Category: Global

U.S. House and Senate Reach Agreement on Uyghur Forced Labor Prevention Act

On December 14, 2021, lawmakers in the House and Senate announced that they had reached an agreement on compromise language for a bill known as the Uyghur Forced Labor Prevention Act or “UFLPA.”  Different versions of this measure passed the House and the Senate earlier this year, but lawmakers and Congressional staff have been working to reconcile the parallel proposals. The compromise language paves the way for Congress to pass the bill and send it to President Biden’s desk as soon as this week.

The bill would establish a rebuttable presumption that all goods originating from China’s Xinjiang region violate existing US law prohibiting the importation of goods made with forced labor. The rebuttable presumption would go into effect 180 days after enactment.  The compromise bill would also require federal officials to solicit public comments and hold a public hearing to aid in developing a strategy for the enforcement of the import ban vis-à-vis goods alleged to have been made through forced labor in China.

This rebuttable presumption will present significant challenges to businesses with supply chains that might touch the Xinjiang region.  Many businesses do not have full visibility into their supply chains and will need to act quickly to map their suppliers and respond to identified risks.  Importers must present detailed documentaton in order to release any shipments that they think were improperly detained, a costly and time-consuming endeavor.  Notably, the public comment and hearing processes will guide the government’s enforcement strategy, providing business stakeholders an opportunity to contribute to an enforcement process that could have implications for implementation of the import ban more broadly.

China’s Xinjiang region is a part of several critical supply chains, lead among them global cotton and apparel trade, as well as solar module production.  According to the Peterson Institute:

Xinjiang accounts for nearly 20 percent of global cotton production, with annual production greater than that of the entire United States. Its position in refined polysilicon—the material from which solar panels are built—is even more dominant, accounting for nearly half of global production. Virtually all silicon-based solar panels are likely to contain some Xinjiang-sourced silicon, according to Jenny Chase, head of solar analysis at Bloomberg New Energy Finance. If signed into law, the bill will send apparel producers and the US solar industry scrambling to find alternative sources of supply and prices are bound to increase.

Article By Ludmilla L. Kasulke and Rory Murphy of Squire Patton Boggs (US) LLP

For more legal news and legislation updates, click here to visit the National Law Review.

© Copyright 2021 Squire Patton Boggs (US) LLP

9th Cir. Upholds Antitrust Jury Verdict Against Chinese Telescope Company [PODCAST]

Court affirms evidentiary rulings on market definition and overcharges. Agrees evidence supported verdict for collusion and attempted monopolization.

The Ninth Circuit Court of Appeals this month upheld judgment in favor of Optronic Technologies, Inc., finding there was sufficient evidence that Chinese telescope manufacturer, Ningbo Sunny Electronic (“Sunny”), conspired with a competitor in the U.S. consumer telescope market to allocate customers, fix prices, and monopolize the telescope market in violation of federal antitrust laws (Optronic Technologies, Inc., v. Ningbo Sunny Electronic Co., Ltd., No. 20-15837, 9th Cir. 2021). Ninth Circuit Judge Ronald M. Gould wrote the opinion.

California-based Optronic, known commercially as Orion Telescopes & Binoculars, sued Sunny in November 2014. Orion alleged Sunny violated Sherman Act Sections 1 and 2 by conspiring to allocate customers in the telescope market and conspiring to fix prices or credit terms for Optronics in collusion with Suzhou Synta Optical Technology. Orion further alleged Sunny’s 2014 acquisition of independent manufacturer, Meade, violated Section 7 of the Clayton Act. Orion alleged that Sunny engaged in these anticompetitive acts to force Orion out and further monopolize the telescope market.

A California jury found in favor of Orion on all counts and awarded the company $16.8 million in damages, which the district court trebled to $50.4 million. The district court also ordered injunctive relief, directing Sunny to supply Orion and Synta’s Meade on non-discriminatory terms for five years, and not to communicate with Synta about competitively sensitive information.

Rulings on key elements of plaintiff’s economic evidence affirmed.

Sunny appealed on several grounds, including two that challenged key elements of the plaintiff’s expert economic evidence. The jury had found Sunny liable for attempted monopolization and conspiracy to monopolize in violation of Section 2, which makes it unlawful for any person to monopolize or attempt or conspire to monopolize any relevant market. Sunny argued on appeal that the evidence could not support a Section 2 verdict because Orion’s economist failed to define a relevant market. In particular, Sunny claimed the expert did not examine the cross-elasticity between substitute products in the market or perform a SSNIP test, the standard analysis used to delineate the outer boundaries of a relevant market.

The appeals court found these contentions lacked merit. The plaintiff’s economist had testified that the relevant product market was the market for telescope manufacturing services. The purpose of the SSNIP test is to determine whether the relevant market is drawn too narrowly and should be expanded to include potential substitutes. But because no other manufacturing capacity can substitute for telescope manufacturing services, wholesale purchasers of telescopes cannot turn to other manufacturers to fulfill orders. Without substitutable manufacturers, a SSNIP test boils down to whether new manufacturers would enter the market fast enough to make an increase in price unprofitable for a hypothetical monopolist, which they could not. As a result, the court held that the economist reasonably could forgo performing a SSNIP analysis.

Sunny also challenged the economist’s estimate of anticompetitive overcharges that could not directly be observed. Neither the “benchmark” nor “before-and-after” estimation methods were available. Therefore, to develop a measure of damages, the plaintiff’s expert presented two different methods of estimating the overcharges. In the first method, the expert collected data on cartel overcharges from the economic literature on markets with structures and conditions similar to telescope manufacturing. The average of those overcharges was then used as an estimate of the overcharge resulting from defendants’ collusion. As a check on this estimate, the economist also submitted a theoretical Cournot equilibrium model of market prices based on assumptions drawn from the record in the case. The two methods yielded similar and consistent results. Affirming the admissibility of the expert’s damages estimates, the appellate court found the expert’s report and testimony “were sufficiently tied to the facts of this case such that the district court properly admitted this evidence.”

In rebuttal, the defendant’s economist testified to the high sensitivity of the assumptions used in the plaintiff’s theoretical model. Interestingly, defendants were not permitted to submit their own estimate of damages for the first time on rebuttal, so the defendants’ expert had to limit her testimony to the sensitivity of the model without the ability to show the jury any resulting alternative estimate of the anticompetitive overcharge. The appeals court affirmed the trial court’s limitation on the defendants’ rebuttal expert.

Price fixing and a larger scheme.

Sunny also argued that Orion failed to present sufficient evidence to support Orion’s Section 1 claims. Section 1 prohibits unreasonable restraints of trade. Horizontal price fixing and market allocation are per se unreasonable and support Section 1 liability without regard to any purported justification or defense. The Ninth Circuit noted that Orion offered evidence that Synta executives encouraged Sunny’s purchase of Meade, an acquisition that was part of a larger scheme by Sunny and Synta to jointly control the telescope manufacturing market, even though federal regulators had already prohibited such a combination. The court also declined to upset the jury’s finding that Sunny conspired with a Synta subsidiary to fix prices and credit terms to Orion, a per se violation of Section 1.

“If you break it, you buy it.”

Finally, it is notable that the appellate court affirmed the award of damages accruing after September 2016, when the defendant and Synta took their last steps to eliminate Meade, and Synta entered a Settlement and Supply Agreement with Orion. The court held that, even if the conspiratorial acts of Sunny and Synta ended in 2016, Orion could still recover post-2016 damages “because it continued to suffer economic harm from the harm to competition caused by the illegal concerted activity.” Thus, where collusion causes a durable change in market structure or sets the pattern of a continuing collusive practice, it is no defense that the conspirators may have ceased engaging in concerted action.

The rule adopted by the Ninth Circuit in Optronics is clear: “[W]here an antitrust plaintiff suffers continuing antitrust injuries from anticompetitive changes to market structure that arose from a proven antitrust violation, we hold that the violation may be a material cause of that injury, and so recovery of damages is permitted, even after the last proven date of the violative conduct. This rule accords with the common-sense principle that ‘if you break it, you buy it.’”

Welcomed clarity.

The Ninth Circuit’s opinion brings welcomed clarity on several points. It demonstrated that plaintiffs need not perform a SSNIP test where market-specific circumstances define a market’s outer boundary. For claimants facing the need to estimate unobservable anticompetitive overcharges, it affirms an ingenious method for arriving at a reasonable and reliable estimate. And, for past conspiracies with continuing anticompetitive effects, the decision announces the common-sense principle that a defendant “remains liable for the continuing injuries suffered by plaintiffs from the structural harm to competition that its unlawful scheme brought about.” Put simply, this is a well-articulated decision by a capable panel that adds precision and certainty to antitrust.

Edited by Tom Hagy for MoginRubin LLP

© MoginRubin LLP

For more articles on 9th Circuit decisions, visit the NLR Litigation section.

China’s Supreme People’s Court Rules No Accounting for Profit for Joint Patent Ownership

In decision no. （2020）最高法知民终954号 dated November 25, 2021, China’s Supreme People’s Court ruled that if the co-owners of a patent or patent application right do not make an agreement on the exercise of the right and one of the co-owners independently practices the patent,  the other co-owner cannot claim the distribution of the proceeds from the separate practicing of the patent on the grounds of co-ownership of the patent right.

 

 

 

 

 

The appellant, the First Affiliated Hospital of Wenzhou Medical University 温州医科大学附属第一医院 (hereinafter referred to as Wenzhou Hospital) and the appellee Shenzhen Huilistong Information Technology Co., Ltd. 深圳市汇利斯通信息技术有限公司 (hereinafter referred to as Huilistong Company) were involved in a patent infringement litigation for CN Patent No. ZL 201210235924.0 entitled “a self-service terminal used in the lobby of a hospital.”

Wenzhou Hospital asserted that it co-owns the involved patent with Huilistong. Without its permission, Huilistong Company violated the rights of Wenzhou Hospital by practicing the patent involved in the case, and requested an order for Huilistong Company to stop the infringement and destroy inventory of infringing products and compensate Wenzhou Hospital for economic losses of 2.5098 million RMB and reasonable expenses for rights protection of 116,400 RMB.

The Shenzhen Intermediate People’s Court of Guangdong Province held that Huilistong Company could independently practice the patent involved in the case in accordance with the law, which does not constitute an infringement of the patent right of Wenzhou Hospital.

Wenzhou Hospital appealed to the Supreme People’s Court. The Supreme People’s Court made a determination on the issue of “allocation of royalties,” and on September 24, 2020, it rejected the appeal and upheld the original judgment.

The Supreme People’s Court explained that Article 15 of the Patent Law stipulates that if the co-owners of the patent right have an agreement on the exercise of the right, such agreement shall prevail. If there is no agreement, the co-owners may practice the patent alone or permit others to implement the patent by way of ordinary licensing; if the patent is permitted to be practiced by others, the royalties collected shall be distributed among the co-owners.

Except for the circumstances specified in the preceding paragraph, the exercise of joint patent application rights or patent rights shall obtain the consent of all co-owners.

Therefore, without the consent of the co-owner of the patent, the co-owner of a patent may directly obtain economic benefits through the co-owned patent in two ways: first, to separately practice the co-owned patent, and second, to license others to exploit the patent in the way of ordinary license, and only in the latter circumstance may there be a requirement for distributing the profits to the co-owners, but under the circumstance of independent exploitation, there is no such requirement.

In this case, Wenzhou Hospital claimed that some of the self-service registration integrated machines involved in this case were marked with such words as the joint research and development by Huilistong Company and the hospital involved in this case. However, this does not prove that Huilistong Company licensed the hospital involved in this case to use the patent involved, and there was no evidence in this case that the hospital involved in this case paid any patent licensing fee to Huilistong Company.

Therefore, the claim of Wenzhou Hospital for sharing the economic proceeds obtained by Huilistong Company from the exploitation of the patent at issue was not valid.

Wenzhou Hospital separately claimed that, according to the provisions of the civil law on the sharing of proceeds by the co-owners with respect to the co-owned property, Wenzhou Hospital also had the right to share the economic proceeds obtained by Huillistong Company from the implementation of the patent in question.

In response, the Supreme People’s Court held that, although Article 78 (2) of the General Principles of the Civil Law of the People’s Republic of China provides that “a co-owner enjoys the rights and assumes the obligations over the co-owned property,” this provision is a general provision on the co-owned property, and the aforesaid provision of the Patent Law falls under the special provisions on the distribution mechanism of the rights and interests of all co-owners under the circumstance of co-ownership of patents, and the special provisions of the Patent Law shall prevail.

Therefore, the Supreme People’s Court ruled for Huilistong Company.

The full text of the decision is available here (Chinese only).

© 2021 Schwegman, Lundberg & Woessner, P.A. All Rights Reserved.

Ontario’s Employment Laws: Several Significant Changes Coming Under Bill 27, the Working for Workers Act, 2021

On November 30, 2021, the Government of Ontario passed Bill 27, the Working for Workers Act, 2021. Bill 27 amends a number of statutes, including the Employment Standards Act and the Occupational Health and Safety Act.

According to the government, this legislation achieves a number of goals, including improving employees’ work-life balance, prohibiting noncompete agreements to increase competition in business and labour markets, facilitating the registration of internationally trained professionals, and implementing a licensing regime for temporary help agencies and recruiters.

Amendments to the Employment Standards Act, 2000

Right to Disconnect from Work

The Working for Workers Act, 2021requires that employers with 25 or more employees at the beginning of the year implement a written “disconnect from work” policy regarding disconnecting from work during nonworking hours. Under the act, the term “disconnecting from work” is defined as “engaging in work-related communications, including emails, telephone calls, video calls or the sending or reviewing of other messages, so as to be free from the performance of work.” Once an employer prepares or amends a policy, employers will have 30 days to share copies of this policy with employees. Employers must also provide new employees this policy within 30 days of being hired.

Once the act receives Royal Assent, employers will have six months from that date to develop their written policies. Following this initial year, employers will have to prepare their policies by no later than March 1 of each year.

The regulations that will be promulgated to establish the content of the policy have not yet been published. As such, it is not yet known what specific steps employers must take to prohibit after-hours work and whether they will be restricted in terms of which employees may or may not be permitted or required to perform after-hours work, in addition to other unsettled issues.

Prohibition of Noncompete Agreements

The act prohibits employers from including noncompete clauses in any agreement they form with an employee. If this provision is violated, the noncompete agreement will be void.

There are two exceptions to this rule.

  1. Employees in an executive role are excepted from this provision. An “executive” is an employee who holds the office of a chief executive position, including that of president, chief executive officer, and chief administrative officer.
  2. There is also an exception when there has been “a sale of a business or part of a business” (which includes a lease). If the purchaser and seller enter into a noncompete agreement, and the seller becomes an employee of the purchaser immediately after the sale, this prohibition will not apply.

Once Royal Assent is received, the noncompete prohibition is deemed to come into force on October 25, 2021.

With the passing the act, Ontario has become the first province to require “disconnect from work” policies and to prohibit noncompete agreements outright.

Licensing Requirements for Temporary Help Agencies

The act specifies that temporary help agencies and recruiters must now apply for a license. Anyone wishing to engage with a temporary help agency or recruiter must ensure that they are licensed, as knowingly doing business with an unlicensed agency or recruiter is prohibited under the act.

Temporary help agencies or recruiters may be refused a license and may have their licenses revoked or suspended for a number of reasons, including:

  • using recruiters that charge fees to foreign nationals;
  • providing “false or misleading information in an application”; and
  • situation in which the director of Employment Standards has reasonable grounds to believe that “the applicant will not carry on business with honesty and integrity and in accordance with the law.”

If applicants dispute the refusal, revocation, or suspension of their licenses, they can seek a review at the Ontario Labour Relations Board.

These amendments will come into force on a day to be proclaimed by the lieutenant governor.

Amendments to the Employment Protection for Foreign Nationals Act, 2009

Prohibition on the Collection of Recruitment Fees

To protect foreign nationals from predatory recruitment practices, the act prohibits employers and recruiters from knowingly using the services of recruiters that charge foreign nationals for their services.

A recruiter that charges a fee, and an employer or recruiter that violates this prohibition will be liable for repaying the fees charged to the foreign national.

These amendments will come into force on the day the Working for Workers Act, 2021 receives Royal Assent.

Amendments to the Fair Access to Regulated Professions And Compulsory Trades Act, 2006

Facilitating the Registration of Internationally Trained Professionals

To facilitate the registration of internationally trained professionals, the act specifies that Canadian experience will not be a qualification for registration in a regulated profession. Regulated professions may apply to be exempted from this rule “for the purposes of public health and safety in accordance with the regulations.” Regulated professions will also be required to develop accelerated registration processes to aid with emergency preparedness.

The fairness commissioner will also evaluate language proficiency requirements to ensure that any French or English testing does not contravene the regulations.

These amendments will come into force on the day the act receives Royal Assent.

Amendments to the Occupational Health and Safety Act

Mandating Washroom Access for Delivery Persons

Under the act, a new requirement is created that if a person requests washroom access in the course of delivering or picking up a package from a business. Business covered by the act must allow use of their washrooms.

Businesses will be exempt from this requirement if:

  • Sharing the washroom is unreasonable or impractical because of health and safety reasons;
  • The context makes sharing the washroom unreasonable or impractical; or
  • The delivery person would have to enter a dwelling to use the washroom.

These amendments will come into force on a day to be proclaimed by the lieutenant governor.

Amendments to the Workplace Safety and Insurance Act, 1997

Distribution of Surplus Insurance Fund

The act includes a provision that specifies that if there is a surplus in the Workplace Safety and Insurance Board’s insurance fund, this surplus may be distributed among eligible employers. The insurance board will have discretion to determine the timing and the amounts to be granted to eligible employers, based on factors such as adherence to the Workplace Safety and Insurance Act. Based on these factors, the insurance board will also be empowered to exclude any eligible employers from the distribution of surplus funds. Employers will not be able to appeal the funding decisions made by the insurance board in this respect.

These amendments will come into force on a day to be proclaimed by the lieutenant governor.

Amendments to the Ministry of Agriculture, Food and Rural Affairs Act

Increasing Information Gathering in Relation to “agriculture, food or rural affairs”

Under the act, the minister of Agriculture, Food and Rural Affairs is granted the authority to “collect information, including personal information, directly or indirectly” related to “agriculture, food or rural affairs” for the purposes of emergency response and public health. Personal information will not be collected, used, or disclosed in cases where other sources of information are available to fulfil the same purpose.

These amendments will come into force on the day the act receives Royal Assent.

Next Steps

Bill 27 passed its third reading on November 30, 2021. At the time of publication of this article, the legislation has not received Royal Assent, but it likely will shortly. Once Royal Assent is received, some amendments come into force immediately, while others follow different timelines. Employers may want to begin reviewing the new legislation, noting any important dates and features relevant to their organizations. In addition, employers may want to review their policies, practices, and contracts to ensure compliance.

Article By Michael Comartin and Gloria Ilunga of Ogletree, Deakins, Nash, Smoak & Stewart, P.C.

For more labor and employment legal news, click here to visit the National Law Review.
© 2021, Ogletree, Deakins, Nash, Smoak & Stewart, P.C., All Rights Reserved.

Omicron COVID-19 Variant Prompts US To Suspend Travel From Eight African Countries

The Republic of South Africa informed the World Health Organization (WHO) of a new B.1.1.529 (Omicron) variant of SARS-CoV-2, in late November. That notice led the Biden Administration to announce the suspension of travel and restricted entry into the United States, which went into effect on Nov. 29, 2021.

At the moment, these travel restrictions appear to apply to individuals who were physically present – during the 14-day period preceding their entry or attempted entry into the United States – within the Republic of Botswana, the Kingdom of Eswatini, the Kingdom of Lesotho, the Republic of Malawi, the Republic of Mozambique, the Republic of Namibia, the Republic of South Africa, and the Republic of Zimbabwe.

These travel restrictions do not apply to the following:

  • U.S. citizens and their spouses
  • Lawful permanent residents and their spouses
  • U.S. military personnel, their spouses and children
  • Parents or guardians of unmarried U.S. citizens, lawful permanent residents, and U.S. military personnel under the age of twenty-one
  • Siblings of U.S. citizens, lawful permanent residents, and U.S. military personnel under the age of 21, all of whom must be unmarried and under 21 years of age

The Centers for Disease Control and Prevention (CDC) provided clarification for international travelers, regardless of their vaccination status:

  • For fully vaccinated individuals, a viral test must be conducted no more than three days (72 hours) before the flight’s departure from the designated foreign country along with proof of being fully vaccinated against COVID-19. Individuals should bear in mind that the testing period may be reduced to 24 or 48 hours before boarding and should check with their respective airlines prior to departure.
  • For individuals who are not fully vaccinated, a viral test must be conducted no more than one day (24 hours) before the flight’s departure from the designated foreign country. A quarantine requirement is also under consideration.

Consideration should be taken for limiting international travel at present, since circumstances and requirements are changing rapidly.

This article was written by Tejas Shah, Sarah J. Hawk, Michael E. Durham, M. Mercedes Badida-Tavas and Mandira Sethi of Barnes and Thornburg law firm. For more information regarding COVID travel bans, please click here.

Just When I Thought I Was Out: Omicron Variant and the Return of Regional COVID-19 Travel Bans

Following its November 8, 2021 move to remove and replace all regional COVID-19 Travel bans with a blanket vaccination requirement, the Biden administration announced a new COVID-19 travel ban on those seeking to enter the U.S. from various African nations.  The new Proclamation bars most non-U.S. citizens who have been physically present in the following countries during the 14-day period prior to attempting to enter the United States:

  • Republic of Botswana

  • The Kingdom of Eswatini (formerly Swaziland)

  • The Kingdom of Lesotho

  • The Republic of Malawi

  • The Republic of Mozambique

  • The Republic of Namibia

  • The Republic of South Africa

  • The Republic of Zimbabwe

Who is covered?

The Proclamation includes several important qualifiers and exemptions. It only applies to “noncitizens” of the United States, but it includes both immigrants (those coming to stay indefinitely) and nonimmigrants (those coming temporarily).

The Proclamation bars entry for noncitizens who have been physically present in the listed countries during the 14 days prior to attempting to enter the U.S., not because of their citizenship. In other words, a South African coming to the U.S. directly from South Africa is barred, but a South African coming directly to the U.S. after 14+ days in Australia is free to enter. Importantly, the Proclamation applies in addition to the blanket vaccination requirement, so anyone seeking an exemption from the new Proclamation must also either be properly vaccinated or qualify under the extremely limited exceptions to the Vaccination requirement.

The new Proclamation does not apply to the following classes:

  • Lawful permanent residents (aka green card holders). The Proclamation does apply to immigrants, meaning it would bar those seeking to enter on immigrant visas to become lawful permanent residents.

  • The spouse of a U.S. citizen or lawful permanent resident.

  • The parent or legal guardian of a U.S. citizen or lawful permanent resident, as long as the U.S. citizen or lawful permanent resident is unmarried and under 21.

  • The sibling of a U.S. citizen or lawful permanent resident as long as both are unmarried and under 21.

  • Noncitizen nationals of the United States.

  • The children, foster children, or wards of a U.S. citizen or lawful permanent resident and certain prospective adoptees.

  • Those invited by the U.S. government to fight the Corona virus.

  • Those traveling on certain crewman and transit nonimmigrant visas.

  • Nonimmigrants in most diplomatic statuses.

  • U.S. Armed Forces members and their spouses and children.

  • Those whose entry would not pose a “significant risk” of spreading the virus as determined by HHS and CDC.

  • Those whose entry would “further important law enforcement objectives” as determined by named agencies.

  • Those whose entry would be in the U.S. national interest, as determined by named agencies. National interest exception (NIE) procedures are still unclear and should be addressed in the near future, including whether prior NIE approvals will be honored.

In addition, the new Proclamation should not affect any applicant for asylum and other related humanitarian relief such as Withholding of Removal or protections under the Convention Against Torture.

How Long Will it Last and are More Travel Bans Coming?

The Proclamation’s ban began on November 29, 2021 and will remain until terminated by the President. On-the-ground case numbers in each country will determine the White House’s willingness to lift travel restrictions, but an increase in numbers in other countries could see an expansion and return to regional travel bans.

The duration of the new Proclamation and its potential expansion to other countries will likely depend on the effectiveness of vaccines against the Omicron variant and any new variants that arise in the coming months. If existing or newly created vaccines are able to combat new variants, the White House will likely rely on its blanket vaccination requirement and not fall back to the Trump-era country-specific regional bans.

© Copyright 2021 Squire Patton Boggs (US) LLP
For more COVID-19 travel updates, visit the NLR Coronavirus News section.

Game Changing Reform to NSW Environment Protection Laws

The NSW Government has introduced the Environment Legislation Amendment Bill 2021 (NSW) (Bill) which proposes wide ranging reforms to NSW environmental laws to enable the NSW Environment Protection Authority (EPA) to “crack down” on environmental offenders.

The Bill makes good on Minister Matt Kean’s commitment to ensure that “the book [is] thrown at anyone who has done the wrong thing”. While the EPA has made it clear that the reforms are “aimed solely at those who deliberately choose to circumvent the law”, the amendments proposed by the Bill will materially increase environmental liabilities for all NSW operators.

This article outlines the key reforms proposed by the Bill which will amend a raft of environmental legislation, including the Protection of the Environment Operations Act 1997 (NSW) (POEO Act) and Contaminated Land Management Act 1997 (NSW) (CLM Act) and include:

  • the creation of new environmental offences;
  • increasing the penalties for a number of existing offences;
  • increasing the powers of the EPA and other environment regulators to hold to account those perceived to be responsible for pollution or contamination and to enforce environment protection licence conditions;
  • enabling the EPA to recover profits arising from the commission of environmental offences and the cost of remediating contaminated land from related bodies corporate and directors and managers of offending corporations; and
  • making it easier for the EPA to prove certain environmental offences.

The Bill is expected to be debated by Parliament in early 2022 and, if passed, will result in the largest overhaul of NSW environmental laws in over five years.

KEY REFORMS

Description Analysis
Greater Liability for Directors, Managers and Related Bodies Corporate
  • New power for the EPA and other environment regulators to issue clean-up notices and prevention notices to:
    • current and former directors and persons concerned in management; and
    • related bodies corporate, of companies responsible pollution or contamination, if the company does not comply with notices issued to it.
  • Making it an offence for a:
    • director or person concerned in management;
    • related body corporate; or
    • director or person concerned in management of a related body corporate,

to receive or accrue a monetary benefit as a result of certain proven environmental offences by a company.

  • New and expanded powers for the EPA and other prosecutors to obtain monetary benefit orders requiring:
    • directors or persons concerned in management;
    • related bodies corporate; and
    • directors or persons concerned in management of related bodies corporate,

to repay monetary benefits accrued as a result of certain proven environmental offences by a company.

If passed, the Bill will significantly increase potential liability of those concerned in the management of companies (including related bodies corporate) who commit environmental offences or fail to comply with environment protection notices in NSW.

Managers, directors and related bodies corporate could be put on the hook:

  • to clean up pollution or contamination caused by a company;
  • to carry out works required by a prevention notice to ensure that activities of the corporation are carried on in future in an environmentally satisfactory manner; and
  • to repay “monetary benefits” received as a result of any proven offence.

The proposed measures are not entirely unique to NSW. Queensland passed “chain of responsibility” environment legislation in 2016 and put it to use in the long-running Linc Energy matter.

However, the proposal for directors and related bodies corporate to be automatically liable for an offence if they profit from a proven offence of a corporation under environment protection legislation is likely to be the source of significant concern. This is especially the case as the Bill does not propose any defences. This means that a director or person concerned in management could potentially be liable even if they have taken all due diligence to prevent the commission of the offence by the company, although the EPA is unlikely to commence a prosecution in such circumstances.
New EPA Powers to Regulate Contaminated Land
  • New powers for the EPA to issue clean-up notices and prevention notices as soon as the EPA is notified of contamination of land, even before the EPA has determined that the land is “significantly contaminated”.
  • New power for the EPA to require financial assurances to ensure compliance with under ongoing maintenance orders, restrictions and public positive covenants.
 The new reforms demonstrate the importance on engaging with the EPA at an early stage and on an ongoing basis in relation to contaminated land.

If passed, the Bill would enable the EPA to take strong and proactive action without agreement even before it determines that the land is “significantly contaminated” and warrants contamination.
New Offence of Giving False or Misleading Information to the EPA
  • The Bill includes a new general offence of giving information to the EPA that is false or misleading in a material respect.
  • A defence applies where the person took all reasonable steps to ensure the information was not false or misleading in a material respect.
  • Greater penalties apply where the false or misleading information is provided knowingly.
  • Directors and other persons involved in the management of the corporation will be liable for any offence committed by the company under the new provision if they ought reasonably to know that the offence would be committed and failed to take all reasonable steps to prevent the provision of false and misleading information.

This new false and misleading information offence is significant because it applies regardless of whether the information was provided:

  1. voluntarily; or
  2. in circumstances where the information was known to be false or misleading.

The new offence is an apparent response to the decision in Environment Protection Authority v Eastern Creek Operations Pty Limited [2020] NSWLEC 182, where the defendant successfully resisted an EPA prosecution which alleged that the provision of false or misleading information by establishing that the notice in response to which the information was provided was legally invalid.

The new offence would create material new risks for entities regulated by the EPA, and highlights the need to take great care in taking “all reasonable steps” to ensure that information provided to the EPA is not false or misleading.
Higher Maximum Penalties for Some Environmental Offences
  • Substantial increases to some maximum penalties for offences under environment protection legislation, including the CLM Act, to more than double the current maximum penalties.
 The Second Reading Speech states that maximum penalties have been increased so that “they reflect the true cost of the crime”
Increased Liability for Suspected “Contributors” to Pollution
  • New power for the EPA and other environmental regulators to issue a clean-up notice to persons who is “reasonably suspected of contributing”, to any extent, to a pollution incident.
  • New powers for public authorities to recover costs and expenses of taking clean-up action from persons the authority “reasonably suspects contributed” to the pollution incident, in addition to occupiers and persons the authority reasonably suspects caused the pollution incident.
  • New right for person issued a clean-up notice to recover costs from others who caused or contributed to pollution incidents as a debt.

These new provisions are likely to be of significant concern, as they enable the EPA to issue clean-up notices requiring alleged contributors to pollution incidents to clean-up all of the pollution, at its cost. This has the potential to lead to the unintended result that:

  •  suspected contributors could be made liable for clean-up costs far exceeding their actual contribution; and
  • the EPA may seek to regulate the potential contributor with the “deepest pockets” – rather than the person most directly responsible.

While the Bill includes a right for a contributor to recover costs from others who caused or contributed to the pollution incident as a debt, this offers very limited protection to suspected contributors issued a clean-up notice, particularly if the person responsible or other persons responsible have limited financial capacity.
Expanded Environmental Licensing Powers
  • The Bill includes a new power for the EPA to require restrictions on the use of land or pubic positive covenants to enforcing environment protection licence conditions (including conditions imposed on the suspension, revocation or surrender of the licence). In line with this, the Bill also includes new provisions to enable a person other than the holder, or former holder, of a licence, to apply to vary the conditions of the suspension, revocation or surrender of the licence.
  • New ability for the EPA to deny environment protection licences to corporations where current or former directors of the corporation, related bodies corporate or for current or former directors of related bodies corporate have contravened relevant legislation.
 The proposed power to impose restrictions on use and public positive covenants to enforce licence conditions is material as, currently, licence condition only bind the holder of the environment protection licence. The changes proposed will enable the EPA to legally enforce conditions against land owners or occupiers, even if the activity regulated by the environment protection licence was conducted by a former land owner or tenant.

The EPA will now be able to take a deeper look at the overall environmental compliance history of an entity in licensing decisions, meaning that it will be even more important for corporations, directors and managers to maintain a strong environmental compliance history.
Consistent Court Powers including for Cost Recovery
  • Additional powers for public authorities including the EPA or other persons to recover costs, expenses and compensation from offenders in the Land and Environment Court.
  • Additional powers for the Land and Environment Court to make specific kinds of orders where environment offences are proven.
 The Bill proposes to have more consistent provisions across environment protection legislation in terms of the orders a court can make in relation to offenders, and the cost recovery that the EPA can seek from the Court.
New Offence to Delay Authorised Officers
  • The Bill contains a new offence of delaying, obstructing, assaulting, threatening or intimidating an authorised officer in the exercise of the officer’s powers, in addition to the existing offence of wilfully delaying or obstructing an authorised office.

This is an apparent response to the McClelland and Turnbull matters which involved the assault or delay of environment protection officers. The new offence is significant because the EPA would not be required to prove that the relevant delay or obstruction was willful, and so a person could be held liable for unintentional delays or obstructions.
Expanded Prohibition Notice Powers
  • Expanded power for the Minister to issue prohibition notices to occupiers of a class of premises or to a class of persons.
  • Expanded power to issue prohibition notices to directors, former directors or related bodies corporate of a corporation who has not complied with a prohibition notice.
 Currently, the Minister can only issue prohibition notices requiring occupiers or persons to cease carrying on an activity.

The Bill proposes to enable the Minister to prohibit occupiers of a class of premises or a class of persons from carrying on an activity. This would enable the Minister to shut down all of the premises of so-called “rogue operators”, if recommended to do so by the EPA. While it is likely to be rarely (if ever) used, the expanded power could potentially be relied on by the Minister where a pattern of non-compliance is identified across a specific industry or across multiple premises of one organisation.
Administrative Reforms to EPA
  • The Bill also proposes a range of administrative The most notable reform is to considerably reduce the Minister’s control of the EPA so that the EPA is no longer subject to the control or direction of the Minister, and that the Minister only has a limited power to issue directions of a general nature to the EPA.
 The EPA is generally regarded as an “independent” regulator, and the proposed reform formally reduces Ministerial control of the EPA thereby increasing its independence.

The Bill also includes some additional measures regarding board appointments to achieve greater diversity of collective skills, including expertise in human health and Aboriginal cultural values.

PUBLIC CONSULTATION ON POEO ACT REGULATIONS

In addition to the reforms contemplated by the Bill, the EPA is currently consulting on the following regulations under the POEO Act:

  • Protection of the Environment Operations (Clean Air) Regulation 2021 (NSW); and
  • Protection of the Environment Operations (General) Regulation 2021 (NSW).

Each of these regulations:

  • were remade with only minor amendments earlier this year, to avoid automatic repeal under the Subordinate Legislation Act 1989 (NSW); and
  • will be substantively amended in 2022. The EPA has committed to carrying out consultation on the proposed changes in 2022.

IMPLICATIONS

The reforms contained in the Bill demonstrate how important it is for all businesses which operate in NSW, and their related bodies corporate, directors and managers to:

  • take environmental compliance very seriously; and
  • work effectively with the EPA to address any pollution and contamination issues.

Copyright 2021 K & L Gates

Article by Kirstie Richards and Luke Salem with K&L Gates.

For more articles on climate change initiatives, visit the NLR Environmental & Energy section.

Continuing Effort to Protect National Security Data and Networks

CMMC 2.0 – Simplification and Flexibility of DoD Cybersecurity Requirements

Evolving and increasing threats to U.S. defense data and national security networks have necessitated changes and refinements to U.S. regulatory requirements intended to protect such.

In 2016, the U.S. Department of Defense (DoD) issued a Defense Federal Acquisition Regulation Supplement (DFARs) intended to better protect defense data and networks. In 2017, DoD began issuing a series of memoranda to further enhance protection of defense data and networks via Cybersecurity Maturity Model Certification (CMMC). In December 2019, the Department of State, Directorate of Defense Trade Controls (DDTC) issued long-awaited guidance in part governing the minimum encryption requirements for storage, transport and/or transmission of controlled but unclassified information (CUI) and technical defense information (TDI) otherwise restricted by ITAR.

DFARs initiated the government’s efforts to protect national security data and networks by implementing specific NIST cyber requirements for all DoD contractors with access to CUI, TDI or a DoD network. DFARs was self-compliant in nature.

CMMC provided a broad framework to enhance cybersecurity protection for the Defense Industrial Base (DIB). CMMC proposed a verification program to ensure that NIST-compliant cybersecurity protections were in place to protect CUI and TDI that reside on DoD and DoD contractors’ networks. Unlike DFARs, CMMC initially required certification of compliance by an independent cybersecurity expert.

The DoD has announced an updated cybersecurity framework, referred to as CMMC 2.0. The announcement comes after a months-long internal review of the proposed CMMC framework. It still could take nine to 24 months for the final rule to take shape. But for now, CMMC 2.0 promises to be simpler to understand and easier to comply with.

Three Goals of CMMC 2.0

Broadly, CMMC 2.0 is similar to the earlier-proposed framework. Familiar elements include a tiered model, required assessments, and contractual implementation. But the new framework is intended to facilitate three goals identified by DoD’s internal review.

  • Simplify the CMMC standard and provide additional clarity on cybersecurity regulations, policy, and contracting requirements.
  • Focus on the most advanced cybersecurity standards and third-party assessment requirements for companies supporting the highest priority programs.
  • Increase DoD oversight of professional and ethical standards in the assessment ecosystem.

Key Changes under CMMC 2.0

The most impactful changes of CMMC 2.0 are

  • A reduction from five to three security levels.
  • Reduced requirements for third-party certifications.
  • Allowances for plans of actions and milestones (POA&Ms).

CMMC 2.0 has only three levels of cybersecurity

An innovative feature of CMMC 1.0 had been the five-tiered model that tailored a contractor’s cybersecurity requirements according to the type and sensitivity of the information it would handle. CMMC 2.0 keeps this model, but eliminates the two “transitional” levels in order to reduce the total number of security levels to three. This change also makes it easier to predict which level will apply to a given contractor. At this time, it appears that:

  • Level 1 (Foundational) will apply to federal contract information (FCI) and will be similar to the old first level;
  • Level 2 (Advanced) will apply to controlled unclassified information (CUI) and will mirror NIST SP 800-171 (similar to, but simpler than, the old third level); and
  • Level 3 (Expert) will apply to more sensitive CUI and will be partly based on NIST SP 800-172 (possibly similar to the old fifth level).

Significantly, CMMC 2.0 focuses on cybersecurity practices, eliminating the few so-called “maturity processes” that had baffled many DoD contractors.

CMMC 2.0 relieves many certification requirements

Another feature of CMMC 1.0 had been the requirement that all DoD contractors undergo third-party assessment and certification. CMMC 2.0 is much less ambitious and allows Level 1 contractors — and even a subset of Level 2 contractors — to conduct only an annual self-assessment. It is worth noting that a subset of Level 2 contractors — those having “critical national security information” — will still be required to seek triennial third-party certification.

CMMC 2.0 reinstitutes POA&Ms

An initial objective of CMMC 1.0 had been that — by October 2025 — contractual requirements would be fully implemented by DoD contractors. There was no option for partial compliance. CMMC 2.0 reinstitutes a regime that will be familiar to many, by allowing for submission of Plans of Actions and Milestones (POA&Ms). The DoD still intends to specify a baseline number of non-negotiable requirements. But a remaining subset will be addressable by a POA&M with clearly defined timelines. The announced framework even contemplates waivers “to exclude CMMC requirements from acquisitions for select mission-critical requirements.”

Operational takeaways for the defense industrial base

For many DoD contractors, CMMC 2.0 will not significantly impact their required cybersecurity practices — for FCI, focus on basic cyber hygiene; and for CUI, focus on NIST SP 800-171. But the new CMMC 2.0 framework dramatically reduces the number of DoD contractors that will need third-party assessments. It could also allow contractors to delay full compliance through the use of POA&Ms beyond 2025.

Increased Risk of Enforcement

Regardless of the proposed simplicity and flexibility of CMMC 2.0, DoD contractors need to remain vigilant to meet their respective CMMC 2.0 level cybersecurity obligations.

Immediately preceding the CMMC 2.0 announcement, the U.S. Department of Justice (DOJ) announced a new Civil Cyber-Fraud Initiative on October 6 to combat emerging cyber threats to the security of sensitive information and critical systems. In its announcement, the DOJ advised that it would pursue government contractors who fail to follow required cybersecurity standards.

As Bradley has previously reported in more detail, the DOJ plans to utilize the False Claims Act to pursue cybersecurity-related fraud by government contractors or involving government programs, where entities or individuals, put U.S. information or systems at risk by knowingly:

  • Providing deficient cybersecurity products or services
  • Misrepresenting their cybersecurity practices or protocols, or
  • Violating obligations to monitor and report cybersecurity incidents and breaches.

The DOJ also expressed their intent to work closely on the initiative with other federal agencies, subject matter experts and its law enforcement partners throughout the government.

As a result, while CMMC 2.0 will provide some simplicity and flexibility in implementation and operations, U.S. government contractors need to be mindful of their cybersecurity obligations to avoid new heightened enforcement risks.

© 2021 Bradley Arant Boult Cummings LLP
For more articles about cybersecurity, visit the NLR Cybersecurity, Media & FCC section.

Get with The Program – China’s New Privacy Laws Are Coming

The People’s Republic of China (PRC) passed the Personal Information Protection Law (PIPL) on Friday the 20th of August 2021. The new privacy regime strengthens the protection around the use and collection of personal data and introduces a new requirement for user consent.

The PIPL, closely resembling the European Union’s General Data Protection Regulation, prevents the personal data of PRC nationals from being transferred to countries with lower standards of data security; a rule that may pose inherent problems for foreign businesses. The PIPL was introduced following an increase in online scamming and individual service price discrimination – where the same service is offered at different prices based on a user’s shopping profile. However, while businesses and some state entities face stronger collection obligations, the PRC state security department will maintain full access to personal data.

Although the final draft of the PIPL is yet to be released, the new law is set to commence on the 1st of November 2021. Companies will face fines of up to 50 million yuan ($7.6 million USD), or 5% percent of their annual turnover if they fail to comply. For an in-depth discussion of the Draft PIPL released in August 2020, see our K&L Gates publication here.

Ella Richards also contributed to this article.

Copyright 2021 K & L Gates
Article by Cameron Abbott with K&L Gates.
For more articles on international privacy law, visit NLR Section Cybersecurity Media & FCC.

COVID-19 Fears Prompt State Department ‘Do Not Travel’ Advisory for UK, Other Restrictions Continue

The State Department, in coordination with the CDC, raised its Travel Advisory for the United Kingdom to “Do Not Travel” because of COVID-19 (Level IV).

Coincidentally, the Department’s move came on the same day Prime Minister Boris Johnson lifted most COVID-19-related restrictions in the United Kingdom (yet, excluding Wales, Scotland, and Northern Ireland). He made this move as the case numbers are rising because most adults in the United Kingdom are fully vaccinated.

Despite the United Kingdom lifting its restrictions, the European Union has opened its borders to individuals from the United States (with various restrictions). Further, Canada is about to open its borders to fully vaccinated U.S. citizens and permanent residents. Moreover, the White House reported that the United States will not be lifting travel restrictions due to the spread of the Delta variant. Press Secretary Jen Psaki said that it is not clear how long the restrictions will last. As of July 23, 2021, the CDC announced that the seven-day average of COVID-19 cases in the United States was up over 46 percent from the prior week.

Therefore, despite lobbying efforts aimed at increasing summer tourism from Europe, the Presidential Proclamations restricting travel to the United States due to COVID-19 are likely to remain in effect throughout the tourist season and beyond. The travel restrictions were imposed more than a year ago, in January 2020, when President Donald Trump instituted the ban on travel from China. Further bans were instituted in 2020 and 2021 on individuals travelling from Iran, the United Kingdom, Ireland, the 26-member countries of the Schengen Zone, Brazil, South Africa, and, more recently, India. To overcome these restrictions those who need to travel to the United States but are subject to the bans must either “camp-out” in a non-banned country (if they can enter such a country) for 14 days before attempting to enter the United States or they must apply for and receive a National Interest Exception (NIE) to the relevant ban. Eligibility for NIEs is set forth in a web of complex and changing guidance from the Department of State and Customs and Border Protection.

Employers all over the country are suffering due to the bans. Their key employees cannot travel back and forth from or to the United States for important business purposes. The highly skilled or temporary, seasonal workers they need to boost their businesses and the economy cannot be hired. This is compounded by the fact that most U.S. consulates abroad are extremely back-logged and understaffed due to COVID-19.

Jackson Lewis P.C. © 2021