The traffic light parties are on track: Next week, the SPD, the Greens, and the FDP want to present their coalition agreement. Wednesday, Friday, and the coming Monday are scheduled as negotiation days for the top representatives in the head group, with more possibly to come.
A lot still needs clarification, including EU issues: It remains to be seen, for example, whether all three parties will support the formulation that nuclear power should not be considered sustainable in the taxonomy, the news agency Reuters reported in the evening, citing a paper by WG Finance.
The Nord Stream 2 Baltic Sea pipeline, on the other hand, is behind schedule. The German Federal Network Agency has suspended certification of the controversial project – first, the operating company has to be organized in accordance with German law. But this takes time; experts already consider a certification by the end of 2022 to be “ambitious”, as Timo Landenberger reports. The news drove gas prices up again yesterday – because Russia is making little effort to ramp up supplies without Nord Stream 2. A lawsuit filed by the German environmental organization Deutsche Umwelthilfe against the gas pipeline, on the other hand, failed before the Greifswald Higher Administrative Court.
Also already behind schedule is the EU Duty of Care Act. The impact assessment for this project, dreaded by the industry, is currently being reviewed again by the Regulatory Scrutiny Board, as Charlotte Wirth has learned. It seems doubtful whether the announced deadline in early December can be met.
The Nord Stream 2 Baltic Sea pipeline has been completed. The Russian energy company Gazprom wanted to start the first gas deliveries to Europe before the end of the year, and Kremlin leader Vladimir Putin pressed for an early operating permit from decision-makers in Germany and at the EU level. But nothing will come of it now.
The Federal Network Agency has suspended certification of the controversial project indefinitely. First, the operating company must be organized according to German law, the Bonn-based agency announced. That could delay commissioning by many more months. The news drove gas prices up sharply once again on Tuesday.
According to the EU Gas Directive, against which Nord Stream 2 AG had fought several times in court, production, transport, and distribution of the gas must be sufficiently separated. The so-called unbundling is intended to ensure the independence of the network operator from other energy supply activities. One possibility would be to sell the pipeline to another company.
The alternative: certification as an unbundled transmission operator (Independent Transmission Operator, ITO). Nord Stream 2 AG has already submitted the corresponding application to the German Federal Network Agency. The advantage: The pipeline remains in the company’s ownership.
Instead of restructuring the existing company, Nord Stream 2 AG has decided to establish a subsidiary under German law only for the German part of the pipeline. From a legal point of view, this is unproblematic and perfectly in line with the ITO model, says energy law expert Valentina Eigner from the law firm bpv Hügel to Europe.Table. “The separation under company law is one of the prerequisites. But that doesn’t mean the new company can’t be under the ownership of the holding company.”
Other requirements include the clear separation of staff and the management board, the introduction of a corporate identity and a new name, and the provision of the company’s own financial resources. This takes a lot of time, says Eigner, which is why the original deadline for certification of 8 January 2022 is impossible to meet. The expert expects certification by the end of 2022 at the earliest. And even that is “ambitious”.
According to the Federal Network Agency, the certification procedure will remain suspended until the transfer of the main assets and personnel resources to the subsidiary has been completed. After that, the procedure will be continued with the subsidiary as the new applicant. Even if the authority gives the green light, the European Commission will then have four months to review the matter. An assessment by the Federal Ministry of Economics and Technology regarding the security of energy supply is also required before, again, the BNetzA has a further two months to make a final certification.
Suspending the process is absolutely logical, Claudia Müller, a member of the Bundestag from Mecklenburg-Western Pomerania, told Europe.Table. The Green politician rejects the pipeline and calls the project a “geopolitical fiasco of German foreign policy that was pushed through against all warnings of close allies.” In addition, the pipeline damages the EU’s climate goals and is, therefore, a “backward-looking mistake”.
For CDU energy politician Markus Pieper, on the other hand, the suspension is an example of “how you can put obstacles in your own way when it comes to energy transition. I think that with a little goodwill, such certification issues can also be cleared up quickly without violating any laws.” The project is particularly important for Germany, which is phasing out coal and nuclear power at the same time, said the parliamentary director of the CDU/CSU group in the European Parliament. The previous federal government is relying on gas as an energy source for the transition to renewable energies.
However, the Association of European Gas Suppliers does not expect gas consumption in the EU to increase, Müller counters. Even a coal phase-out in 2030 would probably not push the existing pipeline capacities to their limits. Instead, continuing to rely on fossil gas would hinder the necessary steps towards post-fossil energy sources.
It is the EU Commission’s problem child: The law on corporate due diligence is to be postponed for at least another week. The Commission no longer seems convinced that it can meet the current deadline of December 8th. Internally, there is now already talk of December 14th. The regulation will “definitely come before this winter”, Didier Reynders is said to have promised representatives of the European Parliament on Monday. That leaves only December 14th and December 22nd until the Commission will take a winter break.
Perhaps, following the example of the EU-China investment deal, they also hope to escape the criticism of those who advocate a strong law just before Christmas. In the internal dispute between Didier Reynders and Thierry Breton, the French Industry Commissioner seems to have prevailed. In other words: not too strong a law with too broad a scope.
Currently, the impact assessment is once again before the Regulatory Scrutiny Board. The last time the text was rejected by the board, it was the only way Breton could get the dossier at all. But some points are still open. For example, whether one or two texts are to be expected. That depends on how much discontent some elements of the text have caused.
Specifically, it is about the personal liability of directors, which is a sore point not only for the industry but also for some commissioners. At the moment, all the indications are that this part will either be outsourced or, even more likely, that it will disappear into a drawer at some point.
The scope of the text also remains unclear. However, it is becoming apparent that the law is primarily aimed at large companies. It is hoped that there will be a cascade effect: As large companies often work with a large number of suppliers, due diligence would also be introduced there indirectly. And this is without SMEs having to fear too great an administrative burden or sanctions. The Commission’s complementary proposal to combat deforestation, which is being presented today, talks of “a targeted regime for SMEs” in relation to the law on corporate due diligence.
The pressure from Germany is said to be great. There, company representatives, in particular, would like the EU regulation to be equivalent to an adaptation of the German Supply Chain Act and thus only affect the first stages of the supply chains.
So far, however, only the Member States from Western Europe have been involved in the discussions. It is foreseeable, however, that the Eastern European states are anything but happy about a regulation. Tensions are to be expected at the latest when the Council works out its position on the Commission’s proposal next year. Meanwhile, under the French presidency in the first half of 2022, a tightening of a European proposal is hardly expected.
Today, the Council’s general approach to the Digital Services Act will be finalized in Coreper I. The Permanent Representatives Committee is expected to sign off on the final draft before it is formally adopted by the Council on November 25th, thus becoming the basis for negotiations in the trialogue.
The draft resolution contains a number of amendments that harbor potential for conflict with the Parliament. The vote in the Internal Market Committee is scheduled for December 9th. In particular, the proposed rules on deletion periods, personalized advertising, the rules on so-called dark patterns, and the institutional structure between the supervisory authorities of the national states and the EU Commission are likely to be new points of conflict.
Particularly large search engines have been included as a separate category in the Council’s position: If they have at least 45 million active users per month, the regulations of Section 4 (Containment of Systemic Risks) should also apply to them. In line with the abbreviation for Very Large Online Platforms VLOP, the Very Large Online Search Engines are called VLOSE.
A point emphasized by whistleblower Frances Haugen: Particularly large online platforms should explicitly check their systems for risks that could have fundamental rights consequences – including the recommendation systems (Article 27).
One point of contention among all parties involved has until recently been the question of the deletion periods for illegal content in the VLOPs. The Council proposal now provides that in the case of a report by so-called trusted flaggers, the majority of illegal hate content should be deleted within less than 24 hours (recitals 46 and 58). In other cases, the deadlines would vary, depending on the content and complexity.
However, the exact deadlines are not reflected in the actual legal text: Article 27 of the Council proposal does impose moderation processes on VLOPs to remove illegal content or make it inaccessible. However, hard deadlines are no longer provided for there.
The status of “Trusted Notifier” shall be granted by the public sector body designated as Digital Services Coordinator (DSC). However, their total number is to be limited and include both public bodies, bodies with a public mandate, and associations. Rights users and representatives are no longer named in the Council’s version but should also be able to obtain the status through the associations. Reports from trusted flaggers are to be prioritized over those from other whistleblowers.
A ban on personalized advertising – as demanded by some parliamentarians – is not included in the Council proposal. Instead, according to Article 30, particularly large platforms should ensure greater transparency. In a special online area, they are to be required to store information such as the content, the name of the advertised product, the display period and the main parameters of the target group, as well as the number of users actually reached by each target group in each member state for one year after the advertising has been played. This information should be publicly available without personal data.
In addition, the advertising industry should also adopt codes of conduct (Article 36), which should involve not only the providers but also all the actors in the value chain, users, and civil society involved in advertising.
The misleading designs known as dark patterns, which are intended to coax users into making decisions that are detrimental to them, are prohibited by the Council proposal for the very large platforms: They should not seek to influence the autonomy, decision-making, and choices of users through the design, structure, functions or nature of their user interfaces (Article 29, No 3 Council proposal).
The Council position seeks to further strengthen the country of origin principle and clarify responsibilities, also with a view to enforcement by the EU Commission.
The member states are obviously interested in drawing conclusions from the enforcement deficit of the GDPR, avoiding multiple and parallel responsibilities, and clarifying national and intra-European cooperation. This includes, among other things, that the authority designated by the member state as Digital Services Coordinator (DSC) should be equipped with sufficient legal means, financial resources, as well as adequate staffing and qualified personnel.
The DSC is at the same time the supervisory authority for the providers covered by the DSA in the respective national state as well as the coordination point with other authorities of the member state and with the DSCs of other states. In addition, there is the cooperation in the European DSC Committee as well as the coordination with the EU Commission in those cases of particularly large platforms and search engines in which the latter is to be responsible – a time-consuming task. The member states must transpose the regulations on the DSC into their national law in the form of a directive.
Providers must report essential data on their operations and the measures they have taken to the DSCs. As soon as a provider exceeds the thresholds for VLOPs/VSOEs, the relevant DSCs are to inform the Commission, which will then decide on whether to assume responsibility. In general, the EU Commission is directly responsible for all VLOPs/VSOEs, although it is also to cooperate with the DSCs.
For smaller providers, the supervisory authority based in the home country is in principle responsible. In those cases where an operator has its head office outside the EU, the European head office is taken as the reference point. However, there may be differences: For example, if the parent company has an establishment in one member state, but the provider of a partial service resides in another, duplication of jurisdiction is foreseeable. Similarly, if parts of a service are provided from one member state and other parts from another, two DSCs could claim competence.
The Council intends to counteract this by introducing a notification requirement when a procedure is initiated. The proposal also contains an escalation mechanism: If the Commission considers that the measures do not comply with the rules of the DSA, it is to notify the relevant DSC and report this to the DSC Committee. Article 46, which the Council has massively reworded, lays down the rules under which DSCs can be required to cooperate: On their own initiative, they should be able to participate in investigations carried out by other DSCs, or by decision of the Committee at the request of at least three other DSCs. If no solution is found in the DSC Committee, the Commission is to take the decision on the investigation – and be able to force the competent supervisory authority to carry out the procedure.
The Council proposal also significantly tightens the investigative instruments: Instead of on-site inspections, “all necessary investigations” are declared admissible, particularly sovereign acts such as entering, sealing, auditing, copying, and questioning. These are to be carried out with the knowledge of both the competent DSCs and with their support, but also that of other authorities, in a kind of administrative assistance.
The Council proposal also includes a proposal in Article 49a on how the Commission and DSCs can identify and address systemic and emerging risks. Member states are to promote cooperation with the Commission through their DSCs and other authorities – this includes providing expertise and skills. (With Jasmin Kohl)
The traffic light parties are on track: Next week, the SPD, the Greens, and the FDP want to present their coalition agreement. Wednesday, Friday, and the coming Monday are scheduled as negotiation days for the top representatives in the head group, with more possibly to come.
A lot still needs clarification, including EU issues: It remains to be seen, for example, whether all three parties will support the formulation that nuclear power should not be considered sustainable in the taxonomy, the news agency Reuters reported in the evening, citing a paper by WG Finance.
The Nord Stream 2 Baltic Sea pipeline, on the other hand, is behind schedule. The German Federal Network Agency has suspended certification of the controversial project – first, the operating company has to be organized in accordance with German law. But this takes time; experts already consider a certification by the end of 2022 to be “ambitious”, as Timo Landenberger reports. The news drove gas prices up again yesterday – because Russia is making little effort to ramp up supplies without Nord Stream 2. A lawsuit filed by the German environmental organization Deutsche Umwelthilfe against the gas pipeline, on the other hand, failed before the Greifswald Higher Administrative Court.
Also already behind schedule is the EU Duty of Care Act. The impact assessment for this project, dreaded by the industry, is currently being reviewed again by the Regulatory Scrutiny Board, as Charlotte Wirth has learned. It seems doubtful whether the announced deadline in early December can be met.
The Nord Stream 2 Baltic Sea pipeline has been completed. The Russian energy company Gazprom wanted to start the first gas deliveries to Europe before the end of the year, and Kremlin leader Vladimir Putin pressed for an early operating permit from decision-makers in Germany and at the EU level. But nothing will come of it now.
The Federal Network Agency has suspended certification of the controversial project indefinitely. First, the operating company must be organized according to German law, the Bonn-based agency announced. That could delay commissioning by many more months. The news drove gas prices up sharply once again on Tuesday.
According to the EU Gas Directive, against which Nord Stream 2 AG had fought several times in court, production, transport, and distribution of the gas must be sufficiently separated. The so-called unbundling is intended to ensure the independence of the network operator from other energy supply activities. One possibility would be to sell the pipeline to another company.
The alternative: certification as an unbundled transmission operator (Independent Transmission Operator, ITO). Nord Stream 2 AG has already submitted the corresponding application to the German Federal Network Agency. The advantage: The pipeline remains in the company’s ownership.
Instead of restructuring the existing company, Nord Stream 2 AG has decided to establish a subsidiary under German law only for the German part of the pipeline. From a legal point of view, this is unproblematic and perfectly in line with the ITO model, says energy law expert Valentina Eigner from the law firm bpv Hügel to Europe.Table. “The separation under company law is one of the prerequisites. But that doesn’t mean the new company can’t be under the ownership of the holding company.”
Other requirements include the clear separation of staff and the management board, the introduction of a corporate identity and a new name, and the provision of the company’s own financial resources. This takes a lot of time, says Eigner, which is why the original deadline for certification of 8 January 2022 is impossible to meet. The expert expects certification by the end of 2022 at the earliest. And even that is “ambitious”.
According to the Federal Network Agency, the certification procedure will remain suspended until the transfer of the main assets and personnel resources to the subsidiary has been completed. After that, the procedure will be continued with the subsidiary as the new applicant. Even if the authority gives the green light, the European Commission will then have four months to review the matter. An assessment by the Federal Ministry of Economics and Technology regarding the security of energy supply is also required before, again, the BNetzA has a further two months to make a final certification.
Suspending the process is absolutely logical, Claudia Müller, a member of the Bundestag from Mecklenburg-Western Pomerania, told Europe.Table. The Green politician rejects the pipeline and calls the project a “geopolitical fiasco of German foreign policy that was pushed through against all warnings of close allies.” In addition, the pipeline damages the EU’s climate goals and is, therefore, a “backward-looking mistake”.
For CDU energy politician Markus Pieper, on the other hand, the suspension is an example of “how you can put obstacles in your own way when it comes to energy transition. I think that with a little goodwill, such certification issues can also be cleared up quickly without violating any laws.” The project is particularly important for Germany, which is phasing out coal and nuclear power at the same time, said the parliamentary director of the CDU/CSU group in the European Parliament. The previous federal government is relying on gas as an energy source for the transition to renewable energies.
However, the Association of European Gas Suppliers does not expect gas consumption in the EU to increase, Müller counters. Even a coal phase-out in 2030 would probably not push the existing pipeline capacities to their limits. Instead, continuing to rely on fossil gas would hinder the necessary steps towards post-fossil energy sources.
It is the EU Commission’s problem child: The law on corporate due diligence is to be postponed for at least another week. The Commission no longer seems convinced that it can meet the current deadline of December 8th. Internally, there is now already talk of December 14th. The regulation will “definitely come before this winter”, Didier Reynders is said to have promised representatives of the European Parliament on Monday. That leaves only December 14th and December 22nd until the Commission will take a winter break.
Perhaps, following the example of the EU-China investment deal, they also hope to escape the criticism of those who advocate a strong law just before Christmas. In the internal dispute between Didier Reynders and Thierry Breton, the French Industry Commissioner seems to have prevailed. In other words: not too strong a law with too broad a scope.
Currently, the impact assessment is once again before the Regulatory Scrutiny Board. The last time the text was rejected by the board, it was the only way Breton could get the dossier at all. But some points are still open. For example, whether one or two texts are to be expected. That depends on how much discontent some elements of the text have caused.
Specifically, it is about the personal liability of directors, which is a sore point not only for the industry but also for some commissioners. At the moment, all the indications are that this part will either be outsourced or, even more likely, that it will disappear into a drawer at some point.
The scope of the text also remains unclear. However, it is becoming apparent that the law is primarily aimed at large companies. It is hoped that there will be a cascade effect: As large companies often work with a large number of suppliers, due diligence would also be introduced there indirectly. And this is without SMEs having to fear too great an administrative burden or sanctions. The Commission’s complementary proposal to combat deforestation, which is being presented today, talks of “a targeted regime for SMEs” in relation to the law on corporate due diligence.
The pressure from Germany is said to be great. There, company representatives, in particular, would like the EU regulation to be equivalent to an adaptation of the German Supply Chain Act and thus only affect the first stages of the supply chains.
So far, however, only the Member States from Western Europe have been involved in the discussions. It is foreseeable, however, that the Eastern European states are anything but happy about a regulation. Tensions are to be expected at the latest when the Council works out its position on the Commission’s proposal next year. Meanwhile, under the French presidency in the first half of 2022, a tightening of a European proposal is hardly expected.
Today, the Council’s general approach to the Digital Services Act will be finalized in Coreper I. The Permanent Representatives Committee is expected to sign off on the final draft before it is formally adopted by the Council on November 25th, thus becoming the basis for negotiations in the trialogue.
The draft resolution contains a number of amendments that harbor potential for conflict with the Parliament. The vote in the Internal Market Committee is scheduled for December 9th. In particular, the proposed rules on deletion periods, personalized advertising, the rules on so-called dark patterns, and the institutional structure between the supervisory authorities of the national states and the EU Commission are likely to be new points of conflict.
Particularly large search engines have been included as a separate category in the Council’s position: If they have at least 45 million active users per month, the regulations of Section 4 (Containment of Systemic Risks) should also apply to them. In line with the abbreviation for Very Large Online Platforms VLOP, the Very Large Online Search Engines are called VLOSE.
A point emphasized by whistleblower Frances Haugen: Particularly large online platforms should explicitly check their systems for risks that could have fundamental rights consequences – including the recommendation systems (Article 27).
One point of contention among all parties involved has until recently been the question of the deletion periods for illegal content in the VLOPs. The Council proposal now provides that in the case of a report by so-called trusted flaggers, the majority of illegal hate content should be deleted within less than 24 hours (recitals 46 and 58). In other cases, the deadlines would vary, depending on the content and complexity.
However, the exact deadlines are not reflected in the actual legal text: Article 27 of the Council proposal does impose moderation processes on VLOPs to remove illegal content or make it inaccessible. However, hard deadlines are no longer provided for there.
The status of “Trusted Notifier” shall be granted by the public sector body designated as Digital Services Coordinator (DSC). However, their total number is to be limited and include both public bodies, bodies with a public mandate, and associations. Rights users and representatives are no longer named in the Council’s version but should also be able to obtain the status through the associations. Reports from trusted flaggers are to be prioritized over those from other whistleblowers.
A ban on personalized advertising – as demanded by some parliamentarians – is not included in the Council proposal. Instead, according to Article 30, particularly large platforms should ensure greater transparency. In a special online area, they are to be required to store information such as the content, the name of the advertised product, the display period and the main parameters of the target group, as well as the number of users actually reached by each target group in each member state for one year after the advertising has been played. This information should be publicly available without personal data.
In addition, the advertising industry should also adopt codes of conduct (Article 36), which should involve not only the providers but also all the actors in the value chain, users, and civil society involved in advertising.
The misleading designs known as dark patterns, which are intended to coax users into making decisions that are detrimental to them, are prohibited by the Council proposal for the very large platforms: They should not seek to influence the autonomy, decision-making, and choices of users through the design, structure, functions or nature of their user interfaces (Article 29, No 3 Council proposal).
The Council position seeks to further strengthen the country of origin principle and clarify responsibilities, also with a view to enforcement by the EU Commission.
The member states are obviously interested in drawing conclusions from the enforcement deficit of the GDPR, avoiding multiple and parallel responsibilities, and clarifying national and intra-European cooperation. This includes, among other things, that the authority designated by the member state as Digital Services Coordinator (DSC) should be equipped with sufficient legal means, financial resources, as well as adequate staffing and qualified personnel.
The DSC is at the same time the supervisory authority for the providers covered by the DSA in the respective national state as well as the coordination point with other authorities of the member state and with the DSCs of other states. In addition, there is the cooperation in the European DSC Committee as well as the coordination with the EU Commission in those cases of particularly large platforms and search engines in which the latter is to be responsible – a time-consuming task. The member states must transpose the regulations on the DSC into their national law in the form of a directive.
Providers must report essential data on their operations and the measures they have taken to the DSCs. As soon as a provider exceeds the thresholds for VLOPs/VSOEs, the relevant DSCs are to inform the Commission, which will then decide on whether to assume responsibility. In general, the EU Commission is directly responsible for all VLOPs/VSOEs, although it is also to cooperate with the DSCs.
For smaller providers, the supervisory authority based in the home country is in principle responsible. In those cases where an operator has its head office outside the EU, the European head office is taken as the reference point. However, there may be differences: For example, if the parent company has an establishment in one member state, but the provider of a partial service resides in another, duplication of jurisdiction is foreseeable. Similarly, if parts of a service are provided from one member state and other parts from another, two DSCs could claim competence.
The Council intends to counteract this by introducing a notification requirement when a procedure is initiated. The proposal also contains an escalation mechanism: If the Commission considers that the measures do not comply with the rules of the DSA, it is to notify the relevant DSC and report this to the DSC Committee. Article 46, which the Council has massively reworded, lays down the rules under which DSCs can be required to cooperate: On their own initiative, they should be able to participate in investigations carried out by other DSCs, or by decision of the Committee at the request of at least three other DSCs. If no solution is found in the DSC Committee, the Commission is to take the decision on the investigation – and be able to force the competent supervisory authority to carry out the procedure.
The Council proposal also significantly tightens the investigative instruments: Instead of on-site inspections, “all necessary investigations” are declared admissible, particularly sovereign acts such as entering, sealing, auditing, copying, and questioning. These are to be carried out with the knowledge of both the competent DSCs and with their support, but also that of other authorities, in a kind of administrative assistance.
The Council proposal also includes a proposal in Article 49a on how the Commission and DSCs can identify and address systemic and emerging risks. Member states are to promote cooperation with the Commission through their DSCs and other authorities – this includes providing expertise and skills. (With Jasmin Kohl)
