAST to develop the province’s NEV ecosystem by attracting suppliers and manufacturers of batteries, motors, electric controls, sensors, and on-board operating systems. The plan also names the Xi’an Hi-tech Industries Development Zone, Xi’an Economic and Technological Development Zone, and Baoji Hi-tech Industries Development Zone as bases for the development of the NEV industry.

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Companies with business interests affected by Chinese NEV policies should carefully monitor local and sectoral developments to determine how best to navigate this rapidly evolving terrain. They should also consider engaging with Chinese policymakers where necessary to express their needs or share industry best practices.

Senate Passes Landmark Legislation on Innovation and Competition

The Senate voted 68 to 32 to pass one of the most expansive bills on U.S. economic competitiveness in decades.  The United States Innovation and Competition Act (“USICA”) is the culmination of three months of bipartisan negotiations after Majority Leader Chuck Schumer (D-NY) invited six Senate committees to propose bills to bolster U.S. leadership in research and development (“R&D”), technological advancement, and economic growth.  Before the vote, Leader Schumer remarked that “the ambitions of this legislation are large, but the premise is simple.  If we want American workers and American companies to keep leading the world, the federal government must invest in science, basic research, and innovation just as we did decades after the Second World War.”  He applauded the bill for “paving the way for the largest investment in science and technology in generations.”

The convincing bipartisan vote to authorize over $200 billion in federal funding reflects broad  support for investing in U.S. innovation and competition.  The heart of the bill is the Endless Frontier Act authorizing $81 billion to the National Science Foundation (“NSF”) and $17 billion to the Department of Energy (“DOE”) to support R&D across ten key technologies, including artificial intelligence, advanced communications technology, biotechnology, and semiconductors.  The bill also includes institutional support, including establishing a new technology and innovation arm at the NSF and hundreds of provisions recognizing the Federal Government’s role in innovation and competition, including support for science, technology, engineering, and mathematics (“STEM”) education; protecting research security and intellectual property rights; and competing globally, including against China.  Against the backdrop of a global chips shortage, the bill appropriates $52 billion in emergency funding to support semiconductor manufacturing and R&D and $1.5 billion to support open and interoperable interface radio access networks (“open-RAN”) enabling more secure deployment of 5G.

The bill’s provisions are organized across six divisions:

Division A funds two programs that were enacted as part of the National Defense Authorization Act last year.  First, the division appropriates $52 billion to fund programs authorized by the Creating Helpful Incentives to Produce Semiconductors for America Act (“CHIPS Act”), including financial assistance for companies to invest in facilities and equipment for semiconductor manufacturing and R&D, a Department of Defense public-private partnership to ensure a robust semiconductor supply chain, and a Department of Commerce (“DOC”) study on the capabilities of the U.S. industrial base to support semiconductor needs.   Second, the division appropriates $1.5 billion to a Public Wireless Supply Chain Innovation Fund, authorized by the Utilizing Strategic Allied Telecommunications Act (“USA Telecommunications Act”), to award grants for companies to research, develop, and deploy 5G and next-generation technology that uses open-RAN. Continue Reading

Emerging Trends in UK Competition Law Vlog Series – Part II: Enforcement and Litigation

Covington’s four-part video series offers snapshot briefings on key emerging trends in UK Competition Law. In part two, James Marshall and Sophie Albrighton focus on current trends in enforcement and litigation. They are joined by guest speaker Louise Freeman, co-chair of Covington’s Commercial Litigation and European Dispute Resolution Practice Groups, who has extensive experience representing parties in significant competition litigation proceedings, including a number of the leading cases in England.

Pressed for time? Click here to download this session’s key takeaways.

 
  

The Week Ahead in the European Parliament – Friday, June 4, 2021

Next week will be a plenary week in the European Parliament.  Members of the European Parliament (“MEPs”) will gather virtually and in person in Brussels.  Several interesting votes and debates are scheduled to take place.

On Tuesday, MEPs will have an exchange of views with the High Representative of the Union for Foreign Affairs and Security Policy Josep Borrell on the EU’s response to the forced landing of a Ryanair flight and arrest of journalist Raman Pratasevich by Belarusian authorities.  After the incident on May 23, 2021, the European Council quickly responded with calls for, among other measures, additional targeted economic sanctions and banning Belarusian airlines from access to EU airports.  This ban was formally adopted by the Council of the EU on June 4, 2021, and will enter into force the day after.  The MEPs are set to adopt a resolution on this matter on Thursday.  The Council Decision is available here.

On Wednesday, MEPs will debate the upcoming G7 and EU-U.S. summits that are scheduled for June 11-13 and June 15, 2021.  As the EU is a supranational organization and not a sovereign Member State, the EU is a “non-enumerated” member of the G7, but representatives of the European Commission do participate in its meetings.  MEPs will debate the priorities that the EU should represent at the summit, likely ranging from global (corporate) taxation to international cooperation on health matters and climate change.  The MEPs will also share their ideas about transatlantic cooperation ahead of the EU-U.S. summit.  Specific attention could be given to the ongoing trade disputes regarding Airbus-Boeing and the digital services tax.  On June 2, 2021, the United States Trade Representative (“USTR”) imposed 25% tariffs on over USD 2 billion worth of imports on, among others, three EU Member States after the USTR’s investigation concluded that their digital services taxes discriminated against U.S. tech companies.  However, the USTR simultaneously suspended the tariffs, pending international negotiations.

On Wednesday, the plenary will vote on whether to instruct the European Commission to ask the WTO to waive the intellectual property rights for COVID-19 vaccines.  Following a plenary debate on May 19, 2021, the Committee on International Trade (“INTA”) adopted the draft resolution, in which the European Parliament would call for a temporary TRIPS waiver for vaccines and health-related technologies.  This call clashes with the position of EU Member States representatives, such as German Chancellor Angela Merkel, who has stated that a TRIPS waiver would not solve the global vaccine shortages.  On June 4, 2021, the EU already submitted a proposal to the WTO for an action plan to expand vaccine production with the sharing of expertise, but not a (temporary) IP waiver.  What the European Commission will do with a potential resolution calling for an IP waiver from the European Parliament remains to be seen.  The draft report was adopted by INTA with a very comfortable majority.  The draft report is available here.

For the complete agenda and overview of the meetings, please see here.

FCC Set to Ease Rules that Have Limited Pre-Sales and Other Marketing of Some New Electronic Devices

Last Thursday, the Federal Communications Commission (“FCC”) announced that it will consider a Report and Order at its June 21, 2021 open meeting that would permit the importation and conditional sale of radiofrequency (RF) devices prior to obtaining equipment authorization in some circumstances.  The consumer electronics industry has advocated for this rule change, which will facilitate pre-sales and other marketing of new devices in the marketplace.If adopted, the Report and Order would afford manufacturers and developers of RF devices significant flexibility in conducting pre-sale activities and potentially reduce the time required to deliver devices to market.  These revisions represent a significant change to the FCC’s equipment and marketing rules and bring the FCC’s equipment marketing and pre-sales regime in line with many other industries.

Importation

Under the FCC’s current rules, it is unlawful for equipment to be imported until the equipment has been fully authorized under the FCC’s rules.  The Report and Order, if adopted, would modify the FCC’s equipment authorization rules to permit up to 12,000 devices with a single FCC ID to be imported prior to obtaining certification if certain conditions are met.  (That number was designed so that manufacturers or retailers could display sample devices in brick-and-mortar stores across the country to gauge, or promote, consumer interest in the devices.)  These conditions would include:

  • Completing compliance testing and submitting a certification application to the Telecommunications Certification Body;
  • Appropriately labeling the devices;
  • Retaining legal ownership of the devices with the manufacturer, developer, importer, or ultimate consignee or their designated customs broker; and
  • Maintaining a retrieval process for devices that are not ultimately authorized, with the burden falling on the manufacturer, developer, importer, or ultimate consignee or their designated customs broker.

The Report and Order would not permit devices to be imported prior to authorization if they are subject to the Suppliers Declaration of Conformity (SDoC) process, because the SDoC process provides manufacturers greater flexibility in determining whether a device complies with FCC requirements.

Conditional Sales

Under the FCC’s current rules, which have been in place for decades, it is unlawful for any person to offer for sale to consumers or generally to advertise a device until the device has been fully authorized by the FCC.  The Report and Order would revise the FCC’s rules to permit conditional sales and advertisement of FCC-regulated devices to consumers prior to obtaining equipment authorization, on several conditions, including:

  • Providing appropriate disclosures to buyers;
  • Retaining legal ownership of the initiating party (i.e., manufacturer or developer) over the devices;
  • Delaying delivery of devices until the equipment authorization process is successfully completed;
  • Affixing appropriate temporary labels on devices indicating that authorization has not yet been obtained; and
  • Maintaining required recordkeeping practices with respect to the devices.

In addition, the scope of permitted pre-sale activity would not include the display or demonstration of the device to consumers.

And in a further break from its decades of practice, the FCC will allow physical transfer of RF devices prior to authorization where devices are subject to certification (rather than the SDoC process) and transferred to contracting parties other than the ultimate user for qualified pre-sale activities, such as packaging and transferring devices to distribution centers or retailers.  Additionally, the Report and Order would adopt rules that ensure that consistent measures apply to devices regardless of their origin, whether imported or manufactured in the U.S.

A Proposed Global Minimum Corporate Income Tax Rate

In mid-May, the Biden Administration officially threw its support behind a minimum global corporate income tax rate of at least 15%.  The US proposal would be limited to the world’s 100 largest companies – those with revenues of over $20 billion.  The proposal would not depend on the company’s nationality (the US has made clear that it would not support any proposals that discriminate against US multinationals) and, since it would apply to digital services companies as well as to those selling tangible goods, would not be specific to any one sector.

Air in the OECD Sails?

OECD have been negotiating a new global taxation agreement to tackle ‘base erosion and profit shifting’.  Those negotiations are based around two Pillars. Pillar 1 would allow destination countries to impose tax on multinationals selling goods or providing services within their borders, rather than limiting the ability to tax to the countries in which such companies are head-quartered or have a physical presence (this Pillar is perceived to have particular relevance to digital service companies). Pillar 2 would introduce a global minimum corporate income tax rate, which would be implemented through a combination of controlled foreign corporation rules and undertaxed payment rules.

Why the Damascene Conversion?

Under the previous Administration, US support for OECD efforts was mixed at best and driven, in large part, by a desire to prevent digital service taxes (DST), which were perceived to discriminate against US multinationals.  DST proposals remain of concern to the Biden Administration, but the US’ renewed robust support for global minimum taxes adds momentum to the OECD effort.  An agreed minimum global corporation tax level would help level the playing field for US headquartered multinationals if the US corporate income tax rate were increased above the current 21% rate (to 28% as proposed to pay for the American Jobs Plan).

Initial Opposition

Whilst there was general support (including from the EU) for a corporation minimum tax of 15%, the US’ suggestion was above the OECD Pillar 2 rate which had been under consideration (apparently 12.5%).  Many countries view their ability to set a lower corporation tax rate as a key element of their economic attractiveness for international investors.

Of particular note, is Ireland’s current corporation tax rate of 12.5%.  Dublin argues that smaller countries (including Belgium, the NL and Luxembourg) need to be able to use tax policy as a legitimate policy lever to compensate for advantages of scale, resources and location enjoyed by larger countries – if larger countries struggle to compete, they should lower their tax rates, rather than forcing smaller countries to raise theirs.  Reforms to Pillars 1 and 2 would force Ireland to consider how to manage a potential €2 billion p.a reduction in corporation tax collections and how to reform its industrial strategy to offer international companies a reason to continue to base themselves there, beyond a low corporation tax rate.

But even a 15% rate would remain internationally competitive – lower than the US’ current 21% corporate income tax rate for its global multinationals (which itself is double the US’ current 10.5% minimum tax on American companies’ global intangible low-tax income – GILTI) and far below the administration’s new proposed US rate of 28%.  And the UK (traditionally Ireland’s closest competitor for US corporate investment), facing the double impact of leaving the EU and suffering the largest Coronavirus economic hit of any G7 country, has already announced plans to increase its corporation tax rate to 25%.

Headwinds…

Although the US minimum 15% proposal has changed the mood (Japan, Australia, the EU and some of the larger individual Members State have welcomed the threshold), headwinds remain.  For example, any global agreement on taxation would need the support of the EU.  Implementing Directives involving tax would require unanimity and the EU’s record is not strong in this area – attempts to unify what companies are taxed on,  have been stalled since 2011…

Furthermore, while reaching agreement on Pillar 2 now may be possible, there is no apparent solution to the contentious Pillar 1 question about where companies (in particular digital service companies) will be required to pay taxes.  France’s Finance Minister commented on 26 May, “one condition is to have all big [important] digital companies, being included in the scope of the tax” – US acceptance of any changes in this area is conditional on an insistence that the approach must not discriminate against US multinationals.

For its part, the EU has indicated that it does not see an OECD agreement as an impediment to its proposed Digital Levy and plans to press ahead with a Proposal later this month; and a number of non-EU countries have already imposed, or plan to introduce a Digital Service Tax (including the UK, Brazil, Indonesia, India and Turkey).

Agreement on the Horizon?

Notwithstanding these potential obstacles, G7 Finance Ministers apparently made good progress in discussions at the end of May and aim to announce a common position during their formal meeting on 4-5 June.  That would enable G7 leaders to sign off a deal at their Summit in mid-June.  That would, in turn, put pressure on the G20 to agree to the plan in their meeting at the end of July – although many commentators view October as a more realistic timetable.

On balance, despite the objections, it seems likely that the US proposal of a minimum global corporation tax rate of 15% will be accepted at the G20 Summit.  If so, it will be seen as an indication that the international community is able to work together and find solutions to complex commercial issues.  If the proposal is accepted, it will have implications for multinationals (which may face higher tax bills) and for countries (which may see their competitive tax-rate advantage eroded).

Covington’s public policy teams will be following these developments and would be delighted to speak to clients who may have concerns or questions about them.

Final Countdown to POPIA Compliance – Five Critical Steps to Take Before July 1st, 2021

In Episode 12 of our Inside Privacy Audiocast, together with special guest Advocate Pansy Tlakula, Chairperson of the Information Regulator of South Africa, we discussed the Information Regulator’s mandate, and the implementation of data protection legislation in South Africa.  Now, with less than a month to go before South Africa’s Protection of Personal Information Act, 2013 (“POPIA”) is set to go into full effect on July 1, 2021, it is critical for organizations operating in South Africa to ensure that they are ready if and when the Information Regulator comes knocking.

It is only when organizations start their POPIA journey that they realize just how wide the POPIA net is cast, and that very few businesses fall outside of its reach.  The road to POPIA compliance should be viewed as a marathon, and not a sprint.  While implementing and maintaining an effective POPIA compliance program will take continued effort and resources well beyond the July 1, 2021 go-live date, here we outline five steps to which companies subject to POPIA should give their attention in the short term.

Step 1: Identify and Appoint an Information Officer

POPIA provides for a similar position as the GDPR’s data protection officer in the form of an “Information Officer.” Organizations subject to POPIA must identify an Information Officer who will be responsible (and who may be held personally liable) for, among other things, all of the organization’s data protection compliance requirements, working with the Information Regulator, establishing policies and procedures, and POPIA awareness and compliance training.

The “head” of the organization (i.e., the CEO, managing director, or “equivalent officer”) is automatically deemed the organization’s Information Officer, however, the organization can “duly authorise” another person in the business (who is at management level or above) to act as Information Officer.  Similarly, the organization can designate one or more employees (also at management level or above) to act as “Deputy Information Officers” to assist the Information Officer perform his or her responsibilities.  Both the Information Officers and Deputy Information Officers must be registered with the Information Regulator before the end of June 2021, via the Information Regulator’s Online Registration Portal, or by submitting the downloadable Manual Registration Form to the Information Regulator.

Step 2: Review the Organization’s Marketing Practices

While many organizations may not consider themselves to be engaging in so-called “direct marketing” practices, this concept is widely defined in POPIA to include “any approach” to a data subject “for the direct or indirect purpose of […] promoting or offering to supply, in the ordinary course of business, any goods or services to the data subject […].”  POPIA provides data subjects with certain rights with respect to unsolicited “electronic communications” (i.e., direct marketing by means of automatic calling machines, fax machines, SMSs, or emails).  The processing of a data subject’s personal information for the purposes of direct marketing is prohibited, unless the data subject has consented to the processing, or the email recipient is an existing customer of the organization.

In practical terms, the organization must have obtained the data subject’s details through the sale of a product or service, and the marketing should only relate to similar products or services of the organization.  The data subject must be given a reasonable opportunity to object to the use of their personal information for marketing each time the organization communicates with the data subject for marketing purposes, i.e., recipients must be able to “opt-out” at any stage.  Potential new customers can only be marketed with their express consent, i.e., on an “opt-in” basis.

Step 3: Review the Organization’s Security Measures Aimed at Protecting Personal Information, and Understand What Steps Must Be Taken in the Event of a Data Breach

POPIA obliges organizations to take appropriate technical and organizational measures to safeguard the security and confidentiality of personal information – aimed at preventing any loss, damage to, or unauthorized destruction of personal information, including measures to prevent unlawful access to, or processing of personal information under the organization’s control.

There is a general data breach notification obligation under POPIA.  Where there are reasonable grounds to believe that a data subject’s personal information has been accessed or acquired by an unauthorized person, the organization, or any third party processing personal information under its authority (e.g., an outsourced payroll service provider), must notify the Information Regulator and the data subject of the data breach “as soon as reasonably possible,” unless the identity of the data subject cannot be established.  It is therefore crucial that organizations ensure that they have an effective data security incident protocol in place, which will allow them to comply with the breach notification obligations under POPIA, and avoid falling under additional scrutiny.

Step 4: Review the Organization’s Existing Data Transfer and Outsourcing Arrangements

POPIA generally applies not only to organizations that process personal information in South Africa, but also to any person or company that processes personal information on behalf of the organization – commonly referred to as a “processor.”  POPIA also applies to organizations outside of South Africa that process personal information in South Africa with the assistance of a third party (e.g., a channel partner, or outsourced service provider).  Where any processing of personal information is outsourced by an organization, it must, in terms of a written contract between it and the processor, ensure that the party processing personal information on the organization’s behalf establishes and maintains appropriate security measures as prescribed under POPIA.

POPIA contains a general prohibition on cross-border transfers of personal information.  However, this prohibition is subject to numerous exceptions, including: (1) where the data subject consented to the transfer; (2) the transfer is necessary for the performance of a contract between the company and the data subject; (3) the transfer is necessary for the conclusion or performance of a contract between the company and a third party that is in the interest of the data subject; or (4) the transfer is for the benefit of the data subject.  Where personal information is being transferred to a third party outside of South Africa, the company must ensure that the recipient of the personal information is subject to a law, binding corporate rules, or binding contract which provide an adequate level of protection that effectively upholds POPIA’s principles for reasonable processing, and that include provisions substantially similar to the conditions for the lawful processing of personal information, and for the further transfer of personal information under POPIA.

Step 5: Deliver POPIA Awareness Training

POPIA awareness training is a not only a valuable tool for organizations to promote compliance, it is also a requirement under the POPIA Regulations.  The Information Officer must ensure that awareness sessions are conducted regarding the provisions of POPIA, the POPIA Regulations, codes of conduct (where applicable), as well as any information that is obtained from the Information Regulator from time to time.

This post can also be found on CovAfrica, the firm’s blog on legal, regulatory, political and economic developments in Africa.

The Week Ahead in the European Parliament – Friday, May 28, 2021

Next week will be a committee week in the European Parliament.  Members of the European Parliament (“MEPs”) will gather virtually and in person in Brussels.  Several interesting votes and debates are scheduled to take place.

On Monday, the Committee on Security and Defense (“SEDE”) will have an exchange of views with the Commission Executive Vice-President Margrethe Vestager on the EU’s Action Plan on Synergies between Civil, Defense and Space Industries.  Presented on February 22, 2021, the Action Plan was already announced in the EU’s 2020 Industrial Strategy and aims to enhance complementarity between EU programs and instruments with regard to R&D.  It also seeks to promote further EU funding for R&D in the defense and space sector that can hold economic and technological dividends (spin-offs).  It will further try to facilitate the uptake of civil industry research in the context of European defense cooperation projects (spin-ins).  The Action Plan is available here.

On Tuesday, negotiators of the European Parliament, Council of the EU, and European Commission will attempt to find a compromise on the “public country-by-country reporting” Directive in their third round of trilogue negotiations.  The proposal is aimed at enhancing tax transparency and tackling base erosion and profit shifting.  The legislative proposal, dating back to 2016, would require certain multinationals to disclose the amount of income tax they accrued and the income tax they paid, in addition to the amount of accumulated earnings.  Reporting should also include an overall narrative at the group level explaining the material discrepancies between the accrued and amount paid.  The Parliament and Council have diverging views on these reporting requirements.  For example, the Parliament wants to demand subsidiaries of certain multinationals to disclose their fixed assets and number of employees, in an attempt to identify letterbox or storefront companies.  Certain Member States, however, argue that this reporting would create unnecessary risks for European companies in relation to third country tax administrations.  The Commission’s proposal is available here.  The European Parliament’s position is available here.

On Thursday, the Committee on Civil Liberties, Justice and Home Affairs (“LIBE”) will debate on a draft Opinion of Rapporteur MEP Patrick Breyer (DE, Verts/ALE) on the Digital Services Act (“DSA”).  The proposal for a Digital Services Act is aimed at enhancing consumer protection online; establishing transparency and accountability frameworks for online platforms; and improving competitiveness within the Single Market.  LIBE will provide an Opinion to the Internal Market Committee (“IMCO”) who holds the main jurisdiction over the file.  Rapporteur Breyer suggests, among many other things: to phase out behavioral advertising to protect users and replace it with contextual advertising; to not make automated tools for content moderation and content filters mandatory.  The DSA should also ensure that the legality of online content should rest with the independent judiciary and not with administrative authorities and that online platforms should not be compelled to “de-platform” users (as such a decision would fail to ensure a decision by the judiciary and by pass the legally defined sanctions).  The draft Opinion is available here.

For the complete agenda and overview of the meetings, please see here.

Rescissions of Policy Statements Illustrate Continued About-Face at CFPB

On March 31, 2021, the Consumer Financial Protection Bureau (“CFPB”) rescinded a range of policy statements issued under the leadership of former Director Kathleen L. Kraninger.  These rescissions concerned one policy statement governing communications between institutions subject to CFPB supervision and their examiners, and seven policy statements issued during the COVID-19 pandemic to provide regulatory relief to affected institutions.  Click here to read our recent article on the ABA Business Law Today website analyzing these rescissions and what they may signal regarding the future of the Bureau.
 

 

 

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