The Act’s new objectives include to increase housing supply, diversity, and affordability, and to facilitate efficient infrastructure provision. 

Three-Tiered Planning Permit Assessment

The Act introduces a three-tiered approach to the assessment of planning permit applications, aimed at reducing the time and cost associated with obtaining such permits. 

The Act amends Part 5 of the Principal Act, introducing the following novel categories of permit applications in order of complexity: 

1. Type 1 – for low impact, small scale developments, such as single dwellings and minor subdivisions. A project assessed as type 1 is not subject to public notice requirements or objections and will be deemed as approved if not determined within the prescribed time. Though greater clarity will come with amendments of the planning regulations, this deemed approval period is estimated to be 10 days. 
2. Type 2 – for moderate impact developments that are compliant with planning policies. Though also not an application type against which objections may be made, some “specified type 2 applications” may be subject to notice requirements. People who receive notice may comment on the proposed development, though a comment does not amount to an objection. 
3. Type 3 – for more complex development subject to the full process of assessment, including the provision of notice and receipt of objections. Under new section 57(2A), a responsible authority may reject an objection that it considers frivolous, vexatious, irrelevant, or made to secure a commercial advantage.

This three-tiered framework systematically reduces the scope for objection and delay within the majority of applications. For developers, this is a positive reform, simplifying and expediting the approval process commensurate to the complexity of the project. We look forward to further regulations and guidance on the precise scope of coverage contemplated by each of these streams. 

Impact-Based Planning Scheme Amendments

A three-tier approach has also been adopted in relation to amendments to planning schemes. Revised section 16N categorises potential amendments into the following groups based on impact: 

1. Low-impact amendment – small scale amendments where public submissions and panel referrals are not required; 
2. Medium-impact amendment – opens the amendment to public submissions, but dispenses with panel referrals; and 
3. High-impact amendment – exhibition and independent review of the amendment is required. 

Additionally, in relation to medium and high impact amendments, notice of an amendment must be given to any native title holders, traditional owner group entities, and registered Aboriginal parties in the area affected by the amendment. 

Similarly to the staggering of planning permit assessments, this tiered approach in relation to scheme amendments is designed to fast-track straightforward amendments while ensuring due scrutiny for significant changes. The exact scope of the categorisations will be set by regulations. 

Easing Removal of Restrictive Covenants

The Act also introduces a series of significant reforms in the way restrictive covenants are treated in the permit process, greatly shifting the balance between the rights of the covenant beneficiary and the facilitation of streamlined, orderly development in the broader public interest. 

Contrary to the prior regime, permits may now be granted despite potentially breaching a restrictive covenant. The responsible authority would not be liable for any loss arising out of that breach. To similar ends, the Victorian Civil and Administrative Tribunal is authorised to amend a permit despite potentially creating opportunities for a registered restrictive covenant to be breached. 

In considering whether a permit should allow the removal or variation of a restriction, a responsible authority must consider: 

• The interests of the owner of the dominant tenement;
• Victorian state and regional planning strategy; and
• The merits of the proposed development itself, among others.

Notably, financial loss to the beneficiary of the covenant is excluded from the list of matters to be considered. 

Compensation for Land Reserved for a Public Purpose

Part 5 of the Principal Act allows for owners or occupiers of land reserved for a public purpose to seek compensation from the planning authority for financial loss. 

The Act restricts the type of loss able to be claimed by clarifying that references to compensable financial loss are to actual financial loss, and references to value mean market value. Claims for legal and other professional expenses incurred in connection with submitting compensation claims have also been limited to expenses accruing after the right to compensation arises. 

The amendment further restricts a landowner’s right to compensation by expanding the circumstances in section 98(3) where a person cannot claim compensation to include: 

• Where the land has been vested in the planning authority by purchase, compulsory acquisition, or otherwise; and 
• Where a permit granted in relation to the land provides that compensation is not payable. 

A new two-year limitation period on the making of compensation claims has also been introduced, with the period starting on the date on which the right to compensation arises. 

Gifts and Donations Disclosure

The Act introduces a new disclosure regime for political donations and gifts given within a period of two years prior to the submission of a planning application. 

Relevant reportable gift recipients include the Minister, Secretary to the Department, Ministerial Officers or Parliamentary advisors, Councillors, and Council staff, depending on the nature of the responsible authority. The disclosure must include matters such as the names of donors and recipients as well as the value of the gift. 

New section 113G makes it an offence to knowingly or recklessly fail to declare a reportable gift or donation, with a breach punishable by a fine of 240 penalty units (currently AU$203.51 per unit), two years imprisonment, or both. 

Strengthened Enforcement Powers

The Act also considerably strengthens enforcement powers to respond to contraventions against the Principal Act. 

A new general offence under section 126A makes it an offence to give false or misleading statements or documents to a person or body carrying out a function under the Principal Act. These offences are punishable by a fine of 240 penalty units, two years imprisonment, or both. 

Following a person’s conviction for a planning offence, courts may now also make a range of new orders including: 

• Adverse publicity orders – requiring wrongdoers to publicise their own offences, typically in electronic and print media; 
• Commercial benefits orders – requiring payment of up to three times the estimated gross commercial benefit derived from the offence;
• Supervisory intervention orders – imposing compliance requirements of up to one year for systematic or persistent offenders; and 
• Industry exclusion orders – prohibiting systematic offenders from participating in the delivery of services relating to the commercial development of land. 

Finally, the court is also empowered to order a person to pay a civil penalty of up to 2,000 penalty units for a natural person and 10,000 for a corporation in response to a contravention of a civil penalty provision.

This dramatically enhanced enforcement regime sends a clear message that planning noncompliance carries with it serious commercial and reputational consequences. 

Next Steps

The Act is due to commence on 29 October 2027 to allow industry participants, councils, and planning practitioners sufficient time to incorporate changes into their operational practices. In the interim, flow-on amendments are also expected to be made to the Planning and Environment Regulations 2015, Victorian planning provisions, and ministerial guidelines. 

While the Act offers real and tangible opportunities for faster decision making, deemed approvals, and a significantly curtailed objection system, it also restricts the ability of neighbours, covenant beneficiaries, and community groups to have their say. 

In anticipation of the commencement of the reforms, developers should watch for further guidance on the type of development any future planning permit application may fall under, and review gifts or donations that may require disclosure. 
 

Maryland: Court Upholds Montgomery County’s All-Electric Building Law

On 25 March 2026, the US District Court for the District of Maryland granted summary judgment in favor of Montgomery County, upholding its “all-electric building” requirements for new construction.¹ The ordinance prohibits the installation of gas-powered appliances in most newly constructed buildings.

The plaintiffs—industry groups and energy stakeholders—argued that the law is expressly preempted by EPCA because it effectively sets the “energy use” of covered appliances to zero.² The court rejected that argument, holding that EPCA’s preemption provision applies to regulations governing appliance efficiency or energy use standards—not to laws that dictate whether certain fuel types may be used in buildings.³

In the court’s view, the county’s law regulates the type of energy infrastructure permitted in new construction rather than the performance characteristics of covered appliances.⁴ As such, it falls outside EPCA’s preemptive scope. The decision aligns with several recent district court rulings that have declined to extend EPCA preemption to building electrification measures.

District of Columbia: Similar Result for Net-Zero Building Requirements

Just one day later, on 26 March 2026, the US District Court for the District of Columbia reached a similar conclusion, granting summary judgment to the district in a challenge to its Clean Energy DC Building Code Amendment Act.⁵

That law requires certain new or substantially improved buildings to meet “net-zero energy” standards, which effectively preclude the use of natural gas appliances.⁶ As in the Maryland case, plaintiffs argued that the law is preempted because it indirectly regulates the energy use of covered products.⁷

The court disagreed, emphasizing a distinction between appliance performance standards (which EPCA governs) and building-level energy requirements (which it found EPCA does not).⁸ The court concluded that EPCA’s references to “energy efficiency” and “energy use” concern measurable performance metrics under standardized testing conditions—not real-world usage or the availability of fuel sources in specific buildings.⁹

Accordingly, the court held that a prohibition on gas appliances in certain buildings does not amount to a regulation “concerning” the energy use of those appliances within the meaning of EPCA.¹⁰

Key Takeaways From Maryland and DC Decisions

Together, these decisions reinforce a narrower interpretation of EPCA preemption that focuses on product design and performance, rather than downstream use restrictions. Both courts rejected the argument—accepted by the Ninth Circuit in California Restaurant Association v. City of Berkeley—that banning gas infrastructure effectively sets appliance energy use to zero and is therefore preempted.¹¹

Instead, the Maryland and DC courts joined a growing group of decisions concluding that EPCA does not prohibit state and local governments from regulating building energy sources, even where such regulations indirectly affect appliance choices.¹²

This divergence among courts underscores the continuing uncertainty in this area and increases the likelihood of further appellate review.

New York: Litigation Continues; Implementation Paused

In New York, litigation over the state’s gas restrictions remains ongoing. Following an adverse district court ruling, plaintiffs—industry groups and energy stakeholders—appealed to the Second Circuit. In the interim, the parties entered into a stipulation suspending the effective date of the challenged regulations pending resolution of the appeal and any subsequent US Supreme Court review.¹³

As a result, New York’s gas restrictions are currently on hold, preserving the status quo while appellate proceedings move forward. The Second Circuit heard oral arguments on this case, and the companion case challenging a similar ordinance issued by the City of New York, on 30 January 2026.¹⁴ The Second Circuit’s eventual decision may play a significant role in resolving the emerging split among courts.

Looking Ahead

The recent Maryland and DC decisions represent important developments in the evolving legal landscape surrounding building electrification and federal preemption. With courts continuing to reach differing conclusions—and appellate courts now actively engaged—stakeholders should expect further clarification in the months ahead.

We will continue to monitor these cases and provide updates as the legal framework governing gas appliance restrictions continues to take shape.

While much commentary focuses on landlords and operators, the implications for lenders financing living-sector assets are equally significant. The reforms may affect underwriting assumptions, operating risk and the approach taken in real estate finance documentation. This note summarises the reforms most relevant to lenders. 

Core Reforms

Abolition of Assured Shorthold Tenancies; Move to Assured Periodic Tenancies 

The Act abolishes assured shorthold tenancies (ASTs) and replaces them with assured periodic tenancies (APTs). Rent periods may not exceed one month, and landlords will no longer be able to grant fixed-term tenancies. Tenants may terminate on two months’ notice.

Abolition of Section 21 “No‑Fault” Evictions 

The Act abolishes section 21 of the Housing Act 1988, forcing landlords seeking vacant possession to establish statutory grounds under the revised section 8/Schedule 2 framework. Lenders and Law of Property Act (LPA) receivers should prepare for longer lead times and require more robust tenancy information from borrowers. 

Mortgagee Protection: Retention of Ground 2

The “Sale by mortgagee” possession ground (Ground 2) continues to be available. This allows a lender exercising its power of sale to seek court-sanctioned vacant possession on giving four months’ notice. In practice, however, lenders usually appoint LPA receivers rather than exercising their power of sale, in which case Ground 2 will not be available.

Rent Increases Limited to Once Per Year

The Act restricts rent increases to once per year, requiring the use of the statutory section 13 notice procedure. Increases may be challenged by tenants at the First‑tier Tribunal. This may lead to income growth becoming slower and more procedurally constrained. 

PRS Database and Landlord Redress Mechanisms

The Act introduces a mandatory national PRS database for landlords and a PRS ombudsman regime with binding redress powers, reinforcing regulatory oversight and local authority enforcement. Failures in borrower compliance may delay or frustrate possession, attract fines or impair asset performance. 

Restrictions on Deposits and Advance Rent 

The Act limits landlords’ ability to request or accept advance rent beyond prescribed limits. The policy aim is to prevent landlords using large up-front payments to screen out tenants. Where advance rent has been used to de-risk lettings, the restriction may increase reliance on affordability checks, guarantors and active credit control. 

Sector Lens: Purpose Built Student Accommodation

Advance rent payments and academic‑year fixed terms are key to the operation of purpose-built student accommodation (PBSA) assets. Fortunately for PBSA owners, operators and their lenders, most institutional PBSA assets will, going forward, be exempt from the new APT regime. 

Exemptions are provided for university owned/managed accommodation and PBSA providers subject to government-approved codes of practice (the UUK/GuildHE Code for educational establishments and the ANUK/Unipol Codes for private providers). Exempt providers will be able to grant common law tenancies rather than APTs, provided that the accommodation is occupied solely or principally by full-time students. However, the exemption will only apply to new tenancies granted after the Act comes into force on 1 May 2026. Tenancies granted for the 2025/2026 academic year will require active management to mitigate the effects of the Act. 

Summary for Lenders 

The focus of many institutional lenders in the living sector is on financing purpose-built PRS schemes. As these assets typically trade as stabilised income products, in a distressed scenario lenders generally expect to enforce through the appointment of receivers (over the property itself or the shares in the property-owning company), maintain operations and sell as an income-generating block. Nevertheless, lenders may still require the ability to obtain vacant possession to preserve enforcement optionality, support marketability and manage non-performing tenancies. While the Act makes this more difficult, obtaining vacant possession as a secured lender remains possible. 

Aside from the consequences for PRS borrowers for non-compliance with the Act (which, for serious or persistent breaches, can range from fines of up to £40,000 to criminal prosecution) and the reduced saleability of non-compliant PRS assets in an enforcement scenario, non-compliance by PRS borrowers also carries significant reputational risk for lenders who are active in the sector. The Act cannot therefore be ignored by lenders. 

Whilst some lenders may seek to address borrower compliance with the Act through specific representations, undertakings or events of default, others may be comfortable relying on standard Loan Market Association “compliance with laws” provisions. It is, however, clear that any conditions precedent or provisions that assume the existence of ASTs, fixed terms or contractual rent reviews will need to be updated. Once operational, lenders may require evidence of PRS database registration as a condition precedent. We also expect the quarterly property monitoring report to come into sharper focus, with enhanced reporting on arrears, rent challenges and possession activity. 

For student accommodation financings, it will be important to establish from the outset whether units fall inside or outside the APT regime. Given the availability of the PBSA exemption, it seems likely that the identity and reputation of the PBSA operating company will become increasingly important from a credit perspective and that lenders will seek to include covenants requiring compliance with government-approved codes. 

In summary, the Act does not undermine the investment case for PRS assets, but it changes the rules, placing greater emphasis on process, compliance and evidential rigour.

The distinguished panel featured in-house counsel Heorhii Hrabchak (Ukrnafta head of international disputes), Oleksandr Kushch (Naftogaz head of international disputes), alongside Markiyan Malskyy (Arzinger, managing partner and UAA Board Member), and Sergii Uvarov (Impacta partner and UAA President).

What We Shared

Maria Kostytska (Paris partner and UAA Board Member) opened the event by providing context for the discussion, noting the full-scale invasion going into the fifth year and underscoring the importance of looking ahead to investment opportunities and ensuring legal preparedness for investments into Ukraine’s post war reconstruction.

Sergii Uvarov followed with a comprehensive overview of how dispute resolution in Ukraine has evolved over the past four years, how the courts and arbitral institutions continue to function, and how enforcement was stayed in certain cases due to martial law and sanctions.

Thereafter, panel addressed a broad range of legal and practical issues relevant to investors, including:

• Recent legislative and regulatory reforms affecting public private partnerships (PPPs) and privatization
• The legal framework governing production sharing agreements (PSAs), subsoil licenses, conversion of subsoil licenses into production sharing agreements, concessions and joint ventures with foreign investors
• Prevention and mitigation of disputes, as well as techniques and modalities of dispute resolution in the post-war reconstruction context.

Markiyan Malskyy (Arzinger) analyzed recent reforms in PPPs and privatization, highlighting Ukraine’s ongoing efforts to attract foreign capital. He reflected on historic privatization related disputes.  He also addressed the risks associated with investing in or acquiring sanctioned assets—particularly those administered by ARMA and sold through the State Property Fund—as well as the potential for claims to be brought by sanctioned Russian individuals or entities for deprivation of assets.

Heorhii Hrabchak (Ukrnafta) shared insights into investments into Ukraine’s energy sector, which is currently shaped by financial restrictions and sanctions framework. He elaborated on PSAs and the conversion of subsoil licenses into PSAs as a mechanisms for foreign investor participation alongside state-owned enterprises. On the bright side, he commented on Ukraine’s recent victory in the first renewable energy case arising from the change in the green tariff regime, in which the government negotiated with the renewable energy producers, signed a memorandum of understanding, implemented it into law, and thus avoided liability under the Energy Charter Treaty (ECT). 

Oleksandr Kushch provided insights into the gas wars ongoing until the termination of the long-term gas transit contract between Naftogaz and Gazprom, focusing on the ongoing enforcement of arbitral awards. He also mentioned recent achievements in enforcement of Crimea related awards and the complex interplay between Ukrainian and European creditors seeking recovery against assets of Gazprom Export, Gazprom and Russia.

Louis Degos (Bâtonnier du Barreau de Paris) concluded the session with a high level synthesis, emphasizing the importance of legal foresight and strategic planning for Ukraine’s reconstruction.

What We Learned

• Ukraine continues to adapt its legal and regulatory framework to support investment during and after the war, particularly in energy, infrastructure, and natural resources.
• Conducting early due diligence and planning for dispute resolution is critical in protecting investor interests.
• Investors must carefully assess the evolving legal and regulatory framework, sanctions related risks and jurisdictional overlaps when structuring investment transactions and pursuing claims.

The discussion closed with an engaging Q&A, reflecting strong audience interest in the practical and forward looking issues raised by the panel.

Event Insights are key perspectives from events we host, attend, and support highlighting what matters most to our clients and industries.

In this edition of our “Navigating Nuclear” series, we summarize important takeaways and themes from this year’s RIC and look ahead to what will be a transformative year for the nuclear industry. 

Shovels in the Ground...

Over the past year, the makeup of the Commission has changed dramatically. Recently restored to full staffing with the confirmation of Chairman Ho Nieh and Commissioner Douglas Weaver, this year’s RIC provided the first opportunity for the five Commissioners to react to the changing landscape of the past 12 months and set the tone for the wholesale revision of the agency’s regulations directed by Executive Order 14300, “Ordering the Reform of the Nuclear Regulatory Commission.” 

Chairman Nieh addressed these issues head-on in his plenary session where he reinforced the NRC’s commitment to safety and highlighted the NRC’s ongoing role as an independent regulator. At the same time, the Chairman noted that independence does not mean isolation—the NRC must engage with other federal agencies to ensure government-wide support for nuclear technology. He also noted that the NRC is focused on enabling the safe use of nuclear technology and ensuring stronger leadership alignment. Laying out his priorities for the agency, the Chairman focused on delivering the NRC’s core mission “with safety, efficiency, and speed”; ensuring leadership and operational excellence; and providing for “sustainable performance through continuous improvement.” In particular, the Chairman committed to using lessons learned from his time in the private sector to drive continuous improvement at the agency—starting with the implementation of the principles of Institute of Nuclear Power Operations 19-003, which describes how to establish and maintain an organizational culture focused on continuous improvement. 

Building on the theme of enabling the safe use of nuclear technology, the Chairman defined success for the agency as “shovels in the ground…”—meaning the start of construction for NRC-licensed projects.

Although each commissioner had a slightly different focus, all noted the importance of the current moment: Commissioner Wright reflected on his year as chairman and the challenge of implementing Executive Order 14300 and the Accelerating Deployment of Versatile, Advanced Nuclear for Clean Energy (ADVANCE) Act. He talked about how the NRC evolved to become a more modern regulator without abandoning the agency’s key safety mission. Commissioner Crowell, like the Chairman, highlighted that NRC independence does not mean isolation, and he identified two keys to “getting it right”: no “foot faults” on the part of the NRC, existing industry, or new applicants; and building and maintaining a “world class” nuclear workforce. Commissioner Marzano looked back to the early years of the Atomic Energy Commission and cited to Admiral Rickover’s well-known “paper reactor” memo to “underscore the difference between concept and execution.” Commissioner Weaver, in his first RIC plenary, highlighted his overall regulatory philosophy that “regulation should be designed to efficiently achieve adequate protection,” while noting that “what is needed to achieve adequate protection may change over time” and advances over the past 50 years mean that the NRC and the industry may be able to relax some of the large design margins, allowing for power uprates and more risk-informed licensing of advanced reactors.

Themes and Takeaways From RIC 2026

Throughout the conference, speakers focused on new developments and optimism in the industry, the many regulatory changes coming from the NRC, and technological advancements, achievements, and milestones.

Nuclear on the Rise 

Although the NRC has yet to implement expected changes to further streamline and speed up its licensing process, the agency highlighted progress that has been made under the existing framework. In 2025, the NRC consistently moved faster than expected on decisions for both reactor and fuel-cycle license applications, including the TerraPower construction permit,² the NuScale US460 standard design,³ the Palisades restart,⁴ digital instrumentation and control for the Limerick nuclear power plant,⁵ the TRISO-X fuel fabrication facility,⁶ and the first-of-its-kind license to DISA Technologies, Inc. for a remediation technology for abandoned uranium mine waste.⁷ 

Regulatory Changes 

Throughout the RIC, the NRC shared updates about the agency’s ongoing work to implement the wholesale revision directed by Executive Order 14300. In particular, the NRC noted that it was working to implement changes to its reactor-licensing pathway to provide a new, streamlined option for microreactors (Part 57) and risk-informed advanced reactors (Part 53). Looking beyond the Executive Order 14300 rulemaking activities, the NRC highlighted the recent issuance of a proposed rule that would adopt a technology-neutral regulatory framework for fusion machines under the agency’s byproduct-material authorities⁸ rather than the more burdensome reactor licensing⁹ regime.¹⁰ This proposal was repeatedly cited as an effort to tailor regulation to actual risk profiles and is open for public comment until 27 May 2026.

Looking Ahead: Nuclear Outlook for 2026

Last year ended with the NRC returning to its full five-member complement, with Commissioner Weaver filling the fifth Commission spot in December. That trend continued into 2026, with the selection of key senior staff positions at the agency, including deputy executive directors and the office director for the Office of Nuclear Reactor Regulation. With stable senior leadership now in place, the NRC is poised for a busy 2026 that will bring significant change to the agency’s regulatory foundation. The NRC remains on track to begin 2027 ready to accept the first applications under these new regulations, which are scheduled to be finalized in late 2026. The firm's Nuclear Energy practice group will be continuously monitoring these developments throughout the year and are ready to assist in navigating this rapidly changing regulatory and policy landscape.

On 1 August 2025, Public Utility Commission of Texas (PUCT or the Commission) staff (Commission Staff) opened Project No. 58484, Evaluation of Transmission Cost Recovery, pursuant to Senate Bill 6 (SB 6), which requires the Commission to evaluate whether the existing methodology under Public Utility Regulatory Act (PURA) § 35.004(d) used to charge wholesale transmission costs to distribution service providers (DSPs) continues to appropriately assign costs for transmission investments and whether the Commission’s retail ratemaking practices ensure that transmission cost recovery appropriately charges system costs to each customer class. SB 6 requires the Commission to amend its rules no later than 31 December 2026, to ensure that wholesale transmission charges appropriately assign costs for transmission investment. We have previously reported on the impacts of SB 6 on large load development in the Electric Reliability Council of Texas (ERCOT).

On 16 March 2026, following a workshop and two rounds of public comments, the Commission issued a draft report (the Draft Report) providing six draft recommendations. Commission Staff invites comments on the draft recommendations, due by 13 April 2026, prior to the issuance of a final report. 

The Draft Report’s Request for Comments on Recommendations

The Draft Report identifies draft recommendations and requests the public to provide comments on the following draft recommendations: 

1. Changing the methodology for assessing wholesale transmission costs on DSPs from a four coincident peak (4CP) to a methodology utilizing a greater number of coincident peaks.
2. Lengthening the interval over which each coincident peak is measured.
3. Eliminating interconnection cost allowances for large load customers.
4. Requiring large load customers to pay a portion of system upgrade costs.
5. Requiring annual updates to the class allocation factor values used in proceedings, such as a transmission cost recovery factor (TCRF).
6. Requiring large load customers to pay a minimum demand charge based on their contracted peak demand for a period of 10 to 15 years.

Wholesale Transmission Cost Recovery

The current 4CP methodology bills DSPs based on load during four summer coincident peak intervals (June, July, August, and September). Commission Staff found that this framework does not capture winter scarcity events, that the 15-minute measurement interval likely provides too narrow a price signal, and that some types of sophisticated large industrial customers can quickly make consumption reductions in ways that reduce their transmission cost obligations (commonly known as 4CP avoidance) without a commensurate reduction in the system costs they cause. The report also raises the concern that the increasing addition of more flexible large loads (such as crypto mines and certain types of data centers) will make clear transmission cost assignment increasingly difficult utilizing the 4CP methodology. This concern arises because while these flexible large loads require significant transmission system investment and consume electricity on an order of magnitude higher than most other consumers, their flexible operating procedures allow them to quickly reduce consumption without significantly disrupting their core business functions. 

Commission Staff pointed out that in ERCOT’s wholesale energy market, demand reductions are typically expected to occur as a response to high energy prices, which signal real-time generation scarcity. However, the 4CP methodology introduces an additional and significant form of price-responsive behavior, where customers decrease demand to reduce wholesale transmission charges and not to avoid high real-time energy prices. This was a lesser issue when ERCOT summer system peaks coincided with periods of high energy prices. However, because of the increasing market penetration of renewable generation resources, this relationship has shifted and now higher prices tend to have a stronger relationship with peak net load (defined as gross load minus wind and solar generation), which typically occurs during the evening solar ramp down. Commission Staff therefore is considering changing the methodology for assessing wholesale transmission costs on DSPs to a coincident peak methodology with a greater number of coincident peaks and lengthening the interval over which each coincident peak is measured.

Retail Rate Design

The Draft Report stated that the magnitude of load in a small geographic area associated with large load customers raises important issues associated with the existing transmission cost recovery methodology. The Draft Report found that large loads are likely to need significant and extensive transmission upgrades to adequately serve them. Even a large load customer that can eliminate consumption entirely during peak intervals (4CP or otherwise) is likely to require substantial transmission system upgrade investment. Commission Staff opined that a distinct but temporary cost recovery treatment for such customers could be utilized—requiring large load customers to pay a minimum demand charge based on their contracted peak demand for a period of 10 to 15 years. After the applicable period, organic load growth would presumably develop to utilize some or all of the associated transmission buildout, and large load customers would revert to the standard rate design based on actual metered load. 

The Draft Report found this approach would ensure that large load customers’ transmission charges better reflect the uniquely disproportionate costs they cause to be imposed on the system. Under this proposal, DSPs serving large load customers would pay wholesale transmission charges as if its large load customers were on the system at the time of the 4CP or successor intervals. Investor-owned utility DSPs would then allocate their transmission costs to the transmission rate class as if the large load customers were at maximum load at the peak intervals, thereby avoiding allocating those costs to other rate classes. The Draft Report stated that requiring such treatment would ensure that large load customers pay a significant portion of the system upgrade costs they cause to be incurred, as well as for their use of the existing transmission system.

Retail Interconnection Costs

The Commission found that the current patchwork approach electric utilities in ERCOT have taken for determining the financial commitments and the direct interconnection costs that large load customers must pay has resulted in certain service areas being viewed as more favorable for siting and has contributed to difficulties in accurately forecasting load in the ERCOT transmission planning process. Additionally, to the extent that not all direct interconnection costs are treated the same, ratepayers across the ERCOT region are bearing more of the direct interconnection costs for transmission infrastructure than they should be. Commission Staff has noted that Project 58481, Rulemaking to Implement Large Load Interconnection Standards Under PURA § 37.0561, will be evaluating if the Commission should eliminate interconnection cost allowances for large load customers. 

Commission Staff is considering requiring large load customers to pay a portion of system upgrade (highway) costs, in addition to the direct interconnection (driveway) costs they currently bear through contribution in aid of construction (CIAC). Commission Staff stated, on its face, that expanding the interconnection costs to include system upgrades is an appealing approach that seems consistent with cost causation and equitable ratemaking principles. However, such an approach would be complex to administer, because, for example, it would be challenging to assign costs based on cost causation principles. For instance, it may be difficult to determine if a system upgrade that is identified in a batch study process should only be attributed to a single large load customer when the system upgrade will serve other loads on the system.

Retail Cost Allocation

The Commission found that under the current framework under which TCRF rates are calculated, the use of fixed allocation factor values, updated only in base rate proceedings, combined with the disproportionate load growth of the transmission-voltage customer class, has resulted in inequitable cost-shifting between customer classes. Commission Staff notes that the widespread deployment of Advanced Metering Systems now makes annual updates administratively feasible.

Accordingly, Commission Staff is considering requiring annual updates to the class allocation factor values used in TCRF proceedings. The Draft Report flagged Docket No. 58923, Commission Staff’s Petition to Require Annual Updates to Class Allocation Factor Values Under 16 TAC § 25.193(c), as a related pending proceeding. In that proceeding, Commission Staff has petitioned the Commission to require annual updates to TCRF class allocation factor values under the existing rule; the outcome of that docket may parallel or inform the rulemaking approach taken in this project. Commission Staff notes in the Draft Report that an additional option for resolving this issue is updating 16 TAC § 25.193 to require annual updates to class allocation factor values. 

Implications and Next Steps

The draft recommendations, if adopted, would significantly impact large load customers by requiring minimum demand charges based on contracted peak demand for up to 15 years, eliminating interconnection cost allowances, and potentially expanding CIAC to include system upgrade costs. If the Commission moves away from the 4CP methodology for transmission cost allocation, 4CP avoidance will be more difficult, impacting large commercial customers (including large loads). Utilities would face new metering and administrative obligations, including providing ERCOT with large load customer metering data and updating class allocation factor values annually.

Commission Staff invites comments on the draft recommendations, due by 13 April 2026, prior to the issuance of a final report. The Commission must amend its rules no later than 31 December 2026. Our Power practice group lawyers are available to answer any questions you may have when considering how to participate in the PUCT proceeding or understanding how these changes may impact your business. 

On 19 February 2026, the European Securities and Markets Authority (ESMA) published a consultation proposing amendments to the guidelines on delays in the disclosure of inside information under the Market Abuse Regulation (MAR). 

Issuers are generally required to disclose to the public without delay inside information directly concerning them (Art. 17 MAR). However, the disclosure of inside information may be deferred at the issuer’s discretion under certain conditions. The deferral must not, however, be likely to mislead the public. The current MAR guidelines provide examples of these conditions. 

MAR, as amended by the Listing Act with effect of 5 June 2026, provides that in the case of a protracted process, mere intermediate steps (e.g., progress in negotiations, letters of intent) no longer need to be disclosed on an ad hoc basis. This applies even if they constitute inside information. Only the final outcome is subject to the disclosure requirement. Due to this exception, the deferral rules for interim steps are no longer necessary; furthermore, the requirements for deferral have been slightly modified. ESMA is now adapting the MAR guidelines to the future legal situation. In particular, ESMA in accordance with its mandate proposes a non-exhaustive indicative list of legitimate interests of the issuer that justify a deferral (e.g., regulatory order, incomplete information).  

The consultation is open until 29 April 2026.

European Commission Launches Targeted Consultation on Private Equity Exits

On 19 February 2026, the European Commission published a targeted consultation on exiting private equity investments. The aim of the consultation is to identify ways to enable private equity investors to divest their holdings. Through this consultation, the Commission intends to explore market views on potential barriers and challenges to exiting private equity investments, the benefits and possible design of a liquid, multilateral secondary market platform for PE investments, and the use of such a platform to raise new PE capital. To this end, the consultation includes 82 questions for relevant stakeholders.

The consultation is open until 27 April 2026.

ESMA Issues Statement on the Implementation of the Securities Prospectus Regulation

The European Securities and Markets Authority (ESMA) issued a “Public Statement” in February 2026 to ensure the smooth implementation of the amendments to the Prospectus Regulation which have been introduced by the EU Listing Act. 

The Listing Act, which entered into force on 4 December 2024, includes measures to revise the Prospectus Regulation, the Market Abuse Regulation (MAR), and the Markets in Financial Instruments Directive (MiFID II). Most of the changes in the area of prospectuses will take effect on 5 June 2026. Some specific changes to the prospectus formats have already entered into force.

In its opinion, ESMA states that, under the transitional provisions of the Prospectus Regulation, registration documents and universal registration documents approved or filed by 4 June 2026, remain valid. They may continue to be used in securities prospectuses even after the new rules take effect. ESMA also states that these documents must continue to be updated through supplements and amendments as the version of the Prospectus Regulation in force at the time of approval or filing continues to apply to them.

In addition, ESMA recommends that the disclosure requirements set forth in the amended Delegated Act for so-called EU Follow-on Prospectuses and EU Growth Prospectuses be taken into account although the upcoming amendments have not yet entered into force.

ESMA expects national authorities to apply the new requirements uniformly.

European Commission Proposes Delegated Regulation on Securities Prospectuses

On 11 February 2026, the European Commission published a proposal to amend the Delegated Regulation on the format, content, scrutiny, and approval of securities prospectuses. The amendments are related to the implementation of the Listing Act in securities prospectus law.  

The draft contains new simplified requirements for content as well as standardized presentation and sequencing for the new prospectus formats, namely the “EU Prospectus for Subsequent Offerings” and the “EU Growth Prospectus”. The new simplified prospectus formats are intended to streamline prospectuses and reduce the effort required to prepare them (e.g., by eliminating duplications and information that has already been published elsewhere).

In addition to the new short prospectuses, the prospectus rules have been further simplified and standardized. This draft and its accompanying annexes provide, among other things, for changes and new rules regarding registration forms for non-equity securities. Furthermore, adjustments are being made to the securities note for non-equity securities. By changing the formatting requirements, the aim is to make documents shorter, better structured, and easier to understand. Outdated information has been removed, and the annexes to the regulation have been updated.

The Commission is expected to adopt the delegated regulation in the first quarter.

BaFin Supervisory Notice on the Interpretation of the Attribution Criteria under § 34 of the German Securities Trading Act (WpHG)

In a judgment dated 12 February 2026 (Case C-864/24), the European Court of Justice (ECJ) ruled on the interpretation of the provisions on acting in concert (AiC) in the EU Transparency Directive, holding that the current wording of § 34(2) of the German Securities Trading Act (Wertpapierhandelsgesetz, WpHG) violates European law to the extent that it goes beyond the wording of the EU Transparency Directive, and that a stricter attribution rule deviating from the EU Transparency Directive is permissible only if it is directly related to takeover bids, mergers, and other transactions affecting the ownership or control of companies. 

In its Supervisory Notice No. 02/2026 (WA) dated 20 March 2026, the Federal Financial Supervisory Authority (Bundesanstalt für Finanzdienstleistungsaufsicht, BaFin) announced that it will forthwith interpret § 34(1) and (2) of the WpHG in a manner that aligns with European law. This means that voting rights will only be attributed to the extent this is also provided for in the EU Transparency Directive. This applies not only to the attribution provision regarding the AiC, but also to all attribution provisions of § 34 of the WpHG that are linked to reporting obligations regarding voting rights.

BaFin will interpret and apply § 34 (2) of the WpHG such that attribution only occurs if the coordination on the mutual exercise of voting rights is based on an agreement in which the parties have committed to pursuing a long-term common policy regarding the management of the issuer in question; the attribution criteria of § 34 (1) sentence 1 nos. 3 and 5 of the WpHG will no longer be applied. Conversely, the ECJ ruling has no impact on BaFin’s application and interpretation practice regarding § 30 of the Securities Acquisition and Takeover Act (Wertpapiererwerbs- und Übernahmegesetz, WpÜG) in proceedings under the WpÜG.

Consultation on Suitability Assessment for Banks and Securities Firms

On 25 February 2026, the European Banking Authority (EBA) and the European Securities and Markets Authority (ESMA) launched a consultation on the revised joint Guidelines on the assessment of the suitability of members of the management body and key function holders. The revised Guidelines are intended in particular to implement new requirements arising from the revised European Capital Requirements Directive (CRD) and to reinforce the link with the European anti money laundering and combatting terrorist financing (AML-CFT) framework. In parallel, the EBA is consulting on draft Regulatory Technical Standards (RTS) specifying the documentation and information that large institutions must submit to competent authorities. Together, these elements form the so called “Suitability Package”, which aims to harmonise suitability assessments and promote supervisory convergence across the EU. The consultations is open until 25 May 2026. Public hearings will take place on 15 April 2026.

ESMA Report on Retail Investors

On 12 March 2026, the European Securities and Markets Authority (ESMA) published its comprehensive report on the “Call for Evidence 2025” regarding the Retail Investor Journey. The report highlights the regulatory and non-regulatory barriers that prevent private individuals from participating in capital markets.

ESMA noted clear differences between consumers and the industry: while consumers emphasized aspects such as trust, fees, and comparability, the industry highlighted financial literacy, culture, and incentives. Furthermore, ESMA recognized the growing influence of digital platforms and social media, as well as their positive role in improving market access. They also pointed out risks that can encourage speculative behavior—particularly among young investors.

Overall, respondents support the objective of disclosure requirements, yet agreed that current information is too voluminous, too technical, and poorly adapted for “mobile-first” investors. A significant portion of the feedback focused on simplifying suitability and appropriateness assessments, which are seen as essential but often perceived as too burdensome for both clients and firms. Taxation was also identified as a major obstacle, especially for cross-border investments. Finally, ESMA plans to use the report’s findings for future technical advice on MiFID II Delegated Acts, as well as for potential updates to its guidelines.

As the firm explored² last December, this new process would mark a paradigm shift in how the United States approves these projects. Novel mission authorization will fill a significant gap in the US’s obligations under the Outer Space Treaty while encouraging the US space industry to grow and develop novel space technologies. 

The cornerstone of the proposal is the “Space Commerce Certification.” OSC, along with other agencies, would develop “light touch” requirements for projects seeking approval. OSC would then run interagency review for projects seeking certification using those requirements. The review process would include a presumption of approval. This presumption is supported by a requirement that applications will be approved unless OSC finds one of four explicit grounds for denial.³ 

OSC’s vision is that the three regulatory space agencies (the Federal Communications Commission (FCC), the Federal Aviation Administration (FAA), and the office for Commercial Remote Sensing Regulatory Affairs (CRSRA) would incorporate reliance on the certification to waive aspects of their regulatory reviews.  

Other highlights include: A strict 120-day decision timeline, with limited extensions and a defined appeals process, and, incorporated interagency review.

OSC does not rely on notice-and-comment rulemaking, which the agency highlights as a strength that will allow them to quickly change and develop procedures over time. In this vein the OSC is not releasing mission-type specific requirements in the current process to establish a certification procedure. Instead, OSC opts to develop mission-type requirements through the implementation of the process and based on “emerging industry standards.”

OSC is currently seeking industry comments and input on the proposal. 

Our Policy and Regulatory lawyers are closely monitoring developments and are ready and able to help the space industry navigate this rapidly changing regulatory landscape.

While Washington law already prohibits noncompete agreements with employees earning below US$126,858.83 in 2026 and independent contractors earning less than US$317,147.090 in 2026, ESHB 1155 would ban noncompete agreements for all employees and independent contractors alike, with limited exceptions. The freshly inked ban aligns with the growing nationwide trend to proscribe or at least drastically limit noncompete agreements. For example, California, North Dakota, Oklahoma, and Minnesota have enacted near-complete bans, while Colorado, Illinois, Maine, Maryland, Oregon, Rhode Island, and Virginia have adopted significant restrictions on the use of noncompete provisions in the employment context. 

Below is a summary of the most significant aspects of the new-noncompete ban that employers need to know:

ESHB 1155 Enacts an Even-Broader Prohibition on Noncompete Covenants With Retroactive Effect

ESHB 1155 considerably expands the definition of “noncompetition covenant” to include: 

• A covenant “that prohibits or restrains an employee or independent contractor from engaging in a lawful profession, trade, or business of any kind.” 
• An agreement “between a performer and a performance space, or a third party scheduling the performer for a performance space, that prohibits or restrains the performer from engaging in a lawful performance.”
• An agreement “that directly or indirectly prohibits the acceptance or transaction of business with a customer.”
• The ban also now applies to any provision in an agreement that would require an employee, as a consequence of “engaging in a lawful profession, trade, or business,” to “return, repay, or forfeit any right, benefit, or compensation.” 

However, these expansive-noncompete definitions are not the end. The broad-noncompete ban applies regardless of when the agreement was entered into, meaning it would apply to agreements that were entered into before the enactment of the new law if the provisions contained in those agreements are still in effect as of 30 June 2027. 

The new law excludes certain types of restrictions from the definition of a noncompetition covenant, which employers may continue to utilize to protect their interests. Specifically, ESHB 1155 provides that nonsolicitation agreements are not prohibited outright, however, such covenants are to be narrowly construed and have a maximum postemployment duration of 18 months. Permissible nonsolicitation provisions include:

Employee Nonsolicitation

Employers may prohibit former employees from soliciting current employees. 

Customer Nonsolicitation

Employers may prohibit solicitation designed to “shift business” away from the employer—but only if the employee had substantially developed direct relationships with those prospective and current customers through their work.

Prospective Customers

Employers may restrict solicitation of prospective customers, but only if the employee had direct contact with that customer.

However, “nonsolicitation” agreements do not include provisions directly or indirectly prohibiting employees from accepting or transacting business from an employer’s customers. Additionally, employers may still enter into and enforce the following types of agreements: confidentiality agreements; covenants prohibiting use or disclosure of trade secrets; certain covenants entered in connection with the sale of a business involving at least a 1% ownership interest; franchise agreements that comply with RCW 19.100.020(1); and certain education-expense repayment agreements that satisfy specified statutory conditions.

Notice Obligations for Existing Noncompete Agreements

The new law requires employers to make reasonable efforts to provide written notice by 1 October 2027, to current and former workers whose covenants remain in effect to advise them that those provisions are void and unenforceable. 

Consequences of Violations

ESHB 1155 has teeth, too. Employers violate the new law not only by enforcing a noncompete covenant, but also by (1) attempting to enforce a noncompete covenant, (2) threatening enforcement of a noncompete covenant, (3) entering into or attempting to enter into such an agreement, or (4) representing that a worker remains subject to one. ESHB 1155 further provides that instead of allowing claims to persons “aggrieved by a noncompetition covenant,” the law permits any person “aggrieved by a violation of this chapter” to bring a cause of action against the employer. Violations may result in the greater of actual damages or a statutory penalty of US$5,000, plus lawyers’ fees and costs—exposure that can multiply quickly for employers with multiple-affected workers.

Key Takeaways for Employers

Given this significant and far-reaching new law, employers need to act quickly to prepare for ESHB 1155 to go into effect next year. Employers with Washington-based employees and contractors should take the following steps in advance of 30 June 2027:

1. Review Washington employment, contractor, equity, bonus, and separation agreements for provisions that may function as noncompetition covenants;
2. Evaluate customer-based restrictions such as nonsolicitation and noninterference clauses to determine whether they are narrowly tailored and permissible under the new law;
3. Review onboarding, offboarding, and template communications to avoid statements that could be characterized as threatening enforcement or representations of continuing enforceability of noncompetition covenants; and
4. Develop a plan to identify and provide notice to workers with noncompetition agreements once the law goes into effect.

The lawyers of our Labor, Employment, and Workplace Safety practice regularly counsel clients on a wide variety of issues related to restrictive covenants for employees and are well positioned to provide guidance and assistance to clients on this significant new law.

This is a notable turn because many of the first headline AI disputes were framed through various adjacent doctrines—consumer protection, privacy, defamation, and intellectual property. Product liability is different: It is built to evaluate mass-distributed technologies through the lenses of defect, warnings, and foreseeability, with liability that can extend across a chain of entities involved in making a product available. As AI functionality becomes embedded into everyday consumer and enterprise workflows, plaintiffs have stronger incentives to describe the AI-enabled experience as a product and to litigate it the way courts already litigate other complex technologies.

Case Snapshots: How Plaintiffs Are Pleading AI Product Claims

A recurring threshold issue in these disputes is how courts should characterize generative AI outputs. Defendants often argue that chatbot responses are expressive content, seeking to reframe claims as attempts to impose liability for speech rather than for product design. Plaintiffs, by contrast, increasingly draft complaints to target the architecture of the deployed system—guardrails, defaults, escalation pathways, and marketing—so the case looks like a product-defect dispute instead of a content dispute.

Garcia v. Character Technologies, Inc.² is an early bellwether for how plaintiffs are attempting to fit chatbot-related injuries into a traditional products framework. The plaintiffs alleged a 14-year-old user formed an intense emotional relationship with a Character.AI chatbot and died by suicide. The complaint ties the alleged harm to product design and interaction patterns, and the court treated the mass-marketed chatbot app as a “product” under a strict-liability pleading. The ruling also permitted theories aimed at an upstream technology provider and the manufacturer to proceed at the pleading stage, reflecting how product-liability concepts can extend beyond the branded application to alleged component or enabling actors.

Raine v. OpenAI³ and coordinated OpenAI matters (California) illustrate how plaintiffs are reframing “bad outputs” as allegations about AI architecture. In 2025, the parents of 16-year-old Adam Raine filed suit alleging that ChatGPT fostered emotional dependency, contributed to self-harm by providing instructions on hanging, and that the product lacked adequate safeguards. The pleadings emphasize guardrails, crisis-intervention behavior, and whether monitoring signals should have triggered different product behavior. The coordination of multiple actions also signals a familiar products-litigation dynamic: Plaintiffs may seek to develop pattern-of-conduct evidence around design choices, testing timelines, and warning strategies.

Nippon Life v. Open AI⁴ underscores that AI product-liability-adjacent theories may not be limited to end-user personal injury. An insurer sued OpenAI in federal court in Illinois seeking to recover costs from an AI-assisted, meritless legal filings (including at least one citation to a nonexistent case). The case highlights institutional economic-harm theories and the potential for third-party plaintiffs, and it illustrates how terms and disclosures may be litigated as notice and risk-recognition timelines, not solely as defenses.

Nevada v. MediaLab AI, Inc.⁵ demonstrates how some US states are trailblazers for the new wave of AI product-liability litigations. In 2025, the Nevada attorney general filed a lawsuit against a tech holding company and its social messaging app for alleged harms caused to Nevada’s youth. The Nevada attorney general claims that the app is defective and “unreasonably dangerous” to the youth because there are no safety features to protect minors from “being contacted by predators.” The lawsuit illustrates Nevada’s aggressive direction to hold AI platforms responsible for user harm while shaping public policy.

Across these matters, a common strategy is emerging: Treat the “AI system” not as an abstract model, but as the deployed product experience—its interface, defaults, guardrails, and marketing claims. That framing is designed to sidestep threshold fights over whether a particular output is protected expression and instead litigate the system’s design choices as the alleged defect. It also tees up claims against multiple entities involved in deployment, from branded application providers to alleged component or enabling actors.

Why Product Liability Fits AI Deployments

Product-liability doctrine is designed for technologies that reach users at scale through repeatable experiences—precisely how many AI applications are now distributed. As courts decide whether specific AI applications are “products” or “services,” plaintiffs are increasingly pleading traditional product liability theories: design defect (guardrails, interaction design, and lack of safety features), failure to warn (limitations and foreseeable misuse), and negligence (reasonable testing/monitoring in context).

A second recurring theme is supply-chain liability. Pleadings and early rulings suggest plaintiffs will test theories that reach beyond the model developer to the enterprise that brands and deploys the system, as well as upstream providers that allegedly enabled or substantially participated in the final product’s integration. In parallel, legislation like California’s AB 316 (addressing “autonomy” defenses) reflects a policy trend toward keeping causation disputes fact-bound rather than allowing “AI did it” to operate as a categorical shield.

Regulation Is Steering Toward Product-Liability Concepts

Policy developments are increasingly using the language of products doctrine—what a product is, who is in the distribution chain, and how responsibility is allocated when software causes harm. For AI, that matters because these frameworks influence pleading strategies and can supply persuasive authority for defect, foreseeability, and standard-of-care arguments even where claims remain common-law tort.

Several developments illustrate the shift. The PLD treats software—including AI systems—as “products,” extends strict-liability concepts across the distribution chain, and captures parties that substantially modify AI systems; member states must transpose the directive by December 2026. In the United States, the AI LEAD Act (a US Senate proposal sponsored by Illinois Sen. Richard Durbin) reflects a similar policy interest in product-liability framing for certain AI systems, regardless of whether the proposal advances in its current form. At the state level, targeted enactments such as California’s AB 316 (addressing “autonomy” defenses) and SB 243 (companion chatbots) may be cited by plaintiffs to argue foreseeability and to frame what safety features are reasonable in particular deployment contexts.

For multinational products, the EU framework can influence more than European litigation. The PLD’s concepts—software as a product, coverage of substantial modifications, and supply-chain responsibility—are likely to appear in US complaints and expert reports as persuasive reference points, particularly where companies market a single AI-enabled product across jurisdictions. Likewise, detailed state statutes can function as “standard-setting” signals in tort cases: Even when they do not apply directly, plaintiffs may argue they reflect what risks were foreseeable and what safeguards were reasonable for a given category of AI deployment.

What This Means for the Next Wave

Looking ahead, several themes are likely to define how this next wave develops. Courts will continue testing the product-versus-service line, a characterization that can determine whether strict-liability theories are available and how warnings and design are evaluated. Pleadings are also increasingly litigating AI “architecture”—guardrails, escalation design, and user experience choices that invite reliance—rather than focusing on isolated outputs. At the same time, liability theories are moving up and down the AI supply chain as plaintiffs explore component-part and substantial-participation theories that can reach upstream and downstream actors. Finally, regulation is becoming a shared liability vocabulary: The PLD and targeted state statutes are likely to appear in complaints and expert reports as reference points for defect and foreseeability, while testing artifacts, monitoring signals, and change histories remain central in discovery and can shape both causation narratives and settlement leverage.

For companies looking to reduce exposure in this environment, two practical disciplines consistently matter in product cases: defining the product and substantiating the design story. Mapping the deployed system—model and version, prompts, tool connections, retrieval sources, and safety settings—helps avoid ambiguity about what the product was at a given point in time, particularly where behavior changes with updates. In parallel, contemporaneous documentation of testing, risk identification, and safety tradeoffs often become the evidentiary backbone of defect and foreseeability arguments; it is the record that allows a defendant to explain not just what was built, but why the design choices were reasonable when made.

Conclusion

The early AI cases now in litigation—alongside developments like the PLD and California’s targeted statutes—signal a broader trend: Established product-liability doctrine is migrating into AI contexts. Over the next several years, courts will supply threshold answers on product-versus-service characterization, the viability of design-defect framing for AI architecture, and how autonomy and causation arguments are handled. That combination of litigation and legislation makes product liability a likely focal point for the next wave of AI disputes.

In January 2022, we published a client alert¹ examining the initial FAQ issued by Luxembourg’s financial sector regulator—the Commission de Surveillance du Secteur Financier (CSSF)—on the use of what it then called “virtual assets” by investment funds and credit institutions. That FAQ set out a cautious but constructive framework, permitting limited indirect exposure for undertakings in collective investments (UCITS) and opening the door to direct investment for certain alternative investment funds (AIFs).

Since then, the regulatory landscape has changed considerably. Most notably, the European Union’s Markets in Crypto-Assets Regulation (Regulation (EU) 2023/1114) (MiCAR) has entered into force, bringing crypto-assets within a comprehensive EU-wide regulatory framework for the first time.² Against that backdrop, the CSSF published Version 7 of its FAQ on 4 February 2026—a root-and-branch revision of the entire document, updating every single question and replacing all references to “virtual assets” with “crypto-assets.”

This alert summarises the key developments since 2022 and highlights the most significant changes fund managers, depositaries and compliance officers need to be aware of.

A New Framework: MiCAR

The most visible change is terminological: “virtual assets” has been replaced throughout by “crypto-assets,” using the definition in article 3(1)(5) of MiCAR. This is not merely cosmetic—it signals a shift from an ad hoc CSSF approach to one grounded in harmonised EU law. All substantive changes in the 2026 FAQ flow from MiCAR.

UCITS: Core Rules Unchanged, Framework Sharpened

The fundamental position for UCITS has not changed: direct investment in crypto-assets remains prohibited. Indirect investment—through transferable securities with crypto-assets as an underlying asset, provided those securities do not embed derivatives—remains permitted up to 10% of net asset value (NAV).

What is new is that these rules are now expressly anchored in MiCAR, providing greater legal certainty. Although already expected in 2022, the following are now more explicitly stated in the 2026 FAQ: (i) prior CSSF notification before investing in crypto-assets, (ii) case-by-case risk assessment as well as establishment of adequate internal control functions, and (iii) investor disclosure obligations.

Key Point for UCITS Managers

Given that MiCAR excludes financial instruments within the meaning of the Luxembourg law of 5 April 1993 on the financial sector, as amended, from its scope, the investment in securities, which qualify as financial instruments, in order to gain exposure to the crypto-asset sector, is not restricted under the CSSF’s FAQ framework.

AIFs: Broader Permissions, Now Under MiCAR

AIFs have always been permitted to invest directly in crypto-assets, subject to applicable requirements and—for retail-accessible funds—a 10% NAV cap. This has not changed. What is new is the explicit statement that AIF investments fall “under the scope of MiCAR,” bringing the full MiCAR framework into play. Unlike for UCITS, no specific prior notification requirement for AIFs has been introduced.

Fund Manager Authorisation: New MiCAR Consideration

Under the framework established before 2022, Luxembourg investment fund managers (IFMs) managing AIFs investing in crypto-assets were required to obtain prior CSSF authorisation under the “Other-Other Fund-Crypto-assets” strategy. That requirement has now been loosened in that a prior CSSF authorisation is only required where the AIF is investing in crypto-assets beyond 10% of its NAV.

In addition, the 2026 FAQ introduces an important additional obligation: IFMs must now analyse the services they perform in connection with crypto-assets against the activities listed in article 60(5) of MiCAR. This provision of MiCAR deals with financial entities (including IFMs) that may, by virtue of their activities in relation to crypto-assets, be providing crypto-asset services. Depending on the outcome, this may trigger additional authorisation or notification obligations under MiCAR, over and above existing fund management authorisations.

Fund of Funds

The 2026 FAQ (building on a clarification first introduced in 2023) confirms that IFMs managing fund-of-funds structures are not required to hold the “Other-Other Fund-Crypto-assets” licence. However, they must assess each target fund manager’s ability to manage crypto-asset risks—including custody and operational risks—and must be able to produce those assessments to the CSSF on demand.

Depositaries: The Most Significant Changes

The depositary framework has undergone the most substantial transformation since 2022. The January 2022 FAQ first confirmed that Luxembourg depositaries could act for funds investing directly in crypto-assets. The 2026 FAQ replaces that general framework with a structured two-model approach under MiCAR.

In both models, where crypto-assets qualify as “other assets,” the depositary’s liability is limited to safekeeping duties regarding ownership verification and record keeping.

Model 1

Depositary Does Not Offer MiCAR Custody Services

Where the depositary does not itself provide custody and administration of crypto-assets under MiCAR, the fund or its manager directly appoints a specialised crypto-asset service provider for that purpose. Under this model:

• The crypto-assets are not recognised on the depositary’s off-balance sheet; 
• The depositary is not liable for the restitution of the crypto-assets; that liability remains with the crypto-asset service provider; and
• The fund or IFM must have a direct contractual relationship with the crypto-asset service provider.

Model 2

Depositary Offers MiCAR Custody Services

Where the depositary itself provides custody and administration of crypto-assets for the fund, this triggers either a full authorisation as a crypto-asset service provider under article 62 of MiCAR or a notification procedure available to certain financial entities under article 60 of MiCAR. Under this model:

• The crypto-assets are recognised on the depositary’s off-balance sheet; and
• The depositary has specific obligations under article 75 of MiCAR in respect of custody services.

Two distinct notification obligations apply—both new since 2022:

1. All depositaries must notify the CSSF in advance before acting for a fund investing directly in crypto-assets.
2. Depositaries intending to directly safeguard crypto-assets (Model 2) must separately inform the CSSF of that plan in a timely manner.

AML/CFT: Requirement for ML/TF Risk Scoring

The core anti-money laundering/countering the financing of terrorism (AML/CFT) position has not changed. Investing in crypto-assets—directly or indirectly—increases the risk of money laundering, terrorist financing and proliferation financing, and designated compliance officers are expected to demonstrate an adequate understanding of all three.

What is new is the operational detail introduced by the 2026 FAQ, which is now expressly grounded in article 34 of CSSF Regulation 12-02, as amended. IFMs must compute a money laundering/terrorist financing (ML/TF) risk scoring for each crypto-asset investment and calibrate due diligence accordingly, taking into account the type of crypto-asset and the method of acquisition. The fund’s designated compliance officers must demonstrate an adequate understanding of all three financial crime risk categories as they apply to crypto-assets.

What Should You Do Now?

The February 2026 update warrants a careful review of existing arrangements. In particular, you should:

• Review fund documentation and risk management policies for MiCAR compliance.
• As an IFM, conduct a fresh analysis of your activities under article 60(5) of MiCAR.
• As an IFM of a fund of funds, ensure target fund manager due diligence is documented and available for CSSF inspection.
• As a depositary, determine which custody model applies and give the required CSSF notifications.
• Ensure AML/CFT frameworks use ML/TF risk scoring in line with CSSF Regulation 12-02.

How We Can Help

Our Investment Funds and Finance team advises fund managers, depositaries and institutional investors on Luxembourg fund law and the evolving crypto-asset regulatory framework. Please do not hesitate to get in touch.

This alert is for general information purposes only and does not constitute legal advice.

Through ODACS, CMS is trying to meet its statutory obligation to conduct a survey before reducing reimbursement to hospitals for separately payable drugs, particularly for 340B Drug Pricing Program (340B) drugs. CMS will meet the statutory burden only if the survey results in a “statistically significant estimate” of drug costs. The deadline extension indicates that CMS may not be receiving the response rate it deems necessary for the survey to be used as a basis for implementing lower OPPS reimbursement rates for separately payable drugs.

Hospitals Still Face a Difficult Choice, But the Picture is Growing Clearer

As discussed in our prior March 2026 alert, if large numbers of hospitals do not respond to the survey request, then CMS, by statute, will not be able to use its results to cut reimbursement to 340B-covered entities. CMS has a strong desire to effectuate the cuts that the US Supreme Court has already once denied to the agency, but it acknowledges that it cannot mandate the survey under the statute. Therefore, CMS has suggested that it may treat non-responses as an indication of low acquisition costs, but it cites to no law supporting its authority to do so. Counter to its desire to get a robust response, CMS has also created an onerous certification provision accompanying the acquisition cost data submission, which has given many health systems pause. There thus remain considerations arguing both in favor of responding and not responding. 

If a hospital’s decision not to respond is driven in part by whether it will make a difference in terms of its future reimbursement, the extension of time points to the conclusion that it will. CMS likely would not extend the window if it already had a “statistically significant estimate” as required by statute. Thus, so long as the trend remains the same, then hospitals continuing not to respond may find that their reimbursement for outpatient drugs remains secure.

The firm’s 340B Program and Pharmacy practice group practitioners will continue to closely monitor developments on this issue.

On 20 March 2026, the White House released its National Policy Framework for Artificial Intelligence (the Framework), together with companion legislative recommendations, marking the Administration’s next major step following President Donald Trump’s December 2025 executive order limiting state authority to regulate artificial intelligence (AI). Taken together, the Framework and legislative recommendations are intended to translate the December Executive Order’s calls for a unified, minimally burdensome national AI policy into legislative guidance for Congress. With the Framework, the US Government continues to move away from a highly prescriptive approach to regulating AI toward a more balanced, innovation-friendly approach, setting up a clear alternative to the approaches of other major players, such as the European Union and China.

Like the December Executive Order, the Administration’s central premise is that US leadership in AI depends on uniform national rules. The White House cautions that a fragmented patchwork of state AI laws would undermine innovation, increase compliance costs for companies operating across state lines, and weaken the United States’ ability to compete in the global AI race. This unified approach demonstrates the appreciation for the costs of fragmented regulatory approaches in these technology areas, particularly the current state-by-state approach to data privacy. To that end, the Framework and legislative recommendations outline seven thematic policy areas the Administration believes should anchor future federal AI legislation—balancing innovation, competitiveness, and national security with targeted safeguards for children, creators, consumers, and communities. The Administration has indicated that it intends to work with Congress in the coming months to advance legislation consistent with these principles.

Protecting Children and Empowering Parents

The Framework places significant emphasis on safeguarding minors from AI-related risks while empowering parents and guardians. The Administration urges Congress to require commercially reasonable, privacy-protective age-assurance mechanisms (like parental attestation) for AI services likely to be accessed by minors; to mandate features that reduce risks of sexual exploitation and self-harm; and to affirm that existing child-privacy laws, including the Children's Online Privacy Protection Act, apply to AI systems. At the same time, the Framework cautions against ambiguous content standards or open-ended liability regimes that could create compliance uncertainty or constitutional concerns and legislation that would preempt states from enforcing their own generally applicable child protection laws. 

Safeguarding and Strengthening American Communities

Consistent with the Administration’s Ratepayer Protection Pledge, the Framework seeks to ensure that AI-driven growth benefits communities while mitigating downstream harms. The legislative recommendations call for protections to prevent residential ratepayers from bearing increased electricity costs associated with data center expansion, streamlined federal permitting to support AI-related infrastructure (including on-site and behind-the-meter generation), enhanced tools to combat AI-enabled scams and impersonation fraud, attention to national security risks, and measures to support small businesses adoption of AI technologies. 

Intellectual Property and Creators

The Framework emphasizes protecting creators’ works and identities while preserving innovation. The legislative recommendations highlight potential voluntary licensing or collective-rights mechanisms and protections for digital replicas such as voice and likeness that track the bipartisan Nurture Originals, Foster Art, and Keep Entertainment Safe Act (NO FAKES Act) (S.1367), as well as a deliberate decision to defer to the courts on unsettled questions of copyright law—including whether and when AI training constitutes fair use—rather than urging Congress to legislate a definitive answer at this stage.

Preventing Censorship and Protecting Free Speech

Echoing concerns raised in the December Executive Order regarding compelled speech and government overreach, the Framework stresses that AI should not be used by government actors to suppress lawful expression. The administration calls on Congress to prevent government coercion of platforms and AI providers and to provide redress where censorship-related harms stem from government action, while avoiding regulation of private content moderation decisions. 

Enabling Innovation and American AI Dominance

To advance US leadership in AI, the Framework and legislative recommendations favor innovation-enabling guardrails, including regulatory sandboxes, improved access to federal datasets, reliance on existing sector-specific regulators rather than creating a stand-alone AI agency, and support for industry-led standards and best practices. 

Workforce and Education

The Framework calls for integrating AI training into existing education and workforce programs, studying AI-driven labor-market impacts, and supporting land-grant institutions and other educational entities in developing AI-related skills, rather than creating new, stand-alone federal workforce programs.

Federal Preemption

The Administration describes federal preemption as a central pillar of any effective national AI policy, arguing that a unified federal framework is necessary to support innovation and sustain US competitiveness in the global AI race. The Framework cautions that a fragmented landscape of AI laws would create compliance uncertainty, raise costs for companies operating across state lines, and undermine national economic and security objectives. 

To avoid those outcomes, the Framework and legislative recommendations call on Congress to establish a minimally burdensome national standard by preempting state AI laws that impose inconsistent or undue burdens, while respecting core principles of federalism. The Framework draws a distinction between state laws that interfere with inherently interstate AI development and areas where states retain traditional authority, such as enforcing generally applicable consumer- and child-protection laws, regulating zoning and land use for AI infrastructure, and governing a state’s own use of AI through procurement or public services. The White House’s efforts could also materially impact state and local regulatory efforts around AI employment and workforce development. While the Framework does not explicitly propose preemption of AI workforce regulations, efforts to preempt establishment of algorithmic bias standards could have broader workforce implications. Our team will continue monitoring the impact of any preemptive action on employment law.

At the same time, the Framework emphasizes that states should not regulate AI development itself, impose heightened restrictions on otherwise lawful activity simply because AI tools are involved, or penalize developers under divergent state regimes for downstream or third-party uses of AI systems. Taken together, these principles are intended to promote national uniformity while preserving core state functions.

Congressional Proposals

On 18 March, Sen. Marsha Blackburn (R-TN) released an updated discussion draft of her TRUMP AMERICA AI Act, underscoring her effort to position herself as the lead architect of a comprehensive Senate-side AI legislative package. The updated draft closely tracks the Framework, particularly in its emphasis on national uniformity and federal preemption of state AI laws that regulate inherently interstate AI development or impose conflicting compliance obligations.

At the same time, Sen. Blackburn’s draft incorporates elements of two bipartisan measures—the Kids Online Safety Act (S.1748) and the NO FAKES Act (S.1367/H.R. 2794)—and includes provisions addressing online harms to minors; protections against unauthorized use of name, image, and likeness; third party audits related to discrimination and bias; and energy and infrastructure related impacts of AI deployment. 

The Senate dynamics are further shaped by questions of committee jurisdiction and leadership. Senate Commerce Chairman Ted Cruz (R TX) has been closely associated with prior efforts to advance state law preemption in the AI context, and it remains unclear whether he will support the Blackburn approach, particularly given past disagreements over preemption strategy. In parallel, lawmakers in the House, including Rep. Jay Obernolte (R CA), have been developing their own federal AI proposals, suggesting that multiple legislative pathways remain in play.

Key Takeaways

As Congress evaluates legislation informed by the Framework and legislative recommendations, stakeholder engagement is likely to play an important role in shaping how these seven thematic areas are reflected in statutory language. Thoughtful engagement can help policymakers better understand real world operational impacts, calibrate the scope of federal preemption, and assess how proposed requirements would interact with existing legal and regulatory regimes. For companies that have been tracking developments since the December Executive Order, the release of the Framework underscores a clear shift from executive action to an active phase of legislative negotiation and deal making. With the framework, the US Government has further moved away from a highly prescriptive approach to regulating AI toward a more balanced innovation-friendly approach. 

Our team is actively monitoring this space and advising clients on how these changes may impact their operations. If your company wants to stay ahead of the curve or play an active role in shaping the national AI framework, we encourage you to engage with our group. We can help you assess risk, develop compliance strategies, and position your organization to participate in policy discussions that will define the future of AI regulation.

The waiver was issued under 46 U.S.C § 501(a), which permits a waiver “to the extent that the Secretary [of War ]⁴ considers necessary in the interest of national defense to address an immediate adverse effect on military operations.” Section 501(a) is limited to only waivers of the “navigation or vessel-inspection laws,” including the Jones Act.⁵ 

So, what about other US laws? For example, are the foreign vessels subject to US tax laws for their income earned on what are by definition US domestic⁶ voyages? Likewise, will foreign seafarers operating on vessels calling on the United States be required to obtain visas applicable to those operations? Will the vessel owners ensure that their employees are granted the same labor rights—such as paying US minimum wage—afforded to US mariners? In previous studies, the US Government Accountability Office (GAO) has listed US tax, labor, and employee protection laws among those that could apply if a foreign vessel operated in US domestic commerce.⁷ GAO has sometimes referred to these additional US laws as the “cost of compliance” for foreign vessels in US domestic commerce.⁸ 

US Customs and Border Protection (CBP), the agency responsible for issuing Jones Act waivers, has only provided guidance on the requirements for vessels operating under this particular waiver. No other agency has provided guidance on compliance with any other applicable laws for foreign vessels clearly operating in US domestic trades. In addition, it is not clear what authority, if any, the administration could use to waive other US laws for a foreign vessel operating in perhaps the exact same trades as a US vessel for which those US laws would fully apply. 

The issue takes on a particular gravity because since 2021 all foreign vessel operators who transport US domestic cargo under a waiver are required to share detailed information about the voyage with the US Maritime Administration—information that then must be publicly disclosed within 10 days on the US Department of Transportation website.⁹ CBP emphasized the need for public reporting in announcing the waiver. This latest waiver will be the first in which public disclosure is mandated by law in this way, creating additional legal exposure for vessel operators or others utilizing the waiver. 

Our Maritime practice group team is closely monitoring these developments and is well positioned to assist clients in navigating this rapidly changing landscape and its uncertainties. 

The global impact of the regional conflict has prompted renewed focus on the legal and contractual tools available to manage and mitigate risk, including force majeure provisions, material adverse change (MAC) clauses, and statutory mechanisms that may apply in extraordinary and unforeseen circumstances (“imprévision” or hardship). Understanding how such tools operate and their limitations is critical for parties seeking to protect their contractual positions in an increasingly challenging environment. 

In this alert, we briefly discuss some of the contractual and legal implications of the current geopolitical disruption, specifically through the lens of the Qatar Civil Code (Law No. 22 of 2004), and with particular attention to insurance considerations and force majeure, hardship, and MAC type provisions. 

Primary Takeaways and Practical Considerations

• Analyze the Contracts
  • Undertake a clause by clause review of relevant clauses, including force majeure, MAC, change in law, suspension, and variation provisions. Map out notice deadlines, evidentiary requirements, mitigation obligations, and available remedies before taking any formal steps.
• Identify the True Causal Event(s)
  • Avoid generic reliance on terms such as “war” and “hostilities.” Consider whether the actual impediment is a governmental order, regulatory restriction, supply embargo, etc., and align the claim accordingly.
• Comply Strictly With Notice Requirements
  • Timely and properly framed notices are critical. Defective notices may invalidate an otherwise legitimate claim.
• Consider Alternatives to Force Majeure
  • Force majeure imposes a high threshold. In appropriate cases, relief may be more effectively pursued through other contractual mechanisms or, where applicable, the hardship doctrine.
• Preserve Documentary Evidence 
  • Maintain contemporaneous records demonstrating causation, impossibility or excessive burden, mitigation efforts, and the financial and program impact of the event relied upon.
• Review Insurance Policies
  • Identify exclusions that may affect the coverage of certain risks, including war, hostilities, political violence, terrorism, cyber war, and trading exclusions. Assess the potential need for specialist cover. Also, insurance strategy, contractual response, and dispute planning should be coordinated across legal, commercial, treasury, and risk teams.

Insurance Considerations

Most property, business interruption, marine, aviation, and liability policies in the Gulf region contain broad war and hostilities exclusions, often triggered without a formal declaration of war. The escalation of regional tensions, including strikes, drone activity, airspace disruptions, and maritime incidents has exposed significant coverage gaps for policyholders, who may have assumed that “all risks” protection would respond.

Insurers are increasingly scrutinizing whether losses stem from state acts, proxy groups, or terrorism, which directly affects whether war exclusions apply. Under these circumstances, policyholders are exposed to the risk of insurance claim disputes and delayed indemnity, particularly for infrastructure, energy, hospitality, and logistics assets.

Marine war risk and cargo premiums for vessels transiting the Strait of Hormuz, Red Sea, and Persian Gulf have risen sharply, with some underwriters suspending cover altogether in high risk zones. In addition, energy related businesses face tighter terms for offshore assets, terminals, and pipelines, reflecting the compounded risks inherent with interconnected assets together with the strategic importance of the region’s infrastructure. 

All of these issues directly affect supply chains; engineering, procurement, and construction contractors; and energy offtake arrangements across the Gulf Cooperation Council.

Parties should ensure that contractual risk allocation aligns with available insurance cover. Where a contract places delay, suspension, or termination risk on a party, the absence of corresponding insurance protection may result in uninsured exposure. As such, early review of policy terms, targeted enhancements to coverage, and coordinated risk planning is essential for businesses seeking to protect their position amid ongoing regional uncertainty.

Force Majeure

Force majeure provisions in contracts commonly provide for relief in the event of war or hostilities. It is therefore no surprise that many participants in construction and energy projects in the region have already either (a) sent a notice of force majeure under relevant contracts, or (b) received a notice of force majeure from other project participants in response to the evolving situation.

However, the mere occurrence of war and hostility events does not, of itself, trigger force majeure relief. 

The effectiveness of such notices depends on strict compliance with both contractual and legal requirements. Force majeure notices must be issued in a timely manner and must clearly identify the relevant force majeure events, as well as their actual impact on the performance of specific contractual obligations. Failure to properly frame the notice, or to comply with notice requirements, may render a force majeure claim ineffective, either because it does not satisfy the requirements of the contract or because it fails to meet the standards imposed under Qatari law.

The Contract Comes First

Subject to compliance with mandatory Qatari laws, force majeure clauses and related notice mechanisms in contracts are generally upheld by the Qatari courts. However, the courts interpret force majeure clauses narrowly. Accordingly, parties should undertake a careful and structured review of the applicable force majeure provisions and “map out” the procedural and substantive steps required to validly invoke them, including notice timelines, evidentiary requirements, and the scope of relief available. 

By way of an example, the force majeure provisions in International Federation of Consulting Engineers (FIDIC) form contracts, the most widely used standard form construction contracts in the Middle East, are structured as follows:

1. Definition of force majeure (defined as “Exceptional Event” in the 2017 edition) is an event or circumstance that:
   1. Is beyond a party’s control;
   2. The party could not reasonably have provided against before entering the contract;
   3. Having arisen, the party could not reasonably have avoided or overcome; and
   4. Is not substantially attributable to the other party. 
2. FIDIC then includes a nonexhaustive list of events that may constitute an “Exceptional Event,” which expressly includes war, hostilities, and acts of a foreign enemy.
3. Strict notice requirements of an “Exceptional Event”: Where a party is prevented from performing any one or more of its obligations due to an “Exceptional Event,” that party must give notice to the other party within 14 days of becoming aware of the event. The notice must identify the “Exceptional Event” relied upon and specify which contractual obligations are, or are anticipated to be, prevented from performance as a result of the “Exceptional Event.”
4. The affected party is subject to an express duty to mitigate the consequences of the “Exceptional Event,” including by taking reasonable steps to minimize delay and cost.
5. Consequences of force majeure: It is only if the contractor is prevented from performing any of its obligations under the contract by reason of an event that satisfies all of the above conditions for an “Exceptional Event” and suffers delay or incurs additional costs that the contractor may obtain relief.

A common pitfall in force majeure notices is the reliance on an event expressly listed in the force majeure clause that, in reality, does not directly prevent the performance of contractual obligations. In the context of the current geopolitical turmoil in the region, parties may consider it self evident to invoke events such as “war,” “hostilities,” or “acts of a foreign enemy” as the basis for force majeure relief. However, even where such events may have occurred, they do not necessarily prevent contractual performance.

In many cases, the actual force majeure event is unlikely to be the hostilities themselves, but rather a governmental or regulatory measure implemented as a consequence of those hostilities. By way of example, where Qatari aviation authorities temporarily close the airspace as a precautionary response to regional conflict, a project participant may be prevented from mobilizing personnel to a construction site, thereby preventing it from progressing the works. In such circumstances, the event preventing performance is the decision of the Qatari authorities, rather than the hostilities per se. Accurately identifying this causal event is critical to the effectiveness of any force majeure notice.

Further, although force majeure is the most obvious relief mechanism in the context of armed conflict, contracts may contain a number of additional provisions that may afford meaningful relief depending on how conflict related impacts manifest in practice. These provisions are often overlooked and may, in some circumstances, provide a more appropriate or lower threshold route to relief than force majeure. 

In the example provided above, the unforeseeable shortage in personnel and materials might be better addressed under clause 8.4(d) (clause 8.5(d) 2017) of the FIDIC form, which provides that a contractor may seek an extension of time if the shortage is the result of government actions. 

The Qatar Civil Code as Safety Net

Article 188 of the Qatar Civil Code provides that where an extraneous event beyond the control of the parties, which could not reasonably have been foreseen and cannot be prevented, renders the performance of an obligation by a party impossible, the corresponding obligation is extinguished, the obligor is released from liability, and the contract will be deemed rescinded by operation of law.

Where the impossibility to perform is only partial, the obligee may either enforce the contract to the extent of such part of the obligation that can be performed or demand termination of contract.

Although Article 188 does not expressly define the concept of “force majeure,” the Qatari courts have broad discretion to determine, on a case by case basis, whether its conditions are satisfied. In practice, the courts will generally apply Article 188 where the affected party demonstrates the existence of an event beyond the parties’ control that renders performance objectively impossible. 

Qatari law does not provide an exhaustive list of qualifying force majeure events. However, it is likely that armed hostilities and, in particular, government mandated responses adopted as a consequence of such hostilities, may qualify as force majeure events for the purposes of Article 188.

In all cases, reliance on Article 188 requires more than the mere occurrence of an exceptional or disruptive event. The affected party must demonstrate a direct causal link between the event and the objective impossibility of performing the contractual obligation. Increased difficulty, higher cost, or commercial inconvenience are generally insufficient. Performance must be rendered legally or physically impossible.

Article 188 operates as a statutory safety net, applying irrespective of whether the contract expressly refers to force majeure. However, where the parties have agreed to detailed contractual force majeure provisions, the Qatari courts will generally give effect to those provisions, provided they do not conflict with mandatory rules of Qatari law. In such cases, Article 188 may continue to play an interpretative or residual role, particularly where contractual drafting is unclear or silent on a given scenario.

Failure to satisfy the conditions under Article 188 may expose a party not only to the rejection of its force majeure claim, but also to liability for nonperformance.

Hardship

Qatari law recognizes the doctrine of hardship under Article 171(2) of the Qatar Civil Code, which provides a limited mechanism for judicial intervention where exceptional events fundamentally disturb the contractual equilibrium. Unlike force majeure, hardship does not require impossibility of performance. Instead, it applies where exceptional, unforeseeable events render performance excessively onerous, threatening the obligor with excessive loss.

Where the conditions of Article 171(2) are satisfied, the court is empowered to reduce or rebalance the onerous obligation to a reasonable level, after weighing the interests of both parties. However, Article 171(2) may not serve as a basis to terminate the contract, nor does it excuse performance altogether. Rather, the objective is to restore contractual equilibrium.

In the context of current regional geopolitical developments, parties may seek to rely on Article 171(2) where hostilities, sanctions, regulatory interventions, or supply chain disruptions materially distort the economic balance of long term contracts, particularly in construction, energy, and infrastructure projects. However, hardship relief is not automatic, and each case will turn on causation, scale, duration, and impact.

Article 171(2) is a mandatory provision of Qatari law. While parties may contractually allocate risk and include price adjustment, renegotiation, or hardship clauses, such provisions do not exclude the court’s discretion to intervene where the statutory conditions are met. 

Claims based on Article 171(2) are inherently fact specific, and unsuccessful reliance may expose a party to liability for delay, nonperformance, or breach. Early assessment of contractual risk allocation, evidentiary support, and strategic alignment with force majeure and MAC provisions is critical.

MAC Clauses

MAC clauses are most commonly included in project agreements, share purchase agreements, financing documents, and joint venture arrangements. These clauses are typically intended to allocate risk where unforeseen events materially undermine the commercial assumptions underlying the transaction.

In the context of heightened regional geopolitical tension, parties may seek to invoke MAC clauses based on war, hostilities, sanctions, supply-chain disruption, or governmental measures. However, much like force majeure, MAC clauses are not automatically triggered by such events. Causation is critical. The courts will examine whether the alleged change has materially undermined the contractual bargain itself, rather than merely impacting profitability or convenience.

Unlike force majeure, Qatari law does not recognize MAC as a stand-alone statutory concept. Accordingly, whether a party may rely on a MAC clause depends primarily on contractual interpretation subject to mandatory provisions of the Qatar Civil Code and general principles of good faith. Accordingly, a MAC clause does not remove the court’s discretion to assess fairness, causation, and proportionality under mandatory law.

In assessing a MAC claim, the Qatari courts will focus first and foremost on the express wording agreed by the parties, including, in particular:

1. The definition of what constitutes a MAC and any applicable materiality thresholds;
2. Whether the clause relates to the contract, the counterparty, the project, or the wider market; 
3. Agreed notice requirements; and
4. The contractual consequences of a MAC, including termination, suspension, or renegotiation.

Given the consequences of invoking a MAC clause, parties should exercise considerable caution before relying on such provisions as a basis for suspending performance or terminating a contract. An unjustified reliance on a MAC clause may expose a party to claims for wrongful termination and damages under Qatari law.

Conclusion 

Early legal assessment and strategic coordination across contractual, statutory, and commercial considerations are essential for parties seeking to protect their interests in an environment defined by uncertainty and heightened risks. Whether a party can successfully invoke force majeure, hardship, a MAC clause, or look to its insurance policy for protection will depend on the wording of the contract, strict compliance with procedural and substantive requirements, and the ability to demonstrate its claims.

A recurring theme across all these regimes is that labels alone are insufficient. Parties must look beyond generic references to “war” or “hostilities” (for example) and focus instead on identifying the specific factual and legal cause of delay, disruption, or loss. That is particularly so where the true impediment arises from governmental or regulatory measures implemented in response to geopolitical events. 

At all events, businesses operating in the Gulf region are encouraged to review applicable insurance policies to ensure cover is aligned with contractual risk allocations.

The Washington state legislature has adjourned for 2026, and key tax changes are in store if Governor Bob Ferguson signs several tax-related bills into law, and if those tax changes then survive expected legal challenges. The legislature passed a new state income tax (known as the “millionaires’ tax” because it provides a standard US$1,000,000 deduction, effectively limiting application of the tax to individuals whose income exceeds US$1,000,000), while also passing a bill to undo the 2025 increases to Washington’s estate tax rates. The new legislation adds to a rapidly evolving Washington state tax environment, which had already seen the adoption of a new Washington capital gains tax in 2021 (and a subsequent rate increase in 2025 for capital gains over US$1,000,000).

Our firm is closely monitoring the impact of these bills and will supplement this information as these issues progress.

Adoption of State Income Tax (the “Millionaires’ Tax”)

Starting on 1 January 2028 (taxes to be due beginning in 2029), Washington taxpayers would be subject to tax on Washington income at a 9.9% rate. A US$1,000,000 standard deduction from Washington base income would apply and would be indexed for inflation every two years. 

Who Is a Washington Taxpayer?

The new Washington income tax would apply to all income of individuals who are Washington state residents as well as to income of nonresidents derived from Washington sources.

A person is a Washington state resident for purposes of the income tax if either (1) Washington is his or her domicile during the year (unless he or she kept no Washington home, kept a home outside of Washington all year, and spent no more than 30 days physically present in Washington), or (2) he or she is not domiciled in Washington but maintained a Washington place of abode and were physically present in Washington for more than 183 days during the year. This mirrors the residency test applicable to the Washington capital gains tax.

How Would Washington Income Be Calculated?

Washington base income for purposes of determining the amount of the tax would be calculated starting with a taxpayer’s federal adjusted gross income (AGI), which is then subject to various adjustments (e.g., interest income from non-Washington state debt obligations and state and local taxes that were excluded or deducted from federal taxable income are added back). Taxpayers would deduct federal long-term capital gains and add in net Washington long-term capital gains.

How Would the Deduction Be Applied? 

After determining Washington base income, taxpayers would apply the standard US$1,000,000 deduction. Importantly, married couples and state-registered domestic partners would have the same standard deduction of US$1,000,000 of income regardless of joint or separate filing status. 

Charitable deductions against Washington base income would be capped at US$100,000 (including for joint filers). Unlike federal income tax, where charitable deductions are calculated on a percentage of AGI, charitable contributions in excess of US$100,000 would not be deductible for purposes of calculating Washington income tax liability.

What Would Be the Impact on the Washington Capital Gains Tax?

The income tax bill would not eliminate the Washington capital gains tax. Instead, it would provide a credit for Washington capital gains taxes paid. This interaction between the two taxes could have the effect of eliminating the benefit of the lower rate on Washington capital gains up to US$1,000,000, which are currently taxed at 7%.

What Other Sources of Income Are Included?

Washington base income for purposes of the millionaires’ tax includes income that is allocated to individuals on Schedules K-1 from pass-through entities, such as S corporations and partnerships. Pass-through entities may elect to pay the Washington tax at the entity level, which could enhance Washington taxpayers’ ability to deduct Washington state income taxes on their federal returns. 

Does the Tax Apply to Nonresidents?

Nonresidents would also be subject to the tax on Washington-source income, including wages and other compensation, income attributable to any business, trade, profession, or occupation carried on within the state; and rental income attributable to Washington property. There is a safe harbor for service income earned by nonresidents who spend five or less days performing services in-state during a calendar year (excluding compensation for athletes).

When Would the “Millionaires’ Tax” Apply?

As noted above, the relevant period would begin 1 January 2028, with the applicable taxes due beginning in 2029. This is subject to the bill becoming law; in a press release after passage of the bill by the legislature, Governor Ferguson indicated that he would sign the bill as passed. Once signed into law, the millionaires’ tax is expected to face legal challenges—at least one organization, Citizen Action Defense Fund, has stated that if the bill becomes law, it is “prepared to take prompt legal action.”

Washington Estate Tax Rates Reverted But Exemption Frozen 

Starting 1 July 2026, SB 6347 would reduce the estate tax rate increases that went into effect 1 July 2025. A late amendment to the bill has the effect of once again freezing the estate tax exemption.

If the bill is signed into law, the rates would revert (as noted in the table below¹) back to a range between 10%–20%, depending on the value of the decedent’s Washington taxable estate (referring to the amount over the available exemption). 

While last year’s SB 5813 implemented an inflation index, that inflation index would revert under the recently passed bill to an inflation index that does not exist (the former Seattle-Tacoma-Bremerton index). Effectively, while the legislature elected to maintain the increased exemption amount of US$3,000,000 per individual, the exemption would remain frozen with no valid inflation index against which to calculate an increase. 

For decedents dying on or after 1 July 2026, the available exemption would revert to US$3,000,000. The exemption would continue at US$3,076,000 for estates of decedents who died between 1 January 2026 and 30 June 2026 (as a result of 2025 adjustments and prior to the new bill taking effect).

Understanding the Impact

The firm's Tax and Estate Planning and Trusts & Estates practice groups are well positioned to discuss these bills’ impacts on each client’s unique circumstances, as well as planning opportunities, and our policy team continues to monitor these developments. Please reach out to your contact at the firm today to discuss how we can provide insight or assistance.

Despite apparent declines in criminal and civil regulatory enforcement in financial markets, financial firms should expect continued focus on fraud, misleading statements, and improper valuation practices, particularly as private markets become more accessible to retail investors. In November 2025, US Attorney for the Southern District of New York (SDNY) and former Securities and Exchange Commission (SEC) Chair Jay Clayton signaled a renewed enforcement focus on valuation practices, especially as to whether private fund advisors “cherry-pick prices” that benefit themselves through higher fees at the expense of fund investors. Mr. Clayton specifically flagged inter-fund transfers—where assets with no observable market trading are moved from one affiliated vehicle to another—as a high-risk area for manipulation. This renewed emphasis is reflected in the SEC Division of Examinations’ 2026 priorities, which listed among its “developing areas of interest” registered investment companies that use complex strategies or hold significant illiquid investments, including any associated issues regarding valuation and conflicts of interest.

The entry of retail participants into private capital markets cannot be overlooked. Retail participation has broadened portfolio diversification opportunities and flattened access to asset classes historically reserved for institutional investors. The proliferation of retail-oriented vehicles, however, has introduced an investor segment with materially different risk tolerances, time horizons, and disclosure expectations than traditional counterparts. Such a shift brings heightened litigation exposure with respect to expectations on investment returns, suitability, and fiduciary duties. 

With private lending markets coming under scrutiny, we set forth below an overview of significant developments in the area, highlight potential risks from past financial crises, and offer proactive measures to manage any inquiries by government authorities.

The Continuing Financial Crimes Enterprise Statute

On 16 December 2025 the US Attorney’s Office for the SDNY announced the unsealing of an indictment charging the founder and former CEO of Tricolor Holdings LLC with orchestrating a years-long financial crimes enterprise that defrauded multiple banks and other private credit providers. Tricolor’s former CEO and COO also were charged with bank fraud and wire fraud offenses in connection with schemes to fraudulently double-pledge collateral to multiple lenders and manipulate the characteristics of collateral to make assets with questionable value appear to meet lender requirements. Unable to maintain its access to loans, and unable to sustain its business without substantial cash, Tricolor filed for Chapter 7 bankruptcy on 10 September 2025. In related proceedings, prosecutors unsealed the guilty pleas of Tricolor’s former CFO and a former finance executive at Tricolor in connection with their participation in the conspiracy, both of whom pleaded guilty to fraud charges in December 2025.

Six weeks later, on 29 January 2026, the SDNY unsealed an indictment against the founder and former chief executive officer of First Brands Group and his brother for an alleged multi-year, multibillion dollar fraud scheme. The brothers are alleged to have falsified invoices and pledged the same collateral multiple times to lenders, causing the automotive supplier to collapse into bankruptcy with over US$9 billion in debt.

Both sets of indictments are the first major federal prosecutions in nearly thirty years that clearly apply Section 225 of Title 18, the Continuing Financial Criminal Enterprise (CFCE) statute, to a large-scale financial fraud enterprise. The statue was created by the Comprehensive Thrift and Bank Fraud Prosecution and Taxpayer Recovery Act (Pub. Law 101 647) on 19 November 1990 and was enacted in response to the savings and loan crisis of the 1980s.

The statute allows prosecution of individuals who organize or supervise a continuing financial crimes enterprise that involves four or more people and generates US$5 million or more within a 24-month period, with penalties of ten years to life imprisonment plus heavy fines. Designed to mirror the Continuing Criminal Enterprise statute (18 U.S.C. § 848), Section 225 specifically addresses white-collar enterprise-level financial crimes and is aimed at strengthening criminal enforcement against large-scale financial fraud. It targets individuals who organize, supervise, or manage a coordinated set of financial fraud offenses such as bank fraud, mail and wire fraud, false statements, and embezzlement.

There is an implied cautionary message in the renewed use of the CFCE. Criminal exposure might attach not only to executives and other senior officials who personally execute transitions, but to those who direct or approve those business activities.

Fair Value Measurement

In a notable 2026 civil enforcement action, the SEC settled claims against a formerly registered investment adviser and private fund manager, concerning the sufficiency of its fair valuation procedures for principal sales of loans to its private fund clients. See In re Madison Capital Funding LLC, Advisers Act Release No. 6948 (28 February 2026). The loan sales at issue occurred during a narrow window—March through May 2020—when, despite extreme market dislocation at the start of the COVID-19 pandemic, the adviser continued to sell performing loans it had originated before the disruption at par value less the unamortized loan fee, without further assessing whether the market disruption had affected the loans’ fair market value. Mitigating factors noted in the order included that all but one of the loans either continued to perform or were fully repaid by borrowers, and that in May 2021, in response to an examination deficiency letter, the adviser voluntarily reimbursed the funds over US$5 million and enhanced its disclosures and policies. Without admitting or denying the allegations, the adviser agreed to settle negligence-based violations of the Investment Advisers Act and pay a US$900,000 penalty.

This SEC case tracks the approach of prior enforcement actions by federal authorities in cases probing valuation methodologies. For example, in May 2018, a New-York based investment adviser agreed to pay more than US$10 million to settle SEC charges that it falsely inflated the value of securities held by funds the company advised. See In re Visium Asset Management LP, Securities Act Release No. 10494 (8 May 2018). This caused the funds to overstate their net asset value (NAV) and the liquidity of the fund’s holdings, which led to inflated fees to the adviser. In parallel proceedings, the portfolio managers were criminally charged with securities and wire fraud in connection with the scheme and related insider trading. They were convicted or pleaded guilty, and the adviser’s CFO settled charges that he did not reasonably supervise the portfolio managers by appropriately responding to red flags of their mismarking.

Recent case filings by civil plaintiffs against private capital firms and their affiliates have adopted this theory of liability. See Burnell v. BlackRock TCP Capital Corp., Case No. 2:26-cv-1102 (C.D. Cal.). Plaintiffs generally have alleged that private capital firms failed to disclose to investors that their investments were not being timely or appropriately valued; that their efforts at portfolio restructuring were not effectively resolving challenged credits or improving the quality of the portfolio; that resulting unrealized losses were understated; and that as a result the NAV was overstated.

The focus by federal authorities and private plaintiffs on valuation practices and methodologies brings into view the relevant standards for fair value measurement.

When a company places a dollar figure on an asset, auditors, regulators, and investors want to know how defensible is that number. Under Accounting Standards Codification Topic 820 (Fair Value Measurement), the Financial Accounting Standards Board devised a three-tier framework to answer precisely that question. The hierarchy classifies assets by the observability of the inputs used to determine their fair value, with each successive level demanding greater scrutiny, richer disclosure, and, often, more contentious judgment. The stakes are considerable. Misclassification, or manipulation of inputs within a level, can inflate balance sheets, distort earnings, and mislead creditors.

Level 1 assets carry the highest degree of reliability because their valuations rest on unadjusted quoted prices in active markets for identical assets or liabilities. When a portfolio manager checks the closing price of shares on a public exchange during trading hours, that figure is a Level 1 input. The valuation test is straight mark-to-market. It requires no modeling, no assumptions, and no professional judgment about what the asset might be worth. Typical assets in this category include exchange-listed equities, US Treasury securities, exchange-traded funds (ETFs), listed futures and options, and sovereign bonds trading in deep and liquid markets. Even at Level 1, nuance can surface. A fund holding a large block of stock may find that selling the entire position would move the market, yet ASC 820 explicitly prohibits applying a block discount to Level 1 instruments. Firms must also determine whether a market is “active”—a judgment that proved highly contentious during the 2008 credit crisis, when trading volumes declined and bid-ask spreads widened materially. A market that appears liquid under normal conditions can rapidly lose that designation, forcing a reclassification to Level 2.

Level 2 encompasses assets which fair values cannot be read directly from a live exchange but are nonetheless grounded in observable market data. Valuations at this level are model-driven, yet the models are calibrated using inputs that other market participants can verify—such as yield curves, credit spreads, and foreign exchange rates. Level 2 assets generally include investment-grade corporate bonds and municipal securities trading over-the-counter, interest rate and currency swaps, non-exchange-traded equity securities for which comparable transaction prices exist, and certain mortgage-backed securities with sufficient market activity to observe spread data. Various complexities might arise about the correct price to be applied in any given circumstance, such as the mid-market price versus the exit price. ASC 820 prescribes exit price, but in thinly traded markets, the bid can diverge substantially from the mid price. Analysts must also navigate other factors, such as the selection of appropriate peer-group credit spreads and the treatment of instruments that sit on the border between Level 2 and Level 3. A minor deterioration in market liquidity can render a previously observable input unobservable.

Level 3 generally comprises illiquid and bespoke assets. Assets classified here cannot be valued by referencing observable market prices or spreads; their fair values are determined almost entirely by unobservable inputs the reporting entity itself generates. As a result, Level 3 valuations carry the greatest potential for error (and potential misconduct) and attract the most intense scrutiny from auditors, regulators, and investors. Common methodologies include the discounted cash flow analysis, the market approach using earnings multiples from comparable private transactions, and NAV methods for certain fund interests. For this category, typical assets include private equity and venture capital holdings, real estate held for investment, complex collateralized debt obligations, leveraged loans for which no secondary market exists, intangible assets acquired in business combinations, and certain derivative instruments with long-dated maturities.

Liquidity and Concentration Risks

Additional risks bearing on financial condition that have materialized in past financial crises include liquidity risk and concentration risk.

Liquidity risk generally is defined as the risk of incurring losses resulting from the inability to meet payment obligations in a timely manner when they become due or from being unable to do so at a sustainable cost. The Lehman Brothers Securities and ERISA Litigation involved a set of consolidated civil actions following Lehman Brothers’ filing for bankruptcy protection in September 2008. There, a putative class of bond and equity purchasers alleged that the statements that Lehman’s liquidity pool was sufficient to meet its expected needs over the next twelve months and that its liquidity position was “strong” were misleading statements. But the district court held that those statements were non-actionable statements of opinion, for which there were insufficient facts alleged that the Lehman executives did not truly believe them when made. The statement about liquidity were based on models and assumptions, some of which were disclosed in Lehman’s various securities offering materials, about what would happen in the future.

A different result was reached in In re MF Global Holdings Limited Securities Litigation, which involved a commodities futures broker that failed in October 2011. In that case, the operative complaint alleged misstatements about MF Global’s capital and liquidity management based on representations by the company and its officers about its “strong” liquidity position. The district court ruled such statements were actionable under the federal securities laws, in light of allegations that MF Global faced substantial strain on its capital and liquidity and met its regulatory requirements only through “daily intra-company transfers” and collapsed when “RTM [repurchase-to-maturity] counterparties demanded additional margins.”

A risk concentration is any exposure with the potential to produce losses large enough (relative to a bank’s capital, total assets, or overall risk level) to threaten a bank’s health or ability to maintain its core operations. The early 2008 financial crisis case SEC v. Mozilo examined the characterization of concentration risk exposures. There, the SEC alleged that three senior Countrywide executives made a series of misleading statements aimed at reassuring investors that the company was mainly an originator of prime quality mortgages, qualitatively different from competitors who engaged in less sound lending practices. As one of its core holdings, the district court concluded that the SEC had adequately pleaded that Countrywide’s description of its loan categories “prime non-conforming” and “subprime” constituted misleading statements. The court observed that “[b]ecause the banking industry and regulators viewed 660 or 620 as the dividing line between prime and subprime loans, by using the word ‘prime,’ Countrywide affirmatively created the impression that it used the same dividing line, and only included loans with a credit score of 660 or above, or at the very least, 620 or above, within that category.”

In another 2008 financial crisis case, In re Citigroup Inc. Securities Litigation, class plaintiffs alleged that Citigroup and its executives misled investors about, among other things, the bank’s collateralized debt obligation (CDO) exposure. In particular, the plaintiffs had alleged that Citigroup’s November 2007 disclosure that it held US$43 billion of super senior CDO tranches and expected a writedown of US$8 to $11 billion was materially misleading. The district sustained the falsity of those allegations because Citigroup allegedly had omitted from its disclosure the existence of US$10.5 billion in hedged CDOs (and thus US$43 billion was not the full extent of exposure) and the announced writedown was inadequate because it overstated the value of the CDO positions.

Protective Measures

With the uncertain market conditions, it is difficult to predict whether more severe storm clouds are approaching or these are simply squalls as the market self-corrects. For lending businesses, credit counterparties, and their internal counsel, there are a number of meaningful practical steps that can be applied to avoid missteps in the future. Companies can create an internal working group with legal counsel to ensure issues are identified and privileged communications are protected as necessary. Companies can work to ensure that external statements and representations (regarding valuation, risk, diligence, and other items) are consistent with internal statements and established practices. As appropriate, marks can be reviewed so that they are uniform within the enterprise and reflect market conditions. Compliance officials can discuss best practices with respect to communication, documentation, and technology. Finally, senior officials can stress the important of collective decision making to ensure all efforts are taken in good faith and on the basis of professional guidance.

As regional conflict causes disruption to commercial activity, this article considers the enforceability of contractual force majeure provisions and the availability of relief for events of force majeure and loss resulting from extraneous causes under UAE law. 

Enforceability of Contractual Force Majeure Provisions

Under UAE law, contracting parties are generally free to agree on the contractual terms that will govern their relationship provided they do not conflict with a mandatory provision of UAE law or contravene public order or morals. 

The concept of force majeure is recognised and judicially well-understood in the UAE, and force majeure provisions are commonly included in commercial contracts in the region. Express force majeure provisions in contracts governed by UAE law will generally be enforceable. Similarly, contractual notice requirements that must be satisfied before force majeure can be relied on will usually be upheld.

Applicable Provisions of UAE Law

In the absence of (or supplementing) express contractual force majeure provisions, Federal Law No. 5 of 1985 on the Civil Transactions Law (Civil Code) contains several articles that provide for relief in the case of force majeure and other exceptional circumstances. 

Although the Civil Code refers to “force majeure” and “exceptional circumstances” as the basis for relief from performance of contractual obligations, it does not provide any definition of what constitutes force majeure or exceptional circumstances. The starting point for any such analysis is the contract in question and, in particular, whether there are any definitions that encompass conflict (such as war, hostilities, government restrictions, or disruptions to transport). If the contract is silent or unclear, then it will be for the court or arbitral tribunal to determine whether the existence and effects of the conflict constitute force majeure or exceptional circumstances in the context of the Civil Code. Each concept is considered in further detail below. 

Unlike in the common law jurisdictions, where force majeure may result in the suspension of contractual obligations, the default consequence of establishing force majeure that renders the performance of the obligation partially or wholly impossible under UAE law is that the contract is partially or wholly terminated, as applicable. The termination of the contract renders the contract void ab initio. 

Article 273(1) of the Civil Code provides that if a force majeure event supervenes that renders performance of a contract impossible, all contractual obligations will cease and the contract will be automatically terminated. 

Under Article 273(2) of the Civil Code, if the force majeure event renders part of the obligations impossible to perform, only that part of the contract will be extinguished and the remainder will continue in effect. In such cases, the obligor, in respect of the partially impossible obligation, is permitted to terminate the entire contract on giving notice to the obligee.

The requirement to establish impossibility of performance is a high threshold; mere difficulty, delay or the increased cost in the performance is insufficient. 

Although Article 273 of the Civil Code does not require notice (as the contract is wholly or partially terminated automatically by operation of the law), a party seeking to rely upon this provision may still be required to provide notice of the termination to its counterparty, to avoid any allegation of breach of the general obligation under Article 246 of the Civil Code to perform the contract consistent with the requirements of good faith. 

If a contract is terminated under either Article 273(1) or 273(2) of the Civil Code, the parties are to be restored to the position they were in before they entered into the contract; if that is not possible, damages may be awarded by a court (or arbitral tribunal) by way of compensation to a party that has suffered a loss as a result of the inability to unwind the contract. 

Where a party is unable to perform its contractual obligations as a direct result of external events beyond its control, it may also rely upon Article 287 of the Civil Code as a defence to any claim against it for damages for nonperformance. Article 287 of the Civil Code provides that if a person can prove that a loss arose out of an extraneous cause in which it played no part, such as a natural disaster, unforeseen circumstances, force majeure, the act of a third party or the act of the person that has suffered the loss, it will not be liable to make good the loss.

Further, if a party cannot meet the high threshold of impossibility of performance required by Article 273 of the Civil Code, but the contract is no longer economically viable, it may seek relief under Article 249 of the Civil Code. Article 249 of the Civil Code provides that if exceptional circumstances of a public nature that could not have been foreseen occur, as a result of which performance of a contract becomes oppressive for a party, but not necessarily impossible, the judge (or arbitral tribunal) has discretion, after weighing the interests of each party, to reduce the obligation to a reasonable level if justice requires it. Unlike the provisions that concern force majeure, Article 249 of the Civil Code does not result in the termination of the contract, but rather, the rebalancing of contractual obligations in the interests of fairness. The court (or arbitral tribunal) has broad discretion to adjust the parties’ obligations, such as reducing prices or extending timelines.

Recent judgments from the UAE Courts of Cassation provide some guidance as to the applicability of force majeure to the present conflict. In Dubai Court of Cassation Commercial Case No. 1 of 2024, the Dubai Court of Cassation held that the outbreak of war between Russia and Ukraine was a force majeure event that prevented the defendants’ performance of their obligations. The Dubai Court of Cassation specifically found that the war was unforeseeable at the time of contracting and could not be prevented, nor could its consequences be avoided. Therefore, the defendants were not in breach of their contractual obligations. 

Conclusion

Contracting parties facing delay, nonperformance and the increased costs of performance as a result of the regional conflict should carefully review contractual language to identify any applicable force majeure provisions and ensure timely compliance with any notice requirements. They should also assess whether the circumstances amount to force majeure under the Civil Code or constitute unforeseen, exceptional public circumstances rendering performance extremely onerous for one party, in order to establish what relief may be available.

About The Firm

Our Litigation and Dispute Resolution practice has a long history of acting as counsel on high-stakes international arbitration and litigation mandates. Our lawyers in Dubai have extensive experience advising on litigation and arbitration with respect to complex, high-value disputes in the UAE and the wider Middle East region.

Minimum Wage Rate Increases

As of 1 January 2026, New Jersey’s minimum wage rates are as follows:

• Most employers must raise their hourly wage from US$15.49 to US$15.92, with exceptions noted below.
• Tipped workers will see their minimum wage increase from US$5.62 to US$6.05 per hour, with the maximum tip credit remaining at US$9.87.
• Employees working for seasonal or small businesses (with fewer than six employees) will have their minimum wage increased from US$14.53 to US$15.23 per hour.
• Agricultural workers will receive an increase from US$13.40 to US$14.20 per hour.
• Staff in long-term care facilities will see wages rise from US$18.49 to US$18.92 per hour.

Ban on “Captive Audience” Meetings

On 2 December 2025, an amendment to the New Jersey Worker Freedom from Employer Intimidation Act (NJWFEIA) took effect. The NJWFEIA generally prohibits employers from compelling employees to attend employer-sponsored meetings or engage in communications intended to convey the employer’s views on religious or political subjects. The amendment expands the NJWFEIA’s prohibition against employers requiring employees to attend meetings or participate in communications—organized by the employer or its agents—that concern “political matters.”¹

The amendment also broadens the definition of “political matters” to include topics related to electioneering communications, as well as an employee’s decision to join or support any political party or political, civic, community, fraternal, or labor organization or association. In particular, the expansion of this definition to encompass topics related to an employee’s decision to join a “labor organization or association” appears designed to prohibit mandatory employer meetings in the context of union organizing campaigns, a matter that is the subject of considerable oversight by the National Labor Relations Board, the federal agency charged with regulating labor management relations in the private sector. It remains to be seen whether the expansion of the NJWFEIA’s definition of “political matters” in this manner will result in challenges on the grounds that the amendments are preempted by federal labor law.

NJWFEIA continues to prohibit employers from disciplining, penalizing, or retaliating against employees who refuse to attend captive audience meetings that relate primarily to religious or political matters.

Employers are required to post notice of employee rights under this amendment and must ensure that the notice is posted in a conspicuous place commonly frequented by employees where employment-related notices are posted. As of publication, the New Jersey Department of Labor and Workforce Development has not yet provided a poster to reflect the amendment. 

New Jersey Pay Transparency Act

Effective 1 June 2025, New Jersey implemented a pay transparency law (the Act) mandating employers to disclose salary or wage details, or the applicable salary range, within job postings. Under the Act, employers are also required to make reasonable efforts to notify current employees of promotional opportunities available within their departments.

The New Jersey Department of Labor and Workforce Development published proposed rules to the Act on 15 September 2025,² clarifying that a “covered employer” includes any individual, company, corporation, firm, labor organization, or association with at least 10 employees for more than 20 calendar weeks. This definition applies regardless of whether those employees work inside or outside New Jersey, as long as the business operates, employs people, or accepts job applications within the state.

Under the proposed rules, “reasonable efforts” to inform employees of promotion opportunities means:

1. Conspicuously posting notification of the promotional opportunity in a place(s) within the employer’s workplace(s) that is/are accessible to all employees in the department(s) of the employer to which the promotional opportunity is open; and 
2. In the event the employer has an Internet site or intranet site for exclusive use by its employees and to which all employees have access, posting notification of the promotional opportunity on the employer’s Internet site or intranet site.

With respect to new jobs or transfer opportunities, the employer must at a minimum include the following information within notification of the new job opportunity or transfer opportunity:

1. The hourly rate of pay or annual salary, as applicable, or a range of the hourly rate of pay or annual salary, as applicable; and
2. A general description of benefits and other compensation programs for which the applicant would be eligible if selected for the new job opportunity or transfer opportunity.

When the employer includes a range of the hourly rate of pay or a range of the annual salary, the range spread from minimum hourly rate of pay or salary to maximum hourly rate of pay or salary should be no more than 60% of the minimum hourly rate of pay or minimum annual salary, as applicable. This range is calculated by subtracting the minimum pay for the position from the maximum pay, dividing the result by the minimum pay, and multiplying that number by 100. This would not apply to salary ranges established through a collective bargaining agreement or by law, rule, or local ordinance.

Employers may be held accountable for violations related to advertisements on third-party websites only if they maintain authority over the content displayed or have explicitly agreed with the third-party site to transfer control of the advertisement’s content.

The proposed rules also provide clear definitions for “benefits” and “does business.”

• “Benefits” refers to fringe benefits such as health, life, and disability insurance; paid time off; training; and pension benefits, among others.
• For “does business...within New Jersey,” both the solicitation and the actual location of the potential job must be in New Jersey for the Act’s requirements to apply.

While the proposed rules have not been adopted and are currently nonbinding, they are instructive for employers as they evaluate continued compliance with the Act. 

In light of these developments, employers should review their compliance strategies and stay alert to further changes in the year ahead. Our lawyers in the Labor, Employment, and Workplace Safety practice will continue to monitor developments with these and other legal changes affecting New Jersey employers as they arise.

This development marks a significant milestone in the implementation of Law Number 6 of 2014 Regulating the Real Estate Sector (the Real Estate Law).

Following the issuance of the Real Estate Law, the Ministry of Justice took further steps to regulate the real estate sector by issuing law number 5 of 2024 regulating the registration of real estate transactions and rights (the Real Estate Registration Law).

The Real Estate Registration Law established a digitalised register (the Register) in order to streamline the real estate registration process.

The Real Estate Registration Law states that the Register must include details of all property transactions that create rights, including establishing, transferring or removing any ancillary real estate rights, which will also be recorded on the relevant title deed of such property.

However, as part of its internal consultation process, the real estate registration department identified a potential lacuna in the treatment of off-plan units and the related transactions and rights. Before the issuance of this most recent Ministerial Decision, there was no dedicated real estate register to deal with off-plan units or their related transactions—nor there was a mechanism to file applications and documents pertaining to the units in question. In practice, therefore, all dealings and transactions, whether sale or mortgage, for off-plan units were being recorded through side agreements between real estate developers and purchasers.

Obviously, the absence of such a system risked creating complications, and could result in reduced transparency and limited legal protection for the contracting parties.

Key Objectives of the Ministerial Decision

Together, the Ministerial Decision and the Real Estate Registration Law therefore aim to:

• Facilitate real estate registration services through electronic registration systems.
• Streamline access to registration procedures for owners and co-owners.
• Ensure that all rights of any type over real property can be efficiently recorded.
• Enhance transparency and legal confidence of real estate transactions.

Recognition of Off Plan Real Estate Rights

A notable feature of the Ministerial Decision is its express recognition of transactions and rights relating to off plan units, addressing an important market need in Qatar’s growing real estate-development sector.

The Preliminary Real Estate Registry will maintain specialised records for off plan units, including:

• Applications and sales contracts.
• Approved architectural designs.
• Engineering plans and project specifications.

Each registered off plan unit will have a detailed record capturing:

• Unit area and dimensions.
• Project name.
• Unit number as shown in approved plans.
• Relevant technical specifications.
• Details of owners or co owners.
• Ownership percentages.
• Any registered rights or transactions affecting the unit.
• Issuance of preliminary title deeds.

Under the new Ministerial Decision, each off plan real estate unit will be issued a preliminary title deed. This will enable owners and co owners to register key transactions and rights, including sales, mortgages and other rights or interests. This provides developers, investors and buyers with greater protection during the construction phase.

Impact on the Market

The introduction of the Preliminary Real Estate Registry is expected to increase regulatory structure to Qatar’s off plan sales market, improve market transparency and investors’ confidence, support the objectives of Qatar National Vision 2030 and provide enhanced legal protection for both real estate developers and purchasers.

In summary, the Ministerial Decision represents a welcome step forward in modernising and regulating Qatar’s real estate sector.

The DOJ CEP—a nearly word-for-word copy of the DOJ Criminal Division’s (Criminal Division) existing CEP²—is now the uniform enforcement policy across all corporate criminal cases, except for those relating to antitrust, which has its own long-standing incentives for voluntary reporting.³ While providing uniformity, the requirements for, and benefits of, self-disclosure essentially mirror the Criminal Division, and companies must thoughtfully assess self-disclosure with counsel. 

This alert analyzes the DOJ’s uniform policy on corporate enforcement and voluntary self-disclosure, its potential impact on US Attorney’s Offices’ handling of such cases, and practical considerations for companies evaluating whether to self-report under this policy. 

Uniform DOJ CEP Impact on Self-Disclosure Practices

In announcing the uniform DOJ CEP, US Deputy Attorney General Todd Blanche and Assistant Attorney General A. Tysen Duva said the policy builds on the DOJ’s “decades of experience [with self-disclosure, cooperation, and remediation] and creates incentives for companies to come forward and do the right thing when misconduct occurs.”⁴ The stated purpose of this policy is to “hold accountable individual wrongdoers” and reward “well-intentioned business ... when they self-disclose wrongdoing, cooperate with ... investigations, and remediate the misconduct.”⁵ However, Deputy Attorney General Blanche was clear that “for those that do not [self-disclose, cooperate, and remediate], make no mistake—we will not hesitate to seek appropriate resolutions against companies and individuals alike that perpetrate white collar offenses that harm American interests.”⁶

While not explicitly limiting corporate responsibility for misconduct, these statements indicate a continuation of DOJ’s claimed focus on specific bad actors and corporate declination resolutions when companies sufficiently self-disclose, fully cooperate, timely and appropriately remediate, and no aggravating circumstances exist. In addition, the DOJ CEP means that across divisions companies may receive: (1) a declination if they meet all four of the voluntary self-disclosure requirements, or (2) a nonprosecution agreement (NPA) (fewer than three years), no compliance monitor, and a reduction of at least 50% but not more than 75% of the fine range if they self-report in good faith (but do not qualify as voluntary self-disclosures), fully cooperate, and remediate with no aggravating circumstances. 

This DOJ CEP comes only two weeks after the SDNY released its own CEP, offering expedited declinations for qualifying self-reports.⁷ Although the SDNY CEP is formally superseded by the DOJ CEP, it remains to be seen how the SDNY, and other offices, will apply and administer the DOJ CEP. In an effort to attract self-reports, it is possible that some offices may still aim to expedite declination decisions while operating within the DOJ CEP framework, and other DOJ CEP features—like the assessment of “near miss” voluntary self-disclosures or aggravating circumstances—may remain open to interpretation between various offices and departments. Given its recent individual CEP and expedited declination rollout, the SDNY may be the first office to test the boundaries of the DOJ CEP when investigating and resolving alleged corporate misconduct. 

Practical Considerations

For companies, this DOJ CEP establishes baseline self-reporting and cooperation guidelines and guarantees consistent benefits across every DOJ division (other than the DOJ Antitrust Division). While providing certainty and consistency, companies in the United States must still proactively monitor for, and thoroughly investigate, alleged misconduct, as well as assess the merits of self-reporting with counsel. There are practical steps companies can take to best position themselves if they want to take advantage of these DOJ CEP guarantees, including: 

Developing Robust Compliance Programs

An effective compliance program that includes employee training, explicit avenues for self-reporting alleged misconduct, and clear priority areas—including antibribery, conflicts of interest, sanctions, export controls, and tariff compliance—will position companies to timely identify any potential misconduct. 

Conducting Internal Investigations

Underlying the new CEP is timely self-reporting and remediation. To accomplish both, companies must conduct credible internal investigations soon after misconduct allegations are identified so that they can self-report within a reasonably prompt period. Failure to do so could result in a company’s potential resolution moving from a declination to an NPA, despite good-faith efforts to self-disclose. 

Efficiently Evaluating Self-Disclosure Decisions

Despite guaranteed benefits, the uniform policy reinforces the need for companies to have candid discussions with counsel about self-disclosure—including whether the identified issues warrant disclosure, adequate remediation, potential associated criminal fines and restitution, ancillary litigation, and business and reputational risks. 

Conclusion

The DOJ CEP policy essentially applies the Criminal Division’s existing corporate enforcement and self-disclosure policy to all divisions, allowing companies involved in most DOJ investigations to take advantage of timely self-reporting, cooperation, and remediation benefits. While broadening access to potential self-disclosure credit, companies must still proactively identify issues, conduct comprehensive investigations into alleged issues, and consult with counsel. The firm has industry knowledge in white-collar enforcement and compliance regulations and policies that can effectively help your company prepare for, and navigate, any potential misconduct. 

The strategies combine industrial policy, climate regulation, trade policy and infrastructure investment, reflecting the EU’s increasing focus on strategic autonomy, energy security and supply chain resilience. For companies active in maritime transport, port infrastructure, energy and logistics, the initiatives signal both significant business opportunities—particularly in green maritime technologies and port modernization—and increasing regulatory scrutiny, notably in relation to climate obligations and foreign investment in strategic infrastructure.

Strategic Context: Maritime Infrastructure as a Geopolitical Asset

The EU increasingly frames maritime industries as strategic infrastructure critical to trade, energy security and defense mobility. Maritime transport accounts for approximately 75% of EU external trade and around 30% of intra-EU freight, while ports handle roughly 74% of goods entering or leaving the EU.  

Against a backdrop of geopolitical tensions, supply chain disruptions and intensifying global industrial competition, the Commission aims to: i) strengthen Europe’s leadership in high-technology maritime manufacturing; ii) accelerate fleet modernization and decarbonization; iii) modernize and secure EU port infrastructure; and iv) reduce strategic dependencies on third countries.

Industrial Maritime Strategy: Reinforcing Europe’s Maritime Manufacturing Base

The Industrial Maritime Strategy focuses on strengthening the European maritime industrial ecosystem, including shipyards, maritime equipment manufacturers and offshore energy supply chains. A key element of the strategy is the establishment of an EU Industrial Maritime Value Chains Alliance, intended to coordinate investment and support European leadership in key maritime technologies. Priority segments include: i) high-technology vessels (e.g., cruise ships, research vessels, icebreakers); ii) offshore wind installation and support vessels; iii) underwater technologies and maritime robotics; and iv) advanced port equipment and digital maritime technologies.

The Commission acknowledges that, while European shipyards remain competitive in high-value specialized vessels, they face increasing competition from heavily subsidized shipbuilding industries in Asia. Industrial policy measures therefore aim to reinforce EU leadership in high-technology segments with strong innovation potential.

The strategy also envisages measures to stimulate demand through public procurement pipelines for strategic vessels, targeted procurement criteria supporting EU industrial resilience and increased use of EU funding instruments.

EU Ports Strategy: Ports as Logistics and Energy Hubs

The EU Ports Strategy aims to modernize Europe’s ports and position them as key nodes in the energy transition and logistics system. The strategy prioritizes: i) port electrification and onshore power supply; ii) deployment of alternative fuel infrastructure; iii) improved hinterland connections through rail and inland waterways; and iv) digitalization of port operations and logistics chains.

EU ports are expected to evolve into multi-fuel energy hubs, supporting hydrogen imports, renewable fuels and offshore renewable energy supply chains.

The strategy also places greater emphasis on security, cybersecurity and protection of critical infrastructure, reflecting concerns over organized crime, cyber threats and geopolitical risks affecting maritime assets.

Opportunities for Industry Operators

The strategies signal a strong policy push toward commercializing maritime decarbonization and infrastructure modernization, creating several potential areas of opportunity for industry participants.

Investment incentives and funding opportunities

The EU intends to mobilize a range of funding instruments to support the maritime transition, including the Connecting Europe Facility, Innovation Fund, Horizon Europe and other future competitiveness funding programmes. Such programmes are expected to support projects such as port electrification and shore-side electricity infrastructure, vessel decarbonization and fleet modernization, as well as digital maritime technologies and shipyard modernization and clean vessel development.

For investors and technology providers, this may create new incentives to invest in maritime infrastructure and low-carbon maritime technologies.

Alternative fuels and power-to-X projects

Energy security considerations, reinforced by geopolitical developments, are likely to accelerate EU efforts to diversify energy sources and develop alternative fuels for maritime transport. This could create renewed opportunities for power-to-X projects and alternative maritime fuels, including hydrogen, ammonia, methanol and synthetic fuels.

Ports are expected to play a central role in these developments as energy import and distribution hubs, generating demand for infrastructure related to fuel production, storage, bunkering and logistics.

Commercialization of EU maritime policy initiatives

The strategies reflect a broader shift toward translating EU policy objectives into concrete industrial and infrastructure projects. As Member States implement these initiatives at national level, companies may find opportunities to propose commercial solutions and infrastructure projects directly to national governments, port authorities and public entities responsible for maritime infrastructure.

Emerging technologies

The EU’s focus on innovation in zero-emission maritime transport may also create space for emerging technologies, including advanced energy systems and next-generation propulsion solutions. Although still at an early stage of policy discussion, the maritime sector may increasingly explore advanced nuclear technologies, including potential applications of small modular reactors (SMRs) for maritime or port-related energy infrastructure.

Regulatory Exposure for Non-EU Businesses

While the strategies create significant commercial opportunities, they also signal an increasingly interventionist regulatory environment affecting both EU and non-EU companies operating in the maritime sector. 

Expanding climate obligations for shipping operators

The EU continues to strengthen its maritime decarbonization framework through measures such as EU ETS Maritime and FuelEU Maritime, which impose emissions-related obligations on vessels calling at EU ports. Significantly, such measures apply regardless of the nationality of the shipping operator, meaning that non-EU companies are directly affected when operating within EU maritime transport networks. Operators may therefore face increasing compliance costs and may need to accelerate fleet modernization and fuel transition strategies.

Foreign investment screening in port infrastructure

The strategies also highlight the EU’s growing focus on economic security and protection of strategic infrastructure. The Commission intends to provide guidance to Member States on screening foreign investments in ports and other strategic maritime infrastructure, including monitoring foreign ownership and operational control of port assets. Non-EU investors may therefore face enhanced scrutiny and potentially longer approval timelines when acquiring or investing in port infrastructure within the EU.

Legacy climate exposure in vessel acquisitions

Companies acquiring vessels may also face potential regulatory exposure linked to the vessel’s operational history in EU waters. In certain circumstances, climate compliance obligations may be associated with vessels that have previously called at EU ports, even if the purchaser does not intend to operate the vessel within the EU in the future.

This may require enhanced regulatory due diligence and contractual risk allocation mechanisms when acquiring vessels with an EU operational history.

Outlook

Through the Industrial Maritime Strategy and the EU Ports Strategy, the EU is seeking to position the maritime sector as a strategic industrial ecosystem combining decarbonization policies, industrial policy tools and infrastructure investment.

For maritime, energy and infrastructure companies, the initiatives create significant opportunities in green shipping technologies, port modernization and alternative fuels infrastructure, while also signaling greater regulatory oversight of strategic maritime assets and stronger industrial policy support for European supply chains.

The Office of the Comptroller of the Currency (the OCC) has recently issued a comprehensive notice of proposed rulemaking (the NPRM) to implement major portions of the Act within its jurisdiction. In parallel, the Federal Deposit Insurance Corporation and the National Credit Union Administration have issued more limited proposals addressing stablecoin issuance through subsidiaries of state nonmember banks and federally insured credit unions, respectively.

As you may recall, the GENIUS Act establishes a new kind of regulated entity, the Permitted Payment Stablecoin Issuer (PPSI), which is empowered to issue, convert, redeem, and custody payment stablecoins (and related activities), under either federal or state supervision. The NPRM covers the OCC's full supervisory lifecycle, from application and approval as a PPSI, to capital and reserve requirements, to ongoing supervision and enforcement of PPSIs. While many provisions are noncontroversial or closely track the statutory text, the NPRM also contains meaningful clarifications and interpretive positions that, if finalized, will significantly shape the stablecoin market. This client alert highlights key clarifications and identifies several important questions the NPRM leaves unresolved.

(For a detailed summary of the GENIUS Act itself, please see our prior analysis.)

Key Clarifications the NPRM Provides

May PPSIs Engage in Money Transmission–Like Activities Without Having to Obtain State Money Transmitter Licenses?

Apparently, yes.

While not addressed explicitly in the NPRM, the Act clearly indicates that the activities permitted by PPSIs are extensive and such PPSIs are not limited from engaging in payment stablecoin activities:  

“Nothing in subparagraph (A) shall limit a permitted payment stablecoin issuer from engaging in payment stablecoin activities or digital asset service provider activities specified by this Act, and activities incidental thereto, that are authorized by the primary Federal payment stablecoin regulator or the State payment stablecoin regulator, as applicable, consistent with all other Federal and State laws[.]” ¹

And certainly, when the OCC addressed “prohibited activities,” it did not take the opportunity to suggest that PPSIs would be prevented from performing money transmission services.  

Moreover, the NPRM makes it clear that federally qualified PPSIs are subject solely to regulation by the OCC: 

“Section 4(b)(1) of the GENIUS Act (12 U.S.C. 5903(b)(1)) states that, notwithstanding certain Federal law addressing preemption standards for OCC-regulated institutions, and certain State laws, a Federal qualified payment stablecoin issuer 'shall be licensed, regulated, examined, and supervised exclusively by the Comptroller.' This provision provides the OCC with the exclusive authority to exercise visitorial powers with respect to Federal qualified payment stablecoin issuers, consistent with the agency’s authority in 12 U.S.C. 484.” ²

Finally, the NPRM also makes clear that PPSIs may “hold and transact in payment stablecoins as principal or agent.” This clarification is significant. While the Act contemplates issuance and redemption of stablecoins, it does not expressly address whether issuers may act in an intermediary capacity for customers. The OCC even confirms that PPSIs may transact as principal or agent in connection with payment stablecoins, including redeeming payment stablecoins issued by a third party. This language effectively acknowledges that PPSIs may engage in activities functionally similar to money transmission, including the ability to process payments and facilitate transfers beyond simple minting and redemption.

What Additional Activities May PPSIs Undertake?

The NPRM also clarifies that PPSIs may: (1) assess fees in connection with the purchase or redemption of payment stablecoins; and (2) pay transaction fees necessary to facilitate transfers on distributed ledger networks (e.g., blockchain “gas” fees).³

This confirmation is important for both business model viability and consumer protection. Without express authority to assess or pay transaction-related fees, issuers could face technological and regulatory frictions. 

The OCC further clarifies that issuers may hold nonpayment stablecoin crypto-assets for the limited purpose of facilitating payment of transaction fees. This is a practical accommodation, as many distributed ledger networks require native tokens to effectuate transactions.

What Assets May Qualify as Reserve Assets?

The GENIUS Act requires PPSIs to maintain identifiable reserves backing outstanding payment stablecoins on at least a 1:1 basis. The statute limits permissible reserve assets primarily to highly liquid instruments such as US currency, certain deposits, short-term US Treasury securities, and specified repurchase agreements. The Act also permits “money” to qualify as a reserve asset, defined broadly to include mediums of exchange authorized or adopted by domestic or foreign governments. 

The NPRM introduces an important clarification: the OCC proposes that it will publicly confirm whether a particular medium of exchange qualifies as “money” for purposes of the Act. This interpretive gatekeeping function is material because reserve assets may not be readily identifiable as a form of "money" (e.g., certain assets designated by intergovernmental organizations).

May Subsidiaries of Uninsured State Banks Issue Payment Stablecoins?

Yes.

Section 16(d) of the GENIUS Act permits subsidiaries of uninsured state-chartered banks to issue payment stablecoins under the federal framework. Some industry participants advocated for narrowing or eliminating this authority.

The NPRM does not limit or modify this statutory authorization. The OCC’s proposal therefore preserves the ability of subsidiaries of uninsured state banks to operate as PPSIs, subject to applicable federal oversight.

May Issuers Pay Interest or Yield on Payment Stablecoins?

Generally, no.

The NPRM expressly prohibits a PPSI from paying interest or yield to holders of a payment stablecoin “whether in cash, tokens, or other consideration” solely in connection with the holding, use, or retention of that stablecoin. Given the speculation that partnerships with third-party retailers or hospitality companies could be used to provide rewards or loyalty points to payment stablecoin holders, the NPRM also includes a presumption that prohibited yield would arise with certain third-party relationships. The proposal therefore includes an anti-evasion presumption in cases where:

“the permitted payment stablecoin issuer has a contract, agreement, or other arrangement with an affiliate or a related third party to pay interest or yield to the affiliate or related third party; and 

the affiliate or related third party (or affiliate of such related third party) has a contract, agreement, or other arrangement to pay interest or yield (whether in cash, tokens, or other consideration) to a holder of any payment stablecoin issued by the permitted stablecoin issuer solely in connection with the holding, use, or retention of such payment stablecoin.” ⁴

This presumption reflects regulatory concern that yield could be indirectly provided through affiliated structures. The NPRM clarifies, however, that the prohibition does not extend to: (1) merchant discounts for payments made in stablecoins; or (2) profit-sharing arrangements with a partner, for example, in a white-label or commercial partnership context.

The anti-yield provision is among the most consequential elements of the NPRM, reinforcing the statutory distinction between payment stablecoins and deposit-like or investment products that do offer interest.

Key Questions the NPRM Raises

Reserve Asset Diversification Standards

The Act requires the OCC to establish reserve diversification and concentration standards, including limits on deposit concentration at particular institutions. The NPRM presents two alternative approaches:

Option A

A principles-based standard with an optional quantitative safe harbor; or

Option B

A fully quantitative, mandatory diversification framework.

The OCC suggests that a principles-based approach may better accommodate evolving market conditions. However, purely quantitative limits may provide greater predictability and supervisory consistency. The choice between these approaches could significantly affect treasury management strategies for issuers.

State Law Preemption Boundaries

The Act expressly preempts “any State requirement for a charter, license, or other authorization to do business” with respect to a Federal qualified payment stablecoin issuer or certain subsidiaries. At the same time, it preserves state consumer protection laws. However, the NPRM declines to codify additional clarifications regarding preemption, stating that the statutory provisions are self-executing.

This leaves unresolved important questions:

• Where is the boundary between preempted licensing requirements and permissible state consumer protection enforcement?
• Could state unfair or deceptive practices laws be used to indirectly regulate stablecoin practices?
• How will conflicts between state enforcement and exclusive federal supervision be resolved?

Given the dual banking system and history of federal-state tension in financial services regulation, this area is likely to generate industry comment and potential litigation.

Decentralized Finance

The Act restricts digital asset service providers from offering or facilitating the use of noncompliant payment stablecoins to persons in the United States. However, neither the statute nor the NPRM meaningfully addresses how these obligations would apply to decentralized protocols that operate without a centralized intermediary.

Many decentralized exchanges (DEXs) and other decentralized finance (DeFi) protocols facilitate peer-to-peer trading, lending, or liquidity provision involving stablecoins through smart contracts deployed on public blockchains. In these systems, transactions may occur automatically through code rather than through a traditional intermediary that can perform compliance functions such as geofencing, customer identification, or transaction monitoring. 

The NPRM does not clarify whether the operators, developers, governance participants, or front-end interface providers associated with such protocols could be considered “digital asset service providers” for purposes of the Act. It is therefore unclear who, if anyone, would bear responsibility for restricting access to noncompliant payment stablecoins by US persons participating in DEX and DeFi transactions. 

Conclusion

The OCC’s NPRM represents a comprehensive implementation of the GENIUS Act within the OCC’s supervisory perimeter. While much of the proposal closely follows the statute, several clarifications—particularly regarding permissible activities, reserve asset interpretation, anti-yield enforcement, and diversification standards—carry substantial market implications.

The NPRM includes more than 200 questions for public comment. The OCC has requested feedback from stakeholders, and the comment period is currently scheduled to close on 1 May 2026.

Market participants, including banks, fintech issuers, custodians, and digital asset service providers, should carefully evaluate both the clarifications provided and the ambiguities that remain. The final rule will shape not only compliance frameworks but also competitive positioning within the emerging US stablecoin regime.

While Texas has been dominated at the state level by the Republican Party for more than 30 years, the state has proven to be a major factor in the national political conversation no matter which party controls Washington, DC. During Republican administrations, the Texas legislature has served as a fast track to national party priorities, including immigration, voter identification requirements, and mid-decade redistricting maps. During Democratic administrations, the state has served as a challenger to environmental, healthcare, and immigration policies, often through suits filed by the state attorney general. 

In turn, the primary election here has taken center stage as the nation prepares for a contentious and expensive midterm election cycle. Unofficial voter participation numbers by party show Democratic voter turnout is notably higher than previous cycles, and outpaced Republicans by more than 110,000 votes.¹ The total campaign expenditure for US Senate topped US$122 million between all candidates, making it the most expensive primary race in Texas history. US$70 million of that total was in direct buys from incumbent Senator John Cornyn (R-TX).   

While most races were decided on the 3 March Election Day, multiple key races are now in a 12-week runoff concluding on 26 May. These races, especially the runoff for the Republican nomination for US Senate, will continue to set spending records, drawing time, attention, and resources from other states in similar scenarios. Twenty-four percent of the 18.7 million registered voters voted in the primary, including 2.3 million Democrats, and 2.2 million Republicans. This is the first time since the 2020 presidential election that Democrats voted in higher numbers than Republicans. 

Statewide Offices  

The race for governor is set between incumbent Governor Greg Abbott (R-TX) and State Representative Gina Hinojosa (D-TX). Hinojosa defeated eight other Democrat candidates in the primary and is completing her fifth term in the state house. Abbott easily won the Republican Primary after facing ten challengers and began the race with more than US$106 million in campaign funds. Hinojosa has raised approximately US$1.3 million. Abbott is widely credited for making immigration a top line national issue by creating a taxpayer funded bussing program where illegal immigrants were sent to predominantly Democrat leaning cities around the country. Recent national polling on immigration issues and the use of various law enforcement agencies to enforce the Trump administration’s immigration policies have become a net negative polling issue, and driving the undoing of years of Republican gains among Latino voters, particularly along the border counties. This will continue to create opportunity districts for Democrats that will ultimately cause the Republican fundraising apparatus to spend significant resources defending seats in Texas.

The race for lieutenant governor is between incumbent Lieutenant Governor Dan Patrick (R-TX), and either State Representative Vikki Goodwin (D-TX) or Houston-area community activist Marco Velez (D-TX). Patrick has US$31.7 million cash on hand, and has served as lieutenant governor since 2015. The office of lieutenant governor presides over the state Senate, similar to the manner in which the vice president in the US Senate. However, unlike the vice president, the office of lieutenant governor is an independently statewide elected office. Patrick has promoted some of the most socially conservative policies during his time in office, including Preventing Sharia Law in Texas and Promoting America & Texas First in school curriculum. Patrick is a key ally to the Trump administration both in the legislature, and to the Trump campaign. Goodwin is a licensed realtor by profession, served in the Texas House for four terms, and has raised just over half a million dollars in the race. 

The race for comptroller of public accounts is the most important statewide race to which many observers are not paying enough attention. As Texas’ chief financial officer, tax collector, accountant, revenue estimator, treasurer, cashier and purchasing manager, the agency is responsible for the accounting of the US$338 billion Texas budget. The office also collects taxes and fees owed to the state. This was a rare instance of President Donald Trump and Abbott with opposing endorsements between Acting Comptroller Kelly Hancock (R-TX) and former State Senator Don Huffines (R-TX). Abbott spent more than US$3.4 million supporting Hancock only to lose to Huffines by nearly 35 points. Huffines is an ultraconservative running predominantly on social issues that have little to do with the office. The key responsibility, and what could give Huffines an outsized influence over the legislative and executive branches, is the biennial revenue estimate. This estimate gives the legislature a baseline number to build the proceeding state budget. Huffines has expressed interest in applying a Department of Government Efficiency (DOGE) model to the office, which may be done in a way that will directly impact state program implementation, like education savings accounts, the State Energy Conservation Office, the Texas Broadband Development Office, etc. Huffines will face former county judge and current state senator Sarah Eckhardt (D-TX) in the fall.

The race to replace Attorney General Ken Paxton (R-TX) will also be decided in a runoff between Congressman Chip Roy (R-TX) and State Senator Mayes Middleton (R-TX). Roy received a last-minute positive mention, though not a full endorsement, from Trump during a multicandidate campaign event in Corpus Christi, Texas, and enjoys the highest statewide name recognition of the field. Middleton is an ultraconservative member of the Texas Senate who predominantly self-funded his campaign to the tune of US$11.8 million. The winner will face off against State Senator Nathan Johnson (D-TX) or perennial candidate Joe Jaworski (D-TX) in the fall. The office has been held by a Republican since 1999 when US Senator John Cornyn (R-TX) held the office. Paxton often found himself as lead plaintiff or joining multiple suits against former Presidents Barrack Obama and Joseph Biden era policies, often being heard in front of the United States Supreme Court. The office has often been used as a springboard to higher office as was the case for Cornyn, Abbott, and potentially Paxton himself. 

With the offices of governor and lieutenant governor looking like safe Republican holds, a Democrat win in the race for attorney general would be significant. This is another race where more Democrats voted in the primary than Republicans, though only narrowly. If Democrats maintain their high turnout numbers then this will be a race to watch. 

US Senate

The most expensive Republican primary race in United States history will continue another 12-weeks, with the 24-year career of Texas’ senior US senator on the line. After a heated eight way primary with state Attorney General Ken Paxton, Congressman Wesley Hunt (R-TX), and others, Cornyn exceeded expectations to place first in the race with 41.9%, Paxton finished second at 40.7%, and Hunt with 13.5%. Cornyn spent more than US$70 million to get into the runoff and was a guest on Air Force One for a campaign stop in Corpus Christi, Texas late last week. The president called Cornyn a “great Senator” but also made recent positive mention of Paxton as well. Paxton famously led the Texas v. Pennsylvania suit in 2020 that challenged the presidential election results in four states former President Biden won. Those four states were; Wisconsin, Michigan, Pennsylvania, and Georgia. The case was declined by the United States Supreme Court. Should Paxton prevail, it would be a decisive shift to the right of Cornyn. In the eyes of many Democrats this is a more favorable general election match up in the fall. No other candidate who failed to make the runoff has endorsed at this time. President Trump has stated he will formally endorse a candidate and call for the other candidate to withdraw.

Democrats have selected State Representative James Talarico (D-TX) as their candidate for the US Senate seat. Talarico defeated Congresswoman Jasmine Crockett (D-TX) 52% to 46%. After some controversy surrounding the closing times of Dallas County polling locations, there was ultimately not enough outstanding votes to change the outcome. Talarico performed well with Latino voters along the border, and throughout West Texas. While polling fluctuated greatly depending on the day, Crocket’s strongholds of Dallas, Fort Worth, Houston, and deep East Texas were not enough. Despite earlier concerns over disenfranchisement, she conceded the race and called for unity. Talarico can now take advantage of a continuing, and often vitriolic, Republican primary that has pitted the ultraconservative and moderate wings of the party against each other. Democrats see the opportunity to win Texas as a key step in regaining control of the US Senate, and draining Republican resources from races in states like North Carolina and Maine. Should Paxton prevail in the runoff, it is the Democrat’s hope that Republican doners and campaign structures will be occupied in defending the seat in a historically safe state and reduced resources for other states, particularly swing states. Regardless of the general election outcome, this race will have implications for a great many other races. 

US House

Nine of the 38 members from the Texas Congressional Delegation announced their retirement or intention to run for another office, and it saw the first House incumbent in the country to lose a primary. Dan Crenshaw (R-TX) lost to Trump-endorsed State Representative Steve Toth (R-TX) in spite of significantly outraising his opponent. Tony Gonzales (R-TX) was initially in a runoff for the Republican nomination with perennial opponent Brandon Herrera (R-TX). Gonzales trailed Herrera 41% to 43%. However, Gonzales withdrew from consideration after an investigation by the House Ethics Committee for sexual misconduct and inappropriate favoritism in relation to an admitted affair with a former staffer. Democrats will also see two incumbents forced into runoffs in the Dallas and Houston areas. Incumbent Julie Johnson (D-TX) trailed former Congressman Colin Allred (D-TX) by 11 points, 33% to 44%. Allred previously represented the area before challenging Senator Ted Cruz (R-TX) in 2024. A duel incumbent scenario was created by the Republican led mid-decade redistricting maps for Christian Menefee (D-TX) and longtime Congressman Al Green (D-TX) for the newly redrawn 18th district. Menefee led Green 46% to 44% after Menefee just won the special election runoff five weeks ago to replace deceased Congressman Sylvester Turner (D-TX). 

While the redistricting maps from 2020 were generally beneficial to incumbents on both sides of the aisle, the 2025 congressional map to create five Republican opportunity districts were ultimately carved from safe Republican districts based on the last presidential election results. Without President Trump on the ballot, sinking poll numbers for Republicans among Latino and independent voters, and rising Democrat voter enthusiasm and fundraising levels, Texas should be a major concern for a Republican Party looking to defend the slimmest of congressional majorities. Of the 38 members of the Texas Delegation, 13 are Democrats and 25 are Republican. It is worth noting, seven Republican seats are +ten R or less. 

Texas State Legislature

In Texas legislative primaries, candidates compete in partisan contests to secure each party’s nomination for state Senate and House seats; if no candidate receives a majority (>50%) of votes, the top two advance to a runoff. Because Texas has no party registration, voters may choose which party primary to participate in, but can only vote in one party’s primary or runoff election. Primary turnout, local precinct organization, and often high-profile endorsements frequently determine outcomes in down-ballot legislative races. The 2020 legislative redistricting map and the targeted recruitment of challengers have intensified intra-party contests, making this primary election especially heated. In recent election cycles, both parties are experiencing increasingly crowded primary contests of three or more candidates, making the runoff elections an increasingly probable and expensive reality. The runoff election will take place on 26 May 2026. There is no runoff for the general election in the fall. The winners of this primary will face off in the general election on 3 November 2026 for the opportunity to serve in the 90th Texas Legislature, beginning 12 January 2027. 

Texas Senate

The Texas Senate is currently comprised of 18 Republicans, 12 Democrats, and one vacancy in a Republican district. Five seats were open this cycle, in addition to Taylor Rehmet (D-TX) who won a special election to replace Kelly Hancock (R-TX) on 30 January 2026. This race was a surprise loss to many Republicans, as the Fort Worth area district last elected a Democrat in 1991. The rematch between Rehmet and Leigh Wambsganss (R-TX) for Senate District 9 in November is drawing a tremendous amount of national Democrat attention to down-ballot Texas races. Republicans will need to decide how best to allocate their resources to un-flip the seat, given that even with a Democrat in that office, it does not change the Senate majority under the three fifths majority rule. Republican candidates spent ten times the amount Rehmet spent to lose by double digits in the special election and special election runoff. With more defense to play than offense for Republican officeholders around the state, this seat may be considered an acceptable loss, for now. 

There were five Texas senators with hot races, 11 senators who were unopposed or had low-risk primaries, and fifteen senators who were not on this year’s ballot because their terms expire in 2028. The probable new Senators in the Texas Senate will be: Rep. David Cook (R-TX), Rep. Dennis Paul (R-TX), Rep. Trent Ashby (R-TX), Republican nominee Brett Ligon (R-RX), and the winner of the Senate District 9 race described above. Each of the Republicans would represent a hold for the party in those districts. 

Texas House of Representatives 

All 150 members of the Texas House of Representatives are up for re-election every two-year cycle. Prior to this election, the Texas House was comprised of 88 Republicans and 62 Democrats. In this race, there were 39 incumbents facing challengers. Three incumbents lost outright, and one incumbent was forced into a runoff. Twenty-one members are retiring, including 14 Republicans and seven Democrats. At least 24 new members are expected to join the Texas House in 2027.

The three incumbent members of the Texas House who lost their primary elections are: Stan Kitzman (R-TX), Cecil Bell, Jr. (R-TX), and Chris Turner (D-TX). Turner and Bell had the longest tenure of the three primary losses, both serving in senior leadership positions within their parties, and as committee chairmen during their time. Looking ahead to the general election in November, at least six House districts can be considered in ‘swing’ territory, and are expected to be highly competitive. 

Should the high tide of any ‘Blue Wave’ be lower than a Democrat majority in the Texas House, even a slimmer Republican majority for Speaker of the Texas House Dustin Burrows (R-TX) could prove to be problematic. Speaker Burrows was elected in 2025 in large part thanks to Democrat support. However, even with that support, he still ended the longtime practice of appointing minority party members as committee chairs. Adding to the partisan divide, the redrawn congressional districts to favor five new Republican districts led to Democrats breaking quorum to prevent a vote on those maps. The quorum break made national headlines and triggered multiple state legislatures to redraw their own congressional maps. The quorum break delayed the implementation but did not prevent them from becoming law. The United States Supreme Court ruled 6-3 in favor of the Texas map. However, the court also unanimously allowed the California Proposition 50 map, which added five Democrat leaning districts at the expense of five Republican districts.

The actions of the Texas Legislature not only impacted the decision California legislature, but led legislatures in Missouri, North Carolina, Ohio, Utah, Maryland, and Virginia to tinker with their congressional maps as well. This is just the most recent example of how Texas is driving political initiatives around the country that ultimately impact national political trends. Along with California and New York, Texas drives the national political narrative. There is no entity with a political or economic interest in the United States, regardless of where it is headquartered, that is not impacted by the decisions made in these three markets. 

The legislature will begin the 90th Regular Session on 12 January 2027, and run for 140 calendar days, adjourning 31 May 2027. Representatives and Senators can prefile bills just days after the General Election, starting 9 November 2026. Between now and then, Texas will see the most expensive, competitive, and consequential midterm election cycle in our history.

The Australian Competition and Consumer Commission (ACCC) has released its compliance and enforcement priorities for 2026–2027 (the 2026–2027 Priorities).

While many of the ACCC's 2026–2027 Priorities have been retained from last year (including the focus on unfair contract terms, environmental claims and sustainability, and competition and pricing practices in supermarkets and retail sectors), the ACCC has announced a new focus on the following areas:

• Manipulative and false practices and unsafe consumer goods in digital markets; 
• Promoting competition in digital markets; and 
• Improving industry compliance with consumer guarantees—this year focusing on motor vehicles. 

The ACCC's 2026–2027 Priorities will have direct implications for operators of digital platforms and markets, suppliers of consumer goods and businesses that rely on subscription-based models. 

These priorities together with the upcoming introduction of an unfair trading practices prohibition into the Australian Consumer Law (ACL) mean that businesses involved in these areas should expect heightened scrutiny from the ACCC this year and review their practices in preparation.

In this article, we outline the ACCC's 2026–2027 Priorities, focusing on the new, as well as its enduring priorities, along with some practical steps for businesses to consider going forward.

For a full list of the 2026–2027 Priorities, please see here.

THE ACCC'S COMPLIANCE AND ENFORCEMENT PRIORITIES FOR 2026–2027

Digital and Data-Enabled Markets

Given the integral role that digital markets play in the consumer experience—from businesses' marketing practices to how consumers access products and services—the ACCC continues to prioritise ways of protecting consumers, promoting competition, facilitating transparency and consumer trust, and allowing innovation to thrive within these digital markets.

Manipulative Practices and Unsafe Consumer Goods

Undesirable practices such as dark patterns and subscription traps aim to unfairly influence and manipulate consumer behaviour, which can have lasting effects on competition and consumer wellbeing. In her speech, Ms Gina Cass-Gottlieb also acknowledged the recent rise in unsafe consumer goods available across Australia, expedited by the growing scale of digital markets.

The ACCC's focus on manipulative and false practices will not be restricted to large social media platforms or app stores. These concerns may also arise in any digital interface used to sell goods or services online—including subscription services, online marketplaces, e-commerce sites and software platforms.

Digital Platform Competition Reform

The ACCC continues to advocate for the introduction of a specific digital competition regime, which includes service-specific codes of conduct for certain platforms and critical intermediary services. Its engagement with the government is ongoing. 

Promoting competition and enforcing the Consumer Data Right are also central to the ACCC’s digital agenda in 2026–2027, to provide consumers and small businesses greater control over their data.

Scams

The ACCC will implement Australia's new Scams Prevention Framework as part of its digital markets work. This framework establishes a coordinated, economy-wide approach, requiring designated sectors to take proactive steps to prevent, detect, disrupt, respond to and report scams, and to share actionable intelligence with the ACCC.

Consumer Safety, Trust and Confidence

Greenwashing

The ACCC will continue to prioritise enforcement of consumer and fair trading issues, as Australia's transition to net zero and consumer sentiments continue to lead to an increasing prevalence of environmental and sustainability claims. With the increase of environmental claims made in relation to goods and services, the ACCC acknowledges the importance of ensuring that such claims are not misleading or deceptive, as consumers rely on this information to make informed decisions.

The ACCC's focus on greenwashing is particularly relevant for businesses making environmental or sustainability claims about their own physical products, as well as their packaging, supply chains and inputs. Environmental and sustainability claims should be carefully substantiated, particularly where they rely on third-party certifications or complex lifecycle assessments. 

Product Safety

The ACCC will prioritise product safety issues for young children, with a focus on compliance with button battery, infant sleep and toppling furniture mandatory standards. Button batteries remain of particular concern, with the ACCC's enforcement actions in the past year including the following:

• A AU$14 million penalty imposed by the Federal Court of Australia (Federal Court) on City Beach for supplying products that failed to comply with existing mandatory safety standards for button batteries; and
• Infringement notices and court enforceable undertakings relating to products supplied by The Wiggles and Hungry Jack's that lacked the required button battery warnings.

The ACCC has previously emphasised that the responsibility for ensuring products are safe rests with all parties across the supply chain—the onus is not only on the manufacturer of the relevant product, but the importer, distributor and retailer as well. 

Unfair Contract Terms and Consumer Guarantees

The ACCC's priorities for 2026–2027 also include unfair contract terms in consumer and small business contracts, particularly in relation to harmful cancellation practices. Such harmful cancellation practices include:

• Automatic renewals;
• Early termination fees; and
• Non-cancellation clauses.

Improving industry compliance with consumer guarantees—particularly relating to motor vehicles—is another area of focus for the ACCC for the year ahead.

Supermarket and Retail

In the past year, the ACCC has acted in relation to conduct that undermines competition and hinders consumers' ability to make informed choices, including commencing cartel proceedings in the fresh produce space, and actions in relation to resale price maintenance to address restrictions on price competition within retail supply chains. 

These enforcement actions focus not only on enforcement, but on restoring competitive freedom and embedding compliance to prevent recurrence.

Consumer and fair trading concerns in the supermarket and retail sector also remain a priority for the ACCC. Ensuring accurate and meaningful pricing information for consumers to make informed choices remains a key focus, as this is, as noted by Ms Cass-Gottlieb, "fundamental to effective competition".

To underpin this, the ACCC has conducted major sweeps of retailers' Black Friday and Boxing Day advertising—particularly targeting misleading conduct relating to discounts. The ACCC also has ongoing Federal Court proceedings against Woolworths and Coles for alleged misleading discount pricing claims.

Essential Services (Telecommunications, Electricity and Gas)

The ACCC is also aiming to promote competition and address misleading pricing and claims in the telecommunications, electricity, and gas markets.

Ms Cass-Gottlieb highlighted the importance of transparency and accountability in these markets, where market concentration and complex pricing structures can hinder consumers and small businesses from making informed decisions.

The ACCC, in recent years, has engaged in monitoring and reporting on retail electricity, which improved transparency in the energy market and allowed the agency to identify problem areas. It has also previously acted against Optus, obtaining a five-year court-enforceable undertaking from Optus to commit to consumer remediation through various actions.

Aviation

The aviation sector was noted by Ms Cass-Gottlieb to be "characterised by high concentration, significant barriers to entry, and limited consumer choice". As a result, pricing transparency is a concern for consumers, along with any available remedies when services are not delivered as promised.

The ACCC will continue to focus on competition and consumer issues in aviation, advocating for better outcomes and fair treatment. This will be done through market monitoring, advocacy to promote better competition and consumer outcomes, and any appropriate enforcement actions.

THE ACCC'S ENDURING PRIORITIES

The ACCC's enduring priorities serve as the foundation for its annual compliance and enforcement initiatives, providing direction for the regulator's enforcement activities. This year, the ACCC reaffirmed its enduring enforcement focus on conduct that fundamentally undermines competition and consumer welfare. Examples of such conduct include:

• Cartel and collusive behaviour;
• Exclusionary conduct;
• Anti-competitive agreements or conduct; and
• Misuse of market power.

Ms Cass-Gottlieb emphasised that the ACCC's enforcement program remains robust, with four cases currently before the courts that involve allegations of cartel conduct across different sectors. Notably, the ACCC highlighted its misuse of market power case against Mastercard, with the trial scheduled for March 2026.

The ACCC's also re-stated its commitment to prioritise enforcement against actions that place consumers at serious risk, such as:

• Unsafe products;
• Scams; and
• Practices that disproportionately harm vulnerable or disadvantaged consumers, including First Nations Australians.

In addition to the above, the ACCC continues to be vigilant against unfair dealings with small businesses, particularly in the agriculture sector where power imbalances can be significant.

OTHER MATTERS

Unfair Trading Practices

In addition to the 2026–2027 Priorities outlined above, the ACCC continues to advocate for a general prohibition on unfair trading practices in the ACL.

The ACCC's position is that a general prohibition on unfair trading practices embedded in the ACL would "operate as a safety net" and address harmful conduct that may not be adequately addressed or captured by the current law. A general prohibition, if implemented, would facilitate fair conduct and bridge regulatory gaps while simultaneously providing flexibility to respond to emerging harms according to market movements.

These unfair trading practices provisions are currently still in the draft stages, proposed to commence in July 2027. For more information on the proposed laws relating to unfair trading practices, please see our Insight article here.

Merger Reform

The ACCC has also emphasised its intent to "remain focussed on administering the new regime transparently and efficiently" in the year ahead. Ms Cass-Gottlieb noted that the ACCC had met its target of determining an estimated 80% of waiver and notification applications within 20 business days.

Both the ACCC and businesses continue to adjust to the administration of the new regime. Further amendments to the legislation are expected later this year, and Treasury has committed to a review of the relevant monetary thresholds 12 months after coming into effect. 

For more information on the mandatory merger clearance regime, please visit our Insight article here.

GENERAL CONSIDERATIONS FOR BUSINESSES

The ACCC's 2026–2027 Priorities reflect a continued focus on digital markets, consumer protection and supply chain conduct. Businesses operating online platforms, supplying consumer goods or participating in complex distribution networks should ensure that their compliance frameworks evolve in line with these enforcement trends—in particular, consider the below:

Contracts

• Consider and review their standard form contracts with consumers and small businesses for any unfair contract terms.
  • Do the contract(s) contain any harmful cancellation terms (particularly relating to automatic renewals, non-cancellation clauses or feed for early termination)?

Misleading Representations

• Representations (General): Consider and review representations and statements made in sales and marketing for products or services.
  • Are these representations and statements accurate, balanced and able to be substantiated?
  • Are there any grounds for these representations and statements to be considered misleading or deceptive?
• Greenwashing: Monitor and verify environmental and sustainability claims made regarding products or services that are supplied to consumers.
  • Can the environmental claim(s) made can be substantiated with robust evidence?
• Digital Markets: Consider the digital interface(s) and services that customers use to interact with the business, and ensure that:
  • Subscription terms and renewal periods are clearly disclosed; 
  • Cancellation mechanisms are simple and accessible; and 
  • Consumers are not steered towards particular choices through misleading interface designs. 

Consumer Matters

• Consumer Guarantees: Consider and review the processes, instructions and policies for a consumer to enforce their rights.
  • Do consumers face an unfair burden or difficulty in exercising their legal rights or seeking legal remedies?
• Pricing: Consider pricing information in relation to products or services available to customers.
  • Is the pricing information accurate and meaningful to consumers?
  • Are pricing structures complex such that consumers face difficulty in comparing offers and exercising choice?
• Product Safety: Consider and review compliance of products or services with established mandatory safety standards.

If you require any assistance in relation to carrying out any of the above, please contact us and we can assist you further.
 

Below are some key points to note arising out of the New Civil Code:

Employer’s Right to Terminate for Convenience

The Old Civil Code does not expressly entitle an employer to terminate a contractor for convenience. However, the United Arab Emirates (UAE) Courts of Cassation have acknowledged that an employer has the right to terminate for convenience provided that the employer compensates the contractor, not only for its expenses and the value of the work completed, but also for the profit the contractor would have made had it completed the work (for example, Dubai Court of Cassation in Case No. 223 of 2023 (Commercial)). The New Civil Code codifies this right. Article 836 states that the employer can withdraw from a contract at any time prior to the completion of the work, but it must compensate the contractor for its expenses and the work completed, as well as all profits the contractor would have earned had it completed the work. However, the court has the power to reduce the compensation for lost profit to reflect that the contractor may have saved money by being released from the contract or profited from undertaking alternative work. 

The Court’s Power to Adjust Liquidated Damages

Article 390 of the Old Civil Code expressly recognises that contracting parties may fix in advance the compensation payable (liquidated damages), but it provides the court with the power, upon application of either party, to adjust the pre-agreed compensation to reflect actual loss. The onshore Dubai courts have confirmed that this power can be exercised to reduce or increase the pre-agreed compensation (for example, Dubai Court of Cassation Case No. 194/2024 (Real Estate)). Article 340 of the New Civil Code confirms that parties are permitted to agree in advance on the value of the compensation payable and expressly addresses the circumstances in which the pre-agreed compensation can be adjusted by a court. Articles 340(2) and 340(3) of the New Civil Code provide that the court may reduce the pre-agreed level of compensation if the debtor proves that it has been exaggerated, if it exceeds the loss actually suffered when taking into account the partial performance of the work, or if the creditor contributed to, or exacerbated, the harm by its own fault. In addition, a court may decline to award damages if the creditor’s fault significantly exceeds the debtor’s fault. Article 340(4) states that a creditor may claim an amount exceeding the pre-agreed compensation; however, the creditor must prove that the debtor committed fraud or gross negligence. This new requirement to establish fraud or gross negligence is consistent with other jurisdictions (such as Egypt) and means that there is a higher threshold for upwards revision.

Enforceability of Liquidated Damages Post-Termination

The UAE Courts of Cassation have repeatedly held that liquidated damages cannot be claimed following termination of a contract, as the termination of a contract entails invalidity of the liquidated damages clause (for example, Dubai Court of Cassation Case No. 590 of 2025 (Real Estate)). Upon termination, the employer is required to prove the actual losses that it has suffered. This principle has not been codified in the New Civil Code and it remains subject to the approach taken by the onshore UAE courts. 

Adjustments to Lump Sum Contracts

Article 829 of the New Civil Code addresses a contractor’s entitlement to an increase in payment in a lump sum contract. Article 829(2) confirms that if there is a change or increase in the scope of the work, the contractor is only entitled to an increase in payment by agreement of the parties (as per Article 887(2) of the Old Civil Code) and introduces an entitlement to additional payment where the change is due to the fault of the employer. This provision will apply unless otherwise agreed by the parties. Article 829(3) of the New Civil Code further provides that, where exceptional general circumstances arise which could not have been foreseen at the time of contracting and undermine the foundation upon which the contract was based, the court is empowered to restore the balance between the parties. This may include extending the completion period, increasing or decreasing remuneration, or terminating the contract. This entitlement may be of assistance to contractors in the event of another global pandemic or extreme cost inflation. 

Notice Provisions

The Old Civil Code does not expressly address notice obligations. Article 816(3) of the New Civil Code adopts a stricter approach, requiring the contractor to notify the employer immediately if events or circumstances arise that may impede the proper execution of the work. It also provides that if the contractor fails to give due notice, it bears the consequences arising from such event or circumstances. A failure to give the required notice may therefore result in a contractor being liable for damages, or precluded from an entitlement to additional time to complete the work or additional payment. Article 816(3) of the New Civil Code does not specify what constitutes proper notice, and this will be subject to interpretation by the onshore UAE courts. 

Analysis

The muqawala provisions of the New Civil Code appear to be a positive development as they introduce clearer rights and remedies for parties to construction contracts. However, they remain, in large part, nonmandatory and therefore only apply if the parties’ contract is silent on the relevant matter. It is therefore critical that contracting parties exercise care when negotiating contracts and allocating risk between the parties. It is also worth noting that, although the New Civil Code does not, strictly speaking, apply to contracts executed prior to 1 June 2026, it may nonetheless influence the decisions of the onshore courts going forward. 

About the Firm

Our Litigation and Dispute Resolution practice has a long history of acting as counsel on high-stakes international arbitration and litigation mandates. Our lawyers in Dubai have extensive experience advising on litigation and arbitration with respect to complex, high-value commercial disputes and construction contracts in the UAE and wider Middle East region.

The Proposed Rule would rescind the 2024 Biden-era final rule (2024 Final Rule)¹ and replace it with a slightly modified version of the prior Trump-era 2021 rule that was viewed as more employer-friendly. If finalized, the Proposed Rule may offer employers greater certainty in classifying workers as independent contractors. 

The DOL Reintroduces the “Economic Reality” Test

The Proposed Rule reinstates the “economic reality” test for worker classification, which focuses on the worker’s economic dependence on an employer. The 2024 Final Rule set forth a six-factor test focusing on the “totality of the circumstances” of the relationship between a worker and a potential employer to determine independent contractor status and has generally been credited with resulting in more workers classified as employees. In contrast, the Proposed Rule seeks to functionally ease the standard for employers to classify workers as independent contractors.

Indeed, the Proposed Rule may have substantial consequences for employers, especially in industries that tend to rely more heavily on independent contractors, such as delivery services, home health agencies, and those in the construction industry. If an employer is covered by the FLSA, it generally must provide minimum wage and overtime pay protections to its employees and comply with the law’s recordkeeping obligations. However, FLSA requirements do not apply to independent contractors.

Key Takeaways for Employers

The following are key takeaways for employers under the Proposed Rule as drafted:

• The DOL would reintroduce the “economic reality” test to determine whether a worker is an independent contractor or an employee who is economically dependent upon an employer.
• Under this “economic reality” test, two core factors will be given greater weight in determining if a worker is an independent contractor or employee: (1) the nature and degree of control over the work, and (2) the worker’s opportunity for profit or loss based on initiative or investment. These two core factors should be considered first, and if they both point toward the same classification for a worker, it is likely that such classification is proper.
• While the Proposed Rule does not abandon the other “economic reality” factors as relevant to the classification analysis, these are “additional guideposts” and “are unlikely to outweigh the combined probative value” of the two core factors if they support the same classification. These other factors include the amount of skill required for the work, the degree of permanence of the working relationship, and whether the work is part of an integrated unit of the business. Similar to the Trump-era 2021 rule, none of these factors are exhaustive and no single factor is dispositive.
• The DOL indicated that the actual practice of the worker and employer will be more relevant than contractual or theoretical practices. For example, under the Proposed Rule, requiring a worker to comply with legal obligations, satisfy health and safety standards, carry insurance, or meet contractually agreed-upon deadlines or quality control standards does not constitute control rendering the worker more or less likely to be classified as an employee.
• Employers still need to comply with other applicable state and federal regulations governing worker classification. Employers must remain mindful that the Proposed Rule only affects worker classification under the FLSA, FMLA, and MSPA. Furthermore, at the federal level, the National Labor Relations Board and other agencies may apply different tests than the DOL uses for FLSA cases, and state laws (such as those in New Jersey, Massachusetts, California, Arizona, and Illinois) have different standards that are unaffected by the Proposed Rule, including those related to classification of workers for unemployment insurance, workers’ compensation, hours of work, and wage payment.

Looking ahead

While the Proposed Rule may result in more workers being classified as independent contractors, employers (of all sizes) should remain vigilant and evaluate their workforce, taking into account the following considerations:

Monitor the Rulemaking Process

The Proposed Rule’s 60-day public comment period closes on 28 April 2026. The DOL is expected to take public comments into consideration before publishing a final rule and announcing its effective date. In the meantime, the 2024 Final Rule remains in effect.

Continue to Follow Jurisdiction-Specific Requirements

While the DOL may use the Proposed Rule for internal analyses, wage complaints, and enforcement actions, courts will not be bound by the DOL’s rule. Independent contractor classifications will continue to face strict scrutiny in the courts and government agencies alike. Employers need to refresh themselves on those requirements and how the Proposed Rule may differ. 

Assess Worker Population and Related Policies

Employers that retain independent contractors are encouraged to assess their current worker classifications, review and revise their policies, and analyze their current agreements to ensure that individuals retained as independent contractors satisfy the requirements for such classification under all applicable laws. Employers that engage independent contractors risk facing FLSA liability, which may include minimum wage and overtime back pay, liquidated damages, and attorneys’ fees, as well as potential injunctive relief and even civil or criminal penalties if they are found to have misclassified their workforce.

Consult Employment Counsel

The lawyers of our Labor, Employment, and Workplace Safety practice regularly counsel clients on a wide variety of issues related to classification of employees and are well positioned to provide guidance and assistance to clients on this significant development.

CMS Reiterates Its Position That Participation Is Mandatory

In FAQs released in December 2025, CMS states that all hospitals paid under the OPPS “are to respond to the survey” and that “CMS is considering the assumptions it would be reasonable to make in the event a hospital does not adhere to the statute, including how those assumptions might be reflected in that hospital’s future payment rates.” This position seemingly contradicts CMS’s stated position in the 2026 OPPS Final Rule, where CMS agreed that the statute itself does not mandate specific consequences on hospitals for failing to respond. In the FAQs, CMS is taking a stronger stance that participation is mandatory, but it has identified no additional statutory or regulatory basis for this position. Nevertheless, CMS believes that the statute implicitly imposes the obligation on hospitals to complete the survey. 

CMS Has Not Committed to Implementing Any Reduced Reimbursement in a Budget-Neutral Manner

When CMS previously reduced OPPS reimbursement for separately payable drugs—a decision overturned by the US Supreme Court in American Hospital Association v. Becerra—CMS implemented the reductions in a budget-neutral manner. This is because the OPPS statute clearly required CMS to do so. However, CMS has recently expanded its use of its authority to “control unnecessary increases in the volume of outpatient services” in the hospital outpatient department, such that it now has reduced payment for drug administration services. CMS may similarly determine that the drug reimbursement has incentivized overutilization of drugs purchased under 340B in the hospital outpatient department. Thus, there would be no offsetting benefit to a payment cut. Hospitals considering whether to respond to the survey may want to work through their legislators, trade associations, and others to seek assurances of a budget-neutral adjustment before committing to a response.

CMS’ Survey Instructions Lack Clarity

Though CMS released FAQs and other materials with instructions on how to complete the survey, CMS does not provide a methodology for data submission. CMS provides a template spreadsheet for hospitals to input by National Drug Code: 

• Total Units Purchased – Non-340B
• Total Units Purchased – 340B
• Total Net Acquisition Cost – Non-340B
• Total Net Acquisition Cost – 340B. 

CMS instructs hospitals to exclude purchases intended for inpatient use only, but it does not provide instructions on how to exclude such purchases. This is particularly complicated because hospitals do not always distinguish between inpatient and outpatient when purchasing drugs. 340B hospitals subject to the group purchasing organization (GPO) prohibition will have separate inpatient (GPO) and outpatient (340B) purchasing accounts. However, they will also have wholesale acquisition cost (WAC) accounts used to purchase both inpatient and outpatient drugs. It will be challenging, if not impossible, to identify which drugs purchased on the WAC account are for inpatient use compared to outpatient use. Without instructions from CMS, it is also unclear how hospitals should incorporate WAC purchases and pricing into survey responses.

It could be even more challenging for 340B hospitals not subject to the GPO prohibition to exclude inpatient purchases from survey responses. These hospitals will not have a WAC account, and the GPO account is used for both inpatients and outpatients. The GPO account will likely have significantly more volume than a WAC account would, making it even more burdensome to attempt to analyze the purchasing data for inpatient versus outpatient status. 

Further, CMS does not provide instructions on how to define “inpatient” versus “outpatient,” and a patient could be an outpatient for 340B purposes but an inpatient for Medicare billing purposes because these terms are not uniformly defined across government agencies.

This lack of clarity adds additional burden to an already burdensome survey as hospitals are put in a position of trying to develop a methodology that accurately represents outpatient drug purchasing by using systems and processes that may be incompatible with CMS’s request. 

Required Attestation and Implied Consequences

Perhaps what will give hospitals the greatest pause is the last required step before data submission should the hospital choose to respond to the survey: the attestation (the Attestation). This last step requires the signatory to attest to the truth, accuracy, and completeness of the hospital’s data submission and adds that the signer “acknowledge that this attestation may be relied upon by CMS and other regulatory agencies for program integrity, reimbursement, compliance, and enforcement purposes. [The signer] understand[s] that knowingly providing false information may result in criminal prosecution, civil monetary penalties, exclusion from federal healthcare programs and other sanctions.” On its face, the Attestation demonstrates CMS’s position that data submission raises False Claims Act implications and other severe civil and criminal liabilities, putting hospitals in a position of weighing the potential negative consequences of not participating against the risk that CMS may use the data to seek civil or criminal repercussions against survey participants, including those without any ill intent. The Attestation also states data accuracy is an ongoing obligation, requiring prompt notification to CMS of any material changes or corrections to the submitted information.

Again, it is unclear from where CMS is deriving this expansive authority to interpret or otherwise rely on the data provided in the ways described in the Attestation. But nonetheless the implications are significant. CMS does not provide meaningful guidance as to exactly what lengths hospitals are required to go to ensure “accuracy” and “completeness” of the information before it is submitted. And, as noted above, there are a number of significant, open areas where CMS’s guidance is still less than clear. Though a hospital may ultimately succeed in subsequent legal or regulatory action, should there be any, such defense is likely to carry significant cost.

Hospitals Face a Difficult Choice

While CMS has not committed to pursuing a specific penalty for nonresponsive hospitals, it remains clear that nonparticipation is not without its risks. But what has become clearer with the release of these additional materials and FAQs is that participating in the survey is also not a risk-free choice. 

As stated in our prior alert, for any entity not responding, it should consider filing a submission to CMS that states that the burden to obtain and present the requested data is far larger than CMS had estimated. And, in light of the above, nonresponders can also add that they do not believe that they can meet the heightened accuracy standards that CMS has set for these submissions.

Given the potential consequences of each option, hospitals should consult with their advisors and peers to determine the decision that is most appropriate for their organization.

The firm’s 340B Program and Pharmacy practice group practitioners will continue to closely monitor developments on this issue.

Many more companies than before now fall within the scope of the BSI Act. Previously, the BSI Act only regulated traditional critical infrastructure such as transport and traffic, energy, finance, health, research, and the telecommunications industry. Now, the digital sector is also covered, in particular cloud computing services, data center operators, managed (security) service providers, and providers of online marketplaces, online search engines, and social networks. The production and trade of chemical substances, the production, processing, and distribution of food, and various areas of the manufacturing industry (production of goods) are also affected. Lists of the sectors and activities covered are available here and here. The BSI offers an impact assessment on its website.

Although not provided for in the directive, the German implementation law provides for a de minimis exemption if an activity that is generally covered is negligible in relation to the overall activity of a company. In these cases, the requirements of the BSI law do not apply.

Covered entities must register on the platform provided by the BSI by 6 March 2026. This requires an ELSTER organization certificate.

Violations are punishable by a fine of up to EUR€500,000. Regardless of this, however, companies should thoroughly check whether they fall within the scope of the law and what obligations this entails for them.

Other obligations of covered companies include, in particular:

• Taking appropriate measures to prevent and remedy disruptions to the availability, integrity, and confidentiality of their information technology systems;
• Immediately reporting significant security incidents to a single reporting center;
• Training obligations

Management is liable to their company for damages in the event of violations of these obligations.

Past experience has taught us that, in such uncertain times, it is important to consider whether insurance notifications are needed under event cancellation policies, to think about the effect of postponement-versus-cancellation on insurance and contractual arrangements, to consider the recoverability of costs involved in re-location or re-staging, and to  fully assess available options under potentially applicable policies. Sometimes it is easy to identify what needs doing from a business-perspective, but often it needs experienced, pragmatic and independent legal advice to maximise prospects of recovering loss and expense, to protect revenues and profit, and to provide for continuity, so that short term challenges are mitigated and do not become long term threats to your business.  

The firm has one of the world’s leading policyholder-only insurance practices and vast experience working with clients in the sports, events and entertainment industries on the staging and commercialisation of live events. Previous crises arising from causes such as military action, terrorist threat, extreme weather and pandemic have taught us that key points to keep in mind include the following:

• Event cancellation policies typically cover the costs and losses associated with the cancellation, disruption, curtailment or postponement of events, which may include ticket refunds, hire charges, advance hotel reservations and other wasted costs.
• Coverage triggers vary depending on the precise wording of the policy but will typically require that cancellation is for reasons beyond the insured’s control (such that voluntary cancellations driven by lack of interest in the event are unlikely to be covered).
• Most policies provide additional cover where the event is cancelled or disrupted as a result of critical attendance, meaning where a certain number (or specified percentage) of delegates are unable to attend due to causes beyond their control.
• Some policies provide cover where the event proceeds but losses are incurred as a result of enforced reduced attendance, typically requiring an inability to travel to the event for reasons not otherwise excluded.
• There will be exclusions but these vary from policy to policy meaning a careful consideration of the precise policy wording is critical.
• It is vital to review the cover which is in place and to consider express notice requirements in advance of, or in conjunction with making key decisions on viability.
• Many policies allow for notification of any facts or circumstances which may give rise to a loss, in advance of any decision being made to cancel or postpone an event.
• There can be benefits in early notification in so far as some policies provide cover for mitigation costs incurred to prevent, or more likely minimize, any potential losses, for example by re-arranging an event rather than outright cancellation.
• Prompt action is important as advance consent from insurers may be required and delays in notification can lead to insurers seeking to deny or reduce the amount payable.

The firm's global Insurance Recovery and Counseling practice group has represented policyholders in successful liaison, communication and negotiation with insurers and loss adjusters, but also in the legal enforcement of claims under a range of applicable policies including event cancellation insurance. Our Insurance Recovery and Counseling lawyers assist policyholders in managing and mitigating legal risk by optimising insurance recoveries. Our lawyers stand ready to assist in reviewing any relevant policies and advising on contractual and insurance related considerations impacting any current or forthcoming events. 

There has been significant work in furtherance of the efficient and safe deployment of new nuclear generation. In 2024, Congress passed the Accelerating Deployment of Versatile, Advanced Nuclear for Clean Energy (ADVANCE) Act. Under its Reactor Pilot Program, the Department of Energy is working with industry on 11 projects with a goal of at least three of these demonstration reactors achieving criticality by 4 July 2026. In addition, the Department of Energy’s Advanced Reactor Demonstration Program (ARDP) provides funding through different pathways to support deployment of advanced reactors and the Administration is continuing to implement funding deals, including an US$80 billion deal to facilitate the construction of up to 10 Westinghouse AP1000 reactors. At the same time, the US Nuclear Regulatory Commission (NRC) is scheduled to complete a “wholesale revision” of its regulations by November of this year. Even with all this progress, the Administration’s ambitious goal of 400 gigawatts (GW) of deployed nuclear capacity by 2050, including the goal to have 10 AP1000 reactors under construction by 2030, will not be easy to achieve. However, much of the regulatory work for the first round of this new build has already been completed. 

Between 2012 and 2018, the NRC issued 14 combined licenses for new large-light water reactors. Only two of these facilities, Vogtle Units 3 and 4, using the Westinghouse AP1000 design, have been constructed and are operating. The others either never started or never finished construction. Nevertheless, these licenses remain valid—six, four of which are AP1000s, are still in effect and six, four of which are AP1000s, are “terminated” and potentially eligible for reactivation by the NRC. 

If the Administration wants to achieve the timely construction and operation of 10 new AP1000s, there exist eight licenses that have already been approved by the NRC relying on that design, four of which could be utilized to begin construction of new facilities with minimal NRC involvement. Using these existing licenses, construction would not have to wait for the completion of an NRC regulatory review and could likely begin or resume as soon as the license holders have financing, workers, and supplies in place. 

While the phrase “terminated license” sounds permanent and inflexible, licenses that are in a terminated status may be eligible to be reactivated if the NRC finds that they meet certain criteria. However, there may be additional procedural complexities for licenses where construction had already begun. The process for reactivating terminated licenses would require additional regulatory involvement compared to using a still-active license, but it would be more efficient than the process of obtaining a new license at a new site. 

In the current environment, these already-approved licenses are an untapped resource that could cut years off the regulatory approval timeline. 

The firm's Nuclear Energy practice group is monitoring this development and is ready to aid clients in navigating this complex and rapidly changing industry.

Treasury will hold a public hearing on 28 May 2026. Written comments on the proposed regulations are due on or before 6 April 2026.

The proposed regulations are substantively similar to the draft proposed regulations (draft regulations) released in January 2025, but they make important revisions to incorporate stakeholder feedback and to reflect statutory changes from the One Big Beautiful Bill Act (OBBBA) (Pub. L. 119-21). These include:

• Providing an expanded qualifying sale definition that explicitly includes sales to intermediaries.
• Increasing the scope of the look-through rule to treat taxpayers as selling to unrelated persons if related intermediaries ultimately sell to unrelated persons.
• Detailing recordkeeping requirements with safe harbors for substantiating emissions rates and qualified sales.
• Clarifying that ASTM International (ASTM) standards are “non-exhaustive and non-exclusive” for determining transportation fuel qualification.

legislative developments

For many years, Congress has, with bipartisan support, provided tax credits for the domestic production of biofuel.² In 2022, as part of the Inflation Reduction Act (Pub. L. 117-169), Congress enacted Section 45Z to replace and consolidate this array of fuel-specific tax credits into a single “technology-neutral” credit. The credit is determined as a general business credit under Section 38. As originally enacted, the credit was available for fuel produced after 31 December 2024 and sold before 31 December 2027. 

In January 2025, Treasury announced in Notice 2025-10 its intent to propose regulations implementing Section 45Z. Notice 2025-10 also included an explanation of the rules it intended to propose and invited public comments on the draft regulations. Concurrently, Treasury provided initial guidance on methodologies for determining emissions rates under Section 45Z and provided the 2025 emissions rate table.

In July 2025, as part of OBBBA, Congress made six significant changes to Section 45Z,³ as follows:

1. Extended Section 45Z for two years, so that it expires at the end of 2029, rather than at the end of 2027.
2. Modified the emissions rate calculation by excluding the consideration of indirect land-use changes, requiring distinct emissions rates for emissions from animal manures, and prohibiting emissions rates of less than zero (except for animal manures).
3. Added an anti-abuse provision to prevent double crediting.
4. Required qualified fuel produced after 31 December 2025 to use feedstocks grown or produced in the United States, Canada, or Mexico.
5. Added prohibited foreign-entity restrictions for specified foreign entities (after 4 July 2025) and foreign-influenced entities (after 4 July 2027).
6. Repealed the bonus incentive for SAF produced after 31 December 2025.

Key Highlights From the Regulations

To qualify for the Section 45Z credit, a taxpayer must satisfy several statutory requirements. The fuel must meet the definition of “transportation fuel,” be produced at a qualified facility in the United States by a taxpayer registered under Section 4101, and be sold to an unrelated person in a qualified sale during the taxable year. Transportation fuel produced after 31 December 2025 must be exclusively derived from a feedstock produced or grown in the United States, Mexico, or Canada. These requirements are described in detail in the proposed regulations. 

Transportation Fuel 

The proposed regulations define “suitable for use” to mean that fuel either has practical and commercial fitness for use as fuel in a highway vehicle or aircraft, or the fuel may be blended into a fuel mixture with such fitness. Consistent with the draft regulations, actual use as fuel is not required. Only the first transportation fuel in a production chain qualifies for Section 45Z.⁴

Qualified Facility 

The proposed regulations define “qualified facility” narrowly to include a single production line with interdependent components that produce transportation fuel, excluding any facility for which an “anti-stacking credit” is allowed in the same taxable year.⁵ The proposed regulations also confirm that taxpayers need not own the facility and provide guidance on situations in which multiple taxpayers produce at a facility not owned by all and when a facility has more than one ownership interest.

Section 4101 Registration Process 

The proposed regulations detail Section 4101 registration procedures, including approval, denial, revocation, suspension, reregistration, and separate entity treatment.⁶ The proposed regulations also explain the three tests the IRS applies when evaluating registration applications: the activity test, the acceptable risk test, and the satisfactory tax history test.⁷

Qualified Sale Requirement

Regarding the qualified sale requirement, the statute requires taxpayers to sell fuel to an unrelated person during the taxable year in one of three qualifying manners: (1) for use in the production of a fuel mixture,⁸ (2) for use in a trade or business, or (3) at retail with placement in the fuel tank.⁹ The proposed regulations make significant changes from the draft regulations regarding these qualifying sale requirements, substantially expanding commercial flexibility.

The second option—sales for use in a trade or business—reflects the most significant change from the draft regulations to the proposed regulations. The draft regulations defined this requirement as sales for use “as a fuel” in a trade or business. Stakeholders argued this language would prohibit sales to intermediaries, such as fuel marketers, wholesalers, and distributors. Responding to this feedback, the proposed regulations remove the “use as a fuel” language and explicitly clarify that sales to unrelated persons who subsequently resell the fuel in their trade or business qualify. 

Pursuant to OBBBA statutory changes, the proposed regulations also adopt a broad look-through rule for sales made through related intermediaries, resulting in taxpayers being treated as selling to unrelated persons if any related person—including related intermediary dealers or wholesalers—ultimately sells the fuel to an unrelated person.¹⁰

Credit Value Determinations 

Besides revisions to incorporate OBBBA statutory changes, the proposed regulations do not substantively alter—compared to the draft regulations—the credit value determination of Section 45Z, including how emissions rates are calculated, the applicable amount per gallon, the use of the emissions rate table, or the emissions factor calculation. 

Determining Emissions Rates

In the preamble, Treasury said it “carefully considered” public feedback it received on the draft regulations as it related to emissions rates determinations, and, as a result, the proposed regulations extensively clarify the use of the annual emissions rate table for the purposes of determining emissions rates. Additionally, because of the expressed “urgent need for regulations,” the preamble and proposed regulations implement an extensive provisional emissions rate (PER) process.¹¹

To establish emissions rates, the emissions rate table, generally, instructs taxpayers to use the 45ZCF-GREET Model for non-SAF transportation fuel and allows SAF transportation fuel producers to choose among three methodologies: the CORSIA Default Life Cycle Emissions Values, the CORSIA Methodology for Calculating Actual Life Cycle Emissions Values, or the SAF portion of the 45ZCF-GREET Model.¹² The preamble rejects commenters requests to use older emissions rate tables for future tax years, confirming that taxpayers must use the table in effect on the first day of the taxable year during which they produced the fuel. Within that framework, the preamble reaffirms that a taxpayer should use the most recent determinations under the 45ZCF-GREET Model—which includes determinations from models released throughout the tax year—to calculate the emissions rates of its transportation fuel.¹³

If the applicable emissions rate table does not establish an emissions rate for a specific type and category of transportation fuel produced by a taxpayer, the taxpayer may petition for a PER determination. The proposed regulations clarify the “scope and mechanics” of the PER process. Generally, the PER process has two steps: (i) submission of an Emissions Value Request (EVR) to the Department of Energy (DOE) following DOE’s Section 45Z EVR process instructions, and (ii) filing a PER petition with the IRS when claiming the credit.¹⁴ The proposed regulations provide that newly determined emissions rates relate back to 1 January 2025, allowing taxpayers who have been producing fuel while awaiting a PER determination to claim credits for that earlier production.

45ZCF-GREET Model Developments

Following intensive biofuel industry engagement with both Treasury and congressional tax-writing committees, the proposed regulations maintain the energy attribute certificate (EAC) pathway in the 45ZCF-GREET Model for the purpose of scoring the carbon intensity of electrical inputs. The proposed regulations add a definition of “placed in service” for the Section 45V incrementality pillar requirement, providing that a taxpayer’s facility is considered placed in service in the first taxable year in which it produces a transportation fuel. Applying this clarification within the incrementality pillar, the electricity-generating facility that produces the unit of electricity attributable to the EAC must have a commercial operations date no later than three years before the first day of the taxable year that the facility for which the EAC is retired first produced a transportation fuel. 

Many stakeholders expected a revised version of the 45ZCF-GREET model to be released in tandem with the proposed regulations. However, the proposed regulations suggest that the US Department of Agriculture (USDA) and DOE have not yet finalized their plans for incorporating climate-smart agriculture practices into the 45ZCF-GREET Model, while reports also indicate USDA and DOE have not yet finalized the removal of indirect land-use changes from the model, which they are planning to do before a revised model is released. 

Recordkeeping and Substantiation 

Compared to the draft regulations, the proposed regulations more explicitly outline the recordkeeping requirements a taxpayer must satisfy to claim the credit, which include documents establishing fuel qualification and characterization, feedstock eligibility, life cycle emissions rate determination, facility qualification and timing, and commercialization with third-party verification.¹⁵ A taxpayer must also maintain certain records relating to prevailing wage and apprenticeship requirements and the PER process, if applicable. 

The proposed regulations also include two safe harbors: one for substantiating emissions rates for non-SAF transportation fuel¹⁶ and one for substantiating qualified sales of transportation fuel. The proposed regulations flesh out the emissions rates safe harbor and introduce the safe harbor for substantiating qualified sales, compared to the draft regulations. 

Claiming the Credit 

The proposed regulations establish an extensive framework for claiming the credit using Form 7218. Treasury also includes special claim filing rules for situations where the registered producer is not the ultimate credit claimant, including when disregarded entities, qualified subchapter S subsidiaries, or consolidated group members produce the fuel.¹⁷ A separate Form 7218 is required for each qualified facility. 

Conclusion

These long-awaited proposed regulations introduce a complex regulatory framework requiring fuel producers to satisfy multiple overlapping and tiered statutory requirements—from transportation fuel definitions and qualified facility determinations to Section 4101 registration, qualified sale structuring, and emissions rate calculations. Additionally, significant uncertainty remains, including the absence of a revised 45ZCF-GREET Model, outstanding questions regarding foreign feedstock substantiation requirements, and the practical application of ASTM’s “non-exhaustive and non-exclusive” standard. 

Our firm regularly assists stakeholders in navigating Section 45Z compliance across these interrelated requirements and in engaging with Treasury and the IRS on related advocacy issues. We are available to discuss how the proposed regulations may impact your specific operations, to prepare technical comments, and to help ensure your business is well positioned for compliance and credit maximization.

European Commission Publishes Guidelines on the Application of Certain Provisions of the Foreign Subsidies Regulation

On 9 January 2026, the European Commission (Commission) published the long-awaited Guidelines on certain key substantive aspects of the European Union (EU)’s Foreign Subsidies Regulation (FSR) (Guidelines), including presumptions for certain high-risk subsidies and a case-by-case analysis for others. The Guidelines also explain the balancing test for weighing negative effects against subsidy-specific benefits and set out the conditions under which the Commission may call in below-threshold transactions or tenders.

European Commission Imposes €72 Million Cartel Fine on Battery Manufacturers and Trade Association

On 15 December 2025, the Commission has imposed combined fines of approximately €72 million on several automotive starter battery manufacturers and their trade association for participating in a long-running cartel in the European Economic Area (EEA). The conduct involved coordination of surcharges linked to the price of lead, a key raw material, affecting sales to automotive original equipment manufacturers (OEMs) and potentially raising costs for vehicle producers across Europe.

European Commission’s First Digital Services Act Noncompliance Decision: A Turning Point for Platform Accountability

On 5 December 2025, following a two-year investigation, the Commission imposed a €120 million fine on a microblogging platform for violating its transparency obligations under the Digital Services Act (DSA). This marks the first time the Commission exercised its powers under the DSA to bring action against a major tech company since the DSA came into effect in 2023.

European Commission Imposes Fines of €157 Million for Illegal Pricing Practices 

On 14 October 2025, the Commission imposed fines totalling approx. €157 million on three European fashion houses for engaging in resale price maintenance (RPM) across the EEA. The Commission found that each company restricted the ability of its independent retail partners to determine their own resale prices for nearly all products, in breach of Article 101 of the Treaty on the Functioning of the European Union (TFEU) and Article 53 of the EEA Agreement. This case sends a stark reminder to companies on the importance of designing antitrust compliance programs to effectively manage the enforcement risk in the EU.

ANTITRUST AND COMPETITION

European Commission Publishes Guidelines on the Application of Certain Provisions of the Foreign Subsidies Regulation

On 9 January 2026, the Commission published the long-awaited Guidelines on certain key substantive aspects of the EU’s FSR, including: 

• The criteria for the assessment of distortive foreign subsidies; 
• The balancing test, for assessing the distortive effects versus the positive effects of the foreign subsidy; and 
• The Commission’s power to request a prior notification of below-threshold cases.

Framework of Assessment for Distortive Foreign Subsidies 

The Guidelines clarify that for a subsidy to be deemed distortive, it must (i) be liable to improve the competitive position of the company in the EU; and (ii) in doing so, the foreign subsidy actually or potentially negatively affects competition in the EU.

In connection with the first test—whether the subsidy improved the competitive position of the company in the EU—the Guidelines distinguish between: (i) targeted foreign subsidies, where the improvement of the competitive position is presumed without any further assessment; and (ii) nontargeted foreign subsidies, where the Commission will assess further whether there is cross-subsidization of the company’s economic activities in the EU.

• Targeted foreign subsidies are broadly defined all subsidies that support—directly or indirectly—the company’s competitive position in the EU. These include, for example, subsidies for manufacturing or distribution activities in the EU, subsidies for acquisitions or investments in the EU, subsidies for R&D that might indirectly benefit the company’s products or service offerings in the EU, or subsidies such as financial guarantees that lower the cost of capital of the company’s EU activities.
• Nontargeted foreign subsidies are subsidies that do not support, directly or indirectly the company’s EU activities, and there is no indication on how the company plans to use these subsidies. The Commission will carry a detailed case-by-case assessment of factors that would prevent cross-subsidization, such as the company’s shareholding structure, intra-group links, and laws and regulations that might prohibit cross subsidization. 

Second, the Commission will assess whether, as a result of the improvement of the competitive position, the subsidy actually or potentially negatively affects the level playing field in the internal market. At the outset, the “Article 5” type subsidies are presumed to distort competition in the EU. These Article 5 subsidies include: (i) subsidies granted to a company likely to go out of business without a restructuring plan; (ii) unlimited guarantees; (iii) export financing; (iv) subsidies financing M&A in the EU; and (v) subsidies enabling the submission of a tender at a very low price.

For the other subsidies, the Guidelines will carry out a detailed case-by-case assessment on two key parameters:

• First, whether the subsidy affects the behaviour of the undertaking in the EU. The Guidelines will look at the scope, nature, purpose, and mechanics of the foreign subsidy to make this assessment. 
• Second, the Commission will assess whether the subsidy will actually or potentially affect competitive dynamics to the detriment of other economic operators in the EU.

The vagueness of the above-referenced tests leaves significant leeway to the Commission to find that any particular foreign subsidy constitutes a distortive foreign subsidy.

Balancing Test

Where a distortion is established, the Commission, at the recipient undertaking’s request, can carry out a balancing test, consisting in assessing the negative effects of the distortive foreign subsidy against any positive effects of the subsidy to assess whether to accept commitments or to impose remedial measures. The Guidelines provide details about this balancing test and clarify that any positive effects invoked to offset distortion must be specific to the foreign subsidy under assessment. The Commission will weigh the severity of the distortion and whether the claimed benefits could be achieved without it. The Guidelines also provide examples of supporting evidence. The Commission will not object in case the positive effects outweigh the negative effects. Otherwise, the Commission may accept commitments or impose redressive measures.

Power to Request a Prior Notification

Under the FSR, the Commission has the power to “call in” transactions and tenders falling below the FSR thresholds where it suspects distortive foreign subsidies. In this respect, the Guidelines provide clarifications on the conditions for the Commission to request a prior notification. The Commission will focus on cases involving, among others, acquisitions, where the target’s turnover does not reflect its actual or future economic significance, and strategic assets such as critical infrastructure or innovative technologies.

If the Commission decides to call in a case, it must provide details of the evidence showing there is a suspicion of foreign subsidies. The Guidelines also provide new safe harbours, including subsidies with respect to low-value public procurement procedures and subsidies below €4 million over a consecutive period of three years.

European Commission Imposes €72 Million Cartel Fine on Battery Manufacturers and Trade Association

On 15 December 2025, the Commission imposed a fine on three automotive starter battery manufacturers and a trade association of approx. €72 million for participating in a cartel that illegally coordinated pricing mechanisms over more than 12 years in breach of Article 101 TFEU. A fourth automotive starter battery manufacturer was not fined as it revealed the cartel to the Commission under the leniency programme. The Commission’s leniency programme gives companies the opportunity to disclose their participation in a cartel and cooperate with the Commission during an investigation. A successful leniency applicant will either completely avoid a potentially high fine or receive a substantial reduction from it.

The Commission found that the manufacturers, supported by the trade association, coordinated to create and publish industry-wide lead price premiums, which they used in negotiations with car and truck manufacturers, ensuring surcharges remained artificially high. The Commission concluded that this conduct restricted competition and likely led to inflated costs for OEMs in the EEA. Teresa Ribera, Executive Vice-President for Clean, Just, and Competitive Transition stated that:

“We have zero tolerance for price fixing or any type of cartel. It is our duty to ensure that our citizens and businesses, including European auto manufacturers can depend on suppliers that play fair and respect competition rules.”

The trade association was fined for its role in facilitating the infringement with a lump-sum of €125,000. The Commission stated that fining a trade association in addition to its members sends an important signal that trade associations need to make sure they do not facilitate collusion among their members. This decision reflects the principles established by the Court of Justice of the European Union in AC Treuhand of 22 October 2015 (Case C 194/14 P), where the court upheld that an entity that is not active on a market may nonetheless be held liable if it could reasonably foresee the anticompetitive conduct and intentionally contributed to achieving the common anticompetitive objective. It also emphasises the growing scrutiny that competition authorities place on trade associations that act as facilitators of anticompetitive conduct. 

The Commission’s decision against automotive starter battery manufacturers demonstrates that cartel enforcement remains a clear priority of the Commission. The decision is one out of four cartel decisions in 2025 for which the Commission imposed total fines of approximately €859 million. This upward trend contrasts with 2024 where the Commission has issued one cartel decision with total fines of approximately €49 million. 

European Commission’s First Digital Services Act Noncompliance Decision: A Turning Point for Platform Accountability

On 5 December 2025, the Commission imposed a €120 million fine on a microblogging platform for violating its transparency obligations under the DSA. This decision is the first noncompliance decision under the DSA and constitutes an important step in giving concrete effect to the DSA’s enforcement regime. The infringements include deceptive platform design practices, deficiencies in advertising transparency, and restrictions on access to data for independent research.

The Commission found that the microblogging platform’s use of the “blue checkmark” constituted a deceptive design practice. Once a symbol of verified identity, the Commission stated that the blue checkmark has been transformed into a paid feature, obtainable without meaningful verification of the account holder. While the DSA does not impose user-verification obligations, it prohibits misleading representation of verification. The infringement therefore arose from the checkmark’s signalling effect rather than from the lack of verification itself.

The decision also addresses shortcomings in the microblogging platform’s advertising transparency obligations. The DSA requires very large platforms to maintain a publicly accessible, searchable repository of displayed ads containing specified information. The Commission found that the advertising repository lacked key information on ads and advertisers, as well as access barriers that hinder effective scrutiny. The Commission further found that the platform failed to provide researchers with access to the platform’s public data. The Commission noted that limitations on scraping and the imposition of unnecessary barriers undermined independent research into systemic risks in the EU.

Henna Virkkunen, Executive Vice-President for Tech Sovereignty, Security, and Democracy stated that:

“Deceiving users with blue checkmarks, obscuring information on ads and shutting out researchers have no place online in the EU. The DSA protects users. The DSA gives researchers the way to uncover potential threats. The DSA restores trust in the online environment.”

From an enforcement perspective, the decision is notable not only for its substantive findings but also for the remedial framework accompanying the financial penalty. The Commission has paired the fine with detailed remedial obligations and strict timelines, backed by the threat of periodic penalty payments. This reflects an enforcement approach centred on corrective action and sustained compliance rather than punishment alone. The fine marks the DSA’s first noncompliance decision and sets a precedent in the industry.

European Commission Imposes Fines of €157 Million for Illegal Pricing Practices 

On 14 October 2025, the Commission imposed fines totalling approximately €157 million on three European fashion houses for engaging in RPM across the EEA. The Commission found that each company restricted the ability of its independent retail partners to determine their own resale prices for nearly all products, in breach of Article 101 TFEU and Article 53 EEA Agreement.

The Commission carried out unannounced inspections at the companies’ premises in April 2023 and opened formal proceedings against the three fashion houses in July 2024. According to the Commission, the companies engaged in RPM by imposing pricing constraints through: (i) adherence to recommended retail prices; (ii) restrictions on maximum discount rates; and (iii) limitations on sales periods. In certain cases, the fashion houses also prohibited retailers from offering any discounts. The three fashion houses monitored the retailers’ prices and followed up with deviating retailers. Retailers generally complied with these practices, either from the start or after being asked to do so. 

The Commission concluded that each company acted independently of each other and engaged in a single and continuous infringement of Article 101 TFEU. The Commission imposed fines on the three companies totalling approximately €157 million, taking into account their respective turnover, the duration of the infringement, and their cooperation during the investigation. Two of the companies provided evidence with significant added value at an early stage, and all three expressly acknowledged the facts and their participation in the infringement, which allowed the Commission to conclude the cases under the antitrust cooperation procedure. This procedure is inspired by the well-established cartel settlements procedure and can be used in other situations where companies are willing to acknowledge their liability for an infringement of the EU competition rules (including the facts and legal qualification). The cooperation framework allows the Commission to apply a simpler and faster procedure and the cooperating companies to obtain a reduction in fines, which in this case was 50% for two of the companies and 15% for the third company. 

With its decisions, the Commission sends a stark reminder to companies on the importance of designing antitrust compliance programs to effectively manage the enforcement risk in the EU by ensuring that pricing practices fully comply with antitrust rules. RPM practices are not tolerated, and independent resellers must be free to set their own prices and discounts. While the Commission’s decisions confirm that the use of price monitoring tools is generally legitimate, it reminds that such tools are not used to retaliate independent resellers by putting pressure, threats, supply limitations, or supply incentives. The decisions also confirm the increasing recourse by companies to the Commission’s antitrust cooperation procedure to seek a substantial reduction in the level of fines in exchange for the acknowledgement of their liability for the infringement of the EU competition rules.

We acknowledge the contributions to this publication from our paralegal Martina Pesci, and trainee associates Edoardo Crosetto and Etienne Perrin. 

The One Big Beautiful Bill Act (OBBBA) imposed new restrictions relating to PFEs in several clean energy tax provisions in the Internal Revenue Code. Among these changes, OBBBA disallowed credits under Section 45Y, Section 48E, and Section 45X for qualified facilities, energy storage technologies (ESTs), or eligible components that receive “material assistance” from a PFE. Whether assistance from PFEs constitutes “material assistance” is determined on a percentage basis using a material assistance cost ratio (MACR). OBBBA establishes acceptable MACR threshold percentages for qualified facilities, ESTs, and eligible components. If the relevant MACR is below the applicable threshold percentage, then the associated taxpayer cannot claim the Section 45Y, Section 48E, or Section 45X credits.

The Notice provides interim steps for determining the MACR, as well as certain safe harbors for taxpayers seeking to claim Section 45Y, Section 48E, and Section 45X tax credits. Treasury indicates it plans to issue comprehensive rules relating to material assistance and the determination of PFE status, as well as additional guidance relating to safe harbors. 

MACR Calculation 

The Notice provides preliminary rules, subject to forthcoming regulations and guidance, for determining the MACR for qualified facilities, ESTs, and eligible components. 

Clean Electricity MACR

The notice provides a four-step process to identify the variables used to calculate the MACR for the clean electricity MACR for qualified facilities and ESTs. Taxpayers are directed to:

• Identify the types of manufactured products (MPs) and manufactured product components (MPCs) included in the qualified facility or EST.
• Track the relevant characteristics—i.e., the MP’s or MPC’s PFE or non-PFE status—of each MP and MPC included in the qualified facility or EST.
• Determine the taxpayer’s direct costs attributable to the identified MPs (including MPCs) (Direct Costs).
• Determine the Direct Costs attributable to each of the identified MPs and MPCs that were mined, manufactured, or produced by a PFE (PFE Direct Costs).

Once the Direct Costs and PFE Direct Costs have been established, the taxpayer must subtract the PFE Direct Costs from the total Direct Costs and divide this number by the total Direct Costs. Each qualified facility or EST will have its own MACR, regardless of whether it is owned by the same taxpayer. 

The Notice allows for a de minimis tracking carveout, which permits taxpayers to assign MPs or MPCs of the same type to qualified facilities or ESTs placed in service during the same taxable year without individually tracking them to such qualified facilities or ESTs, if the total assignment is less than 10% of the Direct Costs for the qualified facility or EST. Subject to certain limitations, the cost of steel and iron may be excluded from the clean electricity MACR calculations. 

Taxpayers may rely on this interim Notice for purposes of calculating the clean electricity MACR for any Section 45Y and Section 48E qualified facility or EST for 60 days after the additional safe harbor tables are released.

Eligible Component MACR

To determine the MACR of eligible components, taxpayers follow a four-step process similar to that described above to identify the relevant variables: 

• Identify the constituent elements, materials, or subcomponents (the Constituent Materials) incorporated into the eligible component or consumed in production of the eligible component.
• Track the relevant characteristics (i.e., whether PFE-sourced) of each Constituent Material.
• Determine the taxpayer’s direct materials cost for each Constituent Material used to produce the eligible component (Direct Material Costs).
• Determine the Direct Material Costs attributable to PFE-sourced Constituent Materials (PFE Direct Material Costs). 

Once the relevant variables have been identified, the eligible component MACR is calculated in the same manner as the clean electricity MACR. 

By default, taxpayers must identify each specific MP, MPC, and Constituent Material and track such MP’s, MPC’s, or Constituent Material’s PFE characteristics. As discussed below, the Notice also allows two alternative methods for tracking these characteristics. Taxpayers may employ the Identification Safe Harbor or the Cost Percentage Safe Harbor, or they may employ them both in combination. Second, taxpayers may employ an averaging method. This method allows taxpayers to categorically identify and track a given type of MP, MPC, or Constituent Material, assigning an average Direct Cost, Direct Material Cost, PFE Direct Cost, and PFE Direct Material Cost, as applicable. Averages are taken over the course of a “specified period of time,” which may be selected by the taxpayer, within certain limits prescribed by the Notice.

PFE Direct Material Costs include the costs attributed to each PFE-produced MP and MPC, as well as each PFE-sourced Constituent Material. The PFE Direct Material Costs may be identified using the Certification Safe Harbor. Alternatively, taxpayers may determine this value by applying the PFE definition to the direct supplier of the MP, MPC, and Constituent Material; however, if the direct supplier of an MP, MPC, or Constituent Material is a reseller, the PFE definition is applied to the entity that mined, produced, or manufactured the Constituent Material. Whether an MP, MPC, or Constituent Material is PFE-produced or PFE-sourced is dependent on the relevant supplier’s status in the taxable year during which the taxpayer paid or incurred the Direct Costs of such qualified facility or EST, or the Direct Material Costs of such Constituent Materials. 

Taxpayers may rely on this interim Notice for purposes of calculating the eligible component MACR for Section 45X-eligible components sold in taxable years beginning after the passage of OBBBA until additional safe harbor tables are released. 

Interim Safe Harbors

The Notice provides three interim safe harbors upon which taxpayers may rely: (i) the Identification Safe Harbor, (ii) the Cost Percentage Safe Harbor, and (iii) the Certification Safe Harbor. Note that the Identification Safe Harbor and Cost Percentage Safe Harbor incorporate the safe harbor tables set forth in the IRS domestic content bonus notices (Safe Harbor Tables). 

Identification Safe Harbor

Taxpayers may rely upon the Identification Safe Harbor to identify the status of (i) MPs and MPCs of a qualified facility or EST, and (ii) Constituent Materials of eligible components, provided that the subject property is either an “Applicable Project” or “Applicable Project Component.” This is accomplished using the applicable Safe Harbor Table, which distinguishes between items that are (i) MPs or MPCs, and (ii) steel or iron. When using the Identification Safe Harbor, if an item of MP or MPC is not listed in the Safe Harbor Tables, it is disregarded for the MACR calculation. 

Cost Percentage Safe Harbor

In lieu of tracking actual costs, taxpayers may rely on the assigned cost percentages set forth in the applicable Safe Harbor Table to allocate costs among MPs and MPCs of a qualified facility or EST, as well as among Constituent Materials for eligible components. Note that the characteristics of MPs, MPCs, and Constituent Materials must be analyzed separately from the Safe Harbor Table; this Safe Harbor Table simply helps taxpayers in tracing Direct Material Costs, which then may be attributed among PFE-sourced and non-PFE-sourced items. The Cost Percentage Safe Harbor is applied using a five-step process: 

• Identify MPs and MPCs, or Constituent Materials, as applicable.
• Track the PFE character of each MP, MPC, and Constituent Material.
• Determine the total percentage of all MPs and MPCs, or Constituent Materials, using the Safe Harbor Tables.
• Determine the PFE percentage (i.e., the cost percentage attributed to MPs, MPCs, and Constituent Materials that are PFE-produced or PFE-sourced).
• Calculate the applicable MACR using a fraction, the numerator being total percentage less PFE percentage, and the denominator being total percentage.

Certification Safe Harbor

The Certification Safe Harbor allows taxpayers to rely on certifications from suppliers reciting (i) Direct Costs, Direct Material Costs, PFE Direct Costs, and PFE Direct Material Costs of the component or Constituent Materials supplied; and (ii) whether MPs and MPCs are PFE-produced or whether Constituent Materials are PFE-sourced. Such certifications must be attached to the applicable form used by the taxpayer to claim the tax credit. A taxpayer may rely on a completed certification unless the taxpayer knows, or has reason to know, that such certification is inaccurate. This safe harbor helps to remedy a troublesome information gap, as suppliers often possess critical details that taxpayers cannot obtain from any source other than the supplier. 

Taxpayers may rely on these safe harbors in combination, but they should closely monitor records with respect to these determinations to ensure compliance with the elevated compliance and record-keeping requirements imposed under OBBBA. 

Effective Control

The guidance briefly addresses how to determine whether an entity is subject to “effective control” by a specified foreign entity and therefore is a foreign influenced entity (qualifying it as a PFE) in the following three points:

• First, it states that Treasury and the IRS “expect to include” this discussion in forthcoming proposed regulations addressing certain PFE restrictions.

• Second, the guidance discusses effective control in the context of intellectual property (IP) licensing agreements. Section 7701(a)(51)(D)(ii) defines “effective control” as agreements granting contractual counterparties authority over key aspects of production and establishes tests that apply prior to the issuance of guidance, including a general set of tests and a special set applicable to IP licensing agreements. An IP licensing agreement is one that meets any test in subclauses (AA) through (GG) of Section 7701(a)(51)(D)(ii)(II)(aa). Subclauses (AA) through (FF) describe substantive arrangements deemed to confer effective control, such as rights to direct materials or operations, limit IP use, receive royalties, provide long term services, or withhold information necessary for facility operation. Subclause (GG), by contrast, provides that effective control exists if an IP licensing agreement was entered into or modified on or after 4 July 2025.

• Third, the guidance states that “effective control is determined independently under each provision” and applies this interpretation to conclude that any IP licensing agreement entered into or modified on or after 4 July 2025 confers effective control regardless of whether subclauses (AA) through (FF) apply. As a result, IP licensing agreements entered into before that date confer effective control only if they meet one of the substantive tests in subclauses (AA) through (FF), while agreements entered into, on, or after that date automatically confer effective control under subclause (GG).

Conclusion

The publication of Notice 2025-16 represents an important step in clarifying the tax landscape in the wake of OBBBA. Comments on the Notice are open until 30 March, and more guidance is expected to follow. Please contact any of the authors of this alert for assistance in navigating this evolving landscape. 

The most recent proposal would largely roll back many of the changes made in the August 2024 amendments (the 2024 Amendments) to Form N-PORT. The 2024 Amendments would have increased reporting frequency and accelerated filing deadlines,⁴ requiring affected funds to file monthly Form N-PORT reports within 30 days of each month-end and to report, among other things, information related to newly amended Rule 35d-1 under the Investment Company Act (the Names Rule).⁵ In 2025, the SEC delayed the effective and compliance dates of the 2024 Amendments.⁶ The compliance date for larger fund groups was extended from 17 November 2025 to 17 November 2027, and the compliance date for smaller fund groups was extended from 18 May 2026 to 18 May 2028.

The 2026 Proposal generally seeks to reduce the reporting burdens associated with the 2024 Amendments, address concerns around possible front running of funds’ trading strategies resulting from monthly reporting of holdings, and reduce the new reporting related to the Names Rule.⁷ A detailed comparative chart and related description of the 2024 Amendments and the changes in the 2026 Proposal is included below. Many of the proposed changes respond to issues that were raised by commenters at the time of the 2024 Amendments, and provoked dissent from some commissioners when they were adopted.⁸ While the 2026 Proposal is largely a deregulatory and streamlining effort, it does include notable new requirements related to exchange-traded fund (ETF) share class exemptive relief orders that the SEC has recently granted, as outlined in more detail below.

In a related action, the SEC also extended the compliance dates for the Names Rule-related reporting requirements on Form N-PORT to provide time to consider the proposed amendments to Form N-PORT. Consistent with its extension of the compliance dates under the 2024 Amendments, the SEC extended the compliance dates for the Form N-PORT Names Rule-related requirements to 17 November 2027, for fund groups with net assets of US$10 billion or more; and to 18 May 2028, for fund groups with less than US$10 billion in net assets.⁹ We expect that any final action on the 2026 Proposal would further amend compliance dates to allow firms to adjust their reporting processes accordingly.

The following chart compares the 2024 Amendments with the 2026 Proposal. Following the chart is a more detailed description of the 2026 Proposal.

Details of the Proposal

The proposed revisions to the 2024 Amendments would provide additional filing time, reduce the publication frequency, increase the portfolio level risk metrics threshold, and simplify the interest rate risk metrics. More specifically, the 2026 Proposal would:

Provide Additional Filing Time

The 2024 Amendments would have required funds to file monthly reports within 30 days after month end. The SEC is now proposing to revert the 2024 Amendments to the prior filing deadline of 45 days after month end.¹⁰ The SEC determined that the 30-day deadline was more burdensome than initially anticipated. We expect that reporting funds will benefit from this additional time to confirm reported information, as the shorter window may have put significant pressure on fund back-offices and service providers.

Reduction of Publication Frequency

The 2024 Amendments would have required funds to publish Form N-PORT reports publicly within 60 days after each month end. The SEC proposes to reduce the frequency of public reports on Form N-PORT from monthly (within 60 days after month end) to quarterly (within 60 days after fiscal quarter end).¹¹ This proposal restores the publication frequency that was in place prior to the 2024 Amendments.¹² The change in the 2024 Amendments to monthly public disclosure provoked vigorous opposition from commenters, as there was concern that such frequent exposure of sensitive portfolio information could lead to front running, predatory trading and other investor harm. Even after the adoption of the 2024 Amendments, commenters continued to advocate for a return to quarterly public disclosure,¹³ and the 2026 Proposal reflects these concerns.

Increased Portfolio Level Risk Metrics Threshold

Currently, registered funds subject to reporting on Form N-PORT are required to provide portfolio level risk metrics if the average value of the fund’s debt securities positions for the previous three months, in the aggregate, exceed 25% of the fund’s net asset value. The SEC proposes to increase this threshold to 50% of the fund’s net asset value.¹⁴ Under the proposed amendment, registered funds with less than 50% of their net assets in debt securities, on a three-month average basis, would no longer be required to provide information on portfolio level risk metrics. It has been noted that data captured by the 25% threshold is less relevant as funds investing more than 50% of their net assets in debt securities are more likely to be exposed to risks associated with changes in interest rates or credit spreads.¹⁵ Accordingly, we expect the increased threshold to alleviate operational burdens on reporting while focusing on the utility of data reporting.

Simplification of Interest Rate Risk Metrics

Currently, registered funds are required to report on two interest rate metrics: DV01, which measures the change in value of a fund’s portfolio resulting from a one basis point change in interest rates, and DV100, which measures the change resulting from a 100-basis point change.¹⁶ Under the new amendments, the SEC proposes to modify the interest rate risk metrics as follows: 

Elimination of the DV01 Metric

The SEC proposes to eliminate the reporting of the DV01 metric. The SEC believes that the DV100 metric is more useful for monitoring funds’ exposure to interest rate risk over time.¹⁷

Simplification of the DV100 Metric

The SEC proposes to simplify the DV100 metric by requiring that the metric be aggregated across all currencies (rather than being reported separately for each currency) for which the fund had a value of 1% or more of the fund’s net asset value.¹⁸

Streamlining Information

The SEC proposes to streamline the credit spread risk reporting by no longer requiring funds to report credit spread risk metrics separately for investment grade and noninvestment grade exposures. Credit spread risk metrics are technical data in which many funds faced practical challenges in accurately segmenting and reporting this data. By simplifying the reporting process, we expect a reduction in compliance costs and operational burdens as funds work with service providers to provide this information.¹⁹

Reporting of Returns

The SEC proposes to reform the reporting of returns in four ways:

Multiple Class Reporting

The SEC proposes to simplify reporting of returns by multiple class funds and to provide more specified instructions for funds to calculate returns.²⁰ Currently, registered funds are required to report monthly total returns for each class (if a fund has multiple classes).²¹ Under the SEC’s proposal, returns will be reported for a single representative class and will be calculated in the same way as in the applicable registration form.²² We expect reduced burden for most multiple-class funds on returns while adding targeted, useful granularity for the growing ETF share-class structure. 

Deduction of Sales Loads and Redemption Fees

Additionally, the SEC proposes that a fund’s sales loads and redemption fees are not to be deducted from performance reporting.²³ Currently, total returns are reported in accordance with methodologies outlined in applicable registration forms.²⁴ Furthermore, the current Form N-PORT is out of cadence with the reporting timing required by applicable fund registration forms.²⁵ This is because Form N-PORT provides monthly information while registrants disclose performance metrics on Forms N-1A and N-3 for noncumulative periods of one, five, and 10 years.²⁶ Deducting sales loads and redemption fees for each month over an indefinite number of reports could potentially give investors the impression that these are ongoing fees and would therefore overstate their effect on performance.²⁷ This change could result in more comparable monthly return data on Form N-PORT, with only limited impact to the public’s use of the data, as investors can still see the effect of loads and fees in the return tables in annual reports.

Elimination of Certain Required Reporting By Type of Derivative Instrument

Currently, registered funds subject to reporting on Form N-PORT are required to report the net realized gain (or loss) and net change in unrealized appreciation (or depreciation) attributable to derivatives by asset category.²⁸ Within such asset categories, funds are required to report the same information for different types of derivative instruments, which is intended to help SEC staff, investors, and other potential users to better understand how a registered fund uses derivatives to accomplish its investment strategy and the impact that derivatives have on a fund’s returns.²⁹ The 2026 Proposal would eliminate the requirement to report information by type of derivative instrument, in favor of information by asset category.³⁰ This amendment aligns with the broader 2026 Proposal’s goal of reducing costs and refining data collection without materially impairing risk monitoring or investor transparency.

Return Reporting Made for Each of the Three Months in a Fiscal Quarter

The SEC also proposes that, because Form N-PORT will be submitted quarterly rather than monthly, registered funds will be required to report return information for each of the preceding three months in each report to avoid unintended consequences regarding investor’s access to monthly return information.³¹ As a consequence, the costs savings for the changes may not be as significant as could be expected because funds will be required to continue collecting and submitting granular data about each month in the quarter.

Names Rule Reporting Requirements

In addition to these changes, the SEC has proposed to remove requirements to report information related to the registered fund’s compliance with the Names Rule.³² The Names Rule requires a fund whose name suggests a focus on a particular type of investment, industry, or geographic area to adopt a policy to invest at least 80% of its assets in accordance with its name.³³ The purpose of the Names Rule is to prevent fund names from misleading investors about the fund’s investment risks, particularly where a name could indicate that a fund’s investment decisions incorporates one or more ESG factors.

Removal of Requirements Related to the Names Rule

Under the existing Form N-PORT requirements, funds that are required to adopt the 80% investment policy pursuant to the Names Rule are required to report the following items: (1) definition of terms used in the fund’s name; (2) the value of the fund’s 80% basket, as a percentage of the value of the fund’s assets; and (3) whether each investment in the fund’s portfolio is in the fund’s 80% basket.³⁴ The SEC proposes to remove all three Names-Rule related reporting requirements from Form N-PORT. This proposal will likely be welcomed by the industry, as eliminating these requirements would reduce overall costs associated with filing Form N-PORT, particularly the costs of adding new data tags for Names Rule-related information.

Elimination of Requirements Related to the Payoff Profiles of Nonderivatives

Currently, Form N-PORT requires registered funds to report whether each position is long or short.³⁵ Funds are currently required to report on the value of the holding (positive/negative), and this information can serve as a proxy for whether holdings are long or short. This will eliminate redundancy in reporting and reduce overall compliance burdens.

Elimination of Certain Information About Convertible Debt Securities

On Form N-PORT, registered funds are required to report on the conversion ratio and the delta of certain convertible debt instruments, if applicable. The 2026 Proposal eliminates these reporting requirements as a means of further reducing reporting burdens and streamlining compliance for funds.

Elimination of Explanation to Why a Single Investment Has Multiple Liquidity Classifications

An open-end fund currently is permitted to attribute multiple classifications to a single holding only in the following circumstances: (1) if portions of the position have differing liquidity features that justify the different classification; (2) if a fund has multiple sub-advisers with differing liquidity reviews; or (3) if the fund chooses to classify the position through evaluation of how long it would take to liquidate the entire position.³⁶ If the fund reports multiple liquidity classifications for a single holding, the fund must indicate which of the three permitted reasons led to the different classifications. The 2026 Proposal would eliminate the requirement that open-end funds indicate a specific reason for the multiple classifications, which is likely to simplify liquidity reporting for some funds.

In addition to revising the 2024 Amendments, the 2026 Proposal introduces several new reporting requirements in response to regulatory changes and developments in the asset management industry. Specifically, the new reporting requirements include the following:

ETF Share Class Reporting

The SEC is proposing to add a new requirement for mutual funds with ETF share classes in light of the recently granted exemptive relief for mutual funds to have ETF share classes. The 2026 Proposal requires net assets and flow to be reported separately for an ETF share class as well as for the class’s ticker.³⁷ The SEC asserts that this reporting information is important because not only is an ETF share class structured differently and thus may behave differently than the other share classes in a multiple-class fund, but also that separate information would facilitate SEC staff analysis of industry trends and risks.³⁸

We expect that as firms begin to implement ETF share classes this report will be relevant to understanding the size and scale of investor interest in the new classes, and may provide other valuable insights into their development. While we generally expect that this information should be readily available for funds, adding any additional reporting requirements was a bit of a surprise, given the general focus on deregulatory actions by the current commission.

Additional Identifying Information

The SEC proposes to require registered funds to report the ticker symbol for each registrant and, as applicable, for each class of a registrant or series, along with class names and identification numbers.³⁹ The SEC is encouraging the use of tickers in the Form as the staff has found that ticker symbols enhance the efficiency of data analysis.⁴⁰

Overall, we expect that the amendments will come as welcome relief to many funds. While registrants have successfully established processes to file Form N-PORT in the more than a decade since it was originally adopted, the Form has been in a constant state of flux. The SEC has revised it frequently over the years and has proposed other amendments to the Form that were never adopted. Taking a step back and reviewing what has worked and what has not worked and proposing these streamlined reporting requirements is favorable for the industry in general. Nonetheless, even as part of such a streamlining effort, the SEC has found new areas of information for funds to report, as the market evolves towards ETF share classes.

The 2026 Proposal will be published in the Federal Register shortly, and the comment period will remain open for 60 days after the Federal Register publication date. As funds review and evaluate the proposal, the firm's lawyers are available to help identify areas where the SEC may wish to revise the final amendments and provide feedback accordingly.

We acknowledge the contributions to this publication from our law clerk Stewart J. H. Atkins.

The Bill seeks to introduce a general prohibition on unfair trading practices (UTP) into the existing Australian Consumer Law (ACL), along with other prohibitions relating to subscription products and drip pricing.

We set out below the key aspects of these proposed new laws which are proposed to commence from 1 July 2027, along with some practical considerations for businesses to consider going forward.

IN BRIEF

The Bill proposes:

• To prohibit UTP conduct toward consumers defined as conduct that:
  • Unreasonably manipulates consumers; or
  • Unreasonably distorts the environment in which the consumer makes a decision; and
  • Is likely to cause detriment.

These prohibitions only apply to conduct toward consumers that are individuals and only where the individual is not carrying on a business. 

• New disclosure obligations for subscription contracts, including point-of-offer disclosures, reminder notices during the subscription and clear cancellation pathways, with obligations varying depending on whether the contract is for a fixed-term, indefinite-term or includes a free trial or promotional period.

These obligations apply where the counterparties are individuals and small businesses (where the "consumer requirement" or the "small business requirement" is met.

• Stronger protections against "drip pricing" by requiring prominent, proximate disclosure of any transaction-based charges whenever a base price for goods or services is displayed, to ensure consumers are aware of mandatory per-transaction fees throughout a consumer’s purchase journey.

These obligations apply where the goods or services the subject of the prices being displayed are ordinarily acquired for personal, domestic or household use or consumption.

Importantly, these measures are intended to complement, and are in addition to, existing ACL provisions prohibiting misleading or deceptive conduct, unconscionable conduct and unfair contract terms.  They seek to "close" gaps in the ACL where the conduct may result in consumer harm. exposed by evolving marketplace practices and technologies. 

They will be subject to the civil penalty provisions in the ACL.

KEY OBLIGATIONS AND DISCLOSURE REQUIREMENTS

General Prohibition – Unfair Trading Practices

The Bill proposes to insert a new prohibition against unfair trading practices toward consumers into the Competition and Consumer Act 2010 (Cth).

A person is prohibited from engaging in conduct that does (or is likely to do) the following:

• Unreasonably manipulate the consumer; or
• Unreasonably distort the environment in which the consumer makes, or is likely to make, a decision; or
• Engaging in conduct that causes, or is likely to cause, detriment to the consumer.

The Explanatory Memorandum to the Bill (Explanatory Memorandum) clarifies a number of key concepts relevant to this general prohibition:

• "Unreasonable manipulation" of a consumer refers to conduct that exploits common cognitive or behavioral biases that result in a change in behaviour, decision-making or action against the consumer's interests. 
  
  General, legitimate and accepted marketing practices are not intended to be captured by this prohibition. Instead, this provision intends to target and regulate unreasonable behaviour.
• "Unreasonable distortion of the environment" refers to conduct that encourages a consumer to make economic decisions about proceeding with a transaction, when they would have been unlikely to do so otherwise.
•  "Detriments" include financial loss, wasted time or other negative effects on a consumer. It is sufficient that conduct "likely" causes detriment, instead of causing actual detriment to occur.

Some examples of unlawful conduct include:

• Interference with a consumer's ability to exercise legal rights or seek legal remedies; and
• Providing customers with excessive or confusing information that makes key information difficult to find or understand.

Importantly, this general UTP prohibition on unfair trading practices only applies where the consumer is an individual (not a body corporate) and not where the individual is relevantly carrying on business – these prohibitions are not currently intended to capture business-to-business conduct.

Penalties

Contraventions of this general prohibition by an individual may be subject to a maximum pecuniary penalty of AU$2.5 million.

For contraventions by a body corporate, the penalty is the greater of: 

• AU$50 million;
• Three times the value of the benefit resulting from the contravention; or
• 30% of the body corporate's adjusted turnover.

Infringement notices may also be issued for alleged contraventions of the general prohibition on unfair trading practices.

Subscription Contracts

The Bill requires suppliers to make certain statements and provide certain information:

• When offering goods or services under a subscription contract (i.e. prior to entering the subscription contract); and
• During the term of the subscription contract.

When Offering Goods or Services Under a Subscription Contract

The Bill requires suppliers to disclose a statement informing the counterparty that if entered, the contract would be for a subscription and that it would be for a fixed term, indefinite term, free trial period or promotional period (as applicable).

At the same time, the supplier must disclose the below information: 

• Liabilities to pay that the counterparty would or may incur under the contract; 
• The period of the contract; 
• The renewal of the contract; 
• The notice required before the counterparty can end the contract;
• How the counterparty can end the contract; and
• Any matter prescribed in the regulations.

The abovementioned statement and information must be disclosed:

• In a comprehensible, audible and unambiguous way within a reasonable time before a person could agree to enter the contract; or 
• In a legible, prominent and unambiguous way, near where a person can agree to enter the contract.

While Various Subscription Contracts are in Effect

The Bill provides that suppliers must also provide counterparties with certain information while fixed term, indefinite term, free trial and promotional period subscription contracts are in effect.

The required information to be disclosed is substantially identical to that required to be disclosed when offering goods or services prior to entering into the subscription contract (noted in bold in the section above).

The timing requirements for the information disclosures vary according to the subscription contract type. The relevant timing for each type is set out in the following table:

Ending Subscription Contracts

Under the Bill, suppliers of goods or services under subscription contracts must provide a way for the subscriber to end the contract that is both easy to find and straightforward.

Subscribers should only need to take necessary steps to end the contract and protect their interests. The Explanatory Memorandum clarifies that what is "reasonably necessary" depends on the nature of the subscription product or service, and the relevant industry.

If the subscriber entered the contract online, the supplier must provide a way for the contract to be terminated online.

Importantly, these obligations apply to subscriptions where the counterparties to the contracts are either individuals or small businesses (meeting the "consumer requirement" or the "small business" requirement. 

Penalties

Contraventions of these disclosure requirements are also subject to a civil penalty under the new laws. 

The maximum pecuniary penalty for such contraventions is the same as that for contraventions of the general prohibition on UTP (discussed above).

Transaction-Based Charges or Drip Pricing – Disclosure Requirements

Drip pricing is the practice of advertising a base price for goods or services and then revealing additional mandatory charges later in the purchasing process.

The Bill introduces disclosure obligations for transaction-based charges which are intended to strengthen protections against "drip pricing".

• A "base price" refers to the amount payable by a purchaser for the supply of goods or services. 
• A "transaction-based charge" refers to an amount that is or may be payable by a supplier on a per transaction basis.

The disclosure requirements surrounding "drip pricing" apply only where the relevant supply is of goods or services ordinarily acquired for personal, domestic or household use. However, the disclosures do not apply if an offer to supply is made exclusively to a body corporate.

The Explanatory Memorandum states that these information disclosure requirements are to ensure potential buyers are aware of mandatory transaction-based charges and can make informed decisions throughout the transaction.

Disclosure Obligations 

Where a supplier offers goods or services for supply to which a transaction-based charge applies, whenever the base price is displayed, the supplier must display the following information:

• The amount of the transaction-based charge (or if unknown at the time, the method for calculating the transaction-based charge);
• That it is a per transaction charge; 
• Whether the transaction-based charge will or may apply to the supply; and 
• Whether or not the base price disclosed includes the transaction-based charge.

The above information must be displayed legibly, prominently, clearly, and in close proximity to the base price.

The disclosure obligations apply whenever the base price is displayed. The Explanatory Memorandum further clarifies that an offer to supply (including through advertising, marketing and promotion) is sufficient to trigger the disclosure obligations.

However, there are some exclusions. For example, the disclosure obligations do not apply in the following circumstances:

• Verbal offers to supply (as the base price would not be "displayed"); and
• An offer to supply that is made exclusively to a body corporate.

Importantly, these obligations apply where the good or services the subject of the prices being displayed are ordinarily acquired for personal, domestic or household use or consumption.

Penalties

Contraventions of these disclosure requirements are also subject to a civil penalty under the new laws. The maximum pecuniary penalty for such contraventions is the same as that for contraventions of the general prohibition on unfair trading practices (discussed above).

Effective Timing

The new unfair trading laws proposed by the Bill are currently set to commence on 1 July 2027.

Practical considerations for businesses

General Considerations

• Is accessible customer service support provided to customers, such that they can exercise their legal rights or seek legal remedies (including enforcing their rights under the ACL)?
• Has all material information been disclosed to the customer? Has this disclosure been made in a manner that is complex or ineffective for customers?
• Are changes to a good or service (or the terms on which the good or service is provided) disclosed to the customer in a reasonable time?
• Consider the environment in which a customer makes their decision (e.g. online consumer interfaces and design elements).
  • Is there unreasonable pressure placed on the customer?
  • Is the customer obstructed from making or fulfilling their decision?
  •  Is relevant guidance for the customer available (e.g. guidance on how to cancel supply of goods or services)?
• Consider the business's user interface(s) that customers interact with.
  • Are there any elements that may be considered to be dark patterns?
  • Are there any design elements, functions or features of the user interface that possibly coerce, steer or deceive customers into making unintended decisions?
    • For example, "opt-out" check boxes for additional products or add-ons.
  • For paid subscriptions - is the sign-up process easy, but the cancellation process difficult (e.g. due to a lengthy and confusing process)?

Subscription Contracts

• Consider to whom information relating to subscription contracts is disclosed. That is, to whom is the good or service being offered?
  • Do disclosures only need to be made to the individual prospective subscriber? 
  • If the offer is made to the public at large, has the disclosure also been provided to the public at large?
• For a subscriber to end their subscription contract, what steps do they need to take?
  • Are there any steps in this process that are likely to unreasonably hinder them from their contractual right to exit the contract? (e.g. will they have to attend a branch in person to end the contract despite having moved overseas?)
• For subscription contracts entered into online, is there a way for the subscriber to end the contract online (regardless of whether the subscriber can end the contract in other ways)?

Transaction-Based Charges

• Consider where information on transaction-based charges is displayed.
  • Is the information noticeable?
  • Is the information hidden in fine print or obscured? (e.g. are people required to visit another webpage or pop-up to find further information?)

WHAT'S NEXT?

We expect Treasury to take on board submissions and finalise amendments in consultation with States and Territories and introduce a bill providing for a transition period with the effective date being 1 July 2027.

It is during this period that businesses need to "get their house in order" to mitigate risk, as we expect that this will be a significant Enforcement Priority of the Australian Competition and Consumer Commission next year.

Watch this space – in the meantime, if you have any queries about how the proposed laws may affect your business, please contact us and we can assist you.

The authors acknowledge the assistance of Jessica Lim, graduate, in the preparation of this article.

The SDNY CEP is framed as a way to accelerate investigations, identify culpable individuals, and provide restitution more efficiently. According to SDNY, the program “builds on years of experience with corporate self reporting, a focus on individual accountability, and a commitment to the interests of victims,” and it is intended to protect investors, accelerate detection of wrongdoing, and bolster market integrity by encouraging prompt disclosure and swift remediation.¹ The move furthers SDNY’s push to align prosecutorial incentives with voluntary disclosure, rapid cooperation, and victim restitution, and it follows the US Department of Justice (DOJ) May 2025 update to its Corporate Enforcement and Voluntary Self Disclosure Program² (DOJ CEP), which similarly clarified benefits for timely self reporting—offering companies greater predictability and assurance when they come forward.³

This alert (i) summarizes the key features of the SDNY CEP, (ii) highlights its differences from the current DOJ CEP, and (iii) offers practical guidance (including pros and cons) for companies considering voluntary self disclosure under the new regimes.

Key Features of SDNY Program

Crimes Covered

Stated Purpose

SDNY’s policy is available to companies who self-disclose conduct involving fraud or financial misconduct that affects market integrity.

Broad View of Fraud

SDNY defines fraud “expansively” to include all manners of deceptive conduct, including false statements, forgery, embezzlement, misappropriation, spoofing, insider trading, and market manipulation. SDNY’s specific listing of insider trading and market manipulation are notable given SDNY US Attorney Jay Clayton’s stated interest in policing prediction markets.

Securities Emphasis

The SDNY program specifically reaches all willful violations of the Securities Act of 1933, the Securities Exchange Act of 1934, the Commodity Exchange Act, Investment Advisers Act of 1940, and the Investment Company Act of 1940. 

Eligibility Requirements

Timely and Voluntary Disclosure

A company must self-disclose promptly, including before it has knowledge of a government investigation. However, a company will not be disqualified from the program if they disclose after learning of a whistleblower submission, press reporting of misconduct, or a prior self-report to another agency.

Full Cooperation

Eligibility for a declination requires “timely, truthful, continuing, and full” cooperation with SDNY. Such cooperation includes disclosure of all relevant, nonprivileged information known to the company relating to the conduct, identifying responsible individuals and witnesses, sharing results of an internal investigation, providing documents and other materials, preserving records, and consenting to disclosures to other government agencies.

Full Remediation and Restitution

A company must commit to full remediation and restitution of victims before it can receive a conditional declination letter, and it must reasonably remediate and make reasonable best efforts toward restitution before it can obtain a final declination.

Three-Year Reporting Obligation

For three years after the voluntary disclosure, a company must disclose all credible evidence or allegations of criminal conduct by the company or its employees.

No Protection for Individuals

Declinations provide no protection to individuals, and declination awards are predicated on a company’s willingness to cooperate and share nonprivileged information identifying individuals involved in the misconduct.

Offered Incentives

Declination Letters

The SDNY policy includes a model conditional declination letter, which eligible companies will receive upon a successful self-disclosure.⁴ Such letters are intended to enhance clarity and finality following the self-disclosure process.

Speedy Resolutions

A company should receive a conditional declination letter from SDNY within two to three weeks of self-disclosure.

No Fines or Forfeitures

SDNY will not seek criminal fines or forfeitures as long as a company makes reasonable best efforts to provide prompt and full restitution to injured parties.

No Monitors

A company will not be required to employ or be supervised by a monitor as part of any resolution with the SDNY.

Comparison of SDNY and DOJ Corporate Enforcement Programs

Practical Considerations

Scope and Speed Are Critical

A rapid, focused, well documented investigation that identifies root causes and corrective actions increases chances of favorable treatment. To secure declination or credit, expect demands for prompt production, witness interviews, preserved evidence, and transparent briefing of investigative findings. 

Jurisdictional Limitations

Signed declinations, like non-prosecution and deferred-prosecution agreements, are binding only on the US Attorney’s Office that enters into the agreement. While not routine practice, one office could theoretically bring their own enforcement actions despite the agreements made by another office. Alternatively, agreements under the DOJ CEP offer the potential for broader resolution, given the involvement of the Justice Department and the proximity of the Assistant Attorney General. Weighing these jurisdictional risks are an essential component of any disclosure strategy.

Privilege and Litigation Risk

Thoughtful privilege preservation is essential; waiving privilege selectively may be necessary to obtain cooperation credit, but it increases civil liability exposure.

Remediation and Compliance Enhancements

Concrete remediation (e.g., policy changes, discipline, training, compliance upgrades, independent review) should be implemented and documented before or concurrently with disclosure.

Coordination and Counsel

The premium placed on prompt disclosures puts significant pressure on companies to engage experienced criminal and regulatory counsel at the earliest stages of when problems are identified. Key decisions will include managing disclosure strategy; negotiating timing, scope, and conditional declination terms; and coordinating parallel regulatory or civil risks. 

Tailored Tradeoffs

SDNY’s local practices and points of emphasis (e.g., victim remediation, speed, no forfeiture) may favor disclosure in some matters; in others, the broader DOJ framework may yield different tradeoffs. 

Individual Referrals

Declinations are conditioned on a company’s willingness to cooperate in identifying culpable individuals. Even with corporate declination or credit, companies must be prepared for the potential of individual referrals and potential collateral actions. 
 

Who is Affected

The Circular extends the scope of the regulatory framework to all payment and e-money institutions whose home-member state is Luxembourg, their branches and Luxembourg branches of institutions outside the European Economic Area. Account-information service providers are also in scope and are treated as payment institutions for these purposes, with proportionality applied based on their size and risk profile. 

Key Changes Introduced by the Circular

Central Administration in Luxembourg

Institutions must have not only a registered office but also their decision-making and administrative centre in Luxembourg, although outsourcing remains possible in line with Circular CSSF 22/806. This includes the supervisory and management bodies, as well as key control and operational functions. 

Internal Governance

The Circular sets out more detailed requirements for a clear, transparent and consistent organisational structure, robust internal controls and effective risk management processes. Institutions must ensure segregation of duties, avoid conflicts of interest and document their proportionality assessments annually. Internal governance arrangements must be tailored to the institution’s size, structure, activities and risk profile.

Supervisory and Management Bodies

The roles, composition and functioning of the supervisory (typically the board of directors) and management bodies are clarified. Both bodies must collectively possess the necessary expertise, independence and diversity and are responsible for setting and implementing strategy, risk appetite and internal controls. Regular self-assessment and training are required. The supervisory body must have enough members with the right mix of professional qualifications, experience and personal qualities to ensure sound management.

Three Lines of Defence

The Circular formalises the “three lines of defence” model, requiring clear separation between (a) business units, (b) support/control functions (compliance, risk) and (c) internal audit. Such defence model was already encompassed by several CSSF circulars¹ that the Circular repeals, although now the model is no longer a matter of “how firms choose to map existing controls”; it becomes a regulatory expectation with defined content. Each function must be independent, adequately resourced and report directly to the management and supervisory bodies. Internal controls must effectively prevent fraud, ensure compliance with antimoney laundering and counter-terrorist financing obligations and be adapted to the institution’s risk exposure, with appropriate staff training. Governance is strengthened via annual-supervisory body review/reapproval and an annual-management body attestation to the CSSF (with reservations if noncompliant).

Safeguarding of Client Funds

Safeguarding is now consolidated into a dedicated chapter 8 of the Circular with specific operational requirements. Enhanced requirements are introduced for the safeguarding of client funds, including daily reconciliations, strict segregation of accounts and robust internal controls. Institutions must appoint a management body member responsible for oversight of safeguarding processes. Institutions are required to have mechanisms in place at all times to safeguard client funds received for payment transactions or in exchange for e-money.

Annual Reporting

In addition to the documents usually produced annually, institutions must submit (a) information and communication technology risk assessments, (b) annual attestations of compliance and (c) summary reports from compliance and internal audit functions to the CSSF within three months of financial year end.

What is Next?

Institutions should review their governance, risk and control frameworks against the new requirements, update internal documentation and plan for implementation by the 30 June 2026 deadline. The CSSF has signaled that further updates may follow as European and international standards evolve.

For fintechs and payment service providers, the Circular represents a significant regulatory shift—one that will require careful planning, board-level engagement and potentially substantial operational changes.

On 9 February 2026, the Location Promotion Act (Standortfördergesetz, StoFöG) was published in the Federal Law Gazette (Bundesgesetzblatt). The Act is meant to strengthen Germany as a business location by, among other things, providing incentives for private investment (particularly in the areas of infrastructure, renewable energy and venture and growth capital) and reducing unnecessary bureaucratic costs.

The Location Promotion Act also provides for amendments to the German Capital Investment Code (Kapitalanlagegesetzbuch, KAGB), which are intended to expand the investment options for real estate funds into facilities for the production of renewable energy and to enable open-ended domestic special Alternative Investment Funds (AIFs) with fixed investment terms to invest in closed-ended funds. Amendments to the German Investment Tax Act (Investmentsteuergesetz, InvStG) are designed to provide tax support for investments in renewable energy, infrastructure and venture capital. Furthermore, the "issue" of active entrepreneurial management—in the context of qualification as an investment fund or special investment fund and for the purposes of trade tax exemption—will be mitigated for a range of activities.

The aforementioned amendments to the KAGB and the InvStG entered into force on 10 February 2026.

Bmf Publishes Ministerial Draft on the Implementation of Solvency II Amendments

On 10 February 2026, the Federal Ministry of Finance (Bundesfinanzministerium, BMF) published the ministerial draft for an Act Amending Insurance Recovery, Resolution, and Supervision (Versicherungssanierungs-, -abwicklungs- und -aufsichtsänderungsgesetz, VSAAG). Among other things, the Act serves to transpose the Solvency II Amending Directive (Solvency II–Änderungsrichtlinie) (Directive (EU) 2025/2) into German law.

The Ministerial Draft redefines, inter alia, the basic solvency capital requirement for long-term equity investments. Against the background of EU requirements, the draft also allows for the classification of shares in European Long-Term Investment Funds (ELTIFs) and other Alternative Investment Funds (AIFs) with a low risk profile as long-term equity investments at the fund level, rather than at the level of the underlying assets. Consequently, a look-through approach involving extensive reporting obligations would not be required. Subject to compliance with all requirements, this could result in the application of a basic stress factor of 22% (instead of 39%) to such fund investments.

The Solvency II Amending Directive is to be applied by Member States from 30 January 2027.

Bmf Circular on the Treatment of Fund Establishment Costs

On 19 January 2026, the Federal Ministry of Finance (Bundesfinanzministerium, BMF) issued a circular addressing various points of doubt regarding the income tax treatment of fund establishment costs as acquisition costs pursuant to § 6e of the German Income Tax Act (Einkommensteuergesetz, EStG).

Expenses in connection with the launch of closed-ended funds are not immediately deductible as operating expenses or professional expenses; instead, they are deemed acquisition costs of the fund assets if the funds were established in the form of partnerships using pre-formulated contractual frameworks without significant investor influence (§ 6e EStG). The BMF Circular further elaborates on the conditions under which investors are (or are not) deemed to have significant influence over the pre-formulated contracts. Significant influence is assumed if investors are legally and factually able to change essential parts of the concept (e.g., the selection of investments).

The BMF Circular is to be published in the Federal Tax Gazette Part I (Bundessteuerblatt Teil I) and shall be applied by the tax authorities to all open cases.

Banking Directive Implementation and Bureaucracy Reduction Act Passed

On 28 January 2026, the Financial Committee (Finanzausschuss) approved the Banking Directive Implementation and Bureaucracy Reduction Act (Bankenrichtlinienumsetzungs- und Bürokratieentlastungsgesetz, BRUBEG) with a series of amendments compared to the government draft of 3 December 2025. Among other things, the BRUBEG transposes the Amending Directive to the EU Banking Directive (Directive (EU) 2024/1619 – CRD VI) into German law (e.g., the German Banking Act, KWG). CRD VI is part of the EU Banking Package, which also implements Basel III. Specifically, CRD VI introduces new minimum regulatory requirements for third-country branches.

One amendment compared to the BRUBEG government draft concerns equity exposures of development banks (Förderbanken) entered into as part of their development mandate. The Capital Requirements Regulation (CRR) does not apply to such equity exposures and subordinated debt instruments; therefore, they can be assigned risk weights of 100% under the standardized approach for credit risk (instead of at least 250%). No changes were made regarding third-country branches.

A large part of the CRD VI provisions should have been applied by Member States since 11 January 2026. Despite the delayed implementation in Germany, the Financial Committee has now spoken out against a retroactive entry into force of the BRUBEG. The first day of the next quarter was chosen as the new effective date.

BaFin Guidance on ICT Risks in the Use of AI

On 30 January 2026, the Federal Financial Supervisory Authority (Bundesanstalt für Finanzdienstleistungsaufsicht, BaFin) has issued its “Guidance on ICT risks in the use of AI by financial companies”. The guidance serves as non-mandatory advice and is intended to assist financial firms in implementing the relevant regulatory requirements under the Digital Operational Resilience Act (DORA) when using AI.

By reference to the EU AI Act, an AI system is defined as a machine-based system designed to operate with varying levels of autonomy. The guidance addresses information and communication technology (ICT) risks throughout the entire lifecycle of AI use, including development, testing, operation, and retirement. It emphasizes the need for a robust governance and organizational structure, as well as clear strategies and continuous training. The guidance also covers specific aspects of cloud service usage and issues regarding cyber and data security.

The guidance is primarily aimed at entities supervised by BaFin that must meet ICT risk management requirements (CRR institutions and insurance undertakings regulated under Solvency II). However, the guidance does not define any supervisory expectations of BaFin.

Esma Publishes Translations of Guidelines for Staff Requirements Under MiCA

On 28 January 2026, the European Securities and Markets Authority (ESMA) published the translations of its guidelines on criteria for the assessment of knowledge and competence pursuant to the Markets in Crypto-Assets Regulation (MiCA).

These guidelines set out minimum requirements for the qualification, experience, and continuing professional development (CPD) thresholds for staff providing information or advice on crypto-assets and crypto-asset services to clients. ESMA expects compliance with these guidelines to strengthen investor protection.

Competent authorities are expected to incorporate the guidelines into their national legal and supervisory frameworks and to ensure, through their supervision, that crypto-asset service providers (CASPs) comply with them. Within two months of publication, authorities must notify ESMA whether they comply or intend to comply with the guidelines.

The guidelines will apply from 28 July 2026 (i.e., six months after the publication of the translations on the ESMA website).

This article looks at three recent developments in the area of industrial relations, including:

• The impact of single interest employer authorisations where that authorisation has been appealed by the employer Chemist Warehouse;
• New delegates rights terms in awards brought about by the Full Federal Court’s decision in CFMEU v AIG; and
• The ability of the Commission to unilaterally amend enterprise agreements at the approval stage, as seen in a recent decision involving ALDI.

Single Interest Employer Authorisations—Chemist Warehouse

The Commission decided not to grant Chemist Warehouse a stay of the single interest bargaining authorisation granted to cover six Chemist Warehouse franchisees across Adelaide in December 2025 despite the authorisation decision currently being the subject of an appeal by Chemist Warehouse. 

On 2 December 2025, the Commission granted a single interest bargaining authorisation to the Shop, Distributive & Allied Employees' Association (SDA) in respect of six Chemist Warehouse franchisee operators in South Australia and their employees within nominated classifications under the Pharmacy Industry Award 2020, over the objections of those employers. The effect of the authorisation is that each of the nominated franchisee employers, linked by their commonality under the Chemist Warehouse brand, are now required to bargain with the SDA in respect of one enterprise agreement, which would apply to each of them jointly. 

On 19 December 2025, Chemist Warehouse filed a notice appealing the decision to grant the authorisation and requesting a stay of the authorisation made so as to prevent the SDA from relying on the authorisation until its appeal was determined. On 7 January 2025, the Commission rejected the stay application. 

The Commission reasoned that granting the stay could delay enterprise bargaining for months. In circumstances where the authorisation made only lasts for one year, and the uncertainty of whether the authorisation would be renewed even on application by the SDA, the Commission deemed a stay too prejudicial against the SDA and the employees it represents. 

The Commission determined that allowing a delay of this magnitude would risk undermining the purpose of the authorisation, which is ultimately to assist employees bargain more effectively by coordinating negotiations across similar businesses. The Commission said: 

Accordingly, if a stay is granted, a substantial proportion of the period of operation of the authorisation is likely to be lost before the appeal can be determined. The SDA would be deprived of a substantial part of the outcome it has achieved … The prospects of the SDA achieving a multi-employer agreement will be at least harmed, and perhaps extinguished. 

Notably, the SDA on behalf of the franchisee employees undertook not to engage in protected industrial action until the resolution of the appeal. The Commission found that this removed an element of potential prejudice to Chemist Warehouse in electing to refuse the stay application. 

Ultimately, the Commission’s decision means that bargaining between the six franchisees covered by the authorisation and Chemist Warehouse can proceed under the authorisation, notwithstanding the ongoing appeal into the decision to grant the authorisation. The effect of this is that each franchisee is required to participate in bargaining for the proposed multi-employer agreement and, in doing so, must comply with the good faith bargaining obligations in the FW Act. The Commission’s decision places the efficiency and efficacy of the bargaining process at the centre and shows in this case that if a single interest employer authorisation is made, bargaining may proceed even while the authorisation is being appealed. 

Delegates Rights Clauses Amended in All Modern Awards

The Closing Loopholes legislation introduced delegates rights into section 350A of the FW Act and included a requirement for all modern awards and enterprise agreements to contain a “delegates rights” term reflecting those rights. The Commission amended all awards to contain such a term on 28 June 2024. 

Recently, these amendments have been examined by the Full Court of the Federal Court in the case of Construction, Forestry and Maritime Employees Union v Australian Industry Group [2025] FCAFC 187. On 17 December 2025, the Full Court handed down its decision to quash the terms inserted by the Commission in nine modern awards. 

The Full Court found that in making the delegates’ rights terms, the Full Bench of the Commission had gone beyond the powers conferred on it in three respects:

1. The Commission confined the scope of the workplace delegates to represent members and eligible members only if they were employed directly by the employer of the delegate. The wording of the FW Act was not so confined. Accordingly, the workplace delegate must be entitled to represent the industrial interests of all members and eligible members who work in the enterprise or regulated business in which a delegate works, even if they are not employees of the same employer as the delegate. 
2. The Commission confined the rights of delegates to communicate for “the purpose of representing” the industrial interests of members and eligible members. The wording of section 350(3) is that delegates can communicate with those persons “in relation to” those industrial interests. The Full Court found that the terms need to adhere with the wording of the legislation, which has a wider scope. 
3. The wording of the clauses limited the scope of the delegates’ rights because those rights were subject to an obligation that the delegate comply with their duties and obligations as an employee, and were not to hinder, obstruct, or prevent the normal performance of work, regardless of whether doing so was in the course of the reasonable exercise of the delegates’ rights provided by the clause. The Full Court held that if such a clause is to be included at all, it should ensure the delegates’ rights can be exercised in a way inconsistent with the obligation not to obstruct the work only where the delegate is reasonably exercising their rights. To put it another way, a delegate is not required to comply with their duties and obligations as an employee, and can hinder, obstruct, or prevent the normal performance of work, if they are doing so in the reasonable exercise of their delegates’ rights.

The effect of the Full Court decision was that nine awards were found to not have a delegates’ rights clause, and the clauses contained in the remaining 146 award may not be valid. 

In response to the decision, on 23 January 2026, the Full Bench amended all awards to include a valid delegates rights term, which has been backdated to have effect from 1 July 2024 in light of the exceptional circumstances.

This decision does not just affect award-covered employees. Since the introduction of these clauses, all enterprise agreements have been required to have a delegates’ rights term that is not less favourable than the terms of the underlying modern award(s). If the agreement clause is less favourable, the legislation provides that the agreement clause will have no effect and the underlying award term is taken to be incorporated into the agreement. As a result of this, the Commission has had to carefully consider this issue when approving agreements since the start of 2026. 

The full effect of this decision is yet to be seen; however, employers should be aware of the following points:

• The Commission may exercise greater scrutiny of the delegates’ rights term during the agreement approval process.
• The new award terms have effect retrospectively from 1 July 2024 for any award-covered employees.
• Existing agreements made since 1 July 2024 that incorporated the old award term might automatically be taken to incorporate the new term, depending on the drafting of the agreement.
• Employers are required to act in a manner consistent with the delegates’ rights contained in s 350A (as found by the Full Federal Court), even if the applicable award or agreement term is narrower. 
• The scope of a delegate’s rights extends to workers in the same workplace even if those workers are not employed by the same employer.
• If delegates are reasonably exercising their rights, they are not bound by their ordinary duties and obligations as an employee and may hinder or obstruct the performance of work.

The Commission Tests s 191A Unilateral Amendment Power in ALDI Agreements

On 2 January 2026, the Commission exercised a rarely used power under s 191A of the FW Act to unilaterally amend three ALDI warehousing agreements, only after rewriting key provisions to require ALDI to guarantee fixed rosters for part-time employees.

The decision relied on a legislative power introduced as part of the 2022 industrial relations reforms, which allows the Commission to approve an enterprise agreement that does not pass the “better off overall test” (BOOT) by specifying amendments necessary to remedy identified deficiencies. This mechanism has seen limited consideration to date. This power is distinct from the commonly used undertaking provisions, where employers agree to amendments to enable a proposed agreement to pass the BOOT. Deputy President Slevin had earlier considered his concern could be addressed by an undertaking requiring employees to agree with ALDI on a regular pattern of work and invited ALDI to make such an undertaking, but ALDI refused to provide such an undertaking.

Although the agreements were approved by employee vote and provided pay rates exceeding those in the relevant modern award, the Commission concluded that they failed the BOOT in respect of part-time employees. The Commission’s key concerns were the absence of guaranteed minimum hours, highly variable rostering practices, and the lack of fixed start and finish times. The Commission found that these features undermined employees’ capacity to plan their personal lives and meant that, despite higher hourly pay, some part-time employees were worse off overall. 

The employer did not agree to the amendments sought by the Commission arguing that any detrimental aspects of the agreements were compensated for by the higher rate of pay. The Commission nevertheless determined to make the amendments. ALDI has lodged an appeal to this decision pursuant to s 604 of the FW Act.

The Commission’s approach favoured a broad construction of its power under s 191A, and signals a greater willingness by the Commission to intervene directly in the content of agreements to ensure statutory protections are met. 

Unpredictable hours and insecure rostering arrangements, particularly for part-time employees, are an area where the Commission has increased its scrutiny when conducting BOOT assessments. This scrutiny seems likely to continue, and perhaps intensify, going forward.

The decision underscores the Commission’s readiness to step in where enterprise agreements fail to deliver genuine and practical benefits, even where headline pay rates are attractive. This means that employers need to pay attention not just to the rates they are offering but also focus on how agreement terms operate in practice, especially in relation to job security and certainty of work.

The authors acknowledge the assistance of Sacha Bolton, graduate, in the preparation of this article.

For all maritime stakeholders, the MAP signals an intent for cross-cutting, White House driven changes to funding mechanisms, regulatory frameworks, procurement rules, workforce policy, and trade enforcement. Envisioning “hundreds of billions of dollars” in new investments, the MAP’s broad policy goals will require working with Congress and agencies on appropriations, rulemakings, and new guidance documents. Funding for the White House’s most important goals are expected to be included in the fiscal year 2027 budget request. 

The plan recognizes the nation’s strategic maritime position as a structural vulnerability and sets forth a roadmap for how America “will rebuild maritime strength at the speed and scale required to meet the challenges of today and the future.” In order to do this, the MAP is planned around four broad pillars with numerous action items, deregulatory actions, and legislative proposals. 

These pillars are: 

Rebuilding US Shipbuilding Capacity and Capabilities 

This pillar is focused on increasing shipbuilding supply, investing in shipyards, and encouraging US markets through tax relief, benefits, and deregulatory measures. Specific proposals include: 

Universal Fee on Foreign-Built Vessels From Any Nation Entering US Ports

A “universal infrastructure or security fee on all foreign-built commercial vessels calling at US ports, to be assessed on the weight of the imported tonnage arriving on the vessel.” The MAP estimates that a fee of US$0.01 cent per kilogram on foreign-built ships would yield roughly US$66 billion in revenue over 10 years, and a fee of US$0.25 cents per kilogram would yield close to US$1.5 trillion in revenue. While potentially the most controversial of the MAP’s proposals, it will likely require Congressional or additional administration action to implement. 

Strengthen the US-Built Definition Over Time

The MAP calls for requiring ship materials to be American made, tightening repair duty loopholes, and reducing retrofit compliance frictions, all while growing supplier capacity. 

Continue and Expand Shipping and Shipbuilding Commitments

The MAP recommends the administration “continue diplomatic and trade engagements” through the United States Trade Representative (USTR) with allies and trading partners under the Agreement on Reciprocal Trade (ART) Framework to secure new commitments related to shipping and shipbuilding.

Establish Maritime Prosperity Zones

These zones would be modeled after President Trump’s 2017 “Opportunity Zones” concept to incentivize and leverage domestic private capital and allied investment in America’s maritime industries and waterfront communities. 

Reforming Maritime Workforce Education and Training

This pillar focuses on expanding and increasing funding for both the US Merchant Marine Academy and the state maritime academies while encouraging existing workforce and pipeline program developments. Specific proposals include: 

Authorize and Fund a New Mariner Incentive Program (MIP)

This proposal would direct the Maritime Administration to authorize a suite of programs to support mariner education, recruitment, training, and retention to meet current and future economic and national security needs. The MIP would include improvements to the existing Student Incentive Payments⁴ that provide financial assistance to state maritime academy students.

Encourage Military-to-Mariner Opportunities

The MAP recommends expanding programs to encourage those with prior military training to transition to being a civil mariner. This includes maximizing recognition of military skills and sea service toward Merchant Mariner Credential endorsements, expanding fee exemptions, and formalizing equivalency guidance. 

Protecting the Maritime Industrial Base

Focused on strengthening trade, this pillar proposes new taxes and increasing engagement with China on anticompetitive actions, as well as: 

A New United States Maritime Preference Requirement (USMPR)

The proposed USMPR would require “high-volume exporting economies to transport a gradually increasing percentage of their US-bound containerized cargo on qualifying US vessels.” The USMPR will likely need to be passed by Congress unless included as part of a USTR  action. 

Land Port Maintenance Tax

This tax would create a funding mechanism for land ports of entry that is equivalent to the existing Harbor Maintenance Tax/Fee for seaports. Merchandise entering the United States through land ports of entry would be subject to a tax (0.125% of the value of the merchandise), ensuring that land ports contribute equitably to the costs of maintaining and improving critical trade infrastructure. Funds collected under this tax will be deposited into the newly established Land Port Maintenance Trust Fund, which will support the planning, design, construction, maintenance, and improvement of land port infrastructure. Implementation of this proposal would require Congressional action. 

National Security, Economic Security, and Industrial Resilience 

This pillar focuses on technology, resilience, and foreign dependence, including prioritizing the development of autonomous marine vehicles by: 

Fully Funding the Maritime Security Program (MSP)

The MAP highlights the need to fully fund the MSP and Tanker Security Program to ensure the Department of War has access to additional sealift capacity while directly increasing the number of commercial vessels that operate under the US flag. 

The Creation of the Strategic Commercial Fleet (SCF)

The creation of an SCF, consisting of internationally trading US-built vessels, would provide redundancy for military logistics around the globe and ensure the continuous flow of goods to the US economy. Vessels in the SCF would receive financial support for both construction and operation. The idea of the SCF comes from the SHIPS for America Act, but Congressional action would be required in order to implement the proposal.

Maritime Security Trust Fund

Envisioned to be funded by the universal fee on foreign-built vessels, this fund would serve as a reliable funding source for consistent support of programs detailed in MAP. Its establishment would require legislation to implement.

If fully enacted, the MAP represents a foundational shift in US maritime policy with far reaching implications. Our dedicated and highly experienced team continues to engage on the MAP, gather intelligence, and closely monitor all relevant developments related to the MAP and would be more than happy to provide support to all related matters. Please do not hesitate to contact any of the key contacts listed below if you have any questions or would like to discuss how recent developments may impact you.

One of the most significant areas of exposure for contractors operating in Italy concerns joint and several liability within the subcontracting chain. 

Under Italian law, a main contractor may be held jointly liable with its subcontractors for unpaid wages, severance payments, and social security and insurance contributions owed to the subcontractor’s employees. This applies even if the main contractor has fully complied with its own obligations or was unaware of the subcontractor’s shortcomings, leading employees and social security authorities to act directly against the main contractor. 

This risk can be particularly significant in large, labor intensive projects where multiple tiers of subcontracting are involved.

Contractual indemnities and monitoring mechanisms are essential risk-mitigation tools, but they do not eliminate statutory exposure towards third parties.

Closely connected to this issue is Italy’s strict regulatory framework on health and safety in the workplace under Legislative Decree 81/2008, which places extensive duties on contractors and may lead to administrative or even criminal liability in the event of breaches or accidents, pursuant to Legislative Decree 231/2001.

International operators must therefore ensure that their safety governance, training programs, and documentation are fully aligned with local standards from the very beginning of the project. Relying solely on subcontractors to manage safety compliance is rarely sufficient, and Italian authorities tend to consider the contractor as the primary responsible party for site conditions.

Another area that often surprises foreign operators is the approach to delays and acceleration plans. When projects fall behind schedule, employers—particularly public authorities—frequently require the contractor to submit a detailed acceleration plan, setting out additional resources, revised methodologies, and updated timelines. Although contractors may seek compensation for the increased effort required to recover delays, disagreements often arise as to whether the delay is attributable to the contractor or to external factors. 

Foreign investors should be aware that certain Italian legal provisions apply mandatorily, even when the parties choose a different governing law. 

Among the most impactful is Article 1671 of the Italian Civil Code, which grants the employer the right to withdraw unilaterally from a construction contract at any time, even without the contractor being in breach. 

Although compensation is due for works performed, costs incurred, and loss of profit, the mere existence of this statutory right can significantly affect the stability and risk profile of long-term projects. Many international contractors are unfamiliar with this broad termination power, which may override carefully drafted contractual termination clauses.

Another key provision is Article 1664 of the Civil Code, which provides for price revision where unforeseeable circumstances cause a cost increase exceeding 10% of the agreed price. In such circumstances, the disadvantaged party may seek an adjustment limited to the portion exceeding the 10% threshold. In long-term infrastructure projects exposed to market volatility, this rule may become particularly relevant. Recent legislative developments in the public procurement sector have reinforced mechanisms aimed at addressing extraordinary increases in material and energy costs.

Other mandatory norms may affect foreign operators, including strict rules on subcontracting in public works, certain liability provisions that cannot be contractually excluded, limits on penalty clauses and specific requirements concerning performance guarantees.

In summary, Italy remains a highly attractive market for international contractors but entering it without a clear understanding of these mandatory and sector-specific rules can lead to unexpected liabilities and claims. Joint liability for subcontractors, stringent safety obligations, mandatory price revision mechanisms, and the employer’s statutory right of unilateral withdrawal all have the potential to reshape the economic and operational dynamics of a project. 

Foreign investors would therefore benefit from anticipating these issues early—both in contract negotiations and in project execution—to safeguard timelines, budgets, and long-term commercial relationships.

The firm’s Milan office works closely with the firm’s globally recognized Construction and Projects practice to advise international sponsors, contractors, lenders, and investors on Italian construction and infrastructure projects. Drawing on deep local market knowledge and a fully integrated global platform, the team supports clients at all stages of the project lifecycle, from bid strategy and procurement through contract negotiation and project delivery. For international operators, early and timely legal advice is essential when formulating bids and entering into project documentation, helping to manage risk, address regulatory and procurement requirements, and ensure that contractual structures are aligned with Italian law and market practice. For more information, visit our Milan office page.

The recent police investigations into high-profile individuals, including Peter Mandelson and Andrew Mountbatten-Windsor, have centred around the offence of misconduct in public office. In this article we discuss the offence, its interplay with other offences and disciplinary processes, as well as the UK government’s determination to broaden measures for accountability for those that hold positions in public office.

Understanding the Offence: What Happens?

There are numerous ingredients that must be demonstrated to prove that an offence of misconduct in a public office has been committed. 

Misconduct in public office is a common law offence in England and Wales, developed through caselaw. The elements of the offence, as set out in Attorney General’s Reference (No 3 of 2003) [2004] EWCA Crim 868, are as follows:

1. The individual is a public officer acting as such.
2. The individual wilfully neglects to perform his or her duty and/or wilfully misconducts himself or herself.
3. The conduct is to such a degree that it amounts to an abuse of the public’s trust in the office holder.
4. The conduct is without reasonable excuse or justification.

Except for in exceptional circumstances, the seriousness of the offence and strong public interest in deterrence mean that convictions for misconduct in public office typically result in an immediate custodial sentence. The maximum sentence is life imprisonment, though sentences imposed to date have generally been lower.

Acting as a Public Officer

The offence can be committed by a “public officer” who is “acting” in the course of his or her public duties. Whether someone is a public officer will be assessed on a case-by-case basis, considering his or her position, the nature of his or her duties, and whether the fulfilment of those duties represents the fulfilment of one of the responsibilities of government such that the public has significant interest in the discharge of the duty.¹ Previously, public officers have included elected officials, civil servants, police constables and prison staff.

The “acting as” is an important element of this offence. There must be a close connection between the public officer’s duties and the alleged misconduct—it is not sufficient to simply be acting whilst a public official.²

Wilful Neglect to Perform His or Her Duty or Wilful Misconduct

The offence requires “wilful” conduct. It must involve a positive act or an omission by the duty holder, and this must be done deliberately knowing it to be wrong or with reckless indifference as to whether it was wrong or not. For example, a prison officer passing information to journalists for payment³ or a police officer taking no action to intervene during a disturbance in which an individual was fatally injured.⁴

Abuse of the Public’s Trust

The evidential threshold for abuse of public trust is high: the conduct must represent a serious departure from proper standards and an affront to the standing of the office, warranting criminal punishment rather than disciplinary action. It is a matter for a jury to determine whether the threshold has been met. 

Each case will be determined on its facts, but by way of illustration, previous cases have considered the following:

• How egregious was the abuse of power? Did the wilful misconduct or breach of a duty have the effect of benefitting the wider public interest rather than being damaging to it?⁵
• Did the conduct harm the public interest or undermine public trust? For example, if the suspects objectivity was compromised or they were exposed to a conflict of interest.⁶

This element of the offence can cause difficulties during any prosecution, which, as discussed further below, may lead to alternative routes to accountability. 

Without Reasonable Excuse or Justification

The defendant may seek to argue that there was a reasonable excuse or justification for the misconduct; however, it is not necessary for the prosecution to prove the absence of a reasonable excuse or justification. 

Routes to Accountability: Criminal or Disciplinary?

Historically, disciplinary measures—such as pursuing breaches of the Ministerial Code—have proved more effective than criminal prosecution for suspected misconduct by government ministers given the high evidential burden required for misconduct in public office. The Ministerial Code applies to all government ministers and broadly sets out how each government should function, including propriety, ethics and the separation between public and private interests. It is at the prime minister’s discretion to determine how alleged breaches should be investigated, often leading to investigation by the Independent Adviser on Ministerial Interests (the Individual Adviser) or the cabinet secretary. As of November 2024, the Independent Adviser has power to initiate his or her own investigations into potential breaches.

Breaches of the Ministerial Code can lead to dismissal or resignation for more serious breaches or a public apology, remedial action or removal of salary. In October 2022, Suella Braverman resigned from the UK government following a breach of the Ministerial Code after sending a draft written ministerial statement from a personal email to a colleague outside government in contravention of the rules. 

What Is Changing: The UK Government’s Steps for Accountability

On 9 February 2026, Chief Secretary to the Prime Minister Darren Jones MP highlighted immediate steps that the UK government will take in the wake of information released by the US Department of Justice about Peter Mandelson’s relationship with Jeffrey Epstein. One of these steps includes the passage of the Public Office (Accountability) Bill (the Bill) through Parliament, which was introduced following calls for greater accountability following high-profile scandals, such as the Hillsborough disaster. The Bill will abolish the common law offence of misconduct in public office and replace it with two statutory offences. The first is “seriously improper” acts by a person who holds public office to obtain a benefit or to cause another person to suffer a detriment, knowing his or her behaviour is seriously improper. The second offence is a breach of duty to prevent death or serious injury by a person in public office. 

Whilst the Bill will not impact misconduct in a public office investigation into historic actions involving public individuals associated with Jeffrey Epstein, it remains to be seen what future action will be taken to maintain public trust in those holding public office.

The firm is well positioned to advise on both criminal investigations and wider disciplinary action against those in public office, with an established White Collar Defence and Investigation practice group and an established Public Policy and Law practice group. The authors listed above lead these efforts from the London office. 

The Deepwater Ports Act of 1974,² sets the legal regime for deepwater ports—a term of art, used to describe structures beyond the territorial sea used for oil and gas imports and exports.³ Implementation of the Deepwater Ports Act is shared between the USCG and MARAD.⁴ Among other things in the 1970’s the Secretary of Transportation delegated to the USCG environmental review and coordination, navigation, construction, and operation safety of deepwater ports, while MARAD was delegated review of financial due-diligence, national security concerns, and final authorization. 

The NDAA now sets by statue that authority for environmental review under the National Environmental Policy Act (NEPA), the nation’s bedrock environmental law, will be transferred to MARAD, while also giving MARAD authority to issue regulations to implement NEPA. Meanwhile, the USCG will maintain authority over design, construction, operations, and navigation. 

This overhaul follows years of frustration from Congress and industry over long lag times and lack of transparency from the two agencies over how responsibilities were shared throughout the application process.⁵ Even in a permitting world where timelines for all major infrastructure projects regularly extend to years, deepwater ports have stood out. Over the life of the statute only 11 approvals and eight licenses have been issued. And despite a statutorily mandated 330-day approval timeframe, the program went over 15-years without a single project receiving a license until then MARAD Administrator, Rear Admiral Ann C. Phillips, approved the Texas-based, Sea Port Oil Terminal (SPOT) in 2024.⁶

The current Transportation Secretary Sean Duffy has stated that this new change will bring an end to these historic delays and accelerate approvals. He swiftly followed through on his statement with MARAD issuing its first license under the amended statue in February 2026 for the Texas GulfLink deepwater port,⁷ less than a month after the changes to the program were enacted into law. 

Texas GulfLink is now the third licensee issued since the 2024 revival of the deepwater ports program and the second license issued by the Trump administration. 

The news of this announcement, however, was shadowed by a pipeline explosion on the same day at the first and only other deepwater port licensed by the Trump administration, Delfin LNG. Delfin’s application was originally denied in the final year of the Biden administration but saw a swift reversal in the first few months of 2025. Delfin’s denial drew the attention of Senator Ted Cruz, who explicitly asked Secretary Duffy to “expedite review” of Delfin during his confirmation hearing. 

Reducing red-tape and consolidation of authorities gives MARAD and DOT the opportunity to reduce wait-times, increase applicant transparency, and help meet increased demand for energy export markets as the United States hits record liquid natural gas export numbers. Although the Deepwater Ports Act requires far more for the issuance of a license than just NEPA compliance, the administration seems set to make good on its promise to make the “Deepwater Port Program [] a key pillar of President Trump’s energy dominance strategy.”⁸

Our Maritime and Energy, Infrastructure, and Resources practice groups are closely monitoring all developments related to the administration’s energy dominance strategy and are ready to provide support on all matters related to energy and deepwater ports. 

In a landmark judgment, the High Court of Australia (High Court or the Court) has held that the Catholic Diocese (the Diocese) breached a non‑delegable duty of care owed to a child who was sexually assaulted by a priest in 1969.

The majority of the High Court confirmed that a breach of a non‑delegable duty is not confined to negligence; it can extend to intentional wrongdoing on the part of a delegate (who does not have to be an employee at law) where the harm was reasonably foreseeable and arose in circumstances in which the institution had assumed responsibility for the child’s safety.

In reaching this conclusion, the Court re-opened and overturned the long‑standing position from New South Wales v Lepore (2003) 212 CLR 511 (Lepore), that that there can be no common law non-delegable duty in respect of harm caused by an intentional criminal act.

This decision has significant implications for cases relating to institutional liability and abuse.

*Warning: This article contains details about sexual assault or abuse which may be upsetting for some readers. Please take care when reading and discretion is advised.

BACKGROUND

The Plaintiff, AA (a pseudonym), was 13 years old in 1969 when he attended scripture classes taught by Fr Ronald Pickin. Fr Pickin invited AA and other boys to the parish presbytery on Friday evenings, where he provided them with alcohol and cigarettes and permitted them to gamble on a poker machine located in an area adjoining his bedroom.

It was alleged that Fr Pickin sexually assaulted AA on multiple occasions in that location, out of sight of others. Fr Pickin died in 2015.

AA issued proceedings in negligence against the Diocese.

NSW SUPREME COURT DECISION

At first instance, Schmidt AJ accepted AA’s account of the assaults and held that:

• The Diocese was vicariously liable for Fr Pickin’s wrongful acts of sexually assaulting AA. This decision was made prior to the High Court's decision of Bird v DP (a pseudonym) [2024] HCA 41 (Bird v DP).
• The Diocese owed AA a common law duty of care, which it breached through inaction on the part of the Bishop.
• Damages of AU$636,480 were awarded, calculated on the undisputed basis that the limitations on personal injury damages imposed by the Civil Liability Act NSW 2002 did not apply.

Although AA also contended that the Diocese owed a non-delegable duty, the primary judge did not determine liability on that basis.

NSW COURT OF APPEAL DECISION

The Diocese appealed the primary judge's decision which was subsequently overturned by the NSW Court of Appeal. 

The Court of Appeal unanimously held that the Diocese did not owe AA the common law duty of care identified by the primary judge because the risk of harm to the plaintiff was not foreseeable.

The Court applied Lepore, the prevailing authority that a defendant cannot be liable for breach of a common law non-delegable duty based on an intentional criminal act. Consequently, the Court of Appeal held that the Diocese could not owe a non-delegable duty in respect of an intentional criminal act committed by one of its priests.

AA accepted that the primary judge’s finding of vicarious liability could not stand in light of the High Court’s intervening decision in Bird v DP.

THE HIGH COURT APPEAL

The key issue the High Court determined was whether an institution can be liable for child sexual abuse committed by one of its "delegates" (in this case a priest) on the basis that it owed a non-delegable duty of care to the child. 

Non-Delegable Duty of Care

The majority of the High Court (Gageler CJ, Jagot and Beech-Jones JJ), together with Gordon, Edelman and Steward JJ, all agreed that a non-delegable common law duty of care requires that the duty-holder has undertaken the care, supervision or control of the person or property of another, or is so placed in relation to that person or their property so as to assume a particular responsibility for their or its safety. 

The High Court, Gageler CJ, Jagot and Beech-Jones JJ in the majority, held that the Diocese owed AA a non-delegable duty of care because the Diocese: 

• Placed Fr Pickin in the position of performing the functions of parish priest of the Diocese; and
• As part of the performance of those functions, required Fr Pickin to establish sufficiently familiar relationships with children to enable him to instruct them in their spiritual and personal growth as Catholics and created the circumstances in which he could do so; 
• Knew that children, by reason of their immaturity, were particularly vulnerable to many kinds of harm; 
• Alone had practical capacity to supervise and control Fr Pickin's performance of his functions as parish priest; and 
• Ought reasonably to have foreseen the risk of harm of personal injury to a child under the care, supervision or control of a parish priest such as Fr Pickin, including from an intentional criminal act of the priest or a third party (including an act of sexual abuse of the child).

The High Court noted that a non-delegable duty requires the duty-holder not merely to take reasonable care but to ensure that reasonable care is taken by its delegate/s.

In framing the duty, the Court found that, in 1969, the Diocese owed a duty to a child to ensure that while the child was under the care, supervision or control of a priest of the Diocese, as a result of the priest purportedly performing a function of a priest of the Diocese, reasonable care was taken to prevent reasonably foreseeable personal injury to the child.

Intentional Acts and Non-Delegable Duty of Care

The High Court upheld the primary judge's findings that Fr Pickin abused AA. 

The majority of the High Court held that the criminal nature of the act does not, as a matter of logic, remove it from the scope of a non-delegable duty. The relevant inquiries are whether:

a. A relationship of authority, supervision, trust, care or control existed; and

b. The harm was of a foreseeable kind within the scope of responsibility assumed.

The majority observed that the reasoning in Lepore had “stultified the coherent development of principle” and should be overturned to the extent it excluded intentional criminal acts from the operation of non-delegable duties.

Breach of Non-Delegable Duty of Care

With respect to breach, in 1969 AA was 13 years old. While at the presbytery, he was under the care, supervision or control of the only adult present, Fr Pickin. AA was there because Fr Pickin was performing functions of a diocesan priest, teaching scripture at AA’s school, inviting AA in his capacity as a priest, and being trusted by AA’s parents because of his role. It was in this context that Fr Pickin sexually assaulted AA.

The High Court majority found that, by virtue of Fr Pickin’s sexual assaults in 1969, the Diocese was liable to AA for breach of a non-delegable common law duty of care owed to him at that time.

In reaching this conclusion, the High Court re-opened and overturned the majority finding in Lepore that there can be no common law non-delegable duty in respect of harm caused by an intentional criminal act. The High Court held that the acts of Fr Pickin and the harm suffered by AA fell within the scope of the Diocese's non-delegable duty.

Damages and Application of Civil Liability Act (NSW) 2002

Interestingly, the majority of the High Court also concluded that the limitations on personal injury damages imposed by the NSW Civil Liability Act applied to the determination of the extent of the liability of the Diocese. As a result, damages were reduced from AU$636,480 to AU$335,960 (comprising AU$90,480 for economic loss and AU$245,480 for non-economic loss).

This is only relevant in New South Wales but may significantly reduce the damages awards in this jurisdiction for claims relating to breach of non-delegable duty. 

IMPLICATIONS AND KEY TAKEAWAYS

The decision broadens the circumstances in which institutions may be held legally liable for historical child sexual abuse. Implications of the decision include: 

• Institutions may be directly liable for child sexual abuse committed by delegates who were in positions of authority (but not necessarily employees at law). 
• Where an institution or individual assumes responsibility for the care, supervision or control of a child, liability may extend to intentional harm committed by a delegate, so long as the risk of such harm was reasonably foreseeable. 
• The Court’s reasoning also indicates that foreseeability may be established in contexts involving the supervision of children.
• Institutions cannot point to having no knowledge of risk of harm by the perpetrator or appropriate systems to care for children and monitor delegates. A non-delegable duty where there is liability for intentional tort means that the institution will be liable regardless of their systems if the tort is proven. 
• This may mean that there is greater scrutiny on liability evidence and whether the intentional tort will be proven. 

For further advice on the topic, please contact Emma Dawes, Partner, of the Melbourne office.

The author acknowledges the assistance of Stella Pinirou, clerk, in the preparation of this article.

Across European jurisdictions, a theme emerges: administrative fines are generally viewed as punitive in nature and therefore uninsurable, especially where the breach involves intentional or wilful misconduct. However, the legal position is far from uniform. Some jurisdictions leave room for coverage in cases of negligence, while others adopt a stricter stance that excludes insurance coverage for administrative and regulatory fines and penalties altogether. In practice, insurance markets have responded by offering coverage for defence costs, investigation expenses, and ancillary losses, even where the fine itself is expressly excluded. 

This alert summarizes the position in each of France, England, Germany, and Italy, highlighting statutory principles and evolving regulatory guidance. It is vital reading for lawyers and insurance managers who have responsibility for European data protection, cyber risk, and insurance.

France

Under French law, the insurability of financial penalties imposed by the data protection authority (the Commission Nationale de l’Informatique et des Libertés (CNIL)) has not yet been definitively resolved by the courts. There is no precedent expressly holding that administrative fines imposed by the CNIL for personal data breaches are uninsurable as a matter of law.

Guidance can be drawn from French case law and regulatory practice in other areas. In particular, French courts have consistently ruled that financial penalties imposed by the financial markets regulator (Autorité des marchés financiers) are not insurable, on the basis that such penalties sanction intentional misconduct. French insurance law permits coverage only for accidental events or losses arising from negligence, while losses resulting from the insured’s intentional acts are excluded as a matter of public policy.

More recently, the banking and insurance supervisory authority (Autorité de contrôle prudentiel et de résolution) issued a communication stating that financial penalties imposed by administrative authorities should not be covered by insurance, subject to judicial review. While this communication does not have the force of law and is not directly enforceable, it is highly influential in shaping market practice and supervisory expectations.

These factors suggest that financial penalties arising from intentional breaches of personal data regulations are unlikely to be insurable in France. Conversely, where a penalty results from negligent conduct rather than deliberate wrongdoing, insurance coverage may still be arguable, depending on policy wording and judicial interpretation. As a result, many French insurance policies condition coverage for fines and penalties on their being “insurable as a matter of law,” leaving the ultimate determination to the courts.

England

Under English law, there is likewise no authority directly holding that fines imposed by the Information Commissioner’s Office (ICO) for data protection breaches are uninsurable. Nonetheless, there are public policy constraints that may limit the scope for such coverage, particularly for sanctions of a penal nature.

The clearest guidance comes from the UK financial regulator. The Financial Conduct Authority (FCA) expressly prohibits regulated firms from insuring regulatory fines and penalties imposed by the FCA. Such insurance is considered contrary to public policy, because it would undermine the deterrent effect of regulatory sanctions. While insurance may cover legal and professional fees incurred in responding to FCA investigations, the fines themselves are uninsurable.

Some English case law supports this restrictive approach. In Safeway Stores Ltd v Twigger, the Court of Appeal maintained that a company could not recover competition law fines—whether from its directors/employees or their insurers—where the fines resulted from the company’s own deliberate misconduct in entering into anti-competitive agreements. The court emphasized that allowing such recovery would offend public policy by diluting the punitive and deterrent function of the penalty. More recently, in Patel v Mirza, the Supreme Court indicated that the following factors should be considered before upholding a public policy defence: the underlying purpose of the prohibition transgressed; any other public policies that may be rendered less effective by denial of the claim and whether upholding the defence would be a proportionate response, bearing in mind the seriousness of the conduct and whether it was intentional. 

In practice, English cyber and liability insurance policies commonly provide cover for civil fines and penalties only where insurable “as a matter of law”. In the absence of any direct legal authority, the insurability of ICO fines needs to be considered on a case by case basis, taking all relevant factors into account including whether the breach was negligent and the level of harm that has been caused. If not intentional, or in any way deliberate, there may be scope for recovery. 

Germany

In Germany, the insurability of administrative fines, including General Data Protection Regulation (GDPR) penalties, remains legally unsettled and is assessed primarily through the lens of public policy under section 138(1) of the German Civil Code.

The prevailing concern among courts, regulators, and legal commentators is that transferring the financial burden of a sanction to an insurer would weaken its intended deterrent and preventive effect. On this basis, the dominant view in German legal scholarship is that insurance coverage for fines and penalties is incompatible with public policy and therefore void.

Some commentators have argued for a more nuanced approach, suggesting that a distinction should be drawn between intentional misconduct (which should be uninsurable) and negligent infringements (which might, in principle, be treated differently). However, this view has not gained broad acceptance, and there is currently no authoritative case law endorsing such a distinction in the context of administrative fines.

In the absence of judicial clarification, strong indicators suggest that insurance coverage for GDPR fines would be considered unenforceable under German law. Insurers offering such coverage could also attract regulatory scrutiny from the Federal Financial Supervisory Authority, reinforcing the cautious stance adopted by the German market.

Italy

Administrative fines imposed by the Italian Data Protection Authority (Garante per la Protezione dei Dati Personali) for personal data breaches are generally uninsurable.

Under Italian public policy principles, administrative sanctions are regarded as punitive measures imposed for the breach of a legal obligation. Allowing insurance coverage for such penalties would undermine their deterrent and preventive function under the GDPR. Accordingly, the administrative fine itself—potentially reaching €20 million or 4% of an undertaking’s worldwide annual turnover—is excluded from insurance coverage.

That said, cyber insurance plays an important role in mitigating the broader financial impact of data breaches in Italy. While policies do not cover the fine itself, they typically provide coverage for a wide range of ancillary and consequential costs, including:

• Legal defence costs in proceedings before the Garante;
• Forensic investigations and incident response;
• Notification and communication obligations;
• Third-party liability claims by affected individuals; and
• Crisis management and reputational harm mitigation.

Although the administrative sanction remains uninsurable, Italian companies can still meaningfully reduce their exposure through well structured cyber risk insurance programs.

Key Takeaways for Policyholders 

Across Europe, the insurability of financial penalties for personal data breaches is strongly influenced by public policy considerations, particularly the need to preserve the deterrent effect of GDPR sanctions. While approaches vary by jurisdiction, the trend is clear:

• Fines resulting from intentional or wilful misconduct is almost universally uninsurable.
• Administrative fines are often characterized as punitive and as such may be excluded from coverage.
• Some policies may provide coverage for fines resulting from negligent/unintentional breaches.
• Defence costs and related expenses remain widely insurable and commercially significant.

Organizations operating across multiple European jurisdictions should not assume that data breach fines can be insured and should instead focus on preventive compliance and robust incident response planning. Careful review of cyber insurance policy wording is worthwhile to identify any shortcomings in the coverage provided specific to relevant jurisdictions. In an environment of increasing regulatory enforcement, understanding these national distinctions is essential to effective risk management.

As generative AI (GenAI) tools become embedded in legal and business workflows, courts are grappling with questions regarding how attorney-client privilege and the work-product doctrine apply to GenAI data, including prompts, outputs, and activity logs. While recent decisions confirm that GenAI data may constitute discoverable electronically stored information (ESI) (discussed in a previous Litigation Minute), a separate and equally important question is when those materials may be protected from disclosure.

Recent case law makes it clear that courts will apply traditional privilege and work-product principles to this new category of ESI. Whether a privilege or protection applies will turn on how, why, by whom, and under what conditions GenAI tools are used.

Attorney-Client Privilege and GenAI

Attorney-client privilege protects confidential communications between lawyers and clients made for the purpose of seeking or providing legal advice. GenAI systems themselves, however, are neither lawyers nor clients, and communications with artificial intelligence (AI) tools are not privileged by default even when legal in nature.

Privilege may apply where GenAI is used under the direction and supervision of counsel to facilitate the provision of legal advice, similar to other nonlawyer assistants—but only where there is a reasonable expectation of confidentiality and that confidentiality is preserved. But is there a reasonable expectation of confidentiality when using GenAI?

United States v. Heppner, No. 25-cr-00503-JSR ECF 27 (S.D.N.Y. Feb. 17, 2026) addressed this specific issue. There, the defendant entered factual and legal prompts into a publicly available GenAI tool to analyze his potential legal exposure. He later shared the AI-generated analyses with his defense counsel. Federal agents seized his computer and the ESI it contained during a search of his residence, and the government moved to compel its production.

Judge Jed S. Rakoff held that the AI-generated content was not protected by the attorney-client privilege or the work-product doctrine. The court’s opinion emphasizes that:

• The GenAI platform was a third-party tool for which there was no expectation of confidentiality;
• The GenAI materials were not created at counsel’s direction, and by implication, were not created to facilitate the provision of legal advice; and
• Transmitting AI-generated content to a lawyer after the fact did not retroactively render it privileged or protected.

The decision reinforces that the attorney-client privilege only applies to confidential communications between a lawyer and client to facilitate the provision of legal advice—it does not extend to documents that later become useful to counsel. The decision also highlights the heightened risk posed by unsupervised or exploratory GenAI use, particularly where public tools are involved.

The Work-Product Doctrine: GenAI Use in Anticipation of Litigation

The work-product doctrine protects materials prepared by or at the direction of counsel in anticipation of litigation, including heightened protection for material reflecting counsel’s mental impressions, conclusions, or legal strategy.

In the GenAI context, courts are beginning to distinguish:

• GenAI data created at counsel’s direction to analyze claims, defenses, or litigation strategy, which may qualify as work product; and
• GenAI data created independently for business or exploratory purposes, which generally does not.

In Heppner, the court rejected work-product protection because the AI-generated materials were not prepared at counsel’s direction and did not reflect defense counsel’s strategy. The ruling underscores that GenAI data is not work product simply because it addresses legal issues.

By contrast, in Tremblay v. OpenAI, Inc., the court reached a different conclusion. There, plaintiffs alleging copyright infringement conducted targeted presuit testing of ChatGPT to evaluate potential claims. Plaintiffs produced the prompts they relied upon in their complaint, but refused to produce additional prompts and outputs, arguing they reflected counsel’s mental impressions and litigation strategy. No. 23-cv-03223-AMO, 2024 WL 3748003 (N.D. Cal. Aug. 8, 2024).

The court agreed in part, holding that unused prompts, account data, and testing results constituted opinion work product prepared in anticipation of litigation. Importantly, the court rejected the argument that producing some AI interactions waived protection for all related materials, limiting waiver to the specific prompts and outputs affirmatively relied upon in the pleadings.

Privilege waiver considerations

Heppner and Tremblay focus primarily on whether privilege or work-product protection attach in the first instance. It is equally important to remember that such protection is easily waived where confidentiality is not maintained. If sensitive data is loaded to GenAI tools that permit data retention, reuse, or training, the waiver risk is heightened considerably.¹

Going forward, courts evaluating privilege claims over GenAI data are likely to focus on the open or closed nature of the AI platform used, the existence of contractual or policy-based confidentiality protections, and whether counsel directed or supervised the AI use.

Practical Tips to Preserve Privilege and Work-Product Protection When Using GenAI

Use Secure GenAI Tools

Use closed, enterprise platforms with terms of service that limit the service provider’s ability to store user inputs, review inputs for quality control purposes, and retain or use inputs to train or improve the GenAI model. 

Supervise and Document AI Use

Treat GenAI like a supervised assistant. Prompts and outputs should be generated at counsel’s direction and reviewed by counsel.

Limit and Label

Avoid including otherwise privileged information in prompts and clearly label protected materials as privileged or work product protected; recognizing labels alone are not dispositive.

Remember the Metadata

GenAI activity logs and metadata could independently raise work-product concerns and reveal litigation strategy, such as when counsel investigated particular issues.

Consider Nonwaiver Agreements

Address GenAI data in ESI agreements and seek Rule 502(d) orders to mitigate waiver risk.

Prevent Privilege Challenges

Privilege logs should explain what the GenAI created data is, how it was created, who created it, and under what confidentiality controls it was created.

Looking Ahead

As Heppner illustrates, courts are applying established discovery doctrines to cutting-edge tools. Privilege disputes involving GenAI data will turn on supervision, purpose, and reasonable expectations of confidentiality.

Litigators should address these issues early, coordinate with e-discovery and information-governance teams, and counsel clients that casual or unsupervised GenAI use can generate discoverable—and unprotected—material.

Throughout 2025 and 2026, parties facing IEEPA tariffs grappled with a variety of mechanisms to address the issue of how to deal with increased costs of performance. We wrote about the challenges and limitations of existing contract clauses to deal with these scenarios here. 

As our International Trade, Investment Controls, and National Security team points out, the Trump administration plans to continue to pursue its tariff agenda using different statutory tools. Tariffs imposed under different authorities from IEEPA remain unchanged. For tariffs implemented under IEEPA, however, the Supreme Court decision raises many questions as to how, when, or if the estimated US$175 billion in IEEPA tariffs paid prior to 20 February 2026 will be refunded and who ultimately will be entitled to retain refund proceeds.

The potential for a variety of commercial, class, shareholder, and investor disputes is pronounced. Parties that bore the risk of increased tariffs or that otherwise suffered damage from their imposition will now look for ways to recoup those expenditures. Shareholders, consumers, and other stakeholders may also seek a portion of any refunds that are ultimately given to importers. 

Our firm is tracking the various options for companies, individuals, and investors to assert and defend their rights in this emerging area. Among the issues we are tracking are:

Commercial Contract Claims

Post-closing price adjustment clauses may be implicated, along with executory contracts that specifically provide for allocating any tariff windfall. Contracts for the assignment of tariff refund proceeds will also be scrutinized and may lead to disputes between refund recipients and parties that purchased tariff liability and accompanying refund rights. Force majeure and contract termination claims previously advanced may need to be revisited or renegotiated. Parties with downward price adjustment rights will also look to see if there are actionable measures to account for tariff refunds. Material pricing in construction, manufacturing, and other material-intensive industries may see disputes surrounding lower expected project costs and which parties capture this benefit.

Government Refunds

There are ordinarily two ways importers can seek a refund: (1) seeking a refund from, or lodging a protest with, the Customs and Border Protection; and (2) suing the United States in the Court of International Trade. Importers should consult with counsel to determine the appropriate path and take affirmative steps to ensure they preserve all available remedies.

Investment Treaty Claims

The IEEPA ruling does not automatically create a wave of investor state claims against the United States, but it strengthens certain arguments foreign investors may raise where tariffs were imposed without clear statutory authority, later declared unlawful, and caused measurable investment level harm. The United States is a party to approximately 50 bilateral investment treaties or free trade agreements that contain investor-state arbitration rights.

Class and Shareholder Disputes

Class actions are likely premature, given whether and when any refunds will be provided remain in flux. However, shareholder disputes may arise if corporations fail to seek refunds. 

We continue to monitor this situation and will be reporting on new developments as they occur. Our Commercial Disputes team stands ready to guide clients through this complex and evolving landscape, offering strategic counsel, regulatory insight, and experienced strategic advocacy at every stage of the process. Please contact Thomas Allen, Michael Stortz, or Lindsay Bishop if we can be of assistance.

The FINRA Proposal would permit broker-dealers to show projected performance and targeted returns for a security, a securities portfolio, an asset allocation, or other investment strategy, provided that the broker-dealer:

• Adopts and implements written policies and procedures reasonably designed to ensure that the communication is relevant to the likely financial situation and investment objectives of the intended audience of the communication.
• Has a reasonable basis for the criteria used and assumptions made in calculating the projected performance or targeted return, and the broker-dealer retains written records supporting the basis for such criteria and assumptions.
• Provides sufficient information to enable the intended audience to understand the criteria used and assumptions made in calculating the projected performance or targeted return and the risks and limitations of using the projected performance or targeted return in making investment decisions, including reasons why the projected performance or targeted return might differ from actual performance.

Although the ability to show targeted returns is most relevant to private funds, which have lobbied for additional flexibility, the FINRA Proposal is not limited to certain types of funds or securities, nor is it limited to institutional investors or qualified purchasers. Broker-dealers would be able to show projections and targeted returns in materials promoting mutual funds and exchange-traded funds, as well as individual securities. The FINRA Proposal also covers securities portfolios, asset allocation, and other investment strategies that may be offered through a broker-dealer.  

Key Takeaways

The FINRA Proposal would align broker-dealers’ use of projections and targeted returns more closely to the Securities and Exchange Commission’s (SEC) framework for hypothetical performance under the Marketing Rule and the policies and procedures and disclosure obligations would be largely the same. But harmonization does not mean uniformity. The FINRA Proposal differs from the Marketing Rule in that it: 

• Adds the requirement that broker-dealers have a “reasonable basis” for the criteria used and the assumptions made in calculating projected performance and targeted returns.
• Would not extend to all hypothetical performance. The FINRA Proposal would only cover forward-looking projections and targeted returns, not backtested performance or model portfolios.

The FINRA Proposal also departs from certain long-standing views under Rule 2210. For example, the FINRA Proposal would permit:

• Projections and targeted returns for all customers and would not differentiate between institutional and retail communications.
• General projections outside of the investment analysis tool exception under FINRA Rule 2214.
• Broker-dealers to show the internal rate of return (IRR) for funds with unrealized investments.

The Marketing Rule and FINRA Projections

The clear intent of the FINRA Proposal is to harmonize, as much as FINRA feels possible, the broker-dealer and investment adviser marketing regimes with respect to projections and targeted returns. While the Marketing Rule does not restrict an adviser from showing other types of hypothetical performance, FINRA clearly is not comfortable going that far. Other than that, and a few notable differences discussed below, the FINRA Proposal effectively imports the provisions related to hypothetical performance from the Marketing Rule into the FINRA regime. In the release relating to the FINRA Proposal (the Proposing Release), FINRA even says that it will “interpret requirements in the proposed rule change that align with similar requirements in the Marketing Rule consistently with how the [SEC] has interpreted those Marketing Rule requirements.”² This will come as a relief to many, as the SEC staff has issued a variety of FAQs related to the Marketing Rule,³ and they are likely to issue more.

Like the Marketing Rule, the FINRA Proposal would allow the distribution of projections and targeted returns to any investor—including retail investors, but only if the broker-dealer has policies and procedures reasonably designed to ensure that the communication is relevant to the likely financial situation and investment objectives of the intended audience of the communication.⁴ This condition has the effect of limiting broad public distribution of such performance information because a broker-dealer must have a process to distribute projections and targeted returns only to investors or classes of investors that will find it relevant to their situation.⁵ While these groups may be broadly defined based on the broker-dealer’s past experience, this performance information may not be distributed through mass-market circulation publications or unrestricted website access.⁶

Also like the Marketing Rule, the FINRA Proposal requires the broker-dealer to provide (i) sufficient information to enable the intended audience to understand the criteria used and assumptions made in calculating the projected performance or targeted return, and (ii) the risks and limitations of using the projected performance or targeted return in making investment decisions. 

Limits to Harmonization

The Reasonable Basis Requirement

While the disclosure requirements noted above mirror those in the Marketing Rule, the FINRA Proposal adds a few more bells and whistles. For the first disclosure requirement, the FINRA Proposal would, if adopted as proposed, also require broker-dealers to include “whether the projected performance or targeted return is net of anticipated fees and expenses.” This requirement is not explicitly stated in the hypothetical provisions of the Marketing Rule, but other requirements of the Marketing Rule require that any presentation of gross performance be accompanied by net performance. For the second disclosure requirement, the FINRA Proposal further requires “reasons why the projected performance or targeted return might differ from actual performance.” Again, while this is not explicit in the Marketing Rule provisions, the adopting release relating to the Marketing Rule states that such disclosure should also include any “known reasons why the hypothetical performance might differ from actual performance of a portfolio.”⁷ Accordingly, these additional terms resemble clarifications instead of substantive differences. 

However, FINRA does add a new substantive requirement that is arguably a departure from the Marketing Rule. The FINRA Proposal requires broker-dealers to have “a reasonable basis for the criteria used and assumptions made in calculating the projected performance or targeted return” and to retain “written records supporting the basis for such criteria and assumptions.” FINRA views this reasonable basis requirement as “foundational” because “without forming a reasonable basis, a member’s projections of performance and targeted returns could be based on guesswork, invalid presumptions, and misleading reasoning.”⁸ While FINRA points to the Marketing Rule’s general prohibitions as containing overall principles that align with this concept, this specific reasonable basis requirement and accompanying recordkeeping requirement will likely require enhancements to any dual registrant’s existing policies and procedures. 

The concept of a reasonable basis is contained elsewhere in FINRA rules,⁹ and it is already in Rule 2210’s requirements related to research report price targets. FINRA is not prescribing a specific manner or methodology for broker-dealers to form this reasonable basis. Instead, FINRA suggests that firms follow a principles-based process that is dependent on the specific facts and circumstances. FINRA does offer helpful guidance that may assist firms to develop and substantiate a reasonable basis, including by noting a specific nonexhaustive list of factors that a firm may consider in developing this reasonable basis.¹⁰ Finally, the FINRA Proposal requires broker-dealers to develop an appropriate supervisory system designed to ensure compliance with the reasonable basis condition and accompanying recordkeeping provisions. Firms will need to retain contemporaneous records evidencing methodology, data inputs/sources, assumptions (including fees/expenses treatment), and key limitations as they develop this reasonable basis. 

As broker-dealers consider these proposed new requirements, they should evaluate the extent to which they need to make changes to existing policies and procedures, how they would be appropriately documented, and the burdens of the divergent requirements on providing such projections and targets under the two marketing regimes. 

Only Forward-Looking Hypothetical Performance Permitted

One of the most significant deviations from the Marketing Rule is the FINRA Proposal’s narrow application to forward-looking performance. The Marketing Rule permits (subject to certain conditions) backward-looking hypothetical performance (e.g., model performance, backtested performance) in addition to forward-looking hypothetical performance (e.g., targeted performance, projected performance). FINRA acknowledged this distinction and noted in the Proposing Release that model performance and backtested performance were intentionally omitted from the proposed rule changes. Ultimately, this disconnect between the Marketing Rule and the FINRA Proposal would continue to provide a competitive advantage for investment advisers and private fund sponsors that do not offer funds through a broker-dealer. Despite embracing many SEC constructs in the FINRA Proposal, FINRA is holding fast to its views on backtested performance, which would continue to be prohibited, except in connection with pre-inception index performance data in institutional communications. 

As threshold matter, whether target returns should be considered hypothetical performance at all has been hotly debated in the industry. Target returns are often viewed as fundamental characteristics of an investment strategy and are often used as a benchmark to describe an investment strategy or objective, or to measure the risk/return profile of a strategy. FINRA acknowledges this in the Proposing Release, and the SEC staff has also recognized that target returns may not involve all or any of the inputs and assumptions that go into projected returns. Ultimately, the SEC determined the difference between targeted and projected returns is not always readily apparent, and therefore, they require the same treatment under the Marketing Rule. FINRA essentially takes the same view, noting that that because the intended audience of a communication may not always understand or appreciate the differences between targeted returns and projections, FINRA would subject both targeted returns and projections to the same conditions in the FINRA Proposal. While adoption of the FINRA Proposal would further cement treatment of targeted returns as a restricted type of hypothetical performance, perhaps in the future this recognized distinction between targets and projections can open the door for more flexibility in the presentation of target returns.

FINRA Departs From Certain Long-Standing Views

As noted above, the FINRA Proposal departs from certain historical positions.

No Distinction Between Retail and Institutional Investors

The FINRA Proposal would permit the use of projections and targeted returns for all customers, subject to the limitations described above. This is a significant departure for FINRA, which historically has been careful to limit the use of hypothetical performance to institutional investors. It is also a departure from FINRA’s prior proposals relating to projections and targeted returns. For example, FINRA previously filed proposed amendments to Rule 2210 in 2023 (2023 Proposal)¹¹ that would have permitted broker-dealers to project performance or provide a targeted return with respect to a security, asset allocation, or other investment strategy in (i) an “institutional communication,” or (ii) a communication that is distributed or made available only to “qualified purchasers” (as defined under the Investment Company Act of 1940) and that promotes or recommends either a private offering or private placement exempt from certain FINRA requirements. Accordingly, the text of the 2023 Proposal imposed a clear distinction regarding the type of audience that could receive a communication containing performance projections or targeted returns. This explicit distinction was not included in the FINRA Proposal in order to harmonize its requirements with the Marketing Rule. 

Instead of prohibiting a broker-dealer from distributing a communication with projections or targeted returns to retail investors, FINRA takes the same approach as the Marketing Rule in requiring policies and procedures designed to ensure that the performance is relevant to the likely financial situation and investment objectives of a retail audience. FINRA also points to other controls. Specifically, FINRA noted that, to the extent a member determines that the communication is relevant to the likely financial situation and investment objectives of a retail investor to whom it is recommending a securities transaction or investment strategy, Regulation Best Interest, which generally requires broker-dealers to act in a retail customer’s best interest when making certain recommendations involving securities, would provide additional protection to the retail investor.

General Projections Outside of an Investment Analysis Tool

The FINRA Proposal does not eliminate the existing exception from Rule 2210(d)(1)(F) for investment analysis tools and written reports produced by investment analysis tools that satisfy the requirements of FINRA Rule 2214. Rather, the FINRA Proposal creates another exception for projections that is broader than Rule 2214. Rule 2214 was originally adopted to permit broker-dealers to use technological tools to calculate the probability that investment outcomes such as reaching a particular financial goal would occur.¹² An investment analysis tool provides individual results to each user based on the customer’s interaction with the tool directly or with a representative’s assistance. The FINRA Proposal does not require this interactive element for the delivery of a projection, nor does it require firms to conduct any type of statistical analysis (e.g., Monte Carlo simulation) to determine the likelihood of a particular outcome under various scenarios or the probability of success of any particular scenario. 

The disclosure required under the FINRA Proposal similarly differs from that currently required under Rule 2214 in recognition of the different types of communications. For example, the disclosure under Rule 2214 that relates to the universe of investments considered in the analysis and how the tool determines which securities to select is important in the case of an investment analysis tool that might recommend a different investment or portfolio composition to improve the probability of a particular outcome. However, it is less relevant in the case of projections and targeted returns that forecast the future performance of a particular security, securities portfolio, asset allocation, or other investment strategy. Similarly, the more onerous requirement to have a reasonable basis for the criteria and assumptions made in calculating projections or targeted returns and to retain the associated records supporting the basis for the criteria and assumptions do not apply to investment analysis tools. 

IRR for Unrealized Investments

The FINRA Proposal also represents a departure from prior guidance on the performance of unrealized holdings. Previously, FINRA has stated that the performance of unrealized holdings are prohibited projections under Rule 2210, and therefore, the use of IRR for funds with unrealized investments would be prohibited in retail communications.¹³ In guidance to its members, FINRA did provide limited relief to permit IRR for funds with incomplete investment programs if the IRR was calculated in accordance with the Global Investment Performance Standards. The FINRA Proposal could allow broker-dealers additional flexibility in presenting IRR calculated according to different methodologies, so long as the broker-dealer complies with the conditions of the proposal.

Further Engagement 

This is the third bite at the apple by FINRA on this topic, with previous proposals in 2017¹⁴ (around the time the Marketing Rule was being considered) and in the 2023 Proposal. We expect that the third time will be the charm, and after considering feedback, FINRA will obtain approval for the rule change. Comments will be due 21 days after publication in the Federal Register (potentially as early as mid-March). Industry participants seeking further harmonization should consider submitting comments.

Under the EU AI Act (Regulation (EU) 2024/1689),² AI systems intended for employment decisions are automatically classified as “high-risk” under Article 6 and Annex III. This classification triggers comprehensive obligations, including risk management, data quality controls, technical documentation, record-keeping, transparency to users, and meaningful human oversight. 

Consistent with the EU AI Act, the Italian AI Act places the protection of fundamental rights at the center of technological innovation. Transparency, data protection, gender equality, cybersecurity, and accessibility are no longer aspirational principles, but binding requirements shaping how AI may be deployed in the Italian workplace.

What This Means for Employers

When read together with the Transparency Decree (Legislative Decree No. 104/2022),³ the Italian AI Act significantly expands employers’ compliance obligations when AI systems are used in human resources and workforce-management processes, including recruitment, performance evaluation, task allocation, and termination decisions.

Under the law, employers are required to:

• Provide employees in advance with clear and comprehensive information about the functioning of AI tools and the data used;
• Promptly update such information and provide notice of any material system changes at least 24 hours in advance;
• Share the relevant disclosures with trade union representatives;
• Ensure effective human oversight over automated decision-making; and
• Guarantee that AI systems respect employees’ fundamental rights and operate free from discrimination of any kind.

From Disclosure to Explanation

The law also goes a step further and requires information to be communicated in plain, accessible language to ensure employees understand how automated decisions work, the associated risks of the AI tools, and what effects the tools may produce. Employees must also be given the opportunity to ask for clarification and human review of AI-driven decisions.

In short, compliance is no longer only about informing, it is about explaining.

Sanctions and Enforcement

Failure to comply with the Italian AI Act carries tangible financial exposure. Administrative fines of up to €1,500 per employee may be imposed, with additional monthly increases and further penalties in cases involving failures to inform trade unions.

New Oversight at Institutional Level

The Italian AI Act also establishes a dedicated Oversight Committee on the adoption of AI systems in the workplace within the Ministry of Labour and Social Policies. The Oversight Committee will monitor the employment impact of AI, develop regulatory strategies, and identify sectors most affected by digital transformation, foreshadowing increased institutional scrutiny in the years ahead.

Impact on Regulated Professions

Professionals are not exempted. The new law expressly prohibits the full delegation of professional services to AI systems and requires transparent and comprehensible disclosure of any AI use in professional activities.

Data Protection

Where AI systems involve the processing of personal data, the General Data Protection Regulation (GDPR)⁴ fully applies. 

Accordingly, employers must identify a valid legal basis for processing, ensure compliance with data minimization and purpose limitation principles, conduct a Data Protection Impact Assessment where applicable, particularly where AI systems are used for systematic evaluation or decision-making affecting employees, and, in cases of decisions based solely on automated processing producing legal or similarly significant effects, guarantee the right to obtain human intervention, express a point of view, and contest the decision.

The Italian AI Act reinforces these GDPR obligations. Article 4 of the new regulation reaffirms that any personal data processed through AI systems must be handled lawfully, fairly, and transparently, in line with the original purposes for which the data was collected and in full compliance with European Union law.

What Companies Should Do Now

Companies operating in Italy should act promptly to:

• Assess the AI systems currently in use;
• Update disclosure notices and internal documentation;
• Implement robust internal policies and governance frameworks aligned with the new standards of transparency and algorithmic accountability;
• Comply with GDPR;
• Monitor implementing decrees; and
• Consult with counsel to ensure compliance.

With the Italian AI Act now in force, the current phase represents a critical window for employers to align AI deployment with binding legal requirements ahead of further regulatory guidance and increased institutional scrutiny.

By a 6–3 vote, the Court agreed on the result, though the Justices differed in reasoning. Six Justices joined the majority holding that IEEPA does not permit tariff imposition, while Justices Thomas, Kavanaugh, and Alito dissented, concluding that IEEPA authorizes tariffs and that the President acted within delegated authority.

Three Justices in the majority—Chief Justice Roberts, joined by Justices Gorsuch and Barrett—concluded that the challenged tariffs implicate the major questions doctrine and thus require clear congressional authorization, which, they found, IEEPA does not provide. They also found that IEEPA had not previously been relied upon as a basis for imposing tariffs. According to those Justices, the Government conceded that the President has no inherent authority to impose tariffs in peacetime and relied entirely on IEEPA as the asserted source of power and any delegation of such a core congressional power must be clearly expressed.

As to the statute itself, the majority held that while the statute authorizes the President to “regulate importation,” it contains no reference to tariffs or duties. Congress has consistently used explicit language when delegating tariff authority and has imposed defined limits on scope, duration, and procedure. In that context, the absence of tariff specific language in IEEPA was decisive. They also found that the ordinary meaning of “regulate” does not include the power to impose taxes, and reading it otherwise would transfer one of Congress’s core constitutional powers through ambiguous wording.

With respect to next steps, the majority was explicit about the limits of its ruling. The decision definitively resolves only the statutory authority question and does not address the consequences of invalidating the tariffs. The Court issued no directives concerning enforcement, refunds, or other remedial actions, and did not prescribe how its holding should be implemented. The Court left the practical and remedial consequences of its ruling to be addressed in future administrative action or separate judicial proceedings at the lower court—i.e., the US Court of International Trade (CIT). It is expected that the CIT will remand the matter to US Customs and Border Protection (part of the Department of Homeland Security) to implement. Customs will take time to develop and implement any refund process—a timeline potentially further complicated by the current shutdown of DHS due to the budget impasse in Congress.

Accordingly, IEEPA may no longer be used as a basis for imposing tariffs. However, issues relating to implementation, including the treatment of previously collected duties, were not resolved by the Court and remain outside the scope of this decision.

Importantly, and as our team has been predicting for months (since the challenge to the IEEPA tariffs was first brought), President Trump and his trade officials have already begun implementing other tariff measures. As of the date of publication of this alert, these additional measures include 10% tariffs on imports from all countries under Section 122 of the Trade Act of 1974 and investigations and trade actions under Section 301 of the Trade Act of 1974, among others. Accordingly, we do not expect the Supreme Court’s ruling to alter or materially diminish the President’s current trade and tariff policy. If anything, the refund process and commercial disputes over which party is entitled to refunds (e.g., the importer or the importer’s customer who may have paid a tariff surcharge added by the importer) are likely to drag on for months or even years, creating additional challenges for some companies.

We will continue to monitor developments and will provide further updates as these unresolved issues are addressed through administrative action or subsequent proceedings.

This handbook examines how investors evaluate companies based on ESG and sustainability criteria, the way companies incorporate these standards into their operating principles, and the legal and financial considerations for both groups. Whether you are an investor, an investment manager, a company owner, or board member, it will provide you with valuable insights drawn from our lawyers’ deep industry experience and keen understanding of policy, procedures, and trends.

Read or download the current sections and subscribe to our Environmental Social Governance email list to learn when new sections are available and receive other ESG-related information.

INTRODUCTION	OVERVIEW	SUSTAINABLE INVESTING
OPERATIONAL CONSIDERATIONS	INCENTIVES AND OTHER FUNDING TECHNIQUES	THE GROWING RISK OF ESG-RELATED LIABILITIES
GLOBAL SURVEY OF ESG REGULATIONS FOR ASSET MANAGERS

In the latest chapter of the ESG and the Sustainable Economy Handbook, our lawyers—located in the Americas (the United States), Asia (Hong Kong, Japan, and Singapore), Australia, and Europe (the United Kingdom and the European Union, including Ireland and Luxembourg)—provide an overview of their regional regulation by responding to the same eight questions regarding the existing ESG-related rules and other ESG developments impacting the investment management industry.

To access the new chapter, click here.

Background

Under Section 202(a)(1) of the Clean Air Act (CAA), EPA is tasked with prescribing emission standards for new motor vehicles and engines when the administrator determines that emissions from new motor vehicles and engines cause air pollution that may endanger public health or welfare. In the past, “air pollution” under the CAA meant pollution that harms health or the environment through local and regional exposure. In a novel approach, the Obama-Biden administration accessed EPA’s authority to regulate automobiles for contributing to GHG concentrations. 

Because of the Endangerment Finding, the vehicle industry was pressured to phase down production of various models of traditional gasoline and diesel trucks and reengineer towards electric technologies. The Endangerment Finding also supported off-cycle credits to incentivize automakers into meeting federal GHG standards on paper, by adding features like the start-stop feature. EPA now asserts that its experts have found there was no material benefit to complying with these GHG regulations. 

Recently, US Supreme Court decisions in Loper Bright Enterprises v. Raimondo (2025), West Virginia v. EPA (2024), and Utility Air Regulatory Group v. EPA (2014), have provided significant new analysis and interpretation of the authority of executive branch agencies, including clarifying the scope of EPA’s authority under the CAA, likely making the broad interpretation of “air pollution” under the Obama-Biden administration unlawful. These decisions emphasized that statutes have a meaning fixed at the time of enactment, and policy determinations must be made by Congress, not administrative agencies.

EPA’s Evaluation

EPA considered and reevaluated the legal foundation of the Endangerment Finding and the text of the CAA in light of these recent court decisions. EPA concluded that Section 202(a) of the CAA does not provide statutory authority for EPA to prescribe motor vehicle and engine emission standards in the manner utilized, including for the purpose of addressing global climate change. Therefore, EPA believes there is no legal basis for the Endangerment Finding and resulting regulations. 

EPA now finds that even if the United States were to eliminate all GHG emissions from all vehicles, there would be no material impact on global climate indicators through 2100. Therefore, maintaining GHG emission standards is not necessary for EPA to fulfill its core mission of protecting human health and the environment. Additionally, they found it is not within the authority Congress entrusted to EPA.  

EPA conducted a 52-day public comment period, including four days of virtual public hearings where more than 600 individuals testified. EPA received about 572,000 public comments on the proposed rule and made updates to the final rule in response to the comments. A summary of public input and EPA’s responses to all comments can be found in the final rule preamble and accompanying documents, and all comments received, including entries summarizing several hundred mail campaigns, are available in the rulemaking docket.

Effect of the Deregulation

EPA estimates that the final rule will save Americans over US$1.3 trillion by removing the regulatory requirements to measure, report, certify, and comply with federal GHG emission standards for motor vehicles, and repeals associated with compliance programs, credit provisions, and reporting obligations that exist to support the vehicle GHG regulatory regime. EPA’s decision intends to make vehicles more affordable for American families and decrease the cost of living on all products by lowering the costs of trucks.  

The Supreme Court ruled in 2007 that the EPA had the authority to regulate heat-trapping GHGs. However, the Supreme Court’s more recent decisions—including Loper Bright—direct authority for policy determinations back to Congress, deemphasizing administrative agencies’ role in this process. EPA’s new rule also shows a commitment to avoiding a progressive approach to environmental statutes’ meaning over time. Rather, these statutes will be applied according to their meaning at the time of enactment. 

Many groups are concerned with the impact the deregulation will have on public health. For example, the American Lung Association and other groups point to increased risk of diseases, more asthma attacks, and more ER visits. The Clean Air Task Force said they will be challenging this action in court on behalf of the American Lung Association, Alliance of Nurses for Healthy Environments, American Public Health Association, and Clean Wisconsin.

Conclusion

Environmental groups and public health groups are preparing challenges to this final rule, calling out concerns for the Trump administration’s environmental actions. The administration has already said it is reconsidering other policies that hinge on the endangerment finding, including regulations on methane, another GHG. The final rule has not yet been published, and members of our Environment, Land, and Natural Resources group will be closely monitoring developments.

The Securities and Exchange Commission (SEC) issued multiple statements and frequently asked questions clarifying that certain stablecoins, staking activities, and crypto custody arrangements fall outside traditional securities regulation. The White House inter-agency Working Group on Digital Asset Markets advanced a formal taxonomy for security tokens, commodity tokens, and commercial-use tokens, and Congress enacted the Guiding and Establishing National Innovation for US Stablecoins Act (GENIUS Act) to establish a federal stablecoin regime—leaving broader market structure reforms under the Digital Asset Market Clarity Act of 2025 (CLARITY Act) framework still under negotiation.

For asset managers and investment funds, the period also brought meaningful structural and operational changes, such as modernized co-investment rules for registered funds and business development companies, simplified verification requirements for private offerings under SEC Rule 506(c), an easing of SEC Rule 206(4)-1 (the Marketing Rule) constraints on performance presentation, approval of multicrypto exchange-traded products, and more.

Collectively, the developments reflected a sustained regulatory pivot away from enforcement-driven expansion and toward legal clarity, institutional accommodation, and market-driven innovation—redefining the operating environment for financial institutions, digital asset platforms, and investment managers alike.

In this edition we identify the key priorities in the SEC's regulatory agenda under newly appointed Chair Paul Atkins and anticipate what the SEC is expected to do moving forward.

To access the US Asset Management Regulatory Year in Review 2025, click here.

To help UK employers prepare for the changes, we have produced a timeline summarizing the key reforms, associated implementation dates, and actions required by employers. Click here to download the timeline. 

For additional references on employment, labour, and workplace safety laws in the United Kingdom and across the globe, view our Global Employer Guide. 
 

The new California requirement does not replace or modify federal HSR filings, but instead, it imposes an additional, state‑level notice obligation for covered transactions with a California nexus. While the statute closely tracks the Colorado and Washington laws in structure, California has adopted several notable procedural, threshold, and enforcement differences. 

Transactions Covered

The Act applies to transactions that are subject to the federal HSR Act filing requirements and involve a person with a sufficient nexus to California.

A sufficient California nexus exists if a filing party has its principal place of business in California or has annual net sales in California of the goods or services involved in the transaction that are equal to or exceed 20% of the applicable federal HSR filing threshold.

By tying the California sales threshold directly to the federal HSR filing threshold, the statute does not establish a fixed dollar amount. Instead, the applicable California sales threshold will adjust automatically as the federal HSR thresholds are updated. For example, under the revised threshold of US$133.9 million effective 17 February 2026, this would mean local annual net sales of at least US$26.78 million.

Filing Requirements

For parties having their principal place of business in California, filers must submit a premerger notification filing to the California attorney general that includes a copy of the HSR Form filed with the Federal Trade Commission and Department of Justice, along with a complete electronic copy of any additional documentary material filed. Parties meeting the sales threshold, on the other hand, are required to submit a copy of their HSR Form, plus any additional documentary material that may be requested by the attorney general.

Timing

Unlike Colorado and Washington, which require filing contemporaneously with the HSR submission, the Act requires parties to submit the state filing within one business day of submitting their federal HSR filing.

Filing Fees

The Act authorizes the attorney general to impose a filing fee of US$1,000 for filers submitting because their principal place of business is in California or US$500 for filers submitting because they meet the California sales threshold or are submitting additional documentary materials in response to a request from the attorney general.

Confidentiality Protections

Information submitted to the California attorney general is confidential and exempt from public disclosure under state public records laws, subject to limited exceptions for disclosure to other antitrust enforcement agencies or pursuant to court order. These protections are intended to mirror the confidentiality treatment afforded to HSR filings at the federal level.

Enforcement and Penalties

Failure to comply with the California premerger notification requirement may result in civil penalties of up to US$25,000 per day, following written notice and a three‑business‑day opportunity to cure. 

Effective Date

The Act becomes effective on 1 January 2027, and it applies to transactions closing on or after that date that meet the statute’s criteria.

Practical Implications for Dealmakers

California’s enactment further expands the growing patchwork of state‑level premerger notification regimes, adding to similar requirements in Colorado, Washington, and other states considering comparable legislation. For transactions involving multistate operations, this development underscores the need for early, coordinated filing analysis.

What Companies Should Do Now

Companies and deal counsel should prepare to incorporate California‑specific sales‑threshold and nexus analysis into HSR compliance checklists; update internal transaction planning documents to reflect state‑level timing, fee, and penalty variations; and coordinate HSR and state filings in parallel to ensure timely and consistent submissions.

Viewed together, these developments underscore a coordinated enforcement strategy: broaden the universe of regulated actors subject to sanctions risk, and simultaneously expand the government’s ability to learn about violations through incentivized whistleblowers. Institutions that historically viewed sanctions compliance as peripheral—and that rely heavily on third-party payment arrangements—now face heightened regulatory and whistleblower reporting risk. These risks are further amplified where business activity touches Latin America, a region that remains a focal point of US counter narcotics, anti-money laundering, and sanctions enforcement efforts.

Indeed, as US authorities intensify their efforts against drug cartels and transnational criminal organizations, the risk of sanctions violations extends beyond traditional “high‑risk” industries. It can arise from unexpected sectors and routine business relationships—especially when payments are routed through higher‑risk jurisdictions or structured through third‑party intermediaries. The newly launched FinCEN whistleblower portal creates powerful new channels for authorities to detect violations—incentivizing insiders to report misconduct that might otherwise remain hidden.

The OFAC Enforcement Action

What Happened

On 12 February 2026, OFAC announced a US$1.72 million civil settlement with IMG Academy, LLC, a Florida based boarding school and athletic training complex, to resolve apparent violations of the Foreign Narcotics Kingpin Sanctions Regulations. The violations arose from IMG Academy’s enrollment of two students whose parents were designated as Specially Designated Nationals (SDNs) for supporting a sanctioned Mexican drug trafficking organization, and from the school’s acceptance of tuition payments made on those parents’ behalf.

Between 2018 and 2022, IMG Academy entered into annual tuition agreements with the SDN parents and processed tens of thousands of dollars in tuition payments per student each year, often routed through nondesignated third-parties in Mexico or paid by credit card. OFAC identified 89 apparent violations across six enrollment agreements and 83 payment transactions. OFAC emphasized that the conduct did not involve sophisticated evasion: the parents’ names matched entries on the SDN List, IMG invoiced and communicated with them directly, and basic sanctions screening or third-party payor diligence would have identified the issue. The case underscores OFAC’s willingness to pursue nonfinancial institutions where sanctions screening and third-party payment controls are absent or inadequate.

The Penalty Analysis: Aggravating and Mitigating Factors

OFAC classified the violations as nonegregious but concluded that IMG Academy’s disclosure was not voluntary because OFAC had already opened an investigation prior to IMG disclosures. In assessing aggravating factors—particularly relevant for entities with Latin America exposure—OFAC cited the school’s failure to conduct basic sanctions screening despite exact SDN name matches, its knowing participation in transactions with the sanctioned individuals, and its facilitation of those individuals’ access to US services and the financial system through third-party payment arrangements. OFAC emphasized that liability does not depend on intent and that routing payments through nonsanctioned parties does not mitigate sanctions exposure.

Mitigating factors included the absence of prior OFAC penalties, the school’s substantial cooperation, and the remedial measures taken after an ownership change in June 2023, including hiring a new Chief Legal Officer who conducted a comprehensive compliance review and implemented a risk-based sanctions program.

The Deeper Lesson: Organized Crime Operates in the Open Economy

The IMG Academy case shows that transnational criminal organizations participate in the ordinary economy—sending children to school, purchasing real estate, and investing in businesses. As a result, institutions that do not view themselves as “sanctions‑relevant” may nonetheless find themselves in direct contact with cartel‑linked individuals through routine commercial activity.

OFAC emphasized that institutions face risk when payments come from parties other than the nominal customer. This applies across sectors with third‑party payments: healthcare, law firms, real estate, and professional services. OFAC expects institutions to screen all parties with control over financial obligations, not just the named customer.

The New FinCEN Whistleblower Portal

One day after the IMG Academy settlement, FinCEN announced the launch of a new webpage and intake portal designed to confidentially accept whistleblower tips related to fraud, money laundering, and sanctions violations. FinCEN’s Office of the Whistleblower will receive and triage information and share it with enforcement components within the Department of the Treasury and the Department of Justice (DOJ), including OFAC and DOJ’s Money Laundering, Narcotics and Forfeiture Section.

This announcement is not merely cosmetic. It reflects Treasury’s intent to operationalize the whistleblower authorities enacted under the Anti‑Money Laundering Act of 2020 and expanded by subsequent legislation, and to actively solicit actionable intelligence from employees, counterparties, and other insiders who observe misconduct in real time.

FinCEN Whistleblower Program—Key Basics

The newly launched FinCEN Whistleblower Program provides incentives and protections for individuals who voluntarily provide original information concerning violations of certain statutes enforced by Treasury and DOJ. As described by FinCEN, the program covers violations or conspiracies to violate, among others:

• The Bank Secrecy Act
• The International Emergency Economic Powers Act
• The Trading With the Enemy Act
• The Foreign Narcotics Kingpin Designation Act

These authorities encompass a wide range of anti-money laundering, sanctions, and related national security violations.

Eligibility and Awards

Individuals who voluntarily submit original information that leads to a successful enforcement action by Treasury or DOJ resulting in monetary penalties exceeding US$1 million may be eligible for a monetary award. FinCEN’s whistleblower statute authorizes awards within a percentage range of the collected penalties, subject to statutory requirements and implementing regulations.

Confidentiality and Protections

FinCEN has emphasized its statutory obligation to protect whistleblower confidentiality. The program also includes protections against retaliation, reinforcing that current and former employees of regulated entities may report suspected violations without forfeiting legal safeguards.

Scope of Reporting

Importantly for sanctions compliance, FinCEN expressly invites tips related to sanctions violations and sanctions evasion schemes, including conduct that may not yet have come to the attention of regulators. Information submitted through the portal may be routed to OFAC or other enforcement bodies for investigation.

key takeaways

Sectors at Elevated Risk

OFAC’s enforcement priorities have historically focused on financial institutions, and rightly so: banks are the arteries of the financial system. However, the IMG settlement reflects a broader shift toward pursuing nonfinancial sector actors—a shift now reinforced by FinCEN’s newly launched whistleblower program. Together, these developments increase both the likelihood that sanctions issues in nonbank settings will be detected and the risk that employees or other insiders will report compliance failures. Businesses in the following industries should take particular notice:

Education and Academic Institutions

Schools, universities, and training programs that recruit internationally, accept foreign students, or process tuition payments from overseas sources. Third-party payment arrangements are common in this sector.

Healthcare and Wellness

Medical providers, specialty clinics, and concierge health services that treat international patients or receive payment from foreign guarantors or insurance intermediaries.

Real Estate and Hospitality

Property developers, managers, and hotel operators with international clientele or third-party payment structures. Real estate has long been recognized as a preferred money-laundering vehicle for criminal organizations.

Professional Services

Law firms, accounting firms, and management consultancies serving international clients, particularly those whose fees may be paid by affiliated entities rather than the direct client.

Luxury Goods and Services

Retailers, auction houses, art dealers, and other high-value goods providers attracting international buyers. The Anti-Money Laundering Act of 2020 significantly expanded AML obligations in this space, and sanctions exposure follows the same vectors.

Practical Compliance Recommendations

Drawing on OFAC’s guidance in this enforcement release and its 2019 Framework for OFAC Compliance Commitments—and mindful of FinCEN’s new whistleblower program, which increases the likelihood that sanctions issues will be externally reported—we recommend the following steps for businesses assessing their sanctions risk posture:

Screen All Contractual Counterparties

Not just the nominal customer. When a parent, guarantor, employer, or affiliated entity bears financial responsibility for an account, that party should be screened against the SDN List and relevant consolidated sanctions lists at the outset of the relationship and at regular intervals thereafter.

Identify and Screen Third-Party Payors

When payments are received from parties other than the contractual counterparty—especially international wire transfers—the source should be identified and screened. Unusual payment structures from high-risk jurisdictions warrant heightened scrutiny.

Conduct a Risk-Based Assessment of Your International Touchpoints

Even businesses operating predominantly domestically may have sanctions exposure through international customers, overseas marketing offices, foreign referral networks, or cross-border payment flows. Map these touchpoints and calibrate your screening program accordingly.

Implement Ongoing and Periodic Rescreening

OFAC designations occur continuously. A customer or counterparty who was clean at onboarding may subsequently appear on the SDN List. Annual or event-triggered rescreening—particularly at contract renewal—is a basic and often neglected control.

Train Customer-Facing Personnel

Admissions officers, account managers, and billing staff are often the first point of contact with a sanctioned party. Training them to recognize red flags—unusual payment arrangements, third-party wires from high-risk jurisdictions, reluctance to provide identifying information—can surface issues that automated screening may miss.

Have a Disclosure Protocol in Place Before You Need It

The difference between voluntary and nonvoluntary self-disclosure can substantially affect penalty calculations. In this case, IMG Academy lost the opportunity for a reduced base penalty. If your compliance review uncovers a potential violation, act before OFAC acts first.

Actively Manage Internal Reporting and Hotline Mechanisms

With FinCEN’s new whistleblower program, complaints that are ignored, delayed, or inadequately investigated are increasingly likely to be reported externally as well. Organizations should ensure that hotlines are actively monitored, concerns are taken seriously, and potential sanctions issues are promptly escalated and documented—because odds are regulators may hear about them regardless.

Conclusion

The pairing of OFAC’s IMG Academy settlement with FinCEN’s launch of a new whistleblower portal reflects an enforcement environment that is simultaneously broader and more penetrating. Together, these developments reinforce the Trump administration’s all-of-government strategy against sanctions violations, in particular those with any connection to drug cartels and transnational criminal organizations, which actively seek to move illicit proceeds through family adjacent activity into the legitimate economy—often through routine, nonfinancial transactions. Sanctions enforcement now reaches well beyond banks and multinational exporters, while whistleblower incentives increase the likelihood that cartel linked activity and control failures will be surfaced by insiders. Institutions far removed from traditional sanctions targets—including schools, healthcare providers, real estate developers, and professional services firms—are therefore exposed, particularly where third-party payments or Latin America connected counterparties obscure the true source of funds. Organizations that have not recently stress tested their sanctions and AML controls—especially around third-party payors, customer due diligence, and internal escalation mechanisms—should do so with urgency.

Please contact our White Collar Defense and Investigations practice group with any questions about this enforcement release or your organization’s OFAC compliance program.

Key CHanges

Case Assessment Matrix and Voluntary Disclosure Discounts 

A new case assessment matrix will clarify how cases are categorised and how conduct is assessed, by covering (1) severity and conduct and (2) case outcomes.

In addition, the current voluntary self-disclosure discount will be replaced by a ‘Voluntary Disclosure and Cooperation’ discount capped at 30% (down from 50% for serious cases). It will now be available in all penalty cases, with eligibility and the level of discount depending on the extent of disclosure and cooperation.

Settlement Scheme

OFSI will introduce a time-limited, negotiated settlement scheme. Its subjects would be required to waive their appeal rights in order to participate.

A 20% discount will be applied to the baseline penalty for settling within a 30-business day period, with all discounts now applied cumulatively. OFSI will consider eligibility on a case-by-case basis.

Whilst admission of liability will not be required, subjects must agree not to contest OFSI’s findings. The settlements will not be anonymised—OFSI intends the public notice to act as a deterrent. However, the subjects will be able to provide input into the notice.

Early Account Scheme (EAS)

The EAS will allow subjects to provide an early, comprehensive account of potential breaches, expediting investigations.

A separate discount of up to 20% will be available for EAS participants, regardless of whether the case proceeds to settlement or is contested.

Subjects can access cumulative discounts for each of the categories above: up to 30% under the Voluntary Disclosure and Cooperation discount, 20% for entering a settlement and a further 20% under the EAS, bringing the total to a maximum of 70%.

Fixed Penalties for Information, Reporting, and Licensing Offences 

OFSI will impose fixed monetary penalties of either £5,000 or £10,000 for specific information, reporting and licensing offences, in accordance with the criteria OFSI has published publicly.

Note that not all breaches will result in a penalty; OFSI retains discretion to issue warnings or take no further action. The period for making representations against the penalties will be reduced to 15 business days. All penalties will be made public.

Statutory Maximum Penalties

OFSI is aiming to increase the maximum penalty from the higher of £1 million or 50% of the value of the breach to the higher of £2 million or 100% of the value of the breach.

This change requires legislation and will not take effect until passed by the parliament. OFSI will not adopt turnover-based or breach-by-breach penalty models at this time.

Actions for Compliance 

The majority of the changes set out in the response will be implemented in the coming weeks. Accordingly, businesses should act promptly to familiarise themselves with the developments and consider if their procedures require updating. To comply with the new framework, businesses should take the following steps:

• Review internal sanctions screening and reporting procedures, particularly focusing on escalation processes. Existing investigation processes should be assessed in order to find out if they allow for prompt decision-making once a potential breach is discovered.
• Consider engaging with OFSI early on to benefit from the cumulative discounts. However, seek appropriate legal advice before making a voluntary disclosure.
• Update staff training to reflect the changes in the framework so that day-to-day processes can stand up to regulatory scrutiny.
• Become familiar with the implications of the EAS and settlement schemes for ongoing and potential enforcement matters—promptly entering into negotiations can allow access to substantial discounts.
• Regularly monitor OFSI’s guidance for further details and implementation timelines.

Concluding remarks

OFSI’s enforcement strategy is evolving, signified by increased enforcement and increased penalties. At the same time, introduction of the substantial cumulative discounts demonstrates that OFSI seeks to encourage and reward cooperation. 

If you have any questions or would like to discuss what the sanctions enforcement regime means for you, please do not hesitate to contact the authors.

Artificial intelligence tools are rapidly reshaping how ESI is created and stored, particularly with respect to content generated by large language models. As companies adopt generative AI (GenAI) tools for drafting, summarizing, analyzing, and other business uses, courts are grappling with whether GenAI Data such as prompts (what a user types),outputs (what the AI tool generates), and activity logs (data about when and how tools were used) fall within traditional discovery obligations. The details are evolving, but recent court decisions make two things clear:

1. Relevant GenAI Data is discoverable; and
2. Parties must treat it like any other potentially relevant ESI

Traditional Discovery Rules Still Govern Non-Traditional Data

Under FRCP 26(b)(1), parties may obtain discovery of non-privileged material that is relevant and proportional to the needs of the case. Courts have made clear that new forms of ESI are not exempt simply because they are novel. Traditional discovery principles apply equally to emerging sources of ESI, including GenAI Data.

Key Early Decisions on GenAI Data Discoverability

The most defining ruling so far as to GenAI Data discoverability is In re OpenAI, Inc., Copyright Infringement Litigation, where Magistrate Judge Ona Wang compelled production of millions of GenAI logs, including user prompts and model responses, on the condition that user references be anonymized. No. 25-MD-3143, 2025 WL 3468036 (S.D.N.Y. Dec. 2, 2025). The court concluded these logs were relevant and proportional to plaintiffs’ claims that the defendant’s AI systems reproduced copyrighted works in their outputs. The decision emphasized that privacy concerns can be mitigated through anonymization and protective orders and do not categorically bar production of AI output. 

In a separate ruling in the same litigation, Magistrate Judge Wang denied a motion to compel the New York Times to produce content from its internal AI tools, finding the request both irrelevant and disproportionate. The New York Times argued that review of approximately 80,000 entries would take more than 1,300 hours—a substantial burden given the data’s limited connection to the issues. No. 25-MD-3143 (S.D.N.Y. Sept. 19, 2025).

Relevance and Proportionality Still Reign

These rulings underscore two key discovery concepts:

1. Relevance: GenAI Data is discoverable when tied to a claim or defense.
2. Proportionality: Even massive volumes of GenAI Data may be discoverable when justified by the needs of the case, but proportionality remains a highly relevant inquiry.

GenAI and E-Discovery in Practice

Given the rapidly evolving role of GenAI in all aspects of daily life, parties must be well-prepared to address it head-on in discovery. Since it is rarely reasonable or proportional to preserve all GenAI Data, developing a defensible approach that is targeted, reasoned, and well-documented is critical at the early stages of the engagement.

Identify Relevant GenAI Data

Determine if any custodians of potentially relevant data use GenAI tools, how the tools are used, and where prompts and outputs are stored. Keep in mind that relevant activity logs may exist separately, including on third-party platforms.

Preserve What’s Potentially Relevant

When litigation is anticipated, preserve GenAI Data that relates to claims or defenses, particularly where the GenAI Data may contain factual assertions or substantive content. Steps vary by platform but may include disabling auto-delete settings, exporting chat histories, saving key exchanges in document repositories, and coordinating with IT to understand retention of logs and metadata. Custodians should not edit or selectively copy GenAI Data in ways that alter context and should disclose use of personal or browser-based tools so those sources can be evaluated. Specific preservation measures will depend on the matter and the systems at use; litigators should be prepared to oversee preservation efforts and provide instructions to custodians and client IT during the legal hold process.

Negotiate Scope Early

If GenAI Data is implicated, address relevance and proportionality in ESI protocols and early meet-and-confer discussions. Clear definitions and targeted limits can prevent fishing expeditions and reduce cost and burden.

Address Confidentiality

Take privacy concerns seriously. Where possible, use protective orders and anonymization protocols to manage sensitive information while meeting discovery obligations.

Update Information Governance

Incorporate GenAI Data into ESI inventories, legal hold procedures, and retention policies to improve discovery readiness. AI-specific policies surrounding acceptable use and data confidentiality also should be considered.

Conclusion

GenAI Data discoverability is quickly becoming a central issue in e-discovery. Courts are not carving out exemptions for GenAI Data; traditional discovery principles still apply. When GenAI Data goes to the heart of a dispute, it likely will be discoverable, but proportionality remains a meaningful limit. Companies and their litigation teams should address GenAI Data early in discovery planning, work closely with e-discovery specialists to minimize burden, and proactively manage privacy concerns.

Be sure to contact the firm's E-Discovery Analysis and Technology (e-DAT) team early to ensure GenAI discovery issues are anticipated and managed strategically—avoiding disputes, minimizing disruption and expense, and aligning discovery with case goals.

Stay tuned for an upcoming Litigation Minute on the intersection of GenAI Data with the attorney-client privilege and work product doctrine.

As a globally integrated firm with a client-focused, solutions-driven Corporate practice, we are dedicated to providing pragmatic legal advice that enhances our clients' businesses in the expanding global economy. Serving as primary outside legal counsel to Fortune Global 500, middle market, and emerging businesses, we address critical issues across diverse industries such as healthcare, life sciences, manufacturing and industrials, technology, financial services, energy, transportation and logistics, food and beverage, and consumer products.

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Background 

On 6 February 2023, a Russian-British national opened a bank account at Halifax Bank (Halifax), the Bank of Scotland’s trading division. The individual, an ex-Russian politician, had been a designated person subject to sanctions in the United Kingdom since 2020 for his role in the territorial destabilisation of Ukraine.

The individual, a British citizen, used a UK passport for identification when opening a bank account with Halifax. This passport contained a spelling variation of the individual’s name. The variation within the UK passport to that within the OFSI Consolidated List was a changed character and an additional character in the forename, a missing middle name and a changed character in the surname. OFSI identified that character changes are common equivalents in Russian to English translations. The opening of the account did not trigger an automatic sanctions alert. A politically exposed person (PEP) alert was generated, but, due to human error, the customer was assessed as being removed from both the UK and the EU sanctions list, as opposed to only the EU list.

The Bank of Scotland subsequently processed 24 payments for the account over 16 days in February 2023, with the aggregate value exceeding £77,000.

The Bank of Scotland’s parent company, Lloyds Banking Group (LBG), disclosed the breaches to OFSI in March 2023, approximately two weeks after they occurred.

The Penalty 

OFSI has found that by processing the transactions, the Bank of Scotland breached Regulation 11 (dealing with funds) and Regulation 12 (making funds available) of the Russia (Sanctions) (EU Exit) Regulations 2019.

The Bank of Scotland benefited from a 50% discount for voluntary disclosure, bringing the fine down from £320,000 to £160,000. It was also the sole mitigating factor listed in the penalty notice.

The breach incorporated a range of aggravating factors, including, but not limited to:

• A relatively high value of funds being credited to a personal bank account.
• Payments to and from the relevant account blunted the financial restrictions imposed upon a designated person and enabled him to successfully circumvent UK financial sanctions.
• Sanctions imposed by the United Kingdom in respect of Russia were, and remain, a strategic priority for the United Kingdom and its foreign policy.
• The absence of explicit PEP procedural instructions for employees to escalate all potential sanctions connections for review likely exacerbated the risk of the account remaining unrestricted.

LBG’s mandatory and advanced sanctions training was out of date and did not reflect risks associated with the contemporary sanctions landscape.

Lessons for Compliance 

OFSI’s enforcement action highlights the need for proactive compliance by those subject to the UK sanctions regime. This is particularly important for banks and other business in the financial services industry, which are the essential gatekeepers of the UK financial system.

Organisations should anticipate ways in which sanctions breaches could potentially occur and the following practical steps should be considered:

Enhance Sanctions Screening Systems

Automated screening systems must be capable of identifying spelling and transliteration variations, especially for high-risk jurisdictions and individuals or those for which there are common equivalents in languages. 

Use All Available Information Holistically

Sanctions controls could be optimised by cross-referencing data from PEP screening, customer due diligence and external resources.

Implement Robust Escalation Procedures

Internal policies should provide clear, explicit guidance on escalating potential sanctions and PEP matches, especially when reviews identify links to both categories. 

Regularly Update Staff Training

Sanctions training must be kept up to date to reflect the evolving regulatory landscape and geopolitical risks. Both automated and manual processes should be covered, with an emphasis on contingency escalation and cross-checking information. 

Promptly Disclose Sanctions Breaches to OFSI

However, seek appropriate legal advice in this regard.

Concluding Remarks

The recent wave of OFSI sanctions enforcement demonstrates a strict approach and underscores the need for comprehensive sanctions compliance procedures. To withstand this regulatory scrutiny, organisations should develop robust processes to anticipate and mitigate sanctions risks.

If you have any questions or would like to discuss what the sanctions enforcement regime means for you, please do not hesitate to contact the authors listed above. 

Minimum Wage Rate Increases

New York’s minimum wage increases to US$17.00/hour for employees in NYC, Long Island, and Westchester County, and to US$16.00/hour elsewhere in the state. Other adjustments include higher rates for overtime, tipped food-service workers’ cash wages, overtime for tipped employees, and tip credits. Both the minimum wage and cash wage for tipped food-service workers have also increased in New York.

Changes to the Exempt Salary Threshold

Certain employees may be exempt from the minimum wage and overtime provisions under applicable law, subject to satisfying job duties and salary requirements. Common exemptions include executive, managerial, and administrative positions. In addition to satisfying requirements under the Fair Labor Standards Act (FLSA),¹ employees in New York must earn at least a specified minimum weekly salary to qualify as exempt. 

Effective 1 January 2026, the salary threshold for exempt status increased as follows:

• For NYC, Long Island, and Westchester County, the weekly minimum increased from US$1,237.70 (US$64,350 per year) to US$1,275.50 (US$66,300 per year); and
• For the rest of New York state, the weekly minimum increased from US$1,161.65 (US$60,405.80 per year) to US$1,199.10 (US$62,353.20 per year).

Note that an employee’s salary alone does not determine exemption from overtime, and employers must also meet a job-duties test under federal and state law. Exempt classification cannot be based only on weekly pay.

Increase to the Uniform Allowance 

In New York, if employees are required to wear uniforms, employers must either maintain the uniforms or provide weekly Uniform Maintenance Pay² based on hours worked. A “required uniform” is work-specific clothing that cannot be worn outside of work, such as branded items, chef’s coats, or aprons. Some employers, including those covered by the Farm Workers Minimum Wage Order³ and certain nonprofits, are exempt from the Uniform Maintenance Pay regulations. Below are the updated 2026 weekly Uniform Maintenance Pay.

Antiretaliation for Accommodation Requests

Effective 5 December 2025, New York state now prohibits employers from retaliating against individuals who request a reasonable accommodation. Previously, employers were only barred from retaliating or discriminating against individuals who opposed practices prohibited under the New York State Human Rights Law § 296, or who filed a complaint, testified, or assisted in proceedings pursuant to that section. With this change, the New York State Human Rights Law now aligns with the federal Americans with Disabilities Act and NYC law, which also prohibit retaliation against persons requesting reasonable accommodations.

Ban on Credit History in Employment Decisions

Beginning 18 April 2026, New York state will prohibit employers from requesting or using an applicant’s or employee’s consumer credit history⁴ for employment-related purposes, including decisions related to hiring, compensation, and other terms of employment unless exempted from coverage. Additionally, employers may not discriminate in hiring, pay, or other terms and conditions of employment based on that individual’s consumer credit history. 

Despite the new prohibition, reliance on consumer credit history remains permissible for New York employers in the following instances:

1. Employers required by law or regulations to use consumer credit history for employment;
2. Applicants or employees who are peace officers, police officers, or have law enforcement or investigative roles;
3. Positions subject to a background check by a state agency may utilize credit history for employment purposes only in roles where the commission has determined a high degree of public trust is required;
4. Employees required to be bonded by law;
5. Employees needing security clearance under federal or state law;
6. Nonclerical staff with regular access to trade secrets, intelligence, or national security information;
7. Employees with signatory authority over third-party funds or assets of US$10,000 or more or having fiduciary responsibility to the employer with authority to enter financial agreements of US$10,000 or more; and
8. Roles with duties that allow the employee to modify digital-security systems protecting employer or client networks or databases. 

As a result of this amendment, New York state law is now consistent with NYC law.⁵ New York state exemptions largely mirror NYC’s law, therefore NYC employers should continue to follow whichever law—state or city—provides more employee protection. Because NYC law is already strict, most local employers will see little change from the new state law.

Trapped at Work Act (S4070)

Effective 19 December 2025, S4070 prohibited employers from requiring workers (including employees, contractors, or job applicants) to sign “stay or pay agreements”—also known as employment promissory notes⁶—as a condition of employment. In doing so, New York joins California in limiting the use of repayment agreements for employees.⁷ These agreements, which are broadly defined by S4070, typically require workers to repay a specified amount to the employer (or their agent/assignee) if they voluntarily terminate their employment before completing a defined retention period. As enacted, S4070 also applies to any contract, instrument, or clause requiring workers to reimburse the employer for training costs provided by the employer or a third party (commonly referred to as training repayment agreement provisions). 

S4070 does not extend to any agreement between an employee and employer that: 

• Requires the employee to repay to the employer any sums advanced to such employee by the employer, unless such sums were used to pay for training related to the employee’s employment with the employer;
• Requires the employee to pay the employer for any property it has sold or leased to such employee;
• Requires educational personnel to comply with any terms or conditions of sabbatical leaves granted by their employers; or
• Is entered into as part of a program agreed to by the employer and its employees’ collective-bargaining representative. 

While S4070 does not provide for a private right of action, employers who violate S4070 may face fines ranging from US$1,000 to US$5,000 per offense. Further, employees that successfully bring an action against their employer under S4070, may recover their lawyers’ fees. 

On 6 January 2026, the New York State Assembly proposed amendments to S4070 to address the scope of the law, delay the effective date, and provide clarity on its applicability to employment agreements. As S4070 is currently in effect, employers should review any agreements requiring repayment by an employee or contractor for compliance with the new law while also monitoring the pending amendments. 

Expanded Earned Safe and Sick Time Act in NYC

Effective 25 October 2025, NYC has amended its Expanded Earned Safe and Sick Time Act (ESSTA), broadening the scope of qualifying reasons for employees to utilize paid safe and sick time. Employers are now required to provide safe and sick leave for the following additional circumstances:

• Employees designated as “caregivers”⁸ may use safe and sick time to care for a minor child or a “care recipient.”⁹
• Employees may take leave to address situations involving workplace violence affecting themselves or their family members.
• In the event of a “public disaster,”¹⁰ employees are entitled to take leave for: 
  • Workplace closures; 
  • Caring for a child whose school or childcare provider is closed or has restricted in-person operations; and
  • Compliance with directives from public officials to remain indoors or avoid travel.
• Employees may use leave to attend or prepare for legal proceedings, or to take necessary actions related to applying for, maintaining, or reinstating subsistence benefits or housing for themselves, a family member, or a care recipient.

Introduction of 32 Hours of Unpaid Safe and Sick Time

Additionally, under the latest ESSTA amendment, NYC employers must now provide employees with 32 hours of unpaid safe and sick time annually, that is available to eligible employees for immediate use. Previously, the NYC Temporary Schedule Change Act required employers to grant up to two temporary schedule changes per year for employees to use for attendance at personal events. These schedule changes are now incorporated into the unpaid safe- and sick-time requirement.

Employers may set a minimum-usage increment of up to four hours per day and must separately track and report both paid- and unpaid-time balances to comply with ESSTA’s notice and recordkeeping obligations.

When requesting safe and sick time, employees must specify whether they are seeking paid or unpaid leave. If not specified, employers are required to assume the request is for available paid safe and sick time.

NYC Transparency Pay-Data Reporting

Continuing its focus on wage transparency,¹¹ on 4 December 2025, the NYC Council passed two bills over then Mayor Eric Adams’ veto—Int. 982-A and Int. 984-A—requiring large private employers to report pay data and establishing a city agency to analyze reported information. With the passage of these bills, NYC joins other jurisdictions that require employers to report wage and demographic data to a unit of government¹² in an effort to address pay disparities and promote wage transparency. 

Int. 982-A requires private employers with at least 200 employees in NYC to submit anonymous pay-data reports to a specified city agency, including details about employee demographics and work locations. Under Int. 984-A, a city agency—working with the New York City Commission on Gender Equity and other relevant agencies—must conduct a yearly study of pay equity among large private employers. This study will look for differences in pay based on gender, race, or ethnicity using the submitted data. Findings from the study must be reported to the mayor and council speaker, and the agency must also publish the information contained in the submitted employer reports.

The legislation became effective immediately; however, employers are not required to submit pay data reports until the designated city agency establishes the necessary reporting framework. The legislation outlines a phased implementation schedule:

• The mayor must appoint a responsible city agency by 4 December 2026. 
• Upon designation, the agency is allotted up to 12 months to develop a standardized reporting format and submission procedures.

Employers will subsequently be required to begin reporting within 12 months following publication of the standardized form, with annual submissions required thereafter.

Upcoming Legislation

Ban on Noncompetes (S4641A):¹³ This legislation proposes an amendment to New York Labor Law Section 191-d, which would prohibit the enforcement of most noncompete agreements. Exceptions would be permitted only for highly compensated individuals earning over US$500,000 annually and in cases involving the sale of a business. S4641A would grant covered individuals a private right of action. As the enforceability of restrictive covenants is primarily based on state law, New York employers should monitor this legislation to ensure compliance with postemployment obligations. 

Next Steps

Employers should carefully review their employment agreements, policies, and practices to ensure compliance with these new requirements. Our lawyers in the Labor, Employment, and Workplace Safety practice will continue to monitor for implementing rules, additional amendments, and other updates.

NJFLA Summary

The NJFLA affords eligible employees with up to 12 weeks of unpaid job-protected leave during a 24-month period (1) to care for or bond with a child within the first year of the child’s birth or placement through adoption or foster care, (2) to care for a family member or a family member-equivalent with a serious health condition, and (3) during a state of emergency to either care for a family member or a family member-equivalent who has been isolated or quarantined because of suspected exposure to a communicable disease, or to provide care or treatment for a child if the child’s school or place of care is closed by order of a public official due to an epidemic of a communicable disease or other public health emergency. Employees returning from NJFLA leave generally must be restored to the position they held immediately before they started NJFLA leave or reinstated to an equivalent position of like seniority, status, employment benefits, pay, and other terms and conditions of employment. Notably, the NJFLA does not provide eligible employees with job-protected leave for their own serious health condition. 

EXPANSION OF NJFLA COVERAGE

At present, only employers employing at least 30 employees for each working day during each of 20 or more calendar weeks in the current or immediately preceding calendar year are covered by the NJFLA. When the amendments to the NJFLA take effect on 17 July 2026, that employee threshold will be reduced to 15 employees. Additionally, employees are currently eligible to take NJFLA leave if they worked for their current employer for at least 12 months and worked at least 1,000 hours in the 12 months immediately preceding the requested leave start date. The amended NJFLA will allow employees to become eligible for NJFLA leave after working for their current employer for at least three months and working at least 250 hours in the 12 months immediately preceding the requested leave start date.

TDI AND FLI BENEFIT AMENDMENTS

AB 3451 also provides that for any employee who takes a leave for which they receive TDI or FLI benefits, that employee “shall” be entitled to the same job protections as provided for under the NJFLA. However, AB 3451 also states that “nothing [in AB 3451] shall be construed as increasing, reducing or otherwise modifying any entitlement provided to a worker by the provisions of the ‘Family Leave Act’... to be restored to employment by the employer after a period of family temporary disability leave.” As noted above, the NJFLA does not provide eligible employees with the right to take job-protected leave for their own serious health condition, although an employee may receive TDI benefits during a period of leave for their own serious health condition. Additionally, employees are eligible for up to 26 weeks of TDI benefits, 14 more weeks than the amount of leave to which an eligible employee may be entitled under the NJFLA. Thus, it is not clear whether AB 3451 has created job protection rights for employees who take TDI or FLI benefits or whether AB 3451 simply confirms the job protections for those eligible employees who take NJFLA leave and receive TDI or FLI benefits during NJFLA leave.

EMPLOYEE CHOICE OF BENEFITS

AB 3451 also provides that employees who are eligible for paid sick leave under New Jersey’s Earned Sick and Safe Leave Law and either TDI or FLI benefits are permitted to choose between using paid sick leave or the applicable TDI or FLI benefits, and they may select the sequence in which they take the different kinds of leave available. AB 3451 clarifies, however, that employees shall not receive more than one kind of paid leave simultaneously during any period of time.

CONSIDERATIONS FOR EMPLOYERS

New Jersey employers employing between 15 and 29 employees who are currently not covered by the NJFLA will have obligations under the NJFLA beginning 17 July 2026. Employers both currently and newly covered by the NJFLA will need to consider the significantly reduced criteria for employees to become eligible for NJFLA leave. In preparation for the upcoming 17 July 2026 effective date, employers should update their handbooks and leave policies to incorporate the reduced NJFLA eligibility criteria. Employers also should train human resources personnel on the new rules and communicate changes to employees before July 2026. Finally, employers should be on the lookout for further guidance from the state on the open questions created by the amendments regarding TDI and FLI benefits. Our lawyers in the Labor, Employment and Workplace Safety practice will continue to monitor the implementation of rules, additional amendments, and other updates.

Singapore has introduced the world’s first comprehensive governance framework for agentic artificial intelligence (AI)—systems capable of autonomous reasoning, planning, and action. Unveiled on 22 January 2026 at the World Economic Forum, this new Model AI Governance Framework represents a major evolution in Singapore’s AI regulatory strategy. This is the first of its kind in the world, and the framework provides guidance on managing risks in deployment of agentic AI.

For more details, please refer to the Model AI Governance Framework for Agentic AI. All feedback and case studies can be sent to Singapore’s Infocomm Media Development Authority here.

What Is Agentic AI?

Agentic AI can initiate tasks, update databases, execute actions, and adapt dynamically, introducing new risks such as unauthorized actions, data leakage, and biased decision‑making. 

Key Governance Pillars

The Model AI Governance Framework is centered around the following key concepts:

Assess and Bound Risks Up Front

Organizations must evaluate system linkages, data sensitivity, autonomy, and cascading effects.

Ensure Meaningful Human Accountability

Human oversight must remain central, with clear allocation of responsibilities and approval checkpoints.

Implement Technical Controls

Controls include sandboxing, safety testing, monitoring, and protection against misuse or privilege escalation.

Promote End‑User Responsibility

Training, transparency, and the ability to intervene or deactivate agents are essential.

A Voluntary but Globally Influential Framework

Though nonbinding, the framework shapes global norms and complements tools like AI Verify and Association of Southeast Asian Nations governance initiatives.

Implications for Organizations

Organizations should refine oversight models, limit agent privileges, strengthen monitoring, and prepare for regulatory scrutiny.

Next Steps

Entities should engage in consultations, improve testing, and strengthen documentation for responsible deployment.

As to the regulatory developments, the Environmental Protection Agency (EPA) periodically reviews chemicals such as formaldehyde under the Toxic Substances Control Act (TSCA) to determine appropriate risk management strategies. On 3 December 2025, the EPA released for public comment an Updated Draft Risk Calculation Memorandum for Formaldehyde (Draft Risk Calculation), conducted under TSCA. The period for public comment closed on 2 February 2026, and the Draft Risk Calculation remains under consideration with the EPA. Once finalized, the Draft Risk Calculation may lead to a revised TSCA risk evaluation less scrutinizing of formaldehyde exposures. 

Changes in New EPA Draft Risk Calculation

This Draft Risk Calculation marks a shift from the last final formaldehyde risk evaluation by the EPA in December 2024. The 2024 final risk evaluation noted that “formaldehyde presents an unreasonable risk of injury to human health” under certain conditions.¹ After risk assessments of formaldehyde in 2022 and 2024, the anticipated trend was toward greater regulation of formaldehyde. We previously discussed this potential for increased regulatory scrutiny. However, the new Draft Risk Calculation suggests a significant shift in regulatory priorities and a potential reduction in federal regulatory scrutiny of formaldehyde.

Notably, the recent Draft Risk Calculation shifts away from the 2024 evaluation’s reliance on two components developed by the Integrated Risk Information System (IRIS) program: (1) the chronic noncancer reference concentration, and (2) the cancer inhalation unit risk. Instead, the EPA Draft Risk Calculation proposes that primary emphasis be placed on protection against acute sensory irritation—immediate, short-term effects like eye, nose, and throat irritation—rather than chronic exposures, which refer to low-dose exposure over extended periods. This change suggests that EPA is prioritizing the mitigation of more immediately noticeable health effects, with less emphasis on potential long-term risks of chronic exposures, such as cancer or chronic noncancer conditions where the science is less settled.

The Draft Risk Calculation removes conditions of use that no longer indicate unreasonable risk for workers and consumers due to long-term inhalation. Historically, concerns often focused on indoor environments due to the perceived potential for prolonged formaldehyde exposure from products such as manufactured wood, although the science behind those concerns remains unsettled. But because the Draft Risk Calculation now omits consideration of cancer and chronic noncancer risks for some lower-dose indoor uses, it effectively reduces the overall risk profile for these settings. This change may influence both regulatory enforcement and public perception of formaldehyde risks in homes, offices, and schools. The Draft Risk Calculation does however still acknowledge unreasonable risk to consumers and workers from acute inhalation and dermal exposures. As a result, formaldehyde-containing products such as glues, sealants, automotive care products, and leather products may still receive increased regulatory attention.²

Practically speaking, if the Draft Risk Calculation becomes final, it would raise the levels of formaldehyde that workers are permitted to be exposed to—moving the levels from the proposed lower chronic noncancer and cancer exposure levels identified by IRIS to higher levels causing sensory irritation. If the EPA ultimately deemphasizes risks associated with chronic exposure, manufacturers of products containing formaldehyde may face a reduced regulatory burden. The revised framework could result in fewer restrictions and compliance requirements for manufacturers, especially in relation to products used or stored indoors.

State Regulation of Formaldehyde

While the federal regulatory burden concerning formaldehyde may potentially be less restrictive, at the state level there has nonetheless been an increase in both proposed and enacted legislation focused on prohibiting the use of formaldehyde and other chemicals in cosmetic, personal care, and consumer products. California, Maryland, and Washington prohibit the manufacture, sale, or distribution of cosmetic products that contain certain chemicals, including formaldehyde.³ Similar legislation went into effect recently in Vermont on 1 January 2026, with Oregon to soon follow in January 2027.⁴ And some states, such as Minnesota, restrict the use of formaldehyde in children’s products, including personal care products.⁵

State legislative action focused on formaldehyde shows no signs of slowing. Moreover, given the apparent new federal position on formaldehyde, it is possible that state regulation increases in an effort to fill any perceived voids in the regulation of formaldehyde use. In addition to the regulatory compliance challenges that may result from a patchwork of different regulations, companies should also be cognizant of how this increased regulatory focus may also lead to an uptick in litigation. 

Recent Formaldehyde Litigation

Increased attention from regulators along with a significant jury verdict this past year are likely to continue to draw attention from enterprising plaintiff lawyers and potential claimants. For example, an Alameda County, California jury last year awarded US$18.7 million to employees who alleged the synthetic materials present in their uniforms, including formaldehyde, caused them to experience adverse health conditions.⁶

Litigation results were, however, mixed in 2025. In a similar suit to the Alameda County case,⁷ defendants were granted summary judgment, in part, because plaintiffs’ symptoms “present[ed] incomplete and unreliable information from which no reasonable lay jury could deduce a causal connection.”⁸ The judge also found the testimony from the plaintiffs’ experts to be inadmissible.⁹ Specifically, both experts were found to have failed to present a theory for how “exposure might have caused the plaintiffs’ symptoms,” and the judge critiqued the experts for failing to “provide any support—test results, studies, peer-reviewed literature, or otherwise[.]”¹⁰

The EPA’s recent shift regarding the risks of formaldehyde may further underscore the scientific challenges plaintiffs face in pursuing tort claims related to the alleged health risks of exposure to formaldehyde. Claimants alleging injuries related to chronic formaldehyde exposure, such as long-term respiratory issues or cancer, for example, may find it more challenging to support their arguments against the backdrop of regulatory developments at the federal level. On the other hand, increased state regulations could have the opposite effect. Accordingly, companies must be mindful of how regulatory developments may impact the effectiveness of their litigation defense strategies and work with counsel to adapt those strategies as appropriate.

Any company that uses formaldehyde in its operations or that manufactures products containing formaldehyde should be mindful of these developments and the evolving regulatory and litigation risks. Our lawyers have significant experience managing risks associated with chemicals not fully assessed from a health or risk perspective, as well as chemicals like formaldehyde that have been widely used for many years and are facing additional scrutiny as a result of modern developments. We have also developed an Emerging Contaminants Task Force that is prepared to provide strategic counseling and representation at every turn, whether it be regulatory monitoring and compliance, managing the use of chemicals in operations, defending personal injury and class action litigation, or pursuing insurance recovery.

Artificial intelligence (AI) regulation and litigation are set to take center stage in 2026, as new laws, guidance, and enforcement priorities are introduced at the federal and state levels. This year employers will face a rapidly evolving patchwork of state-level AI laws that impose distinct requirements for transparency, risk assessment, and anti-discrimination in the use of AI systems, particularly in employment and other high-risk contexts. At the same time, federal initiatives, such as the Trump Administration’s (the Administration’s) December 2025 Executive Order on AI, signal a push for a national framework and preemption of state laws, setting the stage for significant legal and compliance challenges. Meanwhile, high-profile litigation over AI training data, copyright, and algorithmic bias continues to progress, with courts addressing novel questions about fair use, data provenance, and liability for AI-generated outputs.

This alert provides an overview of the key US AI laws taking effect in 2026, recent federal and state regulatory developments, and significant pending litigation that will shape the United States’  AI legal landscape in the year ahead.

US AI LAWS ANd REGULATIONS

Colorado—SB 24-205 

Starting 30 June 2026, Colorado’s SB 24-205 (the Colorado AI Act) introduces new compliance obligations for entities doing business in Colorado, regardless of their location, and relying on “high-risk” AI tools to make employment decisions (and other “consequential decisions” not addressed here) that affect Colorado residents.¹ The law is part of Colorado’s Consumer Protection Act.

Key Requirements Under the Colorado AI Act

• Risk Assessments: Covered employers must evaluate high-risk AI systems to identify and mitigate potential harm.
• Transparency Notices: Candidates and employees must be informed when AI influences employment decisions like hiring, firing, or promotion.
• Reasonable Care Standard: Covered employers must take proactive steps to prevent algorithmic discrimination. Otherwise, they risk being subjected to enforcement actions.

What Counts as “High-Risk” AI?

Any AI system that makes or influences significant employment decisions, such as hiring, promotion, or termination, is covered by the Colorado AI Act. This includes systems used by employers such as automated hiring tools, resume-screening algorithms, or predictive analytics.

What Does “Reasonable Care” Mean?

Under the Colorado AI Act, covered employers must exercise “reasonable care” to ensure that high-risk AI systems do not result in unlawful discrimination. The Colorado AI Act requires that employers take affirmative actions to safeguard against unlawful discrimination, including:

• Bias testing to regularly audit AI tools for disparate impact on protected classes.
• Confirming that third-party AI providers or vendors meet legal and ethical standards.
• Maintaining records of risk assessments, mitigation steps, and vendor compliance. 
• Ensuring that final employment decisions are not fully automated and include meaningful human review.

Failing to satisfy this standard may expose employers to enforcement actions, civil liability, and reputational harm. The law positions AI risk-management as a core compliance responsibility, making proactive measures essential for meeting legal standards.

How Can Covered Employers Prepare for Compliance With the Colorado AI Act?

The Colorado AI Act is the latest in a growing trend toward AI accountability at the state-level, and other state and local laws are likely to follow. Early action is key to mitigating risk and ensuring compliance. 

To get ahead of the 30 June 2026 deadline, employers should review and update their policies, focusing on these critical areas:

• Compliance Roadmaps: Develop a clear, step-by-step plan to meet all requirements before the effective date.
• Risk Assessment Frameworks: Implement practical tools to identify, measure, and mitigate bias in AI-driven employment decisions.
• Policy Development: Draft and refine transparency notices and internal protocols to align with the law’s standards.
• Vendor Management: Confirm that third-party AI providers comply with legal and ethical obligations.

California

SB 53: Transparency in Frontier Artificial Intelligence Act 

California’s² Transparency in Frontier Artificial Intelligence Act (SB 53) took effect on 1 January 2026, marking the first US statute focused on transparency and safety governance for “frontier” AI models. The law defines a “frontier model” as a “foundation model that was trained using a quantity of computing power greater than 10^26 integer or floating-point operations.” Generally speaking, a frontier model is a large, highly advanced AI model that has been trained on massive datasets with exceptionally high compute thresholds. The law applies to frontier developers whose models are available in California. The law also imposes heightened obligations on developers of frontier models with more than US$500 million in annual revenue. 

Covered companies must publicly publish and annually update a “Frontier AI Framework” describing how they identify, assess, and mitigate catastrophic risks, including cybersecurity protections for unreleased model weights and internal governance processes. In addition, all frontier developers must issue transparency reports when deploying new or substantially modified frontier models, detailing model capabilities, intended uses, and applicable restrictions, with large developers required to summarize catastrophic risk assessments and any third-party evaluations.

SB 53 also establishes mandatory reporting of “critical safety incidents” to the California Office of Emergency Services, robust whistleblower protections for employees raising AI safety concerns, and civil penalties of up to US$1 million per violation enforceable by the California Attorney General. Although the law applies directly to a relatively small number of developers, its influence is expected to extend well beyond California. Much like prior California privacy and environmental laws, SB 53 may function as a de facto national benchmark in the absence of comprehensive federal AI legislation. 

With the statute now in force, and as California regulators begin issuing guidance and recommendations to update key definitions, companies developing, deploying, or procuring high-capacity AI systems should expect increased scrutiny of AI governance practices, incident response protocols, vendor assurances, and internal reporting structures, even if they fall outside the law’s formal scope.

AB 853: Amendments to the California AI Transparency Act

On 13 October 2025, Assembly Bill 853 (AB 853) was signed into law, delaying the California AI Transparency Act's (the Act’s) effective date to 2 August 2026 and imposing new requirements. 

The Act establishes new standards for generative AI (GenAI) hosting platforms and systems. Among its initial requirements, the law mandates that creators of GenAI systems provide, at no cost to users, an AI detection tool.

System Provenance Data: Disclosure and Preservation Requirements

AB 853 imposes new requirements regarding system provenance data for online platforms. System provenance data is metadata embedded into content that contains information about the type of device, system, or service that was used to generate the content, or information otherwise related to content authenticity. These requirements apply to a range of covered entities, including:

• Public-facing social media platforms;
• Mass messaging services;
• File sharing platforms; and
• Standalone search engines that have served more than two million unique monthly users in the past 12 months.

Under AB 853, social media platforms are subject to the following three requirements regarding system provenance data associated with content distributed on their services. 

• Detection: Covered platforms must detect whether any provenance data is embedded in the content distributed on their platform
• User Interface: Covered platforms are required to provide a user interface that discloses the availability of provenance data, specifically when that data reliably indicates that the content was generally or substantially altered by a GenAI system. These disclosures must be clear and accessible to the users, enabling them to understand when the content has been significantly modified through GenAI technologies. 
• User Inspection: Covered platforms must allow users to inspect all available system provenance data in an easily accessible manner. This can be achieved in the following ways: 
  • Directly through the user interface;
  • By providing downloadable content that contains the provenance data; or
  • By offering a link to the content’s provenance information displayed on an internet website or in another application provided by the platform or a third party.

The law also prohibits these platforms from knowingly removing any system provenance data from content. 

GenAI Hosting Platforms and GenAI Disclosures

AB 853 requires that GenAI systems include latent disclosures in any AI-generated image, video, or audio content. These disclosures must convey specific information and must be permanent or extremely difficult to remove.

Effective 1 January 2027, AB 853 introduces further obligations for GenAI hosting platforms. In particular, these platforms may not knowingly make available any GenAI system that fails to embed the required disclosures within the content it creates.

Manufacturers of Content Creating Devices Must Provide Authenticating Information by Default

Starting 1 January 2028, any device intended for sale in California that captures digital content will be required to include a latent disclosure by default. The disclosure must contain the following information:

• The name of the device manufacturer;
• The name and version number of the capture device that created or altered the content; and
• The time and date when the content was created or changed.

Although users may be given the option to enable or disable these disclosures, the device’s default settings must ensure compliance with the rule. 

Enforcement and Penalties 

Enforcement of these new rules will fall to the California Attorney General, city attorneys, or county counsel. Any violation of the law will result in a civil penalty of US$5,000 per offense. Additionally, attorneys’ fees and applicable costs may be imposed on violators.

Final Regulations Regarding Automated Decision Systems

On 1 October 2025, the final Employment Regulations Regarding Automated Decision Systems (ADS Regulations) final regulations went into effect. For more information on the regulations, please see the firm's 31 October 2025 alert and its 17 November 2025 alert.

An “automated decision system” (ADS) is any system, AI, machine learning, algorithms, statistics, etc., used to make or aid decisions related to job applicants or employees. This includes candidate-scoring tools, personality assessments, recruitment ad targeting, video-interview analytics, and predictive hiring models. 

The ADS Regulations apply existing anti-discrimination laws to tools that employers use to directly or indirectly make employment decisions. Indeed, every California employer covered by the Fair Employment and Housing Act must practice algorithmic accountability when using ADS and AI in employment decisions. Key compliance requirements include:

• Anti-Discrimination Measures: Employers must ensure the ADS does not cause disparate impact against protected groups. Liability applies even without intent, impact alone matters. 
• Bias Testing and Audits: Routine, independent audits and anti-bias testing are mandatory. One-off reviews at deployment are insufficient. 
• Transparency and Notice: Employers must inform applicants and employees both before and after ADS use. Notices should explain usage, options to opt out, and how to request human review. 
• Affirmative Defense: Employers can defend against legal claims by showing they have taken good-faith steps (e.g., audits, corrective measures, continuous oversight) with solid documentation. 
• Vendor Accountability: Outsourcing doesn’t shift responsibility. Employers remain fully liable for bias or discrimination introduced by third-party systems. 
• Record Retention: Maintain all ADS-related documentation (e.g., data inputs/outputs, decision rules, audit results, correspondence) for a minimum of four years. 

To ensure compliance with the regulations, covered employers should:

• Establish policies and procedures for use of an ADS in employment decisions;
• Train human resources personnel, managers, and anyone else using an ADS; 
• Educate users and leadership on the risks associated with using an ADS and the employer’s obligations under the law;
• Ensure there is human oversight and a human element to the decision-making process, even if an ADS is used;
• Continuously monitor and test and regularly audit the ADS for bias and effectiveness.
• Carefully vet vendors; and
• Consult with legal counsel. 

Illinois—HB 3773 

As discussed in more detail in the firm's 1 May 2025 blog post, effective 1 January 2026, Illinois House Bill 3773 (HB 3773) amends the Illinois Human Rights Act, to expressly prohibit Illinois employers from using AI that “has the effect of subjecting employees to discrimination on the basis of protected classes.” Specifically, Illinois employers cannot use AI that has a discriminatory effect on employees, “[w]ith respect to recruitment, hiring, promotion, renewal of employment, selection for training or apprenticeship, discharge, discipline, tenure, or the terms, privileges, or conditions of employment.” HB 3773 also requires employers to notify employees and applicants when using AI during recruitment, hiring, promotion, renewal of employment, selection for training or apprenticeship, discharge, discipline, tenure, or when the use could affect the terms, privileges, or conditions of employment. 

At the end of 2025, the Illinois Department of Human Rights published draft rules implementing HB 3773, but these rules have not yet been finalized. However, Illinois employers should work with counsel to prepare for compliance.

Texas—HB 149

As discussed in more detail in the firm's 25 June 2025 alert, effective 1 January 2026, Texas’ HB 149 Responsible Artificial Intelligence Governance Act (TRAIGA) imposes limited obligations on covered private employers³ and instead focuses on Texas government agencies’ use of AI systems and the use of AI for certain limited purposes, such as to manipulate human behavior to incite violence/self-harm or to engage in criminal activities, and for social scoring. It also creates a state AI advisory council and regulatory sandbox program that allows accepted entities to test AI systems without a license, registration, or other regulatory authorization. 

New Jersey—N.J.A.C. 13:16

New Jersey adopted regulations, effective 15 December 2025, governing disparate impact discrimination in the workplace, which includes the use of automated employment decision technology. “Automated employment decision tools” are defined as any software, system, or process that aims to automate, aid, or replace human decision-making relevant to employment. These regulations clarify that automated employment decision tools must be evaluated for potential disparate impact on protected classes. They explain that automated tools used for recruiting, screening, interviewing, hiring, and other employment decisions can replicate and amplify existing workforce imbalances, penalize applicants based on religion, disability, or medical needs, and generate biased outputs when the underlying technology has not been properly tested on diverse populations. Examples include résumé‑scoring models that mirror the demographics of a nondiverse workforce, scheduling filters that screen out applicants who cannot work on particular days for religious reasons, and facial‑analysis tools that inaccurately assess individuals with darker skin tones, disabilities, religious head coverings, or facial hair because the systems were not validated on comparable groups.

Federal Action

Executive Order 14365—Ensuring a National Policy Framework for Artificial Intelligence

On 11 December 2025, President Trump signed Executive Order 14365, “Ensuring a National Policy Framework for Artificial Intelligence” (EO 14365) aimed at preempting state AI laws in favor of unified, national regulation. EO 14365 provides that state-by-state AI regulation creates compliance burdens, requires entities to embed ideological bias within AI models, and impermissibly regulates beyond state borders, “impinging on interstate commerce.” To “correct” this issue, EO 14365 seeks to establish “a minimally burdensome national standard” by charging various federal agencies with establishing a framework through which states can be penalized for enacting AI laws contrary to the Administration’s AI policy, and existing state AI regulations can be legally challenged. EO 14365 also calls for the preparation of a legislative recommendation establishing a uniform federal policy framework for AI that preempts state AI laws. 

Pursuant to EO 14365, on 9 January 2026, the US Attorney General established the AI Litigation Task Force, comprised of the Attorney General, the Associate Attorney General, and representatives from the Office of the Deputy Attorney General, the Office of the Associate Attorney General, the Office of the Solicitor General, the Civil Division with a state purpose of challenging state AI laws deemed inconsistent with the Administration’s AI policy. 

EO 14365 also provides that, within 90 days:

• The Secretary of Commerce must issue a policy notice describing the circumstances under which states may be ineligible for certain broadband deployment funding under the Broadband Equity Access and Deployment Program if they impose certain AI-related requirements and must publish a list of state AI laws considered “onerous”; and
• The Federal Trade Commission (FTC), in consultation with the Special Advisor for AI and Crypto, must issue a policy statement addressing how the FTC Act’s prohibition on unfair or deceptive acts or practices applies to AI models and explain how certain state laws are preempted by the FTC Act.

In addition, within 90 days of the Secretary of Commerce’s above-described actions, the FTC, in consultation with the Special Advisor for AI and Crypto, must initiate a proceeding to determine whether to adopt a federal reporting and disclosure standard for AI models that preempts conflicting state laws.

Given EO 14365’s breadth and focus on preemption, legal challenges are anticipated. For example, Florida is moving ahead with its own AI regulations despite the issuance of EO 14365. Governor Ron DeSantis has introduced recommendations for Florida lawmakers, including an “Artificial Intelligence Bill of Rights,” introduced as Senate Bill 482 by Sen. Tom Leek for consideration in the legislative session beginning 13 January  2026. SB 482 would prohibit AI companion chatbot platforms from establishing or maintaining accounts with minors without a parent’s consent, and require them to allow parents to monitor, restrict, and disable their child’s interactions. DeSantis stated that EO 14365 cannot preempt state authority under the Tenth Amendment and maintains Florida’s proposals are consistent with child safety goals the federal government encourages. He stated, “Even reading [EO 14365] very broadly, I think the stuff we’re doing is going to be very consistent,” DeSantis said. “But irrespective, clearly, we have a right to do this.”

At this time, employers should: 

• Continue to comply with applicable state AI regulations; and 
• Monitor further developments regarding EO 14365 and related litigation and legislative actions.

For more information on EO 14365, please see the firm's 15 December 2025 alert.

Department of Justice Compliance Guidance

The Department of Justice’s (DOJ) updated Evaluation of Corporate Compliance Programs now directs prosecutors to assess how companies identify, manage, and mitigate risks associated with AI and other emerging technologies. Key elements under scrutiny in prosecutorial investigations include whether organizations conduct explicit AI risk assessments, implement robust controls and mitigation strategies, integrate AI risk management into broader enterprise governance frameworks, and provide training on responsible AI use. Additionally, corporate compliance teams must have adequate access to data and analytical tools to monitor and respond to AI-related risks, and companies are expected to adapt their compliance programs in response to technological and regulatory developments. 

This expanded focus on AI risk management by DOJ can significantly influence prosecutorial decisions, affecting whether a company is charged, the severity of sanctions or monitoring obligations, and the possibility of reduced penalties or declination. The guidance underscores that effective AI governance is now a critical component of a robust corporate compliance program, requiring proactive measures and continuous adaptation to emerging risks.

AI Litigation

Mobley v. Workday, Inc., 740 F. Supp. 3d 796 (N.D. Cal. 2024)

Cases against AI vendors for bias in employment decisions and privacy violations are active, and employers should expect rulings on algorithmic discrimination and disclosure obligations in 2026. One of the most closely watched cases in this area is Mobley v. Workday, Inc., which is currently pending in the US District Court for the Northern District of California and illustrates the litigation risks of using AI in hiring.

In Mobley, a job applicant alleged that Workday’s AI-driven recruitment screening tools disproportionately rejected older, Black, and disabled applicants, including himself, in violation of anti-discrimination laws. In late 2024, Judge Rita Lin allowed the lawsuit to proceed, finding the plaintiff stated a plausible disparate impact claim and that Workday could potentially be held liable as an “agent” of its client employers. This ruling suggests that an AI vendor might be directly liable for discrimination if its algorithm, acting as a delegated hiring function, unlawfully screens out protected groups.

On 6 February 2025, the plaintiff moved to expand the lawsuit into a nationwide class action on behalf of millions of job seekers over age 40 who applied through Workday’s systems since 2020 and were never hired. The amended complaint added several additional named plaintiffs (all over 40) who claim that after collectively submitting thousands of applications via Workday-powered hiring portals, they were rejected—sometimes within minutes and at odd hours, suggestive of automated processing. They argue that a class of older applicants were uniformly impacted by the same algorithmic practices. On 16 May 2025, Judge Lin preliminarily certified a nationwide class of over-40 applicants under the Age Discrimination in Employment Act (ADEA), a ruling that highlights the expansive exposure these tools could create if applied unlawfully. 

Throughout 2025, the case moved forward, with arguments relating to the certification of the class. On 6 January 2026, a motion hearing was held on Mobley’s Motion to file a Second Amended Complaint, and Judge Lin granted the motion. Mobley moved to add additional Class Representatives and to add Title VII (sex and race), ADEA, and Americans with Disabilities Act claims on behalf of these proposed Class Representatives who have received their Notice of Right to Sue from the Equal Employment Opportunity Commission following the filing of the First Amended Complaint and adding race, gender, and age claims under California Fair Employment and Housing Act Gov. Code § 12940 et seq. The court also noted Defendants may take Mobley’s deposition (per certain limitations). 

Mobley marks one of the first major legal tests of algorithmic bias in employment and remains the nation’s most high-profile challenge of AI-driven employment decisions. 

Our Labor, Employment, and Workplace Safety lawyers regularly counsel clients on a wide variety of concerns related to emerging issues in labor, employment, and workplace safety law and are well positioned to provide guidance and assistance to clients on the ever-changing AI legal landscape.

• The key revenue and transaction value thresholds;
• The meanings of the terms used in the new regime - in particular
  • connected entities;
  • control including circumstances where control is deemed.
• The exemptions from notification;
• Information and documentary requirements in applications; and 
• Statutory timelines and fees.

Click here to view the snapshot.

Section 401 requires state or tribal certification of compliance with water quality standards before federal agencies may issue licenses or permits for activities that may discharge into waters of the United States; if the certifying authority does not act within a reasonable time, certification is waived. Historically, states and tribes have also attached conditions to certifications, which then become prerequisites for federal authorization.

EPA’s approach to Section 401 has swung sharply in recent years—first with a rule in 2020 that tightened timelines and limited conditioning authority (the 2020 Rule),² then with a rule in 2023 that restored broader state and tribal discretion (the 2023 Rule).³ The 2026 Proposed Rule would largely return to the 2020 framework, as outlined below.

Scope of Certification

Largely returning to the 2020 Rule, the Proposed Rule would replace the broad activity-based scope of review under the 2023 Rule—which allowed states to consider whether the “activity as a whole” would comply with water quality requirements—with the following: 

The scope of a Clean Water Act section 401 certification is limited to assuring that a discharge from a federal licensed or permitted activity will comply with applicable and appropriate water quality requirements. (emphasis added)

EPA proposes adding a definition of “discharge,” clarifying that it refers only to discharges “from a point source into waters of the United States” and does not include nonpoint source discharges. Furthermore, the Proposed Rule would define “water quality requirements” as “applicable provisions of sections 301, 302, 303, 306, and 307 of the Clean Water Act, and applicable and appropriate state or triable water quality-related regulatory requirements for discharges."

Finally, EPA also seeks comments regarding whether “water quality requirements” should be restricted solely to numeric criteria.

Extensions of Review Time

Generally, under the 2023 Rule, certification decisions must be made within the default period of six months; however, that period may be extended up to one year after submission. While the Proposed Rule does not alter these periods, it proposes to eliminate automatic extensions for public notice procedures and force majeure events, requiring certifying authorities to rely on joint extension processes agreed upon with the federal agency and the applicant when necessary.

Additionally, the Proposed Rule would prohibit certifying authorities from requesting that applicants withdraw and resubmit certification requests to reset the review clock to avoid exceeding a reasonable period of time.

Contents of Requests for Certification

The Proposed Rule introduces a standardized list of required documents at 40 C.F.R. § 121.5(c) that constitutes a complete certification request and prohibits certifying authorities from amending this list. It also makes the submission of the standardized documents—not the materials states or tribes may request—start the statutory review clock.

Contents of a Certification and Modifications

The Proposed Rule would require that a certification (a decision to grant, grant with conditions, deny, or waive a request for certification) must be accompanied by specific information and a statement indicating whether the discharge will comply with water quality requirements. Additionally, any imposed condition must be accompanied by a justification demonstrating the condition is necessary to ensure compliance with water quality requirements. 

Finally, before a certifying authority could modify a certification, the Proposed Rule would require a trilateral agreement among the federal agency, certifying authority, and applicant agreeing to the modification.

Section 401(a)(2) “May Affect” Process

Under the current 401(a)(2) process, a federal agency must notify EPA when it receives a license or permit application and either a certification or waiver from the certifying authority. EPA then has 30 days to determine whether a discharge associated with the permit or license may affect a “neighboring jurisdiction.” If the EPA finds that it will, it notifies the potentially affected jurisdiction, who then has 60 days to object to the certification. Once the neighboring jurisdiction objects, a hearing may be conducted by the issuing federal agency, after which the issuing federal agency must attach relevant conditions to “ensure compliance with applicable water quality requirements.”

The Proposed Rule would alter this process in a few important respects. First, EPA proposes to introduce categorical determinations alongside the current case-by-case process. Under this proposal, if certain criteria are present, EPA will or will not find that a discharge may affect another jurisdiction. Second, all objections by other states must identify the likely violations of water quality requirements that the certification would produce. Finally, EPA proposes adding a requirement that the issuing federal agency hold a public hearing within 90 days of the objection.

Tribes

Finally, the Proposed Rule would eliminate the process allowing tribes to obtain “treatment as a state” (TAS) solely for Section 401 certification purposes. Instead, tribes would pursue TAS status through CWA Section 303(c) (water quality standards). Once a tribe obtains TAS status for water quality standards, it would likewise be eligible for certification authority.

If finalized, the Proposed Rule would represent a substantial shift back toward the more restrictive 2020 Rule framework, diminishing state and tribal authority over federally permitted projects within their jurisdictions. Interested stakeholders should consider submitting comments on the Proposed Rule in advance of the 17 February 2026 deadline and continue to monitor developments related to the rulemaking process.

In the first of its kind, a US company with no prior connection to the United Kingdom, has financially restructured via a Part 26A Companies Act (UK) Restructuring Plan (the RP), in respect of which it also achieved Chapter 15 recognition. 

Whilst the English restructuring market understandably applauds the outcome, the case raises some probing questions from the perspective of US jurisprudence, including the limits of legitimate forum shopping, due process and circumvention of the Ch.11 principle against third-party releases. A more complex but equally important question is whether certain aspects of the case might properly be construed as a work around the controversial ‘Texas Two-Step’. 

Has the era of the ‘Thames Two-Step’ begun? 

That the RP received overwhelming creditor support is likely partly responsible for the English and US courts’ pragmatic approach in respectively sanctioning the RP and granting recognition. Had creditor support been lukewarm, and a dissenting creditor mounted a thoughtful and serious challenge, the outcome may well have been different. In the event, the sole dissenting creditor mounted what appears to be a skirmish of a challenge for negotiating leverage.

In this alert, we examine the issues through the lens of a dissenting creditor and offer some arguments that may be relevant in future cases. But first, we will briefly examine the background to why Fossil Group, Inc. (US Co) availed itself of an RP in the first place, then we will look at the terms of the RP itself and finally, the English and US courts’ reasoning. 

Background: Why Did US Co Use an RP to Restructure?

By utilising an RP to restructure just one slice of its capital structure and raise new money (New Money), US Co avoided a possible ‘363 sale’ of its business and winding up under Chapter 11 US Bankruptcy Code, which it claimed was the most likely option if the RP failed (the Relevant Alternative). The RP achieved what US Co had endeavoured - and was unable (due to failure to reach the requisite 90% consent) - to achieve via a New York law private exchange and SEC-registered exchange offering under the US Securities Act 1933 (together the Exchange Transactions).

Road to the RP? Exchange Transactions and ‘Stapled’ RP

US Co had committed to its ABL lenders to raise New Money and restructure its US$150m 7% senior unsecured notes due 2026 (the Notes). In compliance with this commitment, US Co therefore launched the Exchange Transactions in respect of the Notes and took the unprecedented precaution of ‘stapling’ an RP process (which only requires 75% consent), to be launched if the requisite consent on the Exchange Transactions was not achieved. The terms provided for the release of the Notes in exchange for new notes (either on a 1st out or 2nd out basis, depending on participation in the New Money) and warrants.

US Co took the following steps in parallel with the Exchange Transactions for the specific purpose of establishing a basis for jurisdiction to apply for the RP (Forum Shopping):

• It launched a consent solicitation to amend the indenture governing the Notes from NY law to English law and submit to the exclusive jurisdiction of the courts of England. (The indenture permitted these amendments on a simple majority basis); 
• It incorporated a UK subsidiary to guarantee its obligations under the indenture as a ‘contributory’ and to act as the ‘Plan Company’ proposing the RP; and
• The UK subsidiary entered into a deed of contribution to reimburse US Co for any amounts that US Co might pay on the Notes (the Deed of Contribution), thus requiring any restructuring of the Notes to also include a third-party release of US Co to prevent its contribution or subrogation claims against the UK subsidiary from remaining on its balance sheet.

Its precaution proved prescient: the Exchange Transactions failed to obtain the requisite 90% consents, and so the Plan Company launched the RP. 

RP: Same but Different… to US Exchange Transactions and Chapter 11

RPs combine features of both Exchange Transactions and Chapter 11. In particular:

• Like an Exchange Transaction (but unlike a Chapter 11), it is ‘surgical’ in approach. The plan company may pick and choose which part(s) of its capital structure to include
• Like Ch.11, dissenting classes can be crammed down
• Like Ch.11 there is a point of reference for slicing the benefits of the restructuring, but unlike Chapter 11’s ‘absolute priority’ rule (whereby creditors must be paid in full prior to equityholders retaining any value), the RP employs the concept of ‘relevant alternative’, which may facilitate a fluid division of the pie, including that equityholders may, in certain cases, retain value even where dissenting creditors are compromised.

English Court’s Pragmatic Approach

In sanctioning the RP, the English court emphasised the overwhelming creditor support. Nevertheless, the court scrutinised the plan in a detailed judgment, and the following aspects evidence the English court’s pragmatism and flexibility in approach:

Single Voting Class and Fair Representation

Noteholders were permitted to vote as a single class even though different terms applied to those who opted to take up and/or backstop the New Money. This was because all noteholders were offered the same opportunity to participate in the New Money and the backstop was necessary in view of sizeable retail holdings. The court derived comfort from the fact that a fair representation of each constituent within the class approved the RP. In addition, overall, 99.9% of noteholders voted in favour–with just one noteholder dissenting. 

Jurisdiction

The court decided that the Forum Shopping (which it accepted was done for the sole purpose of establishing a basis for UK jurisdiction) was legitimate as a type of ‘good forum shopping’. In the context of European companies seeking an RP, this is a well-established path to establishing jurisdiction.

Exclusion of Pari Passu Operating Creditors From the RP

The court accepted that these creditors were essential to ensure business continuity, and so their exclusion was acceptable.

Were the Noteholders Better Off Than in the ‘Relevant Alternative’

Although not strictly necessary to consider (because there was no question of cramming-down a dissenting class), the court considered (and accepted) the evidence (presented in the context of class composition) that, in the Relevant Alternative, the Noteholders’ return would be between 40-74%. In contrast, under the RP, their return would exceed 100%. 

Release of Third-Party Debt

The court released claims under the Notes against US Co itself given the ‘ricochet’ issues that otherwise would have burdened the Plan Company, based on the Deed of Contribution. 

International Recognition

The court relied on an expert witness statement from a former US Bankruptcy Judge that the RP would have a ‘reasonable prospect of recognition’ in the US under Chapter 15 of the US Bankruptcy Code.

The Chapter 15 Case

Two days after the English court sanction, the Bankruptcy Court for the Southern District of Texas (the US Bankruptcy Court) entered an order recognizing and giving effect to the RP (including the third-party release of US Co) under Chapter 15, enabling enforcement of the RP in the United States. The sole dissenting creditor mounted a challenge but soon withdrew (on the basis of having sold its Notes).

Arguments That Dissenting Creditors Might Consider in Future Cases

What might a dissenting creditor have argued? The following issues could be used as possible to challenge a future case:

'Bad' Forum Shopping

COMI manipulation. The sole objector asserted manipulation of the basis for the US Bankruptcy Court’s Chapter 15 jurisdiction over the UK Subsidiary–that its “center of main interests” (or COMI) was the UK–based on the US Co being headquartered in Texas and having no prior connection to the UK, and its creation of the UK subsidiary solely for the purpose of effecting the restructuring plan under UK law. But the objector withdrew his objection on the basis that he subsequently sold his Notes. A recent US Chapter 15 case in the New York bankruptcy court (In re Mega Newco Limited) warned of COMI abuse on similar facts–‘because of the risk that creditors’ rights and expectations might be thwarted …. If there were an actual contention or evidence that the structure at issue here had been used in an unfair way and had thwarted third-party expectations, there would be serious questions in my mind as to whether it ought to be approved’, 2025 WL 601463 at *4 (Bankr. S.D.N.Y. Feb. 24, 2025)–but signed off only because of overwhelming creditor support and no objections.

Due Process and Public Policy

Since Chapter 11 cases affect the entire capital structure–and in view of the “absolute priority” rule requiring creditors be paid in full before equityholders may retain any value–it would be worth considering a due process argument that notice of the RP should have been given to all classes of creditors, with an opportunity to object. All creditors of a legal entity are potentially affected by any restructuring of any debt issued by that entity (in this case, US Co), since that debt’s adjustment affects the entity’s financial condition generally. In the Fossil Group case, both the UK and US courts focused on the RP’s beneficial impacts on the Noteholders (as mentioned above, an estimated recovery of over 100% under the RP, compared to an estimated 40-74% recovery under the Relevant Alternative under Chapter 11), but appear to have not addressed–or given other creditors the opportunity to address–the broader impact of the RP on other creditors. Chapter 15 allows the denial of recognition and plan enforcement on public policy grounds and the denial of related relief if creditors and other stakeholders (including the debtor) are not sufficiently protected, so due process and similar issues could be raised if the ‘surgical’ approach under Part 26A fails to give procedural protections to other creditor classes (for example, broad notice of the RP proceeding itself). Similarly, the Fossil Group use of an RP under Part 26A was admittedly used only as a ‘backup’ plan when the Exchange Transactions under US law failed, potentially raising another public policy argument if a US company pursues a Part 26A restructuring only as a way around more rigorous debt restructuring requirements of US securities laws. 

The Thames Two-Step?

From a US perspective, the RP process of restructuring also raises the issue of whether bad faith arguments might be posed as objections by dissenting creditors. A now infamous tactic in US bankruptcies tried a similar model by utilising a unique Texas reverse merger technique to separate a company from its liabilities by parking them into a new subsidiary, then putting that subsidiary into bankruptcy with a third-party release of the operating company that originally held the liabilities–known as the “Texas two-step”. This technique has been controversial in the US, arousing the ire even of US Congress members. Johnson & Johnson famously tried it three times in an effort to rid itself of mass tort liabilities, and all three efforts were dismissed by US federal courts on discretionary bad faith grounds. This raises the prospect that if a US company tries a “Thames Two-Step” under Part 26A to rid itself of liabilities by forming a UK subsidiary solely for that purpose, then seeks a third-party release of the US company under UK law (which would be subject to a more deferential standard of review by a US bankruptcy court under Chapter 15 than are third-party releases in US Chapter 11 cases), dissenting creditors could well object on public policy and similar grounds under Chapter 15. 

Our firm has a diverse international restructuring and insolvency practice serving a broad range of clients and providing creative solutions to transactional and adversarial difficulties resulting from financially distressed circumstances across the Americas, Europe, the Middle East and Africa, and Asia Pacific. Whichever side of the restructuring plan you might find yourself on, be sure to call on one of our trusted lawyers. 

The Reform Package implements the core recommendations that arose out of the 2020 independent Samuel Review of the EPBC Act in order to deliver “stronger environmental protection and restoration”, “more efficient and robust project assessments” and “greater accountability and transparency in decision making”. The most significant amendments to the EPBC Act are set out below.

National Environmental Standards Introduced

A new, legally binding framework is now featured in the EPBC Act which allows the commonwealth minister for Environment and Water (Minster) to make, vary and revoke National Environmental Standards (NESs). Decision-makers are then compulsorily required to apply the relevant NES in decision-making, as prescribed under the EPBC Act or regulations. 

Generally, before making an NES, the Minister must be satisfied that:

• The standard promotes the objects of the EPBC Act; and
• The standard is not inconsistent with Australia’s obligations under relevant international agreements.

An NES must prescribe “one or more outcomes or objectives” and may prescribe the parameters, principles, processes, or actions taken to achieve an outcome or objective.

Under the “no regression principle”, the Minister can only vary or revoke an NES if the Minister is satisfied that the variation or revocation meets any prescribed requirements and does not reduce:

• Environmental protections;
• The likelihood that environmental data or information provided to the government is appropriate;
• “The likelihood that appropriate consultation or engagement” will occur under the EPBC Act, including with Indigenous persons; and
• “The likelihood that outcomes or objectives specified in the standard will be achieved”.

Unless the proposed variation of the NES is minor or mechanical in nature, the minister will be required to publish the draft proposed variation and invite public comment.

New Criteria for Approval of Projects

Consistency With an NES

Under a new provision, s 136A of the EPBC Act, the Minister cannot approve the taking of an action unless it is consistent with one or more of the prescribed NESs.

The “Unacceptable Impacts” Test

A new “unacceptable impacts” test will apply to the approval of projects under the EPBC Act. The Minister must not approve the taking of an action unless the Minister is satisfied that the taking of the action will not have an unacceptable impact on a matter of national environmental significance (MNES). The EPBC Act designates the criteria of what is an “unacceptable impact” for each MNES. Projects with unacceptable impacts will not be approved subject to exceptional circumstances, and importantly, cannot be compensated for through offsets. Instead, projects with unacceptable impacts must be avoided or mitigated below the “unacceptable impact” criteria in order to gain approval.

The “unacceptable impact” criteria will vary according to the protected MNES. One example of an MNES is the “world heritage values of a declared world heritage property”. An unacceptable impact is stated to be “a significant impact that causes loss, damage or alteration to part or all of the world heritage values”.

Residual Significant Impact – Net Gain Test

Approval will not be granted to an action that will have or is likely to have a residual significant impact (RSI) on an MNES unless it passes the “net gain test”.

An RSI on an MNES is defined to be an impact that is significant and cannot be avoided, mitigated, or repaired in the course of taking the action and in the course of complying with any attached conditions to the approval.

An action will pass the net gain test if the action will or is likely to have:

• A condition attached to the approval that requires the holder to compensate for the damage caused by the RSI and a condition requiring the holder to pay a restoration contribution charge related to the RSI; and
• Compliance with the condition(s) results in a net gain for the MNES as prescribed under the regulations or as otherwise is appropriate under requirements to the Minister’s satisfaction; and
• Any other prescribed matter in relation to the compensation for damage is satisfied.

National Interest Exemption and Approval

The EPBC Act seeks to improve environmental outcomes by strengthening the national interest exemption. The Minister can now impose conditions on a national interest exemption for an action and to set a period for which the exemption is in force. National interest exemptions can now also be granted by application or by the Minister’s initiative without an application. 

A national interest approval is also introduced. In rare circumstances where the Minister cannot approve an action as it fails to meet any of the above criteria, the Minister may nonetheless approve it if it is a national interest proposal. 

If an action is a national interest proposal and is inconsistent with the prescribed NES, the Minister may approve the action if the Minister is satisfied that insofar that there are inconsistencies with the prescribed NES, the inconsistencies are “reasonably necessary for the taking of the action to result, or be likely to result, in the intended outcome for the national interest proposal”. Similarly, an action that is a national interest proposal that has an unacceptable impact or an RSI may be approved if the Minister is satisfied that either the unacceptable impact or RSI is “reasonably necessary for the taking of the action to result, or be likely to result, in the intended outcome for the national interest proposal”.

Project Assessments with Increased Efficiency

Bioregional Planning

New provisions are included to allow for the making of bioregional plans that specify development zones and actions and restoration measures. The Minister will be required to take into account any relevant bioregional plan or bioregional guidance plan when granting approvals, although certain “registered priority actions” under bioregional plans can be taken without approval. 

Strategic Assessments

Amendments are now made to the EPBC Act in relation to strategic assessments with the intention to allow strategic assessments to be used more often in landscape scale assessment of classes of actions and to reduce assessment timeframes.

Accreditation and Bilateral Agreements

Provisions in the EPBC Act are now updated and streamlined in relation to accreditation and bilateral agreements to increase durability. Additionally, state, territory and other Commonwealth agency processes will only be accredited if they meet national environmental protections and are consistent with NESs.  

Streamlined Assessment Pathways

The EPBC Act seeks to simplify, streamline and improve the assessment and approval pathways whilst retaining the national environmental significance requirement. The Minister will be required to choose one of five approaches when making an assessment, which include an accredited assessment process, a single new streamlined assessment that replaces two of the three existing assessment pathways, an assessment on preliminary documentation (the retained existing assessment pathway), an environmental impact statement or a public inquiry. 

Reconsideration Framework Changes

Improvements have been made to reconsideration provisions, which include:

• Allowing a Minister to determine an action that was previously not a controlled action but was reconsidered to be a controlled action to continue to be taken while under assessment in the EPBC Act, subject to conditions that limit its environmental impacts;
• Clarifying the reconsideration request requirements including by imposing a 28-day time limit for third parties requesting a reconsideration of a controlled action decision; and
• Introducing a new power for the Minister to reconsider a decision that an action is not a controlled action because the Minister believes it will be taken in a particular manner.

Environment Bodies Established

The National Environmental Protection Agency (NEPA) and the head of Environment Information Australia (EIA) are established under the National Environmental Protection Agency Act 2025 and Environment Information Australia Act 2025, respectively.

The NEPA will have regulatory and implementation functions under environmental Commonwealth laws, including the EPBC Act, such as issuing permits and licences, and carrying out compliance and enforcement activities. Following NEPA’s establishment, the CEO of NEPA will have other functions in relation to administering and enforcing the EPBC Act. 

The EIA is established to improve the availability and accessibility of information and data through reporting, including on the "State of the Environment". Provisions relating to this have therefore been removed from the EPBC Act.

Strengthened Compliance Powers and Penalties

The EPBC Act now has increased criminal penalties and includes a new civil penalty formula that applies to the most serious contraventions. This new formula is modelled on similar schemes in Commonwealth laws that target financial crime. This means that the maximum penalty for certain breaches has increased. For example, under the new s 481A of the EPBC Act, the maximum penalty for a contravention of a civil penalty provision by a body corporate is the greater of:

• 50,000 penalty units;
• If it can be determined by the Ccourt, either the sum of the benefit derived and detriment avoided multiplied by 3three, or otherwise whichever of the benefit derived and the detriment avoided the Ccourt can determine, multiplied by 3three; or
• Either 10% of the annual turnover of the body corporate for the 12-month period ending at the end of the month in which the contravention occurred, or 2.5 million penalty units (if the calculation is higher than 2.5 million penalty units).

New powers to issue environment protection orders are introduced to allow the CEO of NEPA to issue these orders in urgent circumstances where a contravention of the EPBC Act (or conditions of an environmental authority or exemption) is causing or poses an imminent risk of serious damage, although there are corresponding limits imposed on these powers as well. 

Existing audit powers are expanded to introduce compliance audits by the CEO of NEPA, without a requirement to give notice of the audit.

Land-Clearing Changes

Changes to Grandfathering Land-Clearing Provisions

Previously under s 43B of the EPBC Act, actions that were considered lawful before the commencement of the EPBC Act in 1999 were allowed to continue. Section 43B has been amended to exclude this from applying to actions that consist of or involve clearing vegetation from:

• Land that has not been cleared of vegetation for a period of at least 15 years and is not a forestry operation; and
• Land that is within 50 metres of a watercourse, wetland or drainage line in the catchment area of the Great Barrier Reef Marine Park.

Forestry operation is defined under the EPBC Act as the planting of trees, the managing of trees before harvest, and the harvesting of forest products for commercial purposes, and includes any related land clearing, land preparation and regeneration and transport operations.

Land-Clearing Exemption Removed

The new EPBC Act also removes the exemption that allows a Regional Forestry Agreement forestry operation to proceed without approval. The sunset day of this exemption is prescribed to be 12 months after 1 July 2026, which effectively means that land clearing will need approval from 1 July 2027.

The consequence of these amendments is that certain land- clearing actions that previously could be taken without assessment will now need to follow the assessment process as set out in the new EPBC Act.

Other Significant Changes 

The following new provisions and amendments are also included in the EPBC Act:

• Approval pathways for fossil-fuel actions will now be limited under the new EPBC Act, with fossil-fuel action defined as the production or extraction of petroleum or coal. Therefore, fossil-fuel actions will be excluded under streamlined assessment, exclusion determination and bioregional planning provisions, and the national interest proposal exemption.
• The Minister will have a new power to make rulings that set out the Minister’s opinion on how the law, regulations or standards should be applied in particular circumstances, and the Minister, CEO of NEPA or a delegated decision-maker is required to act consistently with a ruling unless the individual circumstances render it inappropriate to do so.
• The Minister can approve the extension of the lapsing of a “not a controlled action” decision to a maximum of five further years.
•  A new provision requires the disclosure of estimates for Scope 1 and 2 greenhouse-gas emissions for the assessment of a controlled action.
• The nuclear trigger will be changed to radiological exposure actions to avoid regulatory duplication.
• The Minister will be allowed to declare that offshore projects do not require separate approval if the Minister is satisfied that the same environmental protections are provided for under the Offshore Petroleum and Greenhouse Gas Storage Act 2006 (Cth) and the corresponding regulation.

Implications for Affected Stakeholders

The reforms to the EPBC Act are wide-ranging and comprehensive. The reforms provide for a more streamlined assessment process and the removal of regulatory duplication, which may achieve greater efficiency and less delays in the approval of projects. 

However, the newly prescribed NESs and additional tests, including the “unacceptable impact” test, are yet to be applied in practice. Larger penalties, new environmental bodies and further ministerial discretion and powers also require stakeholders’ attention. Additionally, the transitional provisions are complex, with some provisions commencing upon Royal Assent of the EPBC Act, and others commencing later – this will affect stakeholders’ existing and future projects.
 

The foundations for the landing areas of the new Dubai International Vertiport are complete, and with the country’s Advanced Air Mobility (AAM) regulations already in force, Dubai is on track to soon launch commercial electric air taxi services.¹ 

This movement towards the commercial implementation of AAM technologies is also occurring in Southeast Asia. In October 2025, EHang Holdings Limited (an AAM technologies company headquartered in China) announced its launch of an AAM Sandbox Initiative in Thailand, a unique regulatory approach to trialling AAM technologies. The initiative is being undertaken in collaboration with the Civil Aviation Authority of Thailand and local partners with the goal of accelerating the commercial operation of AAM aircraft. As continuous trials under this initiative are now underway, we anticipate that Thailand may also soon see AAM aircrafts take to the skies. ²

Closer to home, Airservices Australia’s 2025-26 Corporate Plan (Plan) identifies uncrewed aircraft and air mobility operators as key airspace stakeholders. It confirms that Airservices Australia will work closely with them to support the safe, efficient, and sustainable management of Australia’s airspace and airport operations.³ The Plan also notes demand volatility in the operating environment. It highlights the likelihood of increasing airspace complexity as traditional and new aircraft types operate side by side. It also refers to a growing focus on decarbonisation. Against that backdrop, Airservices Australia anticipates that AAM will create long term growth opportunities. It expects the value of AAM to increase as productivity and decarbonisation benefits are realised in parallel with worsening road congestion.⁴ 

As Brisbane moves towards the 2032 Olympic and Paralympic Games (2032 Games), the National Aviation Authorities Network’s (Network) announcement in June 2025 of its Roadmap for Advanced Air Mobility Aircraft Type Certification (Roadmap) could not have come at a better time.⁵ 

The Network is an international collaboration comprising aviation authorities from Australia (Civil Aviation Safety Authority), Canada (Transport Canada Civil Aviation), New Zealand (Civil Aviation Authority), United Kingdom (Civil Aviation Authority), and the United States of America (Federal Aviation Administration).

The Roadmap paves the way for streamlining and simplifying the certification process for AAM aircraft such as flying taxis across Network countries for emerging aircraft types. The type certification process ensures that a particular type of aircraft meets the necessary safety and airworthiness standards set by the relevant aviation authority. Harmonised airworthiness standards as envisaged by the Roadmap are expected to streamline the entry of AAM aircraft in Network countries, meaning that AAM aircraft can get off the ground and into the air faster.

With aircraft movements in Australia set to increase exponentially in the coming years (read more about the growing aviation sector in Australia here), the Roadmap presents an important step forward for the realisation of the highly anticipated flying taxis proposed for use for the 2032 Games. Wisk Aero, backed by Boeing and Kitty Hawk Corporation, has indicated it intends to launch its flying taxis in Australia in time for the 2032 Games.⁶ 

This article provides a high-level summary of the six key principles of the Roadmap and their broader implications, analyses the challenges and opportunities presented by the Roadmap, and explores the specific implications it has on the 2032 Games and the commercial aviation industry in Australia.

SUMMARY OF KEY PRINCIPLES

The Roadmap sets out six key principles, which are:⁷ 

1. Safety and innovation: Balancing safety standards with technological advancement while still promoting innovation within a safety-first framework;
2. Harmonised type certification: Development of a three-phase approach to achieve streamlined validation of AAM aircraft across the Network. The approach first uses performance-based requirements, then seeks to converge on requirements where differences exist and finally, applies mutually accepted Means of Compliance (MoC);
3. Collaboration and alignment: Fostering collaboration within the Network and enhancing coordination with other key authorities that have active domestic AAM certification projects;
4. Collaborative multi-authority validation: Leveraging opportunities for collaborative multi-authority validation of AAM aircraft undergoing type certification by one of the Network authorities;
5. Incremental approach: Recognition of a “crawl, walk, run” approach to type certifying AAM aircraft, building on initially piloted AAM operations, followed by remotely piloted AAM operations with increasing levels of autonomy; and
6. AAM inclusive bilateral agreements: Establishment of guiding principles and a comprehensive process for entering into new bilateral agreements and updating existing bilateral agreements, specifically regarding type certification and streamlined validation of AAM aircraft. The new bilateral agreements will aim to be inclusive of AAM technology advancements, regulatory changes, and market needs to ensure the proper application of the above principles.

CHALLENGES AND OPPORTUNITIES

The Roadmap is not without its challenges. It recognises the need for:⁸

• Safety: Preserving the safety focus inherent in the type certification process whilst maximising the use of consensus standards and accepted MoC to ensure that Network authorities have the capacity to meet industry demand for type certification and validation; and
• Innovation: Enabling innovation while maintaining, or improving upon, current levels of aviation safety, supporting global harmonisation, and recognising updated bilateral agreements.

The Network recognises that safety is of the utmost importance when it comes to the development of AAM technologies. As technologies and their operations become more complex, society’s demand for safety assurances will become even greater. However, the challenge lies in the difference between the priorities of each Network authority’s target market. Some markets demand more innovation, while others may prioritise safety. The key to overcoming this challenge may be not only to align MoC and airworthiness standards between Network authorities but also to align the public’s demand for safety assurance to ensure that policies reflect the Network’s focus on safety.

The Roadmap also offers important opportunities:⁹ 

• Fostering collaboration, promoting technological advancement, and streamlining validation processes within the Network; and
• Meeting industry demand for regulatory harmonisation of certification and validation requirements and processes to enable transferability of AAM aircraft across the Network.

These opportunities provide unique implications for the various stakeholders across the different sectors of the AAM technology industry. For AAM Original Equipment Manufacturers (OEM), this may mean working with Network authorities to create a certification basis for AAM aircraft. For AAM type certifying and validating authorities, this may involve working with Network authorities and OEMs to achieve collaborative validation. Furthermore, there is a broad invitation for all industry stakeholders to collaborate with the Network to support the development of innovative AAM technologies. 

SPECIFIC IMPLICATIONS

2032 Games

The Roadmap aims to streamline the validation process of type certified AAM aircrafts and create a uniform approach to navigating the complex regulatory landscape. Over time, the Roadmap is expected to improve overall efficiency in the production and operation processes of AAM technologies. The Roadmap provides a promising outlook for turning the adoption of flying taxis for the 2032 Games from an Olympic dream to a reality (read more about using flying taxis for the 2032 Games here). 

Furthermore, as many of the activities outlined in the Roadmap are intended to commence before July 2026, it will be interesting to observe how the Roadmap may influence the use of flying taxis in the 2028 Los Angeles Olympic and Paralympic Games, and Queensland should anticipate the lessons that those games may present to inform planning for the 2032 Games.¹⁰ 

Infrastructure Implications

The Roadmap also carries material consequences for the construction, infrastructure, and broader built-environment sectors. Establishing AAM operations will require new and upgraded assets, including vertiports, charging and battery-swap infrastructure, passenger processing facilities, and integrated intermodal hubs, together with targeted upgrades to existing aviation and transport networks. These projects will need to be delivered against a rapidly evolving regulatory and technical landscape, spanning planning approvals, environmental assessment, building code compliance, and emerging AAM-specific standards. 

For developers, contractors, investors, and airport operators, this presents clear opportunities, particularly in early precinct planning and integration-led design and construction but also introduces heightened risks around interface management, technology obsolescence, allocation of system performance responsibility, and uncertain approval pathways. Early legal engagement will be essential to structure bankable procurement and delivery models, calibrate construction risk allocation, address land and tenure constraints, and align delivery settings with the long-term operational model for AAM.

COMMERCIAL AVIATION INDUSTRY IN AUSTRALIA

In terms of commercial aviation, the Roadmap will help support the growth of the industry by reducing the length and complexity of the processes needed for AAM type certification. Furthermore, the Roadmap is expected to support the innovation of AAM technologies, which may not only allow emerging AAM technology companies to turn their ideas into reality but also allow the industry to advance at an unprecedented rate.

Additionally, the Roadmap aims to achieve a uniform certification process and standard across the Network. This means that, for Network countries, the import and export of AAM technologies and the employment of imported AAM aircraft will become a significantly more efficient and simple process.

CONCLUSION

With flying taxis now in the final stages of testing and certification in the United States,¹¹ and a highly anticipated aspect of the 2032 Olympics taking place in Queensland, the Roadmap is positioning AAM technologies to support a promising future of accelerated development and international collaboration. Through the emergence of AAM technologies across the globe and widespread governmental support for such developments, it is clear that AAM technologies will soon become a key element in the future of Australia’s airspace planning and development.

With the next steps outlined in the Roadmap focused on engaging new members and strengthening existing partnerships,¹²  K&L Gates as an international firm, with offices across four continents, is uniquely positioned to provide advice on matters relating to AAM technologies. 

We are closely monitoring emerging risks and identifying strategies to help market participants mitigate against them. If you are interested in learning more about our perspective on the evolving prediction market space, please use this link to access our analysis or feel free to reach out to us.
 

The decision follows a UK Supreme Court judgement in May 2025, which ended a protracted battle over jurisdiction and established England as the appropriate forum to hear the case, rather than Malaysia.

In this alert, we consider the significance of the Dyson decision for businesses with global supply chains, as well as practical steps to ensure effective due diligence and monitoring of suppliers.

Background 

The case is brought by a group of migrant workers from Nepal and Bangladesh. They allege that between 2011 and 2012 they were trafficked to Dyson supplier factories in Malaysia, where they suffered, “conditions of forced labour, exploitative and abusive working and living conditions and, in some cases, detention, torture or beating”.  

The claims encompass three Dyson entities; two domiciled in England, and one domiciled in Malaysia. The claimants argue that the Dyson companies: (1) were contractually in control of the factories’ working and living conditions (2) exerted a high degree of control over operations and conditions, and (3) were aware of the forced labour risks. The claims are specifically pleaded as negligence, false imprisonment, intimidation, assault, battery, and unjust enrichment.

Dyson denies the claims. Specifically, it denies that it had any knowledge of the factories’ conditions, that it owed a duty of care to the workers, and that it had control over the Malaysian factories as third parties.

The court has ruled that a liability trial against Dyson concerning alleged intimidation, battery, and assault will be heard in early 2027. The claims regarding unjust enrichment will be heard later, on the basis that they rely on establishing the former claims. 

It is notable that the ruling requires Dyson to disclose “known” documents concerning its alleged awareness or oversight over the conditions in the factories. This includes minutes of meetings between Dyson and a Malaysian company running the factories.

Significance

The Dyson case confirms that corporates may be litigated against in the United Kingdom for human rights abuses committed in their supply chains/by their suppliers, even where the alleged harm was committed overseas. 

The case builds on the principles established in recent cases, where the UK Supreme Court held that a UK parent company may owe a duty of care to individuals harmed through an overseas subsidiary where it had a sufficient level of control. While the question of Dyson’s actual liability will be determined at trial, the message across all three cases is clear—geographic distance from harm will not necessarily protect a company from liability in the United Kingdom.

Over the past decade, the United Kingdom’s approach to human rights violations in supply chains has evolved significantly. It began with the UK Modern Slavery Act 2015, which requires companies of a certain size and turnover to publish an annual statement setting out steps taken to prevent slavery/trafficking in their operations and supply chains. However, the act is focused on transparency, with no obligation to take preventative measures, and no meaningful penalties for noncompliance. This has led to mass criticisms on its effectiveness in driving meaningful human rights compliance. The Dyson case marks a step change, with the courts willing to accept jurisdiction and examine litigation alleging abuses in supply chains. 

Additionally, the UK Court of Appeal ruling in World Uyghur Congress v NCA [2024] EWCA Civ 715 recognises that the proceeds from goods produced under forced labour may give rise to UK money laundering offences under the Proceeds of Crime Act 2002 (POCA). It may not be sufficient to rely on the premise that the goods were sold for “adequate consideration” as an absolute defence under POCA. It follows that, if Dyson were found to be liable for the alleged abuses in its Malaysian supply chains, the proceeds from goods manufactured in the factories where the abuses took place may amount to the proceeds of crime. 

Advice to Corporates

Defence of such claims involves vigilance and proactive collection of data. UK companies should apply adequate scrutiny to their business operations and exercise sufficient oversight over their supply chains, wherever they are in the world, in order to mitigate the risk of human rights abuses, across jurisdictions and legal regimes. From the UK Modern Slavery Act to the German Supply Chain Due Diligence Act, to the US Uyghur Forced Labor Prevention Act, to the French Corporate Duty of Vigilance Law, it is more important than ever to establish a unified framework for addressing relevant human rights and supply chain transparency requirements. Failure to do so may leave them open to litigation, as well as reputational, commercial, and criminal risk.

Below are a number of practical steps companies might consider:

Build a Compliance Framework

Develop a human rights policy statement consistent with the company’s values, supported by a mandatory supplier code of conduct that flows these standards down to suppliers. Create a recordkeeping system for tracking all necessary documents. Appoint a policy administrator to monitor compliance with supplier code of conduct, engage independent auditors as needed to verify supplier compliance, and train employees and agents working with suppliers to recognise and report “red flags”. Establish metrics to evaluate performance over time. For companies with a complex corporate structure, this also includes ensuring compliance by overseas subsidiaries.

Contractual Obligations

Insert language into supply chain contracts requiring business partners to ensure human rights compliance and labour safety in accordance with UK law. Key obligations include, for example, (1) compliance with supplier code of conduct, (2) targeted representations regarding forced labor and identifiable risk factors, (3) flowdown of compliance standards to next tier suppliers, (4) document/data flow to establish supply chain transparency over time and commitment to gathering documents tier-by-tier to establish reasonable assurance of compliance, (5) periodic compliance certifications, (6) timely notification of compliance incidents, (7) implementation of remedial action plan if forced labor is discovered or reported, (8) cooperation, including with due diligence and data requests, and (9) periodic, independent compliance audits. 

Supply Chain Mapping

Identify names, locations, products/component parts/raw materials, starting with direct suppliers and enlisting their support in developing upstream data. 

Conduct Regular Risk Assessments

Focus, for example, on the following risk factors: (1) geographic risks, including data to establish reasonable certainty regarding country of origin of component parts and raw materials; (2) operational/industry risks and the extent to which materials are sourced from high-risk industries; (3) transactional risks, such as price for inputs relative to market rates and whether inputs are associated with forced labour (e.g., based on open-source review; and (4) third-party risks, including higher-risk suppliers’ reputation for ethics and integrity, commitment to human rights accountability, willingness to cooperate with information requests.

Perform Commercially-Reasonable and Risk-Based Due Diligence on Highest Risk Suppliers and Sub-suppliers Based on the Results of a Tailored Risk Assessment

Such enhanced due-diligence strategies to mitigate these risks can include, for example, open-source review of highest risk suppliers, watchlist and litigation searches, and identification of ultimate beneficial owners.

Collect and Maintain Clear and Complete Records

Written records help to evidence monitoring and oversight of supply chains. As the Dyson case shows, they can also be requested by the court. Such documentation might include, for example; (1) a detailed description of the supply chain, including any step of the sourcing, manufacturing, or processing of goods in third countries; (2) documentation of the roles of the entities involved at each stage of the supply chain, as well as the relationship between the entities (e.g., whether a supplier is also a manufacturer); (3) auditable documentation demonstrating the origin and control of each raw material or component part, including, for example, detailed importer statements, certificates of origin, supplier affidavits regarding the sources of product inputs, import/export records, customs entry documents, freight forwarder notices, dock or warehouse receipts for both the seller and buyer, shipping records, packing lists, and bills of lading; (4) transaction details, such as relevant portions of supply contracts, purchase orders, production orders, bills of materials, and invoices; (5) foreign transportation documents, including documentation of transshipments of the product, component parts, and raw materials; (6) factory reports including site visit reports, and production capacity reports; and (7) documents related to worker and factory conditions, including documented wage payment, production output per worker, and evidence showing the worker was recruited and is working voluntarily. 

Escalation and Remedial Action Plans

Establish clear and confidential channels for escalation where an issue is identified, take whistleblowing claims seriously, and remediate supplier risks or terminate noncompliant suppliers as incidents are reported.

Concluding Remarks

The Dyson decision shows that global supply chains are under greater scrutiny than before and that there are more avenues for serious legal and reputational exposure for human rights issues than ever before. It is therefore vital that organisations take a robust and proactive approach to ethical supply chain risk management, especially with respect to contract manufacturers and other tier 1 suppliers in high-risk regions for forced labour. 

Our experienced team can help you understand where your risk lies and assist you in establishing procedures to mitigate it. If you have any questions or would like to further discuss how you can improve your compliance, please do not hesitate to contact the authors listed above.

The key theme leading into 2026 is democratization of digital assets—making digital assets accessible to US persons without the fear of imminent enforcement action. During 2026, we expect the SEC and CFTC to provide further guidance to facilitate access to digital assets. In light of the enactment of the GENIUS Act, we also expect further rulemaking initiatives by the US Department of the Treasury (Treasury Department), the Office of the Comptroller of the Currency (OCC), and other federal agencies to implement this new law. By issuing guidance and proposing rulemakings to clarify how market participants can engage in digital assets, the financial regulators are opening these markets onshore, consistent with President Donald Trump’s goal to make the United States the crypto capital of the world.

RECENT REGULATORY ACTIONS AND INITIATIVES LEADING INTO 2026

The SEC Pivots on Custody

One area of regulation that prevented firms from entering the digital asset space for several years is custody. Whereas the Gensler-era SEC made it nearly impossible for advisers to transact in digital assets, the SEC under the Trump administration is enabling greater participation in these markets. During 2025, the SEC formally rescinded Staff Accounting Bulletin 121 and withdrew the proposed Safeguarding rule. In addition, staff of the SEC’s Division of Trading and Markets, together with staff of the Office of General Counsel of the Financial Industry Regulatory Authority, Inc. (FINRA), withdrew their 2019 joint staff statement that prevented broker-dealers from custodying digital asset securities.¹ SEC staff has also issued guidance to clarify SEC custody rules by allowing state trust companies to hold digital assets subject to certain conditions and confirming when broker-dealers can hold digital assets.

Custody in Relation to State Trust Companies

On 30 September 2025, the SEC’s Division of Investment Management issued a no-action letter permitting the treatment of a state-chartered trust company as a bank for purposes of holding digital assets and effecting transactions in digital assets.² To rely on this relief, various conditions must be satisfied. An adviser or 1940 Act fund must determine that the state trust company is in the best interest of the client and that it is authorized by the relevant banking authority to provide digital asset custody services. They must provide disclosure about material risks to clients or the board of directors or trustees, as applicable. In addition, they must enter into a written custodial services agreement with the state trust company providing that assets will be segregated and that the state trust company will not, directly or indirectly, lend, pledge, hypothecate, or rehypothecate any digital assets held in custody without prior written consent (and then only for the account of the client or fund). 

Broker-Dealer Custody of Digital Asset Securities 

Subsequent to providing the state trust company guidance, the SEC’s Division of Trading and Markets issued a statement clarifying when broker-dealers themselves may hold digital asset securities pursuant to paragraph (b)(1) of Rule 15c3-3.³ SEC staff outlined specific circumstances where the Commission would not object to a broker-dealer deeming itself to have physical possession of a digital asset security carried for the account of customers as set forth in paragraph (b)(1) of Rule 15c3-3, provided that the broker-dealer satisfy conditions related to direct access, distributed ledger technology (DLT) assessments, and policies, procedures, and controls. In addition, a broker-dealer may not hold digital asset securities if it is aware of any material security or operational problems or weaknesses with the DLT and associated network used to access and transfer the digital asset security or of other material risks to the broker-dealer’s business by custodying the digital asset security.⁴ 

DTCC Tokenization Relief

On 11 December 2025, the SEC’s Division of Trading and Markets staff granted no-action relief to The Depository Trust Company (DTC) in connection with DTC’s launch of tokenization services.⁵ DTC’s request for no-action relief describes various use cases for tokenization, including 24/7 peer-to-peer transfers between approved wallets.

The relief covers: (1) rule filing requirements under Section 19(b) of the Exchange Act and Rule 19b-4;⁶ (2) covered clearing agency standards, i.e., Exchange Act Rules 17ad-22(e) and 17ad-25 (i)-(j);⁷ and (3) Regulation Systems Compliance and Integrity (Reg SCI).⁸ The relief is available for three years following the launch of the tokenization services.⁹ The relief is based on the facts and circumstances discussed in the request for relief. Importantly, only certain securities will be eligible for tokenization, including securities in the Russell 1000 Index at the time of the launch, US Treasuries, and Exchange Traded Funds (ETFs) that track major indexes (such as the S&P 500 or Nasdaq 100 indexes). Tokens will not be ascribed collateral or settlement value for DTC risk management purposes or for calculating a participant’s “net debit cap” or “collateral monitor.” As a result, tokenized securities would not be used to manage a participant’s default on its obligations to DTC. DTC must provide SEC staff with a quarterly report related to tokenization, amongst other notification requirements. 

An Increased Focus on Financial Surveillance

Recently, the Commission signaled a greater focus on government surveillance on financial transactions and issues that may arise from this surveillance. In this regard, the SEC’s Crypto Task Force (Crypto Task Force) articulated the Commission’s regulatory objective of achieving a balance of sufficient protection of individual privacy to guard against government surveillance of financial activity with sufficient transparency for national security considerations.¹⁰ Of particular relevance to the asset management industry, aspects of blockchain technology—such as proof-of-work (PoW) mechanisms, zero-knowledge proofs (ZKP), and multi-party computation (MPC) mechanisms—function well to remove middlemen and enable asset managers to demonstrate that their portfolio assets meet fund mandates without compromising competitive edge, proprietary asset allocation strategies, or disclosing the precise securities that funds hold.¹¹

Despite highlighting these examples of substantial technological advancement in financial transactions, the Crypto Task Force emphasized that privacy protections must be balanced with the government’s need to police fraudulent activity, such as insider trading. As the SEC considers financial surveillance in the crypto markets, the Commission likely will address how it will implement insider trading protections in a market that is significantly different from traditional securities markets. 

CFTC Developments

At the end of the year, Michael Selig was confirmed as the chairman of the CFTC.¹² With Chairman Selig’s background in working on digital asset initiatives in private practice and his most recent role as chief counsel of the SEC’s Crypto Task Force and senior advisor to SEC Chairman Paul Atkins, it is expected that the CFTC will continue to focus on ways to facilitate market participants’ access to digital assets and use of tokenized collateral. During the second half of 2025, the CFTC launched various initiatives that Chairman Selig will now be responsible for overseeing, including the year-long “Crypto Sprint” and tokenization pilot program.

CFTC “Crypto Sprint”

Since August 2025, when then-Acting Chairman Caroline Pham launched a 12-month “Crypto Sprint,” the CFTC has focused on various regulatory areas related to digital assets, including the listing of spot digital assets on CFTC-registered designated contract markets (DCMs) and allowing derivatives market participants to use tokenized collateral, including stablecoins.¹³ Following through on one of the key goals of the Crypto Sprint, the CFTC announced just last month that spot digital assets were available for trading by a CFTC-registered exchange.¹⁴ In addition, the CFTC established a “CEO Innovation Council,” comprised of 12 members from exchanges.¹⁵ To address ambiguities in regulations and facilitate access to digital asset markets, the CFTC also asked for public comment on the recommendations for the CFTC in the President’s Working Group Report. 

Tokenization No-Action Relief (Issued on 8 December 2025)

As part of the Crypto Sprint, the CFTC asked for comment specifically on the use of tokenized collateral in derivatives markets. Comments were due in October, and in December CFTC staff issued guidance allowing futures commission merchants (FCMs) and derivatives clearing organizations to accept tokenized collateral.¹⁶ The guidance describes when tokens are eligible to be accepted as collateral and confirms that market participants must ensure that tokens satisfy legal enforceability and segregation requirements and must apply the same risk-based approaches to tokens to determine haircuts and valuations as applied to the underlying forms of assets. However, staff noted that the guidance may be updated in the future with the progress of technological and regulatory developments.

On the same day, staff issued no-action relief to allow FCMs to accept non-securities digital assets (including payment stablecoins) as customer collateral, subject to various conditions.¹⁷ In doing so, the CFTC withdrew CFTC Staff Advisory 20-34, which limited an FCM’s ability to accept digital assets as customer collateral.¹⁸ Staff noted that this guidance had become “outdated and no longer relevant.”¹⁹ Under the new no-action relief, FCMs must file a notice of intent to rely on the relief with the CFTC via WinJammer and, for the first three months thereafter, weekly reports of digital assets held in each category of customer segregated accounts. Also, for only the first three months of an FCM’s reliance on the relief, the FCM is subject to a notification requirement in the event of a significant operation or system issue, disruption, or failure (including a cybersecurity event) that affects the use of digital assets as customer collateral. For the first three months of its reliance on the relief, an FCM may only accept payment stablecoins, Bitcoin, and Ether as margin collateral for customers. Moreover, the relief specifies how FCMs must adhere to rules on value and haircuts and how they may use digital assets to comply with their residual interest requirements. 

Stablecoin Developments Under the GENIUS Act 

On 18 July 2025, the “Guiding and Establishing National Innovation for US Stablecoins Act” or the “GENIUS Act” was enacted. The GENIUS Act was the first major piece of digital assets legislation passed by Congress. The GENIUS Act defines and regulates the issuance of payment stablecoins and sets forth a licensing and supervision regime for issuers of payment stablecoins. The GENIUS Act establishes reserve and redemption requirements for payment stablecoins. Under the law, payment stablecoins may be issued only by authorized subsidiaries of banks or by entities licensed to do so by the OCC. Issuers of payment stablecoins are subject to a bank-like regulatory regime, including safety and soundness requirements and anti-money laundering (AML) compliance. Numerous rules must be issued to implement the GENIUS Act by federal and state regulators, including the Treasury Department, the OCC, the Board of Governors of the Federal Reserve System, the Federal Deposit Insurance Corporation (FDIC), and the Financial Crimes Enforcement Network.

Since the law’s enactment, a handful of regulatory developments have occurred. On 19 September 2025, the Treasury Department issued a proposed rulemaking soliciting public input on potential regulations to be issued by the Treasury Department pursuant to the GENIUS Act, including regarding regulatory clarity, prohibitions on certain issuances and marketing, Bank Secrecy Act(BSA) AML and sanctions obligations, the balance of state-level oversight with federal oversight, comparable foreign regulatory and supervisory regimes, and tax issues.

On 11 December 2025, the FDIC board approved a proposed rule to establish the application process for FDIC-supervised state-chartered banks seeking to issue payment stablecoins through a subsidiary pursuant to the GENIUS Act. 

Passage of the GENIUS Act sparked a number of applications to the OCC for new national bank charters, particularly for applicants seeking nondepository national trust bank charters to engage in custody and other activities related to stablecoins and digital assets more generally. These national trust banks would be permitted to issue payment stablecoins under the GENIUS Act. On 12 December 2025, the OCC issued conditional approvals of five such national trust bank charter applications. 

Although the GENIUS Act prohibits the payment of interest or other remuneration on payment stablecoins by payment stablecoin issuers, there are various potential work arounds for payments of rewards by affiliates or others with respect to payment stablecoins. The banking industry is vigorously lobbying for additional prohibition on the payment of rewards with respect to payment stablecoins, including through amendments to the CLARITY Act. This is something that we likely will see play out during 2026 in legislative and rulemaking efforts.

The CLARITY Act In 2026 

In 2025, Congress made significant strides toward establishing a regulatory framework and market structure for digital assets, though it fell short of passing legislation before year-end. These efforts set the stage for potential action in 2026.

In July, the House approved the Digital Asset Clarity Act of 2025 (CLARITY Act), a bill seeking to provide structure to the regulation of digital assets. Importantly, the CLARITY Act aims to resolve regulatory friction between the SEC and the CFTC by defining the boundaries of the agencies’ respective jurisdictions regarding digital assets. Meanwhile, the Senate Banking Committee (SBC) and Senate Agriculture Committee worked on similar—but not identical—drafts through December. In the final weeks, SBC Republicans and Democrats exchanged compromise proposals, and Chairman Tim Scott (R-SC) aimed to advance a bill out of committee before 2026. While that goal was not met, Chairman Scott emphasized that negotiations made meaningful progress before the holiday recess and promised that SBC will resume work on market structure legislation early in the new year.

WHAT TO LOOK FORWARD TO IN 2026 

If the second part of 2025 demonstrates anything, it is that the digital asset environment in 2026 promises to be dynamic and fast-moving. Digital asset issuers, exchanges, and other participants in this ecosystem will be able to innovate and potentially seek guidance from the regulators when necessary. We expect the SEC to make progress on two main fronts: further guidance to facilitate access to digital assets and no-action relief to issuers of digital asset tokens. The Commission probably will continue to provide regulatory clarity for digital asset markets to further define the regulatory landscape and to distinguish digital asset regulation from traditional security regulation. SEC staff may continue providing no-action relief to issuers of digital asset tokens, clarifying that certain tokens are not securities. For example, the SEC staff recently provided no-action relief from securities registration to digital asset issuers Fuse Crypto Limited²⁰ and DoubleZero.²¹ Other digital asset issuers may seek similar assurances before issuing a digital asset, and the SEC staff appears to be amenable to offering these assurances.

We also expect further rulemaking initiatives by the Treasury Department, the OCC, and other federal agencies to implement the provisions of the GENIUS Act. These rulemaking efforts are expected to occur during the first half of 2026. The CLARITY Act is also expected to make additional progress through the Senate. Even though the CLARITY Act is still pending in Congress, we nonetheless expect the CFTC to continue to work with the SEC to delineate their respective jurisdictions regarding digital assets. 

As the new chairman of the CFTC takes the helm, one area of focus for the CFTC likely will be increased harmonization with the SEC, particularly given the new chairman’s role of working with Chairman Atkins and on the Crypto Task Force. If the CLARITY Act is enacted into law, we expect Chairman Selig to swiftly introduce regulatory proposals to implement the new legal framework. As the industry awaits Congressional action, we expect staff of the SEC and CFTC to continue providing guidance on regulatory grey areas or that otherwise facilitates the adoption of digital assets and tokenization.

On 18 December 2025, the European Securities and Markets Authority (ESMA) published a report on the revised guidelines on liquidity management tools (LMTs) for UCITS and open-ended AIFs. The amendments are intended to bring the guidelines in line with the regulatory technical standards (RTS) adopted by the EU Commission on 17 November 2025. 

Changes have also been made to the provisions for redemption gates. Fund managers of open-ended AIFs (without retail investors and with a limited number of professional investors) should consider using investor-level redemption gates (alone or in combination with fund-level gates) in order to reduce the risk of certain investors gaining an advantage by exiting the fund early.

For anti-dilution tools (ADTs), the guidelines previously stipulated that both explicit and implicit transaction costs for subscriptions, redemptions, and repurchases should be included in the estimated liquidity costs. However, implicit transaction costs for ADTs should now only be taken into account if this is consistent with the investment strategy and on a best effort basis. Explicit transaction costs must always be included.

The revised guidelines will apply from the date of entry into force of the RTS on 16 April 2026. A transition period of 12 months applies to existing funds.

Mercosur Agreement Signed

On 17 January 2026, the European Union and some of the Mercosur countries signed a partnership agreement (EMPA) and an interim trade agreement (iTA). This agreement creates the world's largest free trade area, with the aim of abolishing most mutual customs duties, simplifying import processes, and strengthening intellectual property protection.

Among other things, the agreement removes trade barriers in the services sector, particularly for digital and financial services, and gives European banks and insurance companies easier access to South American markets, as well as granting EU asset managers a kind of right of establishment. It also aims to ensure protection and transparency for investments. Financial institutions based in Mercosur will also gain better access to European capital markets.

Following the signing of the EMPA, the European Union and Mercosur will now initiate their respective procedures for ratifying the agreement. At the same time, the ITA is undergoing an EU ratification process.

ESAs sign MoU on DORA with UK Financial Regulators

On 14 January 2026, the European Supervisory Authorities (ESAs) signed a memorandum of understanding (MoU) with the Bank of England, the Prudential Regulation Authority, and the Financial Conduct Authority. The aim of the MoU is to improve cooperation between the authorities in the supervision of critical information and communication technology (ICT) third-party providers under the Digital Operational Resilience Act (DORA).

Among other things, the MoU includes the exchange of information and the coordination of supervisory activities between the authorities responsible for supervising third-party providers. A prerequisite for the exchange of information is that the confidentiality and professional secrecy rules of the United Kingdom are equivalent to the requirements under DORA.

Factsheet With Information for Finfluencers

The European Securities and Markets Authority (ESMA) and national financial market supervisory authorities have created a factsheet for individuals who disseminate content on financial products and financial services in social media (finfluencers), providing an overview of legal obligations and conduct requirements. Among other things, this factsheet points out that finfluencers are fundamentally responsible for the content they post and that the content posted must be true, fair, clear, and not misleading. Furthermore, clear and understandable disclosure is required if finfluencers receive money, gifts, or other benefits for an advertised financial product or if they themselves have invested in this product or could benefit from it. Finally, the factsheet also points out that the dissemination of investment recommendations or advice may be an activity subject to authorization. The factsheet has been published on the ESMA website.

New BaFin Guidance on AI

On 18 December 2025, the German Federal Financial Supervisory Authority (BaFin) published nonbinding guidance on information and communication technology (ICT) risks associated with the use of AI in financial companies. The Digital Operational Resilience Act (DORA) and the EU AI Regulation (Regulation (EU) 2024/1689) are two frameworks that financial companies must take into account when using AI. Financial companies are now to receive assistance in implementing regulatory requirements under DORA when using AI, thereby enabling them to manage their ICT risks effectively.

The guidance considers the entire life cycle of AI systems with the aim of identifying vulnerabilities at an early stage and managing them appropriately. The guidance is intended to make it clear that the use of AI requires close links between specialist departments, information technology, information security, data protection, risk management, and governance structures. In addition to the BaFin guidance and DORA, financial companies must also take into account the EU AI Regulation for the sustainable use of AI and a holistic approach.

On 11 December 2025, President Trump issued a long-awaited executive order (EO) entitled “Protecting American Investors from Foreign-Owned and Politically-Motivated Proxy Advisors.” The EO refers to Institutional Shareholder Services (ISS) and Glass Lewis & Co. LLC as being foreign-owned proxy advisors that together control more than 90% of the proxy advisor market and “advise their clients about how to vote the enormous numbers of shares their clients hold and manage on behalf of millions of Americans in mutual funds and exchange traded funds.” 

Moreover, it says the two proxy advisor firms “regularly use their substantial power to advance and prioritize radical politically-motivated agendas—like ‘diversity, equity, and inclusion’ [(DEI)] and ‘environmental, social, and governance’ [(ESG)]—even though investor returns should be the only priority.” It cites examples of the proxy advisor firms supporting shareholder proposals on company racial equity audits, significantly reducing greenhouse gas emissions, and corporate board diversity guidance. 

The EO builds upon a report published by the House Financial Services Committee ESG Working Group (Working Group) in August 2024. The report, titled "The Failure of ESG: An Examination of Environmental, Social, and Governance Factors in the American Boardroom and Needed Reforms,” identified several factors the Working Group says led to the rise in ESG-related initiatives. One such factor is the proxy voting system. The report also highlighted the ISS and Glass Lewis “proxy advisory duopoly,” increasing scrutiny on the two firms. See here for a more detailed overview of the report. 

What’s In It

The EO directs the Chairman of the Securities and Exchange Commission (SEC) to “review all rules, regulations, guidance, bulletins, and memoranda relating to proxy advisors,” and consider revising or rescinding them pursuant to the Administrative Procedure Act, “especially to the extent that they implicate [DEI] and [ESG] policies.” The EO also directs the SEC Chairman to consider revising or rescinding all rules and guidance relating to shareholder proposals, including SEC Rule 14a-8. 

Further, the SEC Chairman is directed to:

• Enforce federal securities laws’ anti-fraud provisions with respect to material misstatements in proxy advisors’ voting recommendations;
• Assess whether to require proxy advisors’ activities to fall under the scope of the Investment Advisors Act of 1940, and therefore be registered as investment advisors; 
• Consider requiring proxy advisors to provide increased transparency on their recommendations, methodology, and conflicts of interest, particularly those regarding DEI and ESG factors; 
• Analyze whether a proxy advisor serves as a vehicle for investment advisors to coordinate and augment their voting decisions with respect to a company’s securities, and therefore form a group for purposes of sections 13(d)(3) and 13(g)(3) of the Securities Exchange Act of 1934; and
• Direct SEC staff to examine whether registered investment advisors engaging with proxy advisors to advise on nonpecuniary factors in investing, including DEI and ESG, is consistent with their fiduciary duties.

Additionally, the Chairman of the Federal Trade Commission (FTC) and the US Attorney General are directed to “review ongoing state antitrust investigations into proxy advisors and determine if there is a probable link between conduct underlying those investigations and violations of Federal antitrust law.” They are also directed to investigate whether proxy advisors engage in unfair methods of competition or unfair or deceptive acts or practices. 

Lastly, the Secretary of Labor is directed to “take steps to revise all regulations and guidance regarding the fiduciary status of individuals who manage, or, like proxy advisors, advise those who manage, the rights appurtenant to shares held by plans covered under the Employee Retirement Income Security Act of 1974 (ERISA) (29 U.S.C. 1001 et seq.), including proxy votes and corporate engagement, consistent with the policy of this order.” The EO stipulates that the proposed revisions “should include amendments to specify that any individual who has a relationship of trust and confidence with their client, including any proxy advisor, and who provides advice for a fee or other compensation, direct or indirect, with respect to the exercise of the rights appurtenant to shares held by ERISA plans, is an investment advice fiduciary under ERISA.”

This final provision in the EO reflects a decade of back-and-forth policy changes between administrations. In 2015, the Department of Labor (DOL), under the Obama administration, released “Interpretive Bulletin Relating to the Fiduciary Standard Under ERISA in Considering Economically Targeted Investments,” authorizing ERISA plan fiduciaries to consider ESG-factors with a direct economic impact as part of their investment decisions. In response, President Trump signed Executive Order 13868 in 2019, directing the Secretary of Labor to review guidance from the DOL with respect to the “fiduciary responsibilities for proxy voting to determine whether any such guidance should be rescinded, replaced, or modified to ensure consistency with current law and policies that promote long-term growth and maximize return on ERISA plan assets.” The following year, the DOL issued a proposed rule stating that ERISA requires plan fiduciaries to select investments and investment courses based solely on pecuniary factors. However, the final rule, Financial Factors in Selecting Plan Investments, was not finalized until after the 2020 election and it implicitly ratified much of the Obama-era DOL rationale (i.e., it acknowledged that sustainability considerations can impact pecuniary returns). The Biden-era DOL then reversed course again by issuing the “Prudence and Loyalty in Selecting Plan Investments and Exercising Shareholder Rights” final rule, clarifying the “application of ERISA's fiduciary duties of prudence and loyalty to selecting investments and investment courses of action, including selecting qualified default investment alternatives, exercising shareholder rights, such as proxy voting, and the use of written proxy voting policies and guidelines.” Since returning to office, the Trump administration has sought to rescind this rule. 

Concluding Thoughts

The Trump administration and congressional Republicans have long sought to limit the influence of proxy advisors in the shareholder proposal process on the grounds that they divert resources from company operations and disincentivize private companies from going public. However, the primary reason privately held companies do not go public more often has to do with increasing costs in compliance and disclosure obligations for publicly traded companies. 

In short, policymakers’ focus on proxy advisors is seen by many investors as a proxy battle over shareholder rights and corporate disclosures writ large. An example of this dynamic can be seen in SEC Division of Investment Management Director Brian Daly’s recent speech on proxy advisors, which notes that an evolution in the SEC’s proxy rules over the last two decades “gave rise to a small oligopoly of proxy advisory firms with de facto power to impose their views on social and political matters upon a large portion of the American capital markets.” Additionally, he stated, “[I]n short, proxy advisors have acquired the ability to influence corporate policy and public company management, without having to buy a single share of stock, and have done so over time under the cover of a fundamental regulatory tenet that votes must be made in the best interest of the client.”

Therefore, we expect to see additional rulemaking and legislative activity on this front in 2026, as well as a DOL rule proposal in the near term. As in the past, it is likely there will continue to be litigation challenging each of these highly contested rules. In the meantime, investors and other key stakeholders should engage with regulators to help shape rules that will provide much-needed regulatory clarity and stability to capital markets. 

Related Resources

The firm has been and continues to be well positioned to assist clients in navigating this rapidly changing ESG policy landscape. To learn more about the current state of ESG in American public policy, as well as the firm’s role in this space, please visit our previous publications, including:

• Here We Go Again: Red States Continue to Focus on ESG;
• House ESG Oversight Focuses on Proxy Voting; Issuer Attention Is on CSRD;
• SEC Issues Long-Awaited Climate Risk Disclosure Rule;
• DOL Issues Proposed Rule on ESG Investing for ERISA Plans: Part 1: History and State of Play;
• The EU CS3D Trilogue Nears Conclusion;
• California Enacts Landmark ESG Legislation;
• GOP ESG Bills Await US House Floor Consideration;
• The ESG Debate Heats Up: State AGs Investigating Asset Manager Involvement in ESG Initiatives and Related Proxy Voting; 
• ESG Investing and Proxy Voting: DOL’s New Final Rule;
• SEC Adopts Final Rule Requiring Additional Proxy Voting Disclosures;
• Déjà Vu All Over Again: SEC Reverses 2020 Proxy Rules Changes and Proposes Shareholder Proposal Rule Changes;
• SEC Takes First Step Toward Standardized ESG Disclosures for Funds and Investment Advisers; 
• SEC Issues Climate-Related Risk Disclosure Rule Proposal; 
• 2023 ESG State Legislation Wrap Up; and
• Biden Administration ESG Activity Accelerates.

Workplaces worldwide are experiencing rapid transformation as artificial intelligence (AI) becomes increasingly integrated into recruitment, performance assessment, and workforce management. Governments across multiple regions are responding by developing new frameworks aimed at promoting transparency, accountability, and fair outcomes in AI-enabled employment decisions. These shifts coincide with renewed attention to how evolving job functions and the growing use of automated tools, interact with long-standing wage-and-hour standards and exemption criteria.

Global mobility and immigration systems are also adapting, with several jurisdictions reevaluating how talent is selected, assigned, and retained to better align with economic and technological priorities. At the same time, changes in executive policymaking and judicial review in various countries continue to influence employer obligations, adding complexity to cross-border workforce planning.

Collectively, these developments highlight the need for organizations to maintain flexible governance, ensure responsible deployment of emerging technologies, and align internal policies with evolving international standards.

Produced annually since 2015, the Global Employer Guide provides a concise, ready reference of current employment laws across more than 15 countries to help employers navigate an increasingly dynamic workforce landscape. Created to complement our Global Employer Solutions^® service, the guide provides a concise, yet comprehensive, summary of the most notable employment laws across the globe.

GLOBAL EMPLOYER GUIDE 2026

Click on the images below to view and download your country of interest.

In autumn of 2025, the English High Court decided that liquidators have unlimited personal exposure: they cannot contractually limit or exclude their personal liability for breach of duty. An application for permission to appeal that decision is now before the Court of Appeal.  

The first instance decision underscored that a liquidator’s duty is not to the company, nor any other person. Rather, the nature of a liquidator’s duty is that of a trustee under a statutory trust over the company’s assets, to be administered in accordance with and for the purposes of the statutory scheme. Thus, it was not possible for the debtor company (whether acting through its directors or shareholder body) to waive the duty or modify a liquidator’s responsibilities or liability. In contrast, the liquidator’s firm may limit its and its other staff’s liability (provided properly drafted and otherwise lawful).

It remains to be seen whether the Court of Appeal will both grant permission to appeal and overturn the first instance decision.  

This alert will be of interest to insolvency practitioners and their firms.

Facts

Pagden v Fry [2025] EWHC 2316 (Ch) involved claims against former liquidators appointed in a members’ voluntary liquidation (together with their associated firm) regarding alleged breaches of duty (including entering into transactions at an undervalue and misfeasance) during the liquidation of a group of companies in the Core VCT group (the Companies). Although the Companies had been dissolved at the end of the members’ voluntary liquidation process, they had since been restored to the register and new liquidators appointed, who then brought the claims on behalf of the Companies. 

The former liquidators’ firm had issued engagement letters (together with its standard terms) that included liability caps of £1 million for the benefit of the liquidators, as well as for the firm and its employees working on the engagement. The court was asked to determine whether these clauses were effective.

Decision

Liquidators’ Duties Are Statutory 

The court held that a liquidator acts as trustee under the statutory scheme provided for in the Insolvency Act 1986. The court observed that the law has moved on from the proposition that a liquidator’s duty is to the creditors or members (citing Ayerst (Inspector of Taxes) v C. & K. (Construction) Ltd [1976] A.C. 167). As such, these duties cannot be limited otherwise than in accordance with the legislation (i.e., even if such limitation is otherwise agreed by the directors and members of the relevant company). The fact that the liquidator’s fiduciary duty arises under statutory trust distinguishes its position from that of auditors or directors, whose liabilities may be limited by contract. 

The Liquidator’s Firm May Limit Its Liability By Contract

There is nothing in principle objectionable about the liquidator’s firm limiting its own and its other staff’s liability in connection with the assignment on which the liquidator has been engaged. In this instance, as a matter of construction of the terms of the firm’s limitation of liability provision in its standard terms of engagement, the court held that it was effective to cap the liability of its staff (other than the liquidators themselves). It is only the liquidators themselves who are subject to the fiduciary duty of the statutory trust.

Subsequent Developments

The decision in Pagden has been followed in at least one case. Cedar Securities Ltd v Phillips [2025] EWHC 2760 (Ch) concerned the purported exclusion of a liquidator’s liability where the conduct complained of related to the discharge of liabilities. The court identified no good reason why the principles explained in Pagden would not apply equally in this case, but this pre-dated the application for permission to appeal the Pagden decision.    

Key Takeaways

Pending a final decision from the Court of Appeal, liquidators would be well advised to assume that they cannot contractually limit or exclude their personal liability for breach of duty. Engagement letters should be drafted accordingly with clear language used to limit or exclude any separate liability that the liquidator’s firm or its staff (other than the liquidators) may have. The adequacy of professional indemnity insurance coverage should be kept under review.            

Our lawyers help clients proactively manage risk, drawing on our experience in insolvency claims, professional indemnity, insurance coverage and other complex commercial disputes.

Tennessee Governor Bill Lee is a champion of the nuclear industry. In May 2023, the governor signed Executive Order 101,³ creating the Tennessee Nuclear Energy Advisory Council to further advance the nuclear industry in the state.⁴ That same year, Governor Lee and the Tennessee General Assembly created the Nuclear Energy Supply Chain Investment Fund, a US$70 million fund to facilitate nuclear energy business investment, workforce development programs, and site development.⁵ In addition to these statewide initiatives, local government and industry representatives have championed the industry for decades through the East Tennessee Economic Council⁶ and other groups and individuals. US Representative Chuck Fleischmann (TN-03), Chairman of the House Energy and Water Appropriations Committee and whose district includes Oak Ridge, has routinely championed the Oak Ridge community and the nuclear industry at large. For example, Rep. Fleischmann sponsored the Fiscal Year 2024 Energy and Water Appropriations Act, which included an US$800 million federal cost-shared grant program for the US Department of Energy (DOE) to support small modular reactors (SMRs) and other advanced nuclear technology.⁷ The Fiscal Year 2026 Energy and Water Appropriations Act also included increased funding to the NRC and funding for advanced reactor and SMR demonstration projects, among other nuclear priorities.⁸

Below, we provide a short summary of some of the advanced nuclear companies that are operating in Tennessee:

Kairos

Kairos⁹ is an advanced reactor¹⁰ developer that, as of the date of this alert, has received two construction permits from the NRC.¹¹ Like many advanced reactors, Kairos’s reactor uses alternative fuel and coolant, “pebble type” tristructural isotropic (TRISO) fuel and molten fluoride salt.¹² Kairos has selected Oak Ridge as the site for its two low-power test reactors and has partnered with the Tennessee Valley Authority on a power purchase agreement to deliver 50 megawatts (MW) from its Hermes 2 plant. The 50 MW generated by Hermes 2 is part of Kairos’s agreement with Google to “enable up to 500 MW” of nuclear power by 2035.¹³ Additionally, Kairos recently finalized a contract with DOE to receive high-assay low-enriched uranium (HALEU), sourced from DOE material, for the startup and operation of the Hermes 1 plant.¹⁴

Orano 

Orano¹⁵ is a technology and services provider with expertise in decommissioning nuclear energy facilities, nuclear fuel management, and the sale of uranium, conversion, and enrichment services. Building on this expertise, Orano plans to construct a uranium enrichment facility near Oak Ridge, designed to provide “several million” separative work units¹⁶ of enrichment capacity.¹⁷ In January 2026, as part of a larger US$2.7 billion investment, DOE announced a US$900 million award to support this facility.¹⁸ 

EnergySolutions

EnergySolutions¹⁹ is an international nuclear services company and a global leader in the safe recycling, processing, and disposal of nuclear material. In Tennessee, EnergySolutions’s Bear Creek Processing Facility in Oak Ridge provides safe processing of radioactive material.²⁰ EnergySolutions recently won two US Navy nuclear waste contracts, including a corporate recycling and volume reduction contract that will include processing activities for recycling and volume reduction at Bear Creek.²¹ Additionally, EnergySolutions is establishing an advanced nuclear fabrication and manufacturing facility in Roane County, Tennessee, to support nuclear plant life extension and nuclear power plant construction as part of its nuclear services division.²²

Radiant

Radiant²³ is a microreactor (~1MW) developer working to provide “the world’s first portable, zero-emissions power source that works anywhere.”²⁴ In 2025, Radiant announced plans to build its first “R-50” factory in Oak Ridge.²⁵ This naming scheme acknowledges the Manhattan Project heritage of Oak Ridge (where sites included Y-12 and K-25) and Radiant’s plans to build 50 reactors per year once the R-50 factory is fully operational.

Standard Nuclear  

Standard Nuclear²⁶ is a producer of TRISO fuel based in Oak Ridge. In January 2026, Standard Nuclear received a shipment of HALEU from DOE, the first such shipment to a commercial TRISO fuel fabricator in the United States. This HALEU will be fabricated into TRISO fuel for Radiant’s advanced reactor demonstration, which is scheduled for later this year.²⁷

X-Energy

X-Energy²⁸ is a nuclear reactor and fuel-design engineering company working on advanced SMRs that use TRISO fuel. Long Mott Energy, LLC has applied for an NRC construction permit to build X-Energy’s Xe-100 at a facility in Texas.²⁹ In 2025, X-Energy’s wholly owned subsidiary, TRISO-X, began above ground construction at its fuel fabrication facility in Oak Ridge, with an NRC licensing decision expected in the first half of 2026.³⁰ The company plans to begin operation at the facility in 2028. 

LIS Technologies

LIS Technologies³¹ is planning an enrichment plant called LIST Island that will be built on the footprint of the historic K-25 uranium enrichment site.³² The company is set to begin site preparation and nonnuclear construction this year, pending licensing, permitting, and final investment decisions, and it is targeting commercial operations before 2030.³³

Oklo

Advanced reactor company Oklo³⁴ is planning an “advanced fuel center” in Oak Ridge. The facility would recover and recycle used fuel from existing reactors into fuel for advanced reactors. Oklo is currently in pre-application discussions with the NRC. 

Type One Energy

Fusion company Type One Energy³⁵ is developing a stellarator fusion energy system. Type One Energy is working with the Tennessee Valley Authority and Oak Ridge National Laboratory on a project to demonstrate elements of its fusion pilot plant at a former fossil fuel plant in Tennessee. 

The nuclear industry continues to grow in Tennessee, and the firm is well positioned to support clients who are interested in investing in this growing market. Our team in Nashville, in coordination with our national and international nuclear team, is available to support client projects in the state. 

Nashville Nuclear Team 

The firm has a robust team of Nuclear Energy practitioners, spanning offices throughout the United States, that draw on deep experience at the state, federal, and international levels. In Tennessee, our Nashville office brings together lawyers with legal, technical, and regulatory backgrounds—paired with local market knowledge—to ensure that any nuclear investment in Tennessee is well positioned for success.

Ellery R. Richardson has over a decade of regulatory compliance, licensing, waste management, brownfield, and remediation experience in Tennessee. She helps clients navigate environmental permitting, licensing, waste management, and environmental siting concerns. She leverages her deep roots in Tennessee and technical background to find solutions to complex regulatory problems and interface with state and local agencies.

Slade Sevier is the US coordinator of the Construction and Infrastructure practice group in the firm’s Energy, Infrastructure, and Resources practice, which consists of full-time dedicated construction lawyers who regularly advise on all aspects of a construction project’s life cycle, from the early transactional stages of engineering, procurement, and construction contracting; permitting; and design through implementation, construction, project close-out, and dispute resolution. 

Emma R. Wolfe is a partner in the firm’s Construction and Infrastructure practice group. Emma focuses her practice on assisting clients with a variety of construction and infrastructure disputes and dispute resolution procedures. These disputes involve a range of issues, including those related to design and construction defect, warranty, termination, disruption and delay, regulatory and code violations, interconnection, licensing, lien, and payment. Emma has handled issues in the energy industry related to coal, natural gas, onshore wind, solar, geothermal, and other projects.

Navigating Nuclear Series 

We’re proud to share our series, Navigating Nuclear, designed to deliver critical insights on nuclear hubs across the United States. As the industry adapts to rising demand and evolving policy landscapes, so too do the companies and projects shaping its future. While this series summarizes key projects in nuclear hubs, it is not meant to reflect the full breadth of activity within the nuclear sector. We will continue to track industry and project developments and will share updates as they emerge. 

If you have specific questions or would like to discuss opportunities further, our Nuclear Energy team is here to help. We are positioned to support organizations across the entire nuclear energy value chain. We offer guidance to clients through our decades of international, federal, state, and local experience, complemented by proficiency in disciplines including physics, engineering, geology, and public health. With the strength of local presence and the reach of a global platform, we provide strategic counsel that helps leaders navigate complex challenges and seize emerging opportunities in the nuclear sector.

IN THIS ISSUE

Carbon Spotlight

• COP30: Legal and Policy Analysis of Outcomes and Controversies

Carbon Policy

• Japan’s Movement Toward Mandatory Carbon Emissions Trading
• Department of Energy Implements Big Beautiful Bill’s Changes to Loan Programs Office
• Singapore’s New Guide on Quality-Related Claims: Tips to Avoid Greenwashing Risks
• California and Washington Carbon Market Updates

Carbon Litigation

• From Berkeley to Albany: Navigating the Pause in New York’s Electrification Law 
• Recent Activity in Federal Challenges to Climate Superfund Laws 
• Clipping the Wings on ESG Stewardship: Judge Issues Final Judgment in Spence v. American Airlines Proxy Voting Case

Carbon Trading and Investment 

• CFTC Withdraws Guidance Regarding Listing Voluntary Carbon Credit Derivative Contracts 
• Betting on This Month’s Electric Bill: CFTC Staff Issues No-Action Letter Regarding Electricity Binary Options

VIEW CARBON QUARTERLY – VOLUME 13 HERE

New HSR Filing Thresholds

The HSR Act requires premerger notification of transactions that meet the size of transaction and size of person tests to the FTC and the US Department of Justice Antitrust Division, unless an exemption applies. HSR filings trigger a 30-calendar-day initial waiting period that the parties must observe before closing, during which the reviewing agency conducts its preliminary antitrust review of the transaction.¹

Size of Transaction 

Under the new thresholds, the size of transaction test is met if, as a result of a transaction, the acquiring “person” at the ultimate parent entity (UPE) level will hold voting securities, assets, or noncorporate interests of the acquired “person”:²

• With an aggregate value of more than US$535.5 million; or
• With an aggregate value of more than US$133.9 million but less than US$535.5 million, if the size of person test is also met.

Transactions valued at US$133.9 million or less are not reportable.

For HSR purposes, transaction value includes the value of voting securities or noncorporate interests of the acquired person that the acquiring person already holds (for instance, through one or more prior acquisitions). 

Size of Person 

Under the new thresholds, the size of person test is met if one party (at the UPE level) has annual net sales or total assets of US$267.8 million or more and the other party (at the UPE level) has annual net sales or total assets of US$26.8 million or more.⁴

New HSR Filing Fee Schedule

The updated filing fee schedule for 2026 is as follows:

Penalties for Failure to File

Failure to submit an HSR filing and observe the waiting period for a reportable acquisition may result in significant civil penalties. As of 20 January 2026, the penalty for failure to comply with the HSR Act remains up to US$53,088 for each day of noncompliance.

The event, hosted by ICDR–AAA, with information partnership of the US-Ukraine Business Council, brought together government leaders and private-sector experts to explore the strategic implications of the recently created US-Ukraine Reconstruction Investment Fund—initiative designed to accelerate Ukraine’s post-war reconstruction and attract investment in critical minerals and infrastructure.

What We Shared

Maria Kostytska, Paris International Arbitration partner, moderated the session and provided essential context on the legal evolution of the US-Ukraine Minerals Deal, from the draft memoranda of understanding to the ratified intergovernmental agreement and commercial agreements between the US and Ukrainian partners.

She explained that the Reconstruction Investment Fund operates as a parity-based investment vehicle, enabling both the US and Ukrainian partners to co-invest in strategic sectors such as:

• Extraction and processing of 57 critical minerals.
• Oil and gas development (including LNG).
• Infrastructure (ports, railways, cellular towers, data centers).

Key legal insights shared:

• An overview of the legal framework comprising US-Ukraine the Minerals Deal.
• The role of the fund as a private equity fund and its level of participation in investment projects.
• The role of production sharing agreements (PSAs) and public-private partnerships (PPPs) in mitigating investor risks.
• The possibility of conversion of previously issues licenses for subsoil use into PSAs.
• The protection provided by stabilization clauses in PSAs and the carve-outs from such clauses.
• The importance of selecting suitable dispute-resolution mechanisms at the contract drafting stage.

What We Learned

While the discussion was rich in detail, here is what stood out:

• The fund is positioned as a market-making instrument, initially targeting critical materials and expanding into energy and telecom sectors.
• Ukraine is currently adjusting its legal framework to implement the US-Ukraine Minerals Deal, including standardized amendments to subsoil-use agreements.

What Lies Ahead

Looking ahead, the following developments will be worth monitoring:

• The second board meeting of the fund allowing it to finalize investment protocols and prepare a pipeline of high-potential projects.
• Standardization of all subsoil-use agreements, pursuant to the recently adopted resolution of the Cabinet of Ministers of Ukraine, to ensure alignment with US-Ukraine commitments and the fund’s regulatory framework.
• Launch of additional tenders for development of minerals under PSAs.
• Further discussions in relation to the war-risk insurance that can be provided to the individual operators, namely by the DFC.

This alert will be of interest to US and other parties litigating or seeking evidence in the United Kingdom, France, Germany, and Italy. 

United States: Open Justice and Presumption of Public Access

In the United States, the principle of open justice is deeply rooted in the court system, which presumes public access to court proceedings and documents. Most filings, such as party submissions and court orders, are available to the public by default, unless sealed (often only in part) to protect specific privacy, proprietary, national security, or other compelling confidentiality interests.

Electronic filing systems (like PACER for the federal court system) make it easy for the general public to access a wide range of court documents online. This openness enables journalists, businesses, and the public to review filings and follow cases. Such transparency and oversight aims to promote fairness and accountability in the legal system. 

United Kingdom

Traditional Approach Under CPR 5.4

Generally, nonparties to proceedings in England and Wales are only permitted to obtain limited categories of documents from court records, namely statements of case and public judgments or orders. Access to these documents only arises at certain stages in the court process, most commonly after the defendants have filed acknowledgments of service or defenses. Nonparties can only obtain access to other court documents if the court gives permission. 

Changes Under CPR PD 51 ZH Pilot Scheme 

Effective 1 January 2026, a two year pilot scheme provides nonparties with greater access to court documents in the United Kingdom. The pilot scheme applies in the English Commercial Court including the London Circuit Commercial Court and the Financial List. If the pilot scheme is successful, the intention is to extend it to other courts. 

The scheme significantly expands the documents available to nonparties by requiring parties to file or re-file designated Public Domain Documents (PDDs) on the public facing side of the court’s electronic CE-File website shortly after public hearings. The PDDs will then become readily available to nonparties via the CE-File website. There are exceptions, including for cases that are subject to confidentiality or anonymity orders and for litigants in person. The scheme does not apply to hearings that are conducted in private. 

PDDs include: (i) skeleton arguments; (ii) written submissions; (iii) witness statements (excluding exhibits); (iv) expert reports (including all appendices and annexes); and (v) documents deemed, by the judge, to be critical to the understanding of the hearing. Skeleton arguments must be filed within two clear days of the start of the applicable hearing, and all other PDDs must be filed within 14 days after the document is used or referred to at a hearing, unless the court orders otherwise or the parties agree to earlier filing.

Parties and nonparties (named or referred to in a PDD or a document that is expected to become a PDD) can apply for a Filing Modification Order (FMO) to limit or prevent public disclosure. Publication is the default position and an FMO can be challenged by a nonparty. 

This pilot scheme is expected to increase transparency and public scrutiny. Increased openness may heighten stakeholder, competitor, and media attention. This may allow parties to shape the public narrative but may increase reputational and commercial risk. With a wider potential audience, parties will need to anticipate public scrutiny of PDDs and adjust drafting and litigation strategy accordingly. Early confidentiality planning will be important.  

US and other nonparties may be able to take advantage of the access to PDDs on a number of fronts, including, for example, as use as evidence, or to inform litigation strategy, in other cases. It remains to be seen whether this increased openness will push parties towards more generally confidential alternatives like mediation or arbitration.

France

France traditionally adopts a restrictive approach to public access in civil proceedings.

• Hearings are generally public and recording of court hearings (audiovisual or sound) may be authorized. 
• By contrast, access to court files is strictly limited. Only parties—and in some instances, accredited journalists—may obtain documents. 
• Nonparty access typically requires a specific, justified request, and courts are cautious where personal data or commercial confidentiality is at stake.
• Judicial decisions are subject to a separate transparency regime with the free electronic publication of decisions, subject to specific rules governing anonymization and public access.

Digital access remains limited compared to the United Kingdom and the United States. As France continues modernizing its civil justice system, there is growing discussion about increased transparency, but no equivalent pilot program currently exists.

Germany

Germany’s civil justice system places strong emphasis on privacy and data protection and public access to documents remains narrow.

• Hearings are public, but court files are not.
• Nonparties rarely obtain access unless they demonstrate a legitimate interest—a test applied rigorously.
• Personal data, competition sensitive information, and corporate documents are strongly protected under national law and General Data Protection Regulation principles.

Reform discussions continue, but significant change in the short term is unlikely.

Italy

Italian civil courts provide limited public access.

• Proceedings are public in principle, but documents filed in the case are not accessible to the public. However, copies of judicial decisions can be released to anyone who requests them. In addition, since late 2023, the Italian Ministry of Justice has made a publicly accessible database available online, allowing registered users to consult civil court decisions issued from 1 January 2016 onwards. The personal data of the parties are pseudonymized to ensure data protection.
• Nonparty access is allowed only upon a showing of a legitimate interest justifying a third-party intervention in the proceedings, or pursuant to a disclosure order issued by another judicial authority.
• Confidentiality concerns often override broader transparency arguments.

While digitization of court records has been completed and civil case files are now fully electronic, Italy remains among the more restrictive jurisdictions regarding non party access, particularly when compared to common law jurisdictions.

Key Takeaways

The UK pilot scheme represents a significant shift toward transparency, bringing certain English courts closer to US presumption of public access. 

Key jurisdictions in Continental Europe remain far more restrictive. 

Cross border litigation strategies—especially involving US parties—may need to be revisited in light of Europe’s evolving transparency landscape.

The firm's Litigation and Dispute Resolution lawyers regularly help clients proactively manage risk and navigate complex, cross-border and other disputes. Whichever side of a dispute you might find yourself on, be sure to call the authors listed above.

FROM THE EDITORS

We are delighted to present the 41st edition of Arbitration World, a publication from K&L Gates’ International Arbitration practice group that highlights significant developments and issues in international arbitration for executives and in-house lawyers with responsibility for dispute resolution.

This edition continues our tradition of providing updates on key developments in international arbitration, including reports on recent cases and changes in arbitration laws from regions around the globe, as well as reporting on some developments with respect to arbitration institutions. We also include our usual investor-state arbitration update, with a roundup of some of the recent developments of note in international investment law and practice.

In addition, this edition includes links to some articles previously published as Arbitration World alerts. In particular, the relevant alerts cover:

• The opportunities and risks posed by artificial intelligence in international arbitration.
• The key reforms introduced by the new UK Arbitration Act 2025 and their impact on insurance
  contracts.
• A Dubai Court of Cassation decision confirming that seeking provisional measures from UAE courts
  does not waive an arbitration agreement.
• A UAE ruling clarifying that arbitral awards do not need to be signed on every page.
• An overview of the seventh edition of the Singapore International Arbitration Centre (SIAC) Rules
  and how they aim to define the future of SIAC arbitration.

Details are also provided of our Arbitration World podcast series, including:

• A new four-part mini-series on efficient and effective arbitration proceedings, featuring two leading arbitrators: Lucy Greenwood and Klaus Reichert SC.
• A two-part discussion on SIAC’s latest arbitration rules and trends in arbitration.

Finally, we want to mention two of our recorded webinars that provide valuable insights. In “Whether to Litigate or Arbitrate Insurance Disputes: Key Issues, Tips, and Potential Pitfalls,” (June 2025, as part of London International Disputes Week) we examined strategic considerations when deciding between litigation and arbitration in the context of insurance disputes (recording available here). In “Jurisdiction Entanglements in International Arbitration: Perspectives and Lessons From Different Jurisdictions” (October 2025, as part of Hong Kong Arbitration Week), we explored complex jurisdictional issues and shared practical lessons from multiple legal systems to help parties navigate cross-border disputes effectively (recording available here).

As always, our goal is to provide practical insights and thought leadership to help you navigate the evolving landscape of international arbitration. We hope you find this edition of Arbitration World informative and welcome your feedback.

Declan Gallivan, Ian Meredith, Peter Morton

IN THIS issue

Arbitration News From Around The World

By: Carl Hinze (Brisbane), Mitchell Riggs (Brisbane), Christopher Tung (Hong Kong), Jeffrey P. Richter (Tokyo), Raja Bose (Singapore), Joseph D. Nayar (Singapore), Leah J. Kates (New York), Thomas A. Warns (New York), Matthew J. Weldon (New York), Jennifer Paterson (Dubai), Izzah Arshad (Doha), Guillaume Hess (Doha), Liam Fitt (London), Declan C. Gallivan (London), Peter R. Morton (London), Rodolphe Ruffié-Farrugia (Perth) 

World Investment Arbitration Update

Liam Fitt (London), Rodolphe Ruffié-Farrugia (Perth) 

New UK Arbitration Act 2025: Potential Impact on Insurance Contracts

Sarah Turpin (London), Ian Meredith (London), Peter R. Morton (London)

Dubai Court of Cassation Holds Clause Providing for Court Provisional Measures Not a Waiver of Arbitration Agreement

Jennifer Paterson (Dubai), Mohammad Rwashdeh (Dubai), Jonathan H. Sutcliffe (Dubai)

The UAE Confirms There Is not Requirement to Sign Every Page of the Arbitral Award

Jennifer Paterson (Dubai), Mohammad Rwashdeh (Dubai), Jonathan H. Sutcliffe (Dubai)

7th Edition of the SIAC Rules: Defining the Future of SIAC Arbitration

Raja Bose (Singapore), Joseph D. Nayar (Singapore)

Arbitration and AI: From Data Processing to Deepfakes. Outlining the Potential—and Pitfalls—of AI in Arbitration

Matthew R. M. Walker (London), Jack B. Salter (London)

Former colleagues Robert Houston, Susan Munro, and Katie Li contributed to this publication.

On 16 January 2026, DOJ published its report (Report) announcing civil recoveries under the FCA for FY 2025. The recoveries for FY 2025 exceeded US$6.8 billion, marking the highest recovery amount in a single year in the history of the FCA and more than doubling the FY 2024 recoveries of US$2.9 billion. As with recoveries more generally, there was also a notable uptick in health care-related recoveries. Approximately US$5.7 billion of the US$6.8 billion in total recoveries in FY 2025 (84%) involved the health care industry; whereas, FY 2024 health care recoveries were US$1.7 billion of the US$2.9 billion in total recoveries (56%). The US government has now collected over US$85 billion in recoveries under the FCA since the statute was amended in 1986 to allow for treble damages and increased incentives for whistleblowers. 

Notably, the 1,297 qui tam lawsuits filed in FY 2025 marked a record-high, eclipsing the prior high of 980 qui tam lawsuits that had been filed in FY 2024. As with FY 2024, qui tam cases comprised the largest portion of recoveries from FY 2025, with over 78% (US$5.3 billion) stemming from whistleblower actions. Of the record-setting 1,297 qui tam suits that were filed in FY 2025, 458 were health care focused. 

DOJ also highlighted its “key enforcement areas” for FY 2025: health care fraud; fraud in procurement, loan, and grant programs; and avoidance of tariffs and customs duties. DOJ also provided representative examples from these and other areas such as military procurement fraud, pandemic fraud, and cybersecurity fraud. As noted above, health care fraud was the principal source of FCA recoveries, which included recoveries relating to Medicare Advantage fraud, prescription drug-related fraud, and billing for unnecessary services and substandard care.

Health Care Fraud

With Medicare Advantage, also known as Medicare Part C, having become the largest component of the Medicare program, the government continued its focus on Medicare Advantage fraud. In FY 2025, the government secured a substantial recovery from a Medicare Advantage organization that allegedly engaged in retrospective medical record review and added improper diagnoses for plan enrollees to increase Medicare payments. DOJ also highlighted that it is continuing to litigate a number of cases against Medicare Advantage organizations. 

DOJ obtained substantial recoveries from providers who allegedly improperly billed for medically unnecessary services and substandard care. For example, DOJ highlighted a US$45 million settlement with a wound care provider and its founder, who had allegedly engaged in a nationwide scheme to falsely bill Medicare for surgical debridements that were medically unnecessary.

Additionally, some of the largest health care recoveries in FY 2025 resulted from alleged fraud related to prescription drugs. This included a jury verdict for US$949 million against a national long-term care pharmacy that had been alleged to have fraudulently dispensed drugs without valid prescriptions to elderly and disabled people in assisted living facilities and other residential long-term care facilities. 

DOJ also noted two large jury verdicts for claims asserted by qui tam relators against a drug manufacturer and a pharmacy benefit manager (PBM). With regard to the drug manufacturer, qui tam relators had alleged that the manufacturer violated the FCA and its state corollaries through a kickback scheme and off-label promotion of two HIV drugs. In that case, the jury awarded over US$1.6 billion in damages. With regard to the PBM, a qui tam relator alleged the PBM caused certain health insurers to misrepresent to the federal government the amount the insurers paid for prescription drugs on behalf of Medicare beneficiaries, given that the PBM had contracted with pharmacies to pay a fixed average price for prescription drugs but caused higher prices to be reported. In that case, the jury awarded roughly US$289 million.

Other Enforcement Priorities

In addition to health care-specific recoveries, the government recovered significant funds stemming from military procurement fraud, pandemic fraud, cyber fraud, and tariff and customs avoidance. The military procurement fraud recoveries included the second-largest procurement fraud recovery in history—a US$428 million settlement against a contractor to resolve allegations that the contractor knowingly provided false cost and pricing data in negotiating defense contracts and double-billed on certain contracts.

The government also resolved more than 200 cases, totaling over US$230 million, in connection with pandemic-related fraud. As with FY 2024, the pandemic fraud largely stemmed from the submission of inaccurate information in PPP loan applications, though the DOJ also highlighted a US$8.2 million recovery that resolved allegations of false claims for COVID-19 services rendered to patients with active health insurance, which services were billed to a federal health care program designed for uninsured patients. To date, DOJ has collected over US$820 million in recoveries relating to pandemic-related fraud.

In October 2021, DOJ announced its Civil Cyber-Fraud Initiative with the goal of pursuing companies who receive federal funds while failing to follow required cybersecurity standards. In FY 2025, the government recovered over US$52 million in recoveries across nine cybersecurity fraud settlements. DOJ noted that civil cybersecurity fraud settlements have more than tripled in each of the past two years, signaling cybersecurity as a growing enforcement priority for DOJ.

FY 2025 also saw increased enforcement with regard to tariff and customs avoidance. For example, DOJ recovered US$12.4 million in recoveries from a Texas-based supplier of countertop and cabinetry products and the supplier’s president to resolve allegations that the supplier misrepresented the types of goods imported from the People’s Republic of China in order to avoid antidumping and other duties. Of note, tariff and customs-related recoveries could have been even higher in FY 2025; however, the largest customs fraud resolution in the history of the FCA—a US$54.4 million settlement with a distributor of ceramic compounds—was entered in December 2025, putting that recovery in FY 2026.

DOJ Investigations

DOJ’s Report also noted that the government opened 401 investigations in FY 2025, including with regard to matters DOJ had previously announced as policy objectives of the Trump administration. These policy objectives include: combatting discriminatory practices and policies related to diversity, equity, and inclusion; ending antisemitism; gender-affirming care; ending sanctuary jurisdictions; and prioritizing denaturalization of individuals who “illegally procured” naturalization or who procured naturalization by “concealment of a material fact or by willful misrepresentation.”

Whistleblower Suits

Given the record-setting number of qui tam cases filed in FY 2025, it will be important to continue to monitor developments regarding the constitutionality of the qui tam provisions. On 30 September 2024, a judge in the US District Court for the Middle District of Florida held that the qui tam provisions of the FCA violate the Appointments Clause of Article II of the US Constitution. This first-of-its-kind decision has sparked a wave of filings by the defense bar. With the Eleventh Circuit having heard oral argument in December 2025 on appeal of the Middle District of Florida’s decision, we anticipate a decision from the Eleventh Circuit in the coming months; and there are sure to be many other developments on this issue in FY 2026.

The FY 2025 settlements and judgments provide an insight into the government’s enforcement priorities and potential future enforcement areas. The firm's forthcoming article The False Claims Act and Health Care: 2025 Recoveries and 2026 Outlook will provide an in-depth analysis of the 2025 recoveries as well as some key enforcement areas to look out for in 2026.

The firm’s Federal, State, and Local False Claims Act practice group practitioners will continue to closely monitor developments regarding DOJ’s civil fraud enforcement, and we are able to assist entities that are dealing with FCA actions.

The European Union (EU) is ushering in a new era of artificial intelligence (AI) regulation with the introduction of the AI act dated 13 June 2024 (AI Act),¹ a comprehensive framework designed to govern the development, deployment, and use of AI systems² across the EU. This regulation, which is being phased in since February 2025, aims to address risks to safety and fundamental rights, enhance market surveillance, and foster a unified market for trustworthy AI. Importantly, the AI Act seeks to avoid overregulation while ensuring a level playing field for both EU and non-EU providers, thereby preventing market fragmentation.

Interplay with Financial Sector Regulation

The AI Act is crafted to complement existing EU financial regulations, such as the Digital Operational Resilience Act (DORA),³ the Capital Requirements Regulation⁴ and the Payment Services Directive 2⁵ and hence avoid contradictions between the AI Act and current banking or payments rules. Instead, the requirements are largely complementary, with, by way of example, risk-management concepts and governance controls under the AI Act aligning closely with DORA’s IT-risk frameworks and internal governance mandates. Forthcoming guidance from the European Commission is expected to help avoid duplication in reporting.

In an attempt to streamline and harmonize the EU’s digital regulatory landscape, the European Commission, in November 2025, has introduced the so-called Digital Omnibus proposal (Digital Omnibus).⁶ This package simplifies rules on AI, data access, privacy, and cybersecurity, and is particularly relevant for the financial sector, as it amends and consolidates frameworks such as the AI Act, the General Data Protection Regulation,⁷ the Network and Information Security Directive 2,⁸ DORA, and the Data Act.⁹ Notably, it introduces a single incident reporting point and aligns breach notification thresholds and timelines, reducing compliance burdens and clarifying the use of personal data in AI, including for creditworthiness assessments. The reforms are designed to foster innovation and competitiveness while ensuring robust oversight and security.

Currently, the Digital Omnibus is under the ordinary European legislative procedure and is being examined by the European Parliament and the Council of the EU. Formal adoption is expected later in 2026, but timing depends on negotiations between stakeholders.

Luxembourg Specific Regulation

As an EU regulation, the AI Act is directly applicable across all EU member states. Luxembourg is updating its national legislation through draft bill no. 8476¹⁰ (the “Bill”), which designates competent authorities and sets out enforcement and procedural rules. In the financial sector, the Luxembourg financial sector supervisory authority (Commission de surveillance du secteur financier (CSSF)), will act as the market surveillance authority for AI systems directly connected to financial services, while the Luxembourg insurance sector supervisory authority (Commissariat aux Assurances) will oversee insurance-related AI systems. Certain transparency and media aspects will be managed by an independent audiovisual authority (Autorité luxembourgeoise indépendante de l’audiovisuel), and the national commission for data protection (Commission nationale pour la protection des données) will remain responsible for data protection interfaces.

Currently, the Bill is being discussed at the Luxembourg parliament.

AI Opportunities in Finance

A survey conducted by the CSSF and the Luxembourg central bank in 2024 highlights the quickly growing adoption of AI in Luxembourg’s financial sector, particularly for internal use cases. Already at that time, approximately 28% of institutions reported having AI use cases in production or development, while 22% were experimenting with AI. Adoption rates are higher among payment and e-money institutions (63%), and banks (38%). It is expected that adoption rates have considerably increased to date.

Prominent use cases include anti-money laundering and fraud monitoring, client onboarding and KYC, process automation, search and summarization, and customer support. There are also pilot projects in credit scoring and analytics. The benefits of AI in finance are clear: improved efficiency, enhanced analytics and personalization, greater accuracy, and 24/7 availability.

Risks and Controls

The implementation of AI systems introduces a range of operational and cyber risks, including data leakage, system failures, malware, and unauthorized access. Governance remains a critical concern, with accountability resting with senior management and requirements for explainability and transparency. Data risks such as quality, privacy, bias, and discrimination must be managed, while model risks include monitoring for accuracy, model drift, and security vulnerabilities. Oversight of third-party providers and upskilling staff are also essential.

Risk-Based Approach

The AI Act classifies AI systems according to the risk:

• Unacceptable risk: prohibited practices, such as social scoring and emotion recognition in workplaces. Providers and deployers must ensure that such systems are not placed on the market, put into service, or used within the EU;
• High risk: subject to strict requirements, including credit scoring and biometric identification. Providers of high-risk systems must implement a quality-management system, maintain technical documentation, enable automatic logging, undergo conformity assessment, register in the EU database, and fulfil corrective actions and transparency duties;
• Transparency risk: must meet information obligations, such as those applicable to chatbots. Providers must ensure that natural persons are informed when they are interacting with an AI system, and that outputs generated or manipulated by AI are clearly marked and detectable as artificial; and
• Minimal risk: permitted with no restrictions. Providers and deployers of such systems are not subject to the detailed compliance obligations applicable to high-risk or unacceptable risk systems.

Penalties for non-compliance are significant: up to €35 million or 7% of worldwide turnover for prohibited practices, up to €15 million or 3% for other infringements, and up to €7.5 million or 1% for supplying incorrect or misleading information. The penalties apply to both EU and non-EU based companies offering AI systems in the EU.

Timeline and Implementation

The obligations under the AI Act will be phased in over several years, with key milestones as follows:

• By 2 February 2025, prohibited AI practices must cease, and AI literacy obligations will begin for all providers and deployers;
• By 2 August 2025, governance provisions and obligations for general-purpose AI models will come into effect;
• By 2 August 2026, high-risk AI systems in the financial sector must comply with specific requirements; and
• By 2 August 2027, the remaining provisions will become fully applicable.

This timeline may be affected by the Digital Omnibus, as the current draft of the Digital Omnibus links, for instance, the effective date of high-risk obligations’ compliance to the availability of standards and support tools, with long-stop dates set for 2 December 2027 (high-risk systems) and 2 August 2028 (product-embedded systems), respectively.

Why This Matters for You

The global reach of the AI Act means that AI providers and financial institutions operating in or interacting with, users in the EU must comply with its requirements, regardless of where they are incorporated or established. The EU’s risk-based approach, with its emphasis on traceability and explainability, transparency, and human oversight, might influence global best practices and regulatory trends.

The alignment of the AI Act with financial sector regulations underscores the need for integrated compliance strategies across jurisdictions. Furthermore, the EU’s support tools and regulatory sandboxes may serve as models for regulators and industry bodies in other regions, fostering innovation and robust oversight.

Overview of the Act

The Act reflects broad national security concerns that foreign adversaries have leveraged biotechnology platforms, laboratory equipment, and associated data services to gain access to sensitive biological information, including human multiomic and genomic data, or otherwise exert influence over critical biotechnology supply chains. Concerns around the biotechnology sector have been long-standing, most recently manifested in Executive Order 14117, “Preventing Access to Americans’ Bulk Sensitive Personal Data and United States Government-Related Data by Countries of Concern,” which focuses on prohibiting access to genomic and similar types of sensitive personal data.

To address these concerns, the Act restricts both federal agencies and recipients of federal funds from procuring or using certain biotechnology equipment and services associated with designated biotechnology companies of concern. While the statutory prohibitions operate formally through federal procurement and funding mechanisms, their practical impact may extend beyond strictly covered federal work, particularly where designation risk affects commercial and research relationships more broadly.

Scope of the restrictions

Under the Act, executive agencies are generally prohibited from procuring or obtaining biotechnology equipment or services from a biotechnology company of concern. In addition, agencies may not enter into, extend, or renew contracts with entities that use covered biotechnology equipment or services from such companies in the performance of federal contracts. Parallel restrictions apply to federal grants and loans, limiting the use of federal funds for biotechnology equipment or services provided by biotechnology companies of concern, including in arrangements involving subrecipients or downstream funding.

As a result, the Act may affect not only prime federal contractors, but also subcontractors, vendors, research partners, and grant recipients whose products or services are used in connection with federally funded activities. Organizations that do not view themselves as part of the federal contracting ecosystem may nevertheless face compliance considerations depending on how implementing regulations are structured.

Key Definitions Driving Coverage

The Act defines “biotechnology equipment or service” broadly to include equipment and services used in the research, development, production, analysis, detection, or provision of information relating to biological materials. The definition extends beyond physical laboratory instruments to encompass components, accessories, and associated digital features, including software, firmware, data storage, transmission, and related services. This expansive approach suggests that the Act could reach a wide range of laboratory platforms, sequencing and genomics technologies, bioinformatics tools, contract research and manufacturing services, and data-handling infrastructure.

Whether an entity is treated as a “biotechnology company of concern” will depend on designation rather than categorical inclusion in the statute itself. Companies may be captured either through their inclusion on the Department of Defense’s list of Chinese military companies operating in the United States, provided they have a biotechnology nexus, or through a separate Office of Management and Budget (OMB)-led interagency designation process. That process is intended to apply statutory criteria focused on foreign adversary control or influence and national security risk, including risks associated with access to sensitive biological data. The Act contemplates notice and review procedures associated with these designations and directs OMB to maintain and update the relevant list. Prior versions of the legislation specifically identified individual companies—the legislation as enacted removed these identifications and instead directed OMB to develop the designation process described above.

Implementation Timeline

The Act establishes a phased implementation process. OMB is required to publish an initial list of biotechnology companies of concern within one year of enactment, by 18 December 2026. After publication of the list, OMB has up to 180 days to issue implementing guidance for federal agencies. The Federal Acquisition Regulatory Council must then amend the Federal Acquisition Regulation (FAR) within one year after OMB issues that guidance. The statutory prohibitions take effect only after these regulatory steps are completed, with different compliance timelines applying depending on the basis for a company’s designation.

This staged rollout provides affected organizations with time to assess exposure and plan for compliance. However, transitioning away from entrenched biotechnology platforms, laboratory instruments, or service providers can be time- and resource-intensive, making early planning advisable.

Exceptions, Waivers, and Transition Considerations

The Act includes provisions intended to reduce abrupt disruption. These include limited transition concepts for certain existing relationships, waiver authority subject to OMB involvement and congressional notification, and exceptions for specified categories of activity such as certain intelligence functions, emergency public health responses, and particular overseas healthcare services supporting US government personnel. The practical availability and scope of these mechanisms will depend on how they are implemented through agency guidance and FAR rulemaking.

Practical Considerations for Affected Organizations

Entities most likely to be affected by the Act include federal contractors and subcontractors performing work that relies on biotechnology equipment or services; life sciences companies that sell into federal channels or rely on contract research or manufacturing partners; universities, hospitals, and nonprofit research institutions receiving federal research funding; and data-centric biotechnology and bioinformatics providers that handle or enable the processing of biological or multiomic data. For these organizations, compliance risk may arise not only from direct procurement decisions, but also from shared platforms, mixed-use environments, and embedded third-party relationships.

Even before implementing regulations are issued, organizations should consider evaluating their use of biotechnology equipment and services in connection with federal contracts or federally funded projects, mapping relationships with third-party providers that could fall within the Act’s scope, and monitoring developments related to the designation of biotechnology companies of concern. As regulatory details are clarified, these early assessments can help reduce the risk of compressed timelines and operational disruption.

Looking Ahead

Several important questions remain open and will be addressed through forthcoming guidance and rulemaking. These include how diligence obligations will be operationalized across complex supply chains, how mixed-use environments will be treated, the extent of transition relief for existing contracts and grants, and the transparency and procedural safeguards associated with company designations. As these issues are resolved, the practical contours of the Act will become clearer.

The Act represents a significant development at the intersection of national security, biotechnology, and federal procurement and funding policy. Although its requirements will phase in over time, organizations with federal touchpoints should begin considering their potential exposure now to position themselves for compliance once the regulatory framework is finalized.

Lawyers and policy professionals in our Public Policy and Law; International Trade, Investment Controls, and National Security; and Government Contracts and Procurement Policy practice groups have followed the Act as it advanced through Congress and are able to advise clients as agencies move to implement the legislation.

This action—implemented by the FCC’s Public Safety and Homeland Security Bureau—creates a new regulatory barrier for many UAS manufacturers, developers, and importers, with immediate and medium-term implications for product design, supply chains, and US market access.

Overview of the FCC Action

The FCC’s decision implements a 2025 National Defense Authorization Act (NDAA) mandate and reflects an executive branch national-security determination. In practice, it functions as a sector-specific restriction that conditions access to the US market on where a drone or its critical components are produced and whether they meet emerging federal security frameworks.

The core elements of the action are the following:

FCC Covered List Expansion

All foreign-produced UAS and UAS critical components are now included on the FCC’s Covered List.

Prospective Restriction

Covered equipment is ineligible for new or modified FCC equipment authorizations, which are generally required for wireless devices sold in the United States.

Existing Authorizations Preserved

Foreign-produced UAS and components that received FCC authorization before 22 December 2025 may continue to be imported, marketed, and operated—so long as they are not modified in a way that would require a new or updated authorization.

Separately, under related FCC rule changes that took effect on 26 December 2025, the FCC also gained authority—after public notice and comment—to limit or revoke even previously granted authorizations for FCC Covered List equipment. While that authority was not exercised in the UAS action itself, it represents an additional compliance risk over time.

Key Dates and Planning Horizons

For manufacturers and importers, the most important date is 22 December 2025 due to the following:

• Foreign-produced UAS and critical components authorized before that date may remain on the US market.
• New foreign-produced models, or material changes to existing models that require a new or modified FCC authorization, are effectively blocked as of that date unless an exemption applies.

The FCC has also recognized the following temporary exemptions that materially affect planning, which may continue to seek FCC equipment authorizations through 1 January 2027:

• Certain UAS platforms on the US Department of Defense (DoD) Blue UAS lists.
• UAS critical components that qualify as domestic end products under federal “Buy American” rules.

These exemptions automatically sunset on that date unless extended or replaced by a new determination, creating a limited window for qualifying products to enter or remain in the US market.

Blue UAS Designation

“Blue UAS” is a DoD initiative led by the Defense Innovation Unit (DIU) that identifies secure, NDAA-compliant UAS platforms and components suitable for US government use. The program includes the following:

• The Blue UAS Cleared List, which identifies fully-vetted UAS platforms.
• The Blue UAS Framework, which identifies vetted components, modules, and software that may be used in compliant systems.

To achieve Blue UAS status, a platform or component must undergo formal DoD vetting and typically must meet the following criteria:

• Be sponsored by a DoD user with an operational or training need.
• Provide capabilities not adequately addressed by existing Blue UAS platforms.
• Comply with NDAA supply-chain restrictions (including prohibitions on covered foreign adversary suppliers).
• Pass extensive cybersecurity and supply-chain integrity reviews.

Recent updates have also created a more structured pathway from the non-DoD Green UAS program to Blue UAS designation. Platforms certified under Green UAS—demonstrating cybersecurity, supply-chain integrity, and operational safety—may now be eligible for inclusion on the Blue UAS Cleared List without a full bespoke DIU review, though DoD oversight and additional checks still apply. As a result, commercial manufacturers should to plan for both Green UAS-aligned assessments and DoD-specific sponsorship requirements.

Buy American “Domestic End Product” Exemption

In addition to Blue UAS platforms, the FCC announced a temporary exemption for UAS critical components that qualify as “domestic end products” under “Buy American” standards, which require products to be manufactured in the United States and either meet minimum US content requirements (currently at least 65%) or qualify as commercially available off-the-shelf items. This exemption expires on 1 January 2027, unless renewed.

Importantly, there is no blanket brand-wide exemption. Only the following qualify for temporary relief:

• Specific models listed on the Blue UAS Cleared List.
• Individual components that independently meet the domestic end product definition.

Foreign-produced UAS and components that do not fall into one of these categories—including many high-volume Chinese-produced platforms—remain ineligible for new FCC authorizations.

Immediate Compliance Steps for Importers

Importers and distributors should take prompt action to assess exposure under the new rules. Key steps include the following:

Authorization verification

Confirm that each UAS and UAS critical component has a valid FCC equipment authorization issued before 22 December 2025 or qualifies for an applicable exemption.

Change Management

Ensure that no design, performance, or frequency changes have been made that would require a new or modified FCC authorization.

Supply-Chain Diligence

Obtain updated representations from manufacturers regarding production location, bill of materials, and FCC Covered List status of components.

List Monitoring

Regularly cross-check products against the FCC Covered List, Blue UAS lists, and applicable “Buy American” criteria as these frameworks continue to evolve.

Given the scope and novelty of the FCC’s action, companies involved in designing, manufacturing, importing, or integrating UAS should reassess US market strategies and compliance controls to address both near-term authorization constraints and longer-term national security risks.

In regulatory parlance, a co-located load is an electrical configuration where an end-use (retail) customer load is physically connected to the facilities of an existing or planned generation facility.² Importantly, the load connects to the generator’s side of the interconnection to the PJM-operated transmission system; the load does not necessarily connect directly to the FERC-regulated electric grid.³ 

Scope of FERC Jurisdiction

FERC’s order first addresses a threshold dispute about whether its authority under the Federal Power Act (FPA) extends to PJM’s treatment of co-located generation and large loads. Several parties argued that aspects of co-location—particularly where retail load is served behind the meter or where hyperscale data centers contract directly with generators—fall outside FERC’s jurisdiction and should be left to regulation by the state commissions. FERC rejected these contentions, finding that:

• FERC retains exclusive jurisdiction to oversee the interconnection of generating facilities to the interstate transmission system, including the generators that are used to serve co-located load. According to FERC, a generator’s interconnection to the interstate transmission system does not fall outside of its jurisdiction merely because there is a co-located load behind the generator’s point of interconnection.
• FERC has exclusive authority to regulate the procedures and agreements that apply to the interconnection of a generator that will make wholesale sales, both where the generator interconnects directly to the interstate transmission system and where a generator interconnects to dual-use distribution facilities.⁴
• Co-located arrangements necessarily involve transmission service, which FERC exclusively regulates.

Accordingly, even while the retail component of a co-located load is subject to state regulation, the wholesale and transmission components—including cost allocation, reliability, and nondiscriminatory access—are matters for FERC to regulate. For these reasons, FERC found that it has authority under the FPA to direct PJM to revise its tariff to establish clear, uniform rules for co-located generation and load without infringing on states’ authority. 

what's Next? Directed Tariff Changes

Interconnection Reform

By 20 January 2026, PJM must file revised generation interconnection procedures to ensure that it is clear to both new and existing (generator) interconnection customers how to interconnect in a co-location arrangement.⁵ Specifically, PJM must revise its tariff to: (i) make clear how interconnection customers can make use of provisional interconnection service, (ii) permit requests for interconnection service below nameplate capacity, (iii) accelerate the interconnection process under certain circumstances, and (iv) make surplus interconnection service available to interconnect new generating facilities seeking to serve a co-located load. PJM must also clarify the procedures for studies to determine any modifications to interconnection facilities or network upgrades PJM deems necessary to maintain reliability when an interconnection customer seeks to modify its service level to serve a co-located load. Significantly, the interconnection customer is to bear the full cost of such modifications. A generating facility may not withdraw capacity to serve a co-located load until all required upgrades are in service. 

Tariff Clarity

FERC found PJM’s tariff to be unjust and unreasonable because it lacks clear rates, terms, and conditions of service for co-location arrangements. According to the order, the lack of sufficient clarity and consistency with respect to the rates, terms, and conditions of service that apply to co-location arrangements has created uncertainty that has resulted in disparate treatment among generation interconnection customers. 

PJM must submit by 17 February 2026, a compliance filing setting forth specific terms and conditions that an interconnection customer in PJM seeking to serve co-located load must follow to effectuate a co-location arrangement.⁶ An interconnection customer using its generating facility to serve a co-located load must take certain actions to designate the “Eligible Customer” that will take transmission services on behalf of the load. These requirements will ensure that applicable transmission and ancillary services charges will be assigned to responsible parties. 

Three New Transmission Services

FERC disagreed with the view that a co-located load should only be allowed to take Network Integration Transmission Service (NITS),⁷ and it directed PJM to create three new transmission service options to facilitate co-location arrangements and that reflect a co-located load’s ability to limit withdrawals from the transmission system, as follows: 

Interim NITS 

Recognizing a key driver in co-location appears to be service delays in the traditional, front-of-meter interconnection, FERC directed PJM to file by 17 February 2026, a compliance filing to modify its tariff to create an interim network integration transmission product. Interim NITS is a temporary, non-firm transmission service subject to curtailment available to customers seeking NITS until the utility places into service network upgrades required for NITS. Customers taking interim NITS on behalf of a co-located load agree to load curtailments in advance of system emergency conditions. This service allows interconnection before network upgrades are complete, then transitions to full NITS once upgrades are in service. Customers taking Interim NITS pay the NITS rate and applicable ancillary and blackstart service charges but will not be charged for a generation capacity (resource adequacy) product. This transmission service may not be combined with the new Firm Contract Demand transmission service or Non-Firm Contract Demand transmission service.

Firm Contract Demand Transmission Service

Under the new Firm Contract Demand transmission service, customers may request transmission service on behalf of a co-located load up to a specified megawatt (MW) quantity, i.e., the contract demand, for a minimum term of one year. The Firm Contract Demand transmission service will have the same reservation and curtailment priority as existing firm transmission service at the level of the contract demand. Customers taking Firm Contract Demand transmission service will be charged based on its contract demand irrespective of usage. However, unlike NITS customers, customers taking Firm Contract Demand transmission service on behalf of a co-located load cannot withdraw energy beyond the contract demand level. FERC directed PJM to apply a penalty rate if a customer taking transmission service on behalf of a co-located load withdraws energy from the PJM system in excess of its contract demand, for example, due to a special protection scheme failure. The appropriate penalty charge and other terms of service have been set for a paper hearing, with briefing to begin in February 2026.

Non-Firm Contract Demand Transmission Service 

This is a new, flexible, non-firm service based on a defined demand level. Reservations under this service would be available only when there is available transmission capacity and will be available for terms ranging from one hour to one month, similar to existing non-firm transmission service options in the tariff. Non-Firm Contract Demand transmission service must be available during normal operations and curtailed during emergency operations. This service is suitable for co-located customers seeking to withdraw energy from the transmission system from time to time when transmission capacity is available and not needed by firm customers, for example, during an expected outage of the co-located generator. Similar to Firm Contract Demand transmission service, customers must pay a penalty rate for unreserved use of the transmission system. As with Firm Contract Demand transmission service, terms of service are set for a paper hearing. 

Customers can choose to take Firm Contract Demand transmission service or Non-Firm Contract Demand transmission service on behalf of a co-located load instead of taking NITS. The new Firm Contract Demand and Non-Firm Contract Demand transmission services will not require a co-located load to become a network load, and they will serve as permanent alternatives to existing transmission services. However, FERC directed PJM to limit a customer’s ability to “toggle” between Non-Firm Contract Demand and Firm Contract Demand transmission services. 

Paper Hearing

FERC established a paper hearing to determine rates, terms, and conditions of the new transmission services. Hearing participants are asked to address 11 issues covering appropriate rate structures, cost allocation methodologies, and conditions and limitations on the new firm and non-firm service. 

Behind-the-Meter Generation (BTMG)

Due to changed circumstances, FERC held that PJM’s BTMG rules are no longer just and reasonable, finding that loads with BTMG are not fully accounted for in resource adequacy planning and that netting BTMG against load shifts costs to other customers.⁸ According to FERC, large BTMG could mask true transmission usage and reliability and planning impacts, as well as undermine PJM’s ability to plan for capacity and transmission adequacy. However, recognizing that not all BTMG loads pose significant reliability risks, FERC directed PJM to propose a new MW threshold for the amount of load customers may net using BTMG and to maintain current rules for customers below the new MW materiality threshold. Accordingly, under the new rules, BTMG customers over the MW threshold will no longer be able to net out load without being studied for impacts on reliability. Instead, they will be required to follow new requirements that treat BTMG as part of PJM’s resource adequacy and transmission planning framework, which will include full cost responsibility for reliability upgrades and an obligation to take service under the new transmission categories. FERC directed PJM to establish a transition period for retail BTMG currently using PJM’s existing BTMG rules, including a grandfathering of certain contracts, to avoid sudden disruption and provide regulatory certainty while new rules are being implemented. PJM must revise its BTMG rules and file them with FERC by 18 February 2026. The transition design will be proposed by PJM in its compliance filing. 

PJM Critical Issue Fast Path (CIFP) on Large Load Additions

FERC directed PJM to file by 20 January 2026, a detailed informational report on the status of the proposals considered in the CIFP stakeholder process, including the status of PJM’s proposed expedited interconnection process for large loads and the development of enhanced load forecasting. The informational report must specifically identify initiatives that would support the expedited addition of new generation capacity to serve large loads, like data centers, while meeting PJM’s near-term resource adequacy needs.

By mandating tariff reforms for co-located generation and load, FERC is fundamentally reshaping how large energy users—especially data centers—can integrate into the grid and how generation developers can participate in the PJM market. Data center developers will benefit from greater regulatory clarity, reducing project risk and enabling broader portfolio of solutions for power procurement. Generation facility developers could gain new opportunities to partner with large loads, optimize asset utilization, and access streamlined interconnection pathways. Stakeholders should closely monitor PJM’s stakeholder process (happening now) and compliance filings, which will affect how data centers and other large users secure power supplies, as well as how new generation capacity can be developed to meet the rapidly changing needs of the grid and large customers.

Ready to Help

The firm’s Power practice group is closely monitoring these developments and stands ready to assist clients in navigating evolving laws, regulations, and policies governing interconnection of data centers, industrial facilities, and large loads. 

The Grantham 2025 Report identifies the expanding categories of climate change litigation, including: 

• “Polluter pays litigation” which seek to hold companies accountable for climate related harm allegedly caused by their gas emissions
• “Corporate framework cases" which seek to disincentivise companies from continuing with high-emitting activities by requiring changes in corporate governance for example
• “Transition risk litigation” which concern the alleged (mis)management of transition risk by directors, officers and others tasked with ensuring the success of the business
• “Climate-washing” or “greenwashing” cases, where environmental claims by companies are alleged to be untrue or misleading.  These cases remain the most widely used strategy for trying to hold companies accountable, although the rate of filings reduced overall in 2024. 

Climate change litigation targeting both government entities and private organizations has been on the rise globally. As of June 2025, 33 lawsuits were pending before French courts, positioning France among the top ten jurisdictions worldwide, including the United Kingdom, for climate litigation cases.¹

Diversification of Defendants in Climate Litigation

The Grantham 2025 Report highlights the constantly evolving landscape of climate change litigation. While the majority of cases can be considered strategic, aimed at changing government strategy, approximately 20% of climate change cases filed in 2024 targeted companies or their directors and officers. Potential targets are not confined to traditional sectors, like energy and fossil fuels, but now include companies in the animal agriculture, food, retail, and professional services sectors. Moreover, claims are not just based on tortious liability and human rights violations but also rely on new statutory mechanisms.

Professional services firms may face litigation for allegedly facilitating emissions and for the alleged failure to manage or reduce emissions resulting from the activities they advise on.   In the Netherlands, Greenpeace’s legal team issued a legal warning against law firm Loyens & Loeff over its role in facilitating the restructuring of Brazilian meat processing giant JBS, which is facing growing criticism for its contribution to greenhouse gas emissions. 

Financial services firms are also in the firing line. ClientEarth filed a complaint with the French finance regulator seeking an investigation into allegedly misleading claims made by asset manager BlackRock in the marketing of sustainability linked financial products.² It called on BlackRock to allocate investments away from fossil fuels and for the company to stop advertising such investment funds as ‘sustainable’. Supervisory institutions seem to be exerting more pressure on the financial services sector, with the European Banking Authority’s 2025 ESG Risk Management Guidelines requiring banks to identify and mitigate climate-related risks, including litigation risks.

Corporate framework cases are generally on the rise, aiming to hold companies accountable for their contribution to climate change; various types of claims are being brought–some under tort³ and human rights laws.⁴ In France, due diligence claims under the French Duty of Vigilance Law⁵ require companies (with over 5,000 employees in France or 10,000 worldwide) to establish, publish and enforce a vigilance plan which identifies ESG risks and measures to prevent serious violations of human rights, health and safety and the environment resulting from the activities of the company, its subsidiaries and established subcontractors and suppliers. Landmark decisions, such as the Paris Court of Appeal’s ruling in SUD PTT v. La Poste SA,⁶ have set benchmarks for compliance with the duty of vigilance, pending further developments at the EU level. Such statutory pathways could potentially cause litigation against professional service providers for inadequate due diligence procedures.  

Insurance Considerations 

For businesses with a global presence, navigating the current legal and political trends relating to climate change measures. Globally, insurers, who are directly affected by climate change, are placing greater emphasis on addressing these challenges. They also face growing regulatory pressure to integrate environmental considerations into their operations.⁷ These obligations are often passed on to policyholders, encouraging the implementation of measures to prevent environmental harm, either through incentives such as premium adjustments, or through policy exclusions where insufficient measures have been taken by the insured to mitigate its environmental impact.

Thus, businesses will benefit from reviewing their insurance cover on a global scale, to determine what protection they have against potential losses and liabilities arising from climate change-related litigation in its various forms.

Professional liability and D&O insurance may offer some protection for the legal costs incurred by businesses, and individual directors and officers, in responding to investigations or proceedings but policyholders should carefully examine their coverage in light of these expanding risks. Some insurers may seek to limit their exposure by imposing climate or environmental related policy exclusions. In the past, such exclusions may not have seemed relevant, particularly for those in the professional or financial services sector, but that may no longer be the case.  

Most businesses will have Public Liability or Commercial Liability insurance which may be relevant in cases where it is alleged that the business is liable to third parties for personal injury or property damage. Policyholders will need to remain wary of extreme weather or climate-related exclusions being imposed.  

Public Liability policies may not always provide coverage for environmental damage resulting from the insured’s activities or originating from their operating sites. However, coverage exists for losses and liabilities arising from sudden, unforeseen, and unintentional environmental damage (e.g. environmental damage resulting from an unexpected mechanical failure, explosion, fire, or operational error). Additionally, businesses can obtain Environmental Liability Insurance, which covers the financial consequences of any personal injury, property damage, and financial losses suffered by third parties due to accidental or gradual pollution occurring on the company’s premises, as well as the insured’s legal costs in defending third party claims.

If you have queries in connection with climate change litigation and related insurance considerations, please do contact the authors listed above or any of the lawyers in our Insurance Recovery and Counselling team. Our global team assists policyholders in managing and mitigating legal risk by maximizing insurance recoveries and optimising existing insurance arrangements. Our team is familiar with the full spectrum of issues policyholders face, including potential losses and liabilities arising from climate change litigation.

To provide context for this growth, it is notable that Precedence Research recently projected that the advanced recycling market would reach US$7.26 billion by 2035, with a compound annual growth rate (CAGR) of 13.16%.¹ Meanwhile, Future Markets, Inc. projected market revenues to exceed US$15 billion by 2040, with CAGRs exceeding 25%.² Evaluating the broader chemical recycling-service market, Knowledgeable Sourcing Intelligence projected a US$196.2 billion valuation by 2035 based on market growth at a CAGR of 25.8%.³

However, despite these optimistic projections, the industry must contend with opposition from traditional recyclers and environmentalists, as well as with a complicated, ever-changing, and frequently uncertain regulatory landscape characterized by changing definitions, fluctuating state and federal regulations, and continuous discussions about classification and oversight. Successfully managing compliance and innovation depends on effectively navigating this framework. Key challenges to be faced in 2026 are outlined below.

The Clean Air Act: How Should Advanced Recycling Operations Be Regulated?

How advanced recycling operations are regulated under the Clean Air Act (CAA) depends on the technology employed. Currently, the US Environmental Protection Agency (EPA) regulates facilities that combust nonhazardous waste in a starved-air primary chamber and afterburner—such as those using pyrolysis, gasification, or other thermochemical conversion technologies—as solid waste incinerators. These facilities must meet the strict Other Solid Waste Incineration (OSWI) standards outlined in Section 129 of the CAA. This includes adhering to Maximum Achievable Control Technology emission limits for nine specific pollutants, conducting performance tests, continuous emissions monitoring, maintaining operating limits, keeping records, submitting reports, and often obtaining Title V permits.

While facilities complying with the OSWI standards face significant compliance costs and operational challenges, in contrast, facilities that utilize non-combustion-based decomposition methods (such as solvolysis or enzymolysis) or physical purification techniques (like dissolution) are subject to less stringent, category-specific emission standards under the National Emission Standards for Hazardous Air Pollutants.

Notably, this regulatory framework could undergo changes in the near future. Under the Trump administration, the EPA has signaled possible revisions to how pyrolysis and similar units are regulated under the CAA.⁴ Specifically, in 2021, the EPA issued an Advance Notice of Proposed Rulemaking (ANPRM) to gather feedback on whether to continue classifying pyrolysis units under OSWI rules. Possible outcomes of the ANPRM include maintaining the current standards, streamlining permitting and monitoring requirements, or establishing a new category for advanced recycling with customized standards. A decision not to regulate thermochemical conversion technologies as solid waste incinerators could dramatically reduce compliance costs and accelerate innovation for thermochemical technologies. However, it remains unclear if the EPA will take such action. Environmental groups are opposed, arguing that pyrolysis and gasification units combust waste and emit pollutants similar to traditional incinerators, and that removing pyrolysis units from OSWI classification or creating a separate category with customized standards will weaken air protections.

RCRA: Is Advanced Recycling Waste Disposal or Manufacturing?

The Resource Conservation and Recovery Act (RCRA) sets the federal framework for managing both hazardous and non-hazardous waste. RCRA applies when the material being processed qualifies as “solid waste” under 40 C.F.R. § 261.2 and, if so, whether it is classified as hazardous. A material is considered solid waste if it is discarded—whether abandoned, recycled in certain ways, or inherently waste-like. It becomes hazardous waste if it exhibits hazardous characteristics or appears on the EPA’s hazardous waste lists. 

Because advanced recycling typically uses waste plastics as feedstock to produce new materials, these operations often fall within RCRA’s scope. However, states that administer their own waste programs have significant discretion to define what constitutes “waste” and determine whether specific processes are regulated as waste management activities.

If a state concludes that advanced recycling turns discarded plastics into feedstock for new products without creating major disposal concerns, it may classify these operations as manufacturing rather than waste management. This classification can significantly reduce the applicability of RCRA requirements.

Opponents argue that this approach weakens environmental protections by removing stringent waste management standards and creates inconsistencies compared to other recycling operations. According to the opponents, while converting old plastics into new plastic products can reasonably be considered recycling, advanced recycling operations that convert plastic waste into fuels or energy rather than new plastic products is not recycling. They contend that labeling these processes as “recycling” is inconsistent with standards applied to other materials and warn that applying a different standard to plastics risks undermining recycling integrity and environmental protections. Industry advocates counter that converting plastics into fuels or energy should still count as recycling because it recovers value from hard-to-recycle plastics that would otherwise be landfilled or incinerated without energy recovery. Despite these concerns, since 2017, 25 states have taken this approach to encourage innovation and cut landfill use. They now treat advanced recycling as manufacturing instead of waste disposal. This shift offers big advantages. Facilities labeled as manufacturers often face fewer hazardous waste rules under RCRA. For example, if a recycler converts plastic waste into valuable feedstock—such as a solvolysis plant breaking down PET bottles into monomers—the plastic may not meet the definition of “solid waste” under RCRA Subtitle C. That could exempt the material from RCRA waste management requirements.

A manufacturing designation can also help operators argue that their entire process counts as a single Manufacturing Process Unit. This allows them to manage certain hazardous wastes without triggering strict permitting and tracking rules. It may also help recyclers avoid being classified as a Treatment, Storage, or Disposal Facility, or TSDF, which carries heavy compliance burdens.

Not all states agree. Some explicitly regulate advanced recycling as solid waste management. One state has even banned certain advanced recycling facilities. For this reason, location plays a critical role in determining whether an operation will succeed.

Toxic Substances Control Act: Are Chemical Products Derived From Advanced Plastics Recycling “New Chemicals Substances”?

Like the Clean Air Act and RCRA, advanced recyclers face uncertainty under the Toxic Substances Control Act (TSCA). The big question is whether chemicals made from recycled plastics are classified as “new chemical substances.” If they do, they must undergo rigorous pre-market review. If not, they’re treated like existing regulated products.

Under TSCA, any chemical not listed on the EPA Inventory is considered new. Before it can be sold, the company must file a Pre-Manufacture Notice (PMN). EPA then reviews the chemical for safety. If data is lacking or risks appear serious, EPA issues a Section 5(e) order. That order can restrict or stop production until more information is provided. Later, EPA often formalizes these limits through Significant New Use Rules (SNURs), which require companies to notify EPA before using the chemical in new ways.

In August 2022, the EPA issued a Section 5(e) Consent Order to a major fuel producer for five PMN substances made from plastic waste. A community group challenged the order in court, citing cancer risks from contaminants. By mid-2023, EPA proposed SNURs for 18 similar substances. These SNURs targeted feedstocks with PFAS, heavy metals, dioxins, BPA, and other toxins. The rules would have required prior notice before using these plastics in advanced recycling or downstream manufacturing, or in fuel applications. However, due to ongoing litigation, the EPA withdrew both the Section 5(e) Consent Order and the proposed SNURs. That move left the industry in limbo. Future SNURs could reshape compliance obligations for recyclers, refiners, and manufacturers.

The Trump administration has indicated it plans to require impurity testing for new chemicals from waste plastics on a case-by-case basis. So far, that has not happened. Many PMNs remain pending. Companies do not know what rules will apply. Manufacturers, importers, and businesses in biotech, advanced materials, and consumer products need to stay alert. EPA’s next steps could change the game.

The Clean Water Act

The Clean Water Act (CWA) governs pollutant discharges into US waters, and advanced recycling facilities, particularly those using chemical processes, are subject to its requirements. Operations that discharge process water or wastewater must obtain a National Pollutant Discharge Elimination System permit, which sets limits on pollutants and requires monitoring and reporting. Facilities also need to manage stormwater runoff from feedstock storage and chemical handling to prevent contamination during rain events or spills. 

Environmental groups are calling for stronger water protections, arguing that current CWA standards do not adequately address chemical contaminants associated with advanced recycling processes, including PFAS, heavy metals, and dioxins. They urge the EPA to update effluent guidelines and to require comprehensive monitoring and reporting for wastewater and stormwater discharges. Advocates also emphasize the need for advanced treatment technologies to ensure hazardous substances are removed before water is released into the environment. In their view, exemptions or relaxed standards would undermine public health and environmental integrity, making robust oversight essential. Additional concerns include stormwater runoff from feedstock storage, accidental spills, and thermal pollution from process water—issues critics believe demand stringent monitoring, treatment standards, and transparent reporting to prevent contamination of surface and groundwater.

How Might Federal Legislative Proposals Impact Advanced Recycling

Lawmakers on Capitol Hill are pushing initiatives to boost recycling and clarify rules for advanced recycling. One proposal, the Accelerating a Circular Economy for Plastics and Recycling Innovation Act, would set national standards for plastics recycling. It calls for plastic packaging to include at least 30% recycled content by 2030 and defines advanced recycling as a manufacturing process, not waste disposal. If passed, this would standardize definitions and reduce regulatory uncertainty.

Another bill, the Cultivating Investment in Recycling and Circular Local Economies (CIRCLE) Act, takes a financial approach. It offers a 30% investment tax credit for recycling infrastructure, including advanced recycling facilities. This could lower capital costs and speed up adoption of advanced recycling technologies, making them more competitive.

Together, these legislative changes—harmonized federal standards and new financial incentives—could open doors for growth and reshape compliance strategies, investment plans, and market positioning.

Extended Producer Responsibility: How Extended Producer Responsibility Laws Are Affecting Advanced Recycling

States are taking bold steps on waste management, with Extended Producer Responsibility (EPR) laws leading the way. By late 2025, California, Colorado, Maine, Maryland, Minnesota, Oregon, and Washington had rolled out EPR programs for packaging. These laws make producers responsible for post-consumer packaging and link costs to recyclability and environmental impact, thereby pushing investment into technology that tackles hard-to-recycle plastics. Advanced recycling is emerging as a game-changing solution. It turns materials traditional recycling rejects into valuable components, helping producers hit sustainability targets, and cut fees under certain regulations.

Advanced recycling stands out as a transformative, converting materials that traditional recycling rejects into valuable components. This not only helps producers achieve sustainability goals but also reduces fees under certain environmental regulations.

California’s SB 54, the Plastic Pollution Prevention and Packaging Producer Responsibility Act, exemplifies this trend. By 2032, all regulated packaging must be recyclable or compostable, plastic use must decline by 25%, and recycling rates must reach 65%. While SB 54 does not directly regulate advanced recycling, its ambitious requirements make advanced recycling an attractive compliance tool. Proposed regulations would allow producers to leverage advanced recycling to meet reduction and recyclability goals without completely redesigning packaging. Still, companies must navigate federal rules under RCRA and TSCA, since chemical recycling feedstocks can trigger hazardous waste or new substance reviews. 

To succeed, businesses need a proactive strategy—partnering on advanced recycling, tracking lifecycle impacts, and staying on top of regulations.

Conclusion

Advanced recycling has huge growth potential. But in 2026, success depends on agility. Companies that anticipate changes, adapt quickly, and work with policymakers will lead in this evolving market.

The memo outlines six factors as the foundation for the new policy’s “compliance first” framework: 

1. Encourages Use of Compliance Tools and Programs

OECA will focus on deploying compliance assistance tools (proactive outreach, technical assistance, and training) and promote voluntary compliance through voluntary audits and self-reporting by the regulated industry (what OECA has coined “find and fix”).

2. Encourages Federal-State Coordination and Deference to State Enforcement

OECA will be working with state counterparts to ensure consistent compliance determinations. OECA will work more cooperatively with co-regulators by providing technical assistance, training, and collaborative tools to its state counterparts to align priorities and prioritize compliance, strengthen co-regulator capacity, and foster information exchange. The memo also directs OECA’s activities to “affirmatively demonstrate proper deference and support to state leads in most compliance enforcement work.” 

3. Encourages Open Communication Between Industry and EPA

EPA personnel are expected to provide open communication to regulated entities on milestones and deliverables to enhance transparency and to facilitate those entities taking early, proactive steps to address any findings. OECA will also encourage two-way communication so that (1) EPA personnel can “better tailor compliance assurance and potential corrective actions to the specific context of a regulated entity’s operations, potentially making compliance solutions more effective and more economically feasible,” and (2) it can “establish trust and promote a sustainable self-reporting culture.” 

4. Encourages Tailored Findings of Violation and Consistent Enforcement Application

EPA will endeavor to give more clear and tailored findings of violation. To that end, the memo directs regional counsel to consult with the relevant Office of General Counsel and OECA office where a regulated entity raises concerns about how EPA has applied the law to their case. OECA also announced it will be creating a document “consolidat[ing] criteria across all media” to define specific categories of violations for formal enforcement, informal enforcement, and warnings. This forthcoming document will reportedly operate as an agency-wide guidance document with consolidated violation categories that will assist EPA in determining appropriate and uniform enforcement.  

5. Modifies Injunctive Relief Approach

Renews the agency’s focus on achieving efficient, economical, and swift compliance, and therefore directs injunctive relief to be well-tailored to the specific violations. The memo rescinds EPA’s April 2021 guidance memorandum issued under the Biden administration that had set forth expansive injunctive relief tools for civil enforcement settlements, such as third-party audits or advanced monitoring and public reporting. The memo discourages settlement terms that do not have a clear nexus to the governing statute and implementing regulations; this change includes prohibiting any future settlement from including a Supplemental Environmental Project and requiring that any settlement containing mitigation or stipulated remedies be pre-approved by the OECA assistant administrator prior to initiating negotiations with the regulated entity. 

6. Directs Enforcement Decisions to Focus on Programmatic Impact and Stakeholder ImpacT

Clarifies that decision-making must now use the “LEAPS” factors, applying Law, Evidence, and Analysis, as well as Programmatic impact and Stakeholder impact. This means that enforcement decisions must be legally sound, supported by evidence, logically analyzed, bolster EPA’s overall program efficiency and goals, and reflect consideration of fairness and other public policy effects on regulated entities, states, Tribes, and other impacted communities. 

Taken together, OECA’s memo could reshape compliance and enforcement dynamics for industry, but also could become a source of confusion for industry. Specifically, it may: (A) introduce unclear expectations under the compliance first approach, (B) pressure companies to incur significant upfront compliance and audit costs without any guarantee of competitive advantage, (C) provide opportunities to challenge inconsistent or unreasonable regional interpretations, (D) increase litigation risk in progressive states, as state governments may pursue stricter enforcement in response to federal policy changes, (E) heighten OECA’s focus on companies operating in industries that are at odds with the administration’s agenda, (F) create a potential new pathway for companies to invoke the “diligent prosecution” bar to preempt citizen suits, and (G) signal enforcement priorities through explicit carve-outs that exempt a majority of conventional EPA cases from being subject to the compliance assurance and informal enforcement policy suggested by the memo.

(A) Compliance First Guidance: Unclear Expectations and Missed Opportunities for Minor Violations

The memo’s compliance first language is vague, leaving regions and regulated entities uncertain about practical implementation. Should inspections resemble audits, with recommendations rather than findings? Without an audit privilege or changes to penalty policies, the guidance does little to incentivize voluntary auditing or address minor violations that are quickly corrected. This gap suggests a missed opportunity to align enforcement with the realities of day-to-day compliance.

(B) Upfront Compliance Costs Without Competitive Certainty

The memo may place regulated companies in a challenging position by encouraging substantial upfront investment in audit and compliance processes, without assurance that competitors will undertake similar expenditures. Additionally, it remains uncertain what relief companies that proactively invest in compliance efforts will receive in an enforcement action if they disclose their audit results.

(C) Leveraging Interpretation Review: Opportunities and Practical Strategies for Regulated Entities

One positive aspect of the memo is its interpretation review process, which creates a pathway to challenge inconsistent or unusual regional legal interpretations by escalating them to headquarters. Companies can use this mechanism strategically:

• Highlight internal compliance efforts when responding to minor violations.
• Ask whether a contested interpretation has undergone the review process outlined in the guidance.
• Emphasize that the company does not fall under the high-risk categories identified in footnote 7 of the memo (discussed below).

These steps can help regulated entities turn ambiguity into leverage.

(D) Rising Litigation Costs in Progressive States

Notwithstanding the foregoing, with the administration’s deference to state enforcement, progressive states may take a more aggressive enforcement approach to compensate for the administration’s enforcement priority shift. Crucially, this could result in a patchwork of enforcement initiatives depending on the state, which could critically impact companies operating in multiple jurisdictions that would otherwise benefit from resolving enforcement matters federally on a company-wide basis rather than state-by-state. Inevitably, patchwork enforcement could lead to fragmented corrective action requirements due to divergent priorities or policies, increased compliance costs and legal fees due to heightened complexity of seeking multiple agency sign-offs rather than a unified agency resolution, and inefficient operations.

(E) Risk for Those in the Crosshairs of the Administration’s Political Agenda

For regulated entities not aligned with the administration’s objectives or that otherwise operate in spaces not highlighted by the administration’s executive orders and political priorities, access to settlement tools may be limited and enforcement could proceed more aggressively. Enforcement actions must now account for the administration’s executive orders and guidance from EPA Administrator Lee Zelden, including his “Powering the Great American Comeback” initiative that is defined as “restoring American energy dominance.”¹ With traditional settlement strategies discouraged (see above Factor 5) and new notice-of-violation requirements (see above Factor 4), both mandating involvement from senior EPA leadership in certain cases, the new policy ensures the administration’s agenda will be embedded in every enforcement action or settlement. 

(F) Facilitates Diligent Prosecution Bar to Citizen Suits

The memo suggests that OECA will be more willing to engage in resolution of issues raised in citizen suit notice-of-intent letters. Many environmental laws bar citizen suits if regulators are “diligently prosecuting” the same violations; therefore, a quick complaint filing could shield a defendant from activist lawsuits. This collaborative strategy could dramatically weaken environmental groups’ plans to fill enforcement gaps if federal enforcement retreats.

(G) Footnote 7 Factors: What They Reveal About EPA Enforcement Priorities

Footnote 7 of the memo lists exceptions—such as immediate threats, blatant or repetitive noncompliance, and refusals to provide information—that may trigger enforcement regardless of the memo’s compliance first tone. These factors likely represent compromise language from seasoned OECA staff, but they also reflect the fact that most EPA cases fall within these categories. Understanding this carve-out is essential for anticipating enforcement risk.

The primary takeaway from OECA’s memo is that regulated entities must adopt proactive compliance and strategic planning to navigate the administration’s policy shift, which attempts to align enforcement with its priorities. This shift presents a challenge, and an opportunity to clarify expectations, advocate for consistent interpretations, and position strong compliance efforts as a defense against heightened scrutiny. What it does not do is present a compliance holiday. The uncertainties of this as well as the threat of state or citizen enforcement mean that compliance with environmental laws should still be an important priority for the regulated community.

If you have questions about how these developments may affect your organization or would like to discuss tailored compliance strategies, please contact our team. We are here to help you navigate these evolving initiatives and mitigate potential risks.

Background

On 22 December 2025, the California Court of Appeal, First Appellate District, Division Five, issued a published decision in Wise addressing whether an employment arbitration agreement remains enforceable when executed contemporaneously with a nondisclosure and inventions assignment agreement (NDIAA).

The plaintiff, a former Tesla employee, signed an offer letter containing a broad arbitration agreement and, on the same day, executed a separate NDIAA. After her employment ended, she sued Tesla asserting claims under the California Fair Employment and Housing Act and for wrongful termination in violation of public policy. Tesla moved to compel arbitration.

The trial court found the arbitration agreement largely unobjectionable by itself, but construed it together with the NDIAA under California Civil Code section 1642. It concluded that two provisions in the NDIAA—a waiver of any bond requirement for injunctive relief and a clear-and-convincing evidentiary burden on the employee to establish that information was in the public domain—were substantively unconscionable. On that basis, the trial court denied arbitration, reasoning that unconscionability permeated the arbitration agreement and that severance was inappropriate.

The Court of Appeal’s Decision

The Court of Appeal reversed. The court assumed that the arbitration agreement and NDIAA were properly construed together under California Civil Code section 1642 and that the challenged NDIAA provisions were unconscionable. Even so, it held that the trial court abused its discretion by refusing to sever the provisions and declining to enforce the arbitration agreement.

Applying the California Supreme Court’s decision in Ramirez v. Charter Communications, Inc.,² the court emphasized that severability requires a qualitative inquiry focused on whether unconscionable provisions taint the arbitration agreement’s central purpose. The court held that the NDIAA provisions at issue were collateral: they did not affect who must arbitrate, what claims are arbitrable, or how arbitration proceeds, and they did not apply to the plaintiff’s asserted claims, which did not implicate Tesla’s confidential or proprietary information.

The court further concluded that severance was straightforward and required no reformation, and that enforcement of arbitration served the interests of justice. It rejected the contention that the NDIAA provisions reflected a systematic effort to impose arbitration as an employer-favorable forum, noting that the provisions applied broadly to all proceedings and bore no meaningful nexus to the arbitration process itself.

In reaching this conclusion, the court distinguished Silva v. Cross Country Healthcare, Inc.,³ (Silva), Alberto v. Cambrian Homecare,⁴ and Gurganus v. IGS Solutions LLC,⁵ which involved arbitration-specific asymmetries or provisions that directly impaired the arbitral forum. By contrast, the provisions at issue in Wise did not affect the fairness or mutuality of arbitration. The Wise decision thus reinforces that Silva is not a license to invalidate arbitration agreements based on any unconscionability found elsewhere in onboarding documents but rather is limited to situations where unfairness meaningfully infects arbitration itself.

Implications for Employers

Wise provides further clarity on the enforceability of arbitration agreements executed alongside confidentiality or restrictive covenant agreements. While courts may consider contemporaneously executed agreements together under California Civil Code section 1642, Wise provides important reassurance for employers that arbitration is not forfeited merely because a related agreement contains problematic provisions. Where the arbitration agreement itself is bilateral and procedurally sound, and the challenged provisions are collateral rather than arbitration-specific, severance—rather than wholesale invalidation—remains the appropriate remedy under California law.

For employers, the decision underscores the value of maintaining arbitration agreements that stand on their own and are free of arbitration-specific overreach, while confirming that collateral defects in related onboarding agreements will not necessarily preclude enforcement of arbitration. As a practical matter, employers should ensure that arbitration provisions are drafted as self-contained and mutually applicable, without incorporating or depending on confidentiality or injunctive-relief terms that could invite severability challenges.

Shareholder Proposals for 2026 Proxy Statement

No-Action Letter Process for Exclusion of Shareholder Proposals

One of the most significant developments for the 2026 proxy season has been the pause in the no-action letter process for companies seeking to exclude shareholder proposals from their proxy materials. On 17 November 2025, the SEC’s Division of Corporation Finance (Division) announced that it will generally not respond to or express views on no-action requests to exclude shareholder proposals under Rule 14a-8 under the Securities Exchange Act of 1934, as amended (Exchange Act), except for those based on Rule 14a-8(i)(1) (that a proposal is improper under state law). Nevertheless, companies must still provide an “informational only” notice of exclusion to the shareholder proponent and the SEC no later than 80 calendar days before filing their proxy materials. Any company wishing to receive a response from the Division must include in its notice an unqualified representation that it has a reasonable basis for exclusion, but the Division’s nonobjection response will be based solely on the company’s representations. As an exception, the Division will continue to express its views on requests to exclude shareholder proposals under Rule 14a-8(i)(1), which concerns proposals that are improper subjects for shareholder action under state law.

For the upcoming proxy season, this procedural shift increases flexibility and lowers the burden for companies seeking to exclude shareholder proposals. However, it may also increase uncertainty, as companies must now rely on their own assessments, prior Division guidance, and judicial decisions when determining whether to exclude shareholder proposals. 

Rule 14a-8 Exclusions for Shareholder Proposals

On 12 February 2025, the Division issued guidance under Staff Legal Bulletin No. 14M (SLB 14M) that increases flexibility for companies seeking to exclude shareholder proposals under the economic relevance exclusion under Exchange Act Rule 14a-8(i)(5) and the ordinary business exclusion under Exchange Act Rule 14a-8(i)(7) by tying these exclusions more directly to the relevant company’s business. SLB 14M rescinds prior Division guidance in Staff Legal Bulletin No. 14L of 3 November 2021 and outlines a new framework for the Division’s assessment of these exclusions, as follows: 

Economic Relevance Exclusion

This exclusion permits a company to exclude a proposal that “relates to operations which account for less than 5 percent of the company’s total assets at the end of its most recent fiscal year, and for less than 5 percent of its net earnings and gross sales for its most recent fiscal year, and is not otherwise significantly related to the company’s business.” In SLB 14M, the Division states that, if the proposal relates to less than 5% of a company’s total assets, net earnings, and gross sales, the Division will now focus on the proposal’s significance to the company’s business depending on the company’s particular circumstances. Therefore, proposals that raise issues of social or ethical significance “in the abstract” but that are not significantly related to the company’s business may be excluded.

Ordinary Business Exclusion

This exclusion permits a company to exclude a proposal that “deals with a matter relating to the company’s ordinary business operations.” The Division, however, had historically found that proposals concerning day-to-day matters were not excludable if they “raise[d] policy issues so significant that it would be appropriate for a shareholder vote.” The Division will now take a company-specific approach when evaluating significance rather than looking to “broad societal impact” or universal significance.

Board Analysis

The Division will not expect a company’s no-action request under the economic relevance exclusion or the ordinary business exclusion to address its board’s analysis of the policy issue raised and its significance to the company. Instead, a company may decide whether or not the board’s analysis would be helpful in assessing its request.

SLB 14M also provides guidance related to the use of images in shareholder proposals, proof of ownership letters, and use of email for correspondence with shareholder proponents that will be relevant for the upcoming proxy season.

Shareholder Engagement

Introduction of Retail Voting Program

On 15 September 2025, Exxon Mobil Corporation (Exxon) received concurrence from the Division that it would not recommend enforcement action under the Exchange Act if Exxon implements its proposed “Retail Voting Program.” Designed to address historically low retail shareholder participation, this program facilitates standing instructions from Exxon’s retail investors to vote in accordance with the Exxon board’s recommendations. The Division identified several features of the program in support of its position, including the availability at no cost to all retail investors, investors’ ability to opt in and out of the program, the annual reminder to investors about their opt-in status, the continued distribution of proxy materials, the ability of investors to override standing instructions on voting, and Exxon’s full disclosure of the program on its website and in its proxy materials.

Exxon’s program and the Division’s concurrence provide a potential avenue for companies seeking to rejuvenate support from their retail investors, particularly in the face of contentious institutional or active investors.

Beneficial Ownership Reporting

Recent clarification from the SEC regarding eligibility for Schedule 13G reporting (as opposed to the more detailed Schedule 13D reporting) has impacted, and may continue to impact, how shareholders are willing to engage with companies. In February 2025, the SEC staff published updated and new Compliance and Disclosure Interpretations (each, a C&DI) under Regulation 13D-G, Question 103.11 and Question 103.12, respectively, expanding the circumstances under which a shareholder’s engagement with management would cause its securities to be held with the “purpose or effect of changing or influencing control of the issuer” and thereby prevent the shareholder from reporting on Schedule 13G. 

New C&DI 103.12 includes the SEC’s prior guidance that engagement with a company on a particular topic (e.g., sale of the company or its assets, restructuring of the company, or a contested election of directors) may be dispositive in determining whether the engagement has the purpose or effect of changing or influencing control of the company but that the context of such engagement is also highly relevant. New C&DI 103.12 then builds upon this prior guidance by providing specific examples of where a shareholder may be considered to move beyond a “passive investor” in its engagement. These examples include where a shareholder:

• Explicitly or implicitly conditions its support of one or more of the company’s director nominees on adoption of the shareholder’s recommendation for the company to “remove its staggered board, switch to a majority voting standard in uncontested director elections, eliminate its poison pill plan, change its executive compensation practices, or undertake specific actions on a social, environmental, or political policy.”
• States or implies that the shareholder will not support one or more of the company’s director nominees if the company does not make changes to align with the shareholder’s voting policy on a particular topic. 

Several institutional investors reduced their engagement with public companies in light of this guidance during the 2025 proxy season, with some investors canceling engagement meetings. We expect this hesitancy to continue in the 2026 proxy season, which may make shareholder engagement efforts more difficult to navigate.

Considerations for Disclosures in Your Form 10-K and Proxy Statement

DEI and Board Diversity Disclosures

On 11 December 2024, the US Court of Appeals for the Fifth Circuit struck down the requirement that companies listed on The Nasdaq Stock Market LLC disclose director diversity characteristics and identify at least one female director and at least one director who self-identifies as an underrepresented minority or LGBTQ+ person (or explain why there are none). 

Institutional Shareholder Services then announced that, beginning on 25 February 2025, it will no longer consider board gender or racial/ethnic diversity when making director-election recommendations. Glass, Lewis & Co. notified clients that it would continue to apply its existing diversity-related voting policy for the 2025 proxy season but would also provide alternative recommendation options on diversity-related matters—offering clients both a recommendation that considers diversity factors and a recommendation that does not incorporate those considerations—in order to accommodate differing client preferences. 

Many companies also proceeded to scale back their diversity, equity, and inclusion (DEI)-related disclosures in 2025. As observed by DragonGC’s report “Navigating DEI Disclosure Amid Regulatory Shifts: Insights from Select S&P 100 Companies’ 10-Ks and Proxy Statements” of 13 March 2025, among a sample of large US public companies, the prevalence, length, and specificity of DEI statements in Form 10-K and proxy statement filings declined sharply in 2025 compared to prior years.¹ This trend reflects sensitivity to heightened risks related to litigation, regulatory developments, and investor expectations, as well as a reframing of DEI-related disclosures to reflect companies’ shifting human-capital priorities. Companies should ensure that any changes to DEI or diversity-related disclosures throughout 2025 are carried into 2026, as appropriate, and consider more broadly how these developments around DEI topics should be reflected in their broader governance, risk, and human-capital disclosure frameworks.

Artificial Intelligence

As companies increasingly focus on leveraging artificial intelligence (AI)—in particular, generative AI—into their operations, strategy, and product development, the potential impact of AI and the related legal, ethical, and operational risks must be carefully considered in preparing disclosures for their Form 10-Ks and proxy statements. Potentially relevant disclosures include, among others:

• Descriptions of AI-driven products or services and how AI supports or enhances core product or service lines in the business discussion under Item 101 of Regulation S-K.
• Discussions of skills, training, headcount changes, or re-skilling initiatives and how AI adoption impacts talent strategy and workforce planning under Item 101 of Regulation S-K.
• AI-related risk factors under Item 105 of Regulation S-K (e.g., data privacy, AI governance, AI model risk, regulatory uncertainty, reputational risk) with greater specificity where AI is integral to key business functions or customer offerings.
• Quantitative and qualitative disclosures regarding AI investments, costs, or disruptions, including the potential impact of capital expenditures for AI infrastructure and efficiencies generated by automation, in the Management’s Discussion and Analysis under Item 303 of Regulation S-K.
• Disclosures addressing board and committee responsibility for AI-related risk and strategy and how management reports on AI initiatives or emerging regulatory developments under Item 407 of Regulation S-K.

Global Trade and Geopolitical Conflicts

Global tariff volatility, shifting trade dynamics, and geopolitical conflict in 2025 have contributed to significant economic uncertainty, and their impacts and related risks should be considered when updating disclosures for upcoming Form 10-Ks. In particular, the following developments in 2025 may be relevant: 

• The arrest of Nicolás Maduro and United States involvement in Venezuela.
• The tentative ceasefire and ongoing instability in the Israel-Hamas conflict.
• Continued escalation and recalibration of US-China trade measures, including expanded tariffs, export controls, and investment restrictions.
• The imposition of additional tariffs and trade remedies by the presidential administration targeting select imports and industries.

Companies with international supply chains, substantial import or export exposure, or global sourcing in particular should consider whether tariffs, trade restrictions, or trade policy changes could meaningfully affect their business or results of operations. This evaluation may be especially important for companies that depend on concentrated supplier networks or that operate in jurisdictions impacted by geopolitical tension. Even where the impacts of tariffs are not currently material, companies should monitor and disclose the risk of future tariff-driven volatility and should assess whether existing disclosures appropriately capture exposure to evolving political, economic, or regulatory developments in key markets.

Filer Status–Special Note for Smaller Reporting Companies

On 27 August 2025, the SEC published a new C&DI 130.05 clarifying the timeline of filer status transition for a company determining that it no longer qualifies as a “smaller reporting company” (SRC) under the “revenue test” of Exchange Act Rule 12b-2. This guidance provides that, once a company no longer qualifies as an SRC under the revenue test at the end of its second fiscal quarter, it will first transition to (or continue to be) a “non-accelerated filer” only for the following fiscal year. The SEC reasons that the definitions of “accelerated filer” and “large accelerated filer” specifically exclude those companies qualifying as SRCs at the end of the fiscal year and that companies transitioning out of SRC status are still entitled to report as SRCs for their Form 10-Ks in the fiscal year in which this transition occurs. Accordingly, a company still reporting as an SRC for its Form 10-K is explicitly excluded from qualifying as an “accelerated filer” or “large accelerated filer.” This guidance will lessen the compliance burdens for former SRCs under the revenue test in their first fiscal year following transition out of SRC status.  

Pending and Anticipated SEC Rulemaking

Climate-Related Disclosure

In March 2025, the SEC announced that it would end its defense of its March 2024 climate-related disclosure rules being challenged before the US Court of Appeals for the Eighth Circuit. The rules would have required many companies to include significantly expanded disclosures about emissions and climate-related risks in their SEC filings. The court has since ordered the litigation to be effectively suspended until the SEC decides whether to reconsider the rules through a notice-and-comment rulemaking process or renew its defense of the rules in court. While the future of these proposed rules remains unclear, it is important for companies to continue following guidance under the SEC’s Interpretive Release, “Commission Guidance Regarding Disclosure related to Climate Change” of 8 February 2010. 

In addition, New York,² New Jersey,³ and Illinois⁴ have proposed similar legislation to California’s Climate Corporate Data Accountability Act (California Senate Bill 253 (SB 253)) and the Climate-Related Financial Risk Act (California Senate Bill 261 (SB 261)),⁵ requiring disclosures related to greenhouse gas emissions and related risks. Considering the increasing pressure for such disclosures outside of federally mandated disclosures, companies would be prudent to prepare for future disclosures of emissions and climate-related risks before formal rules, even if on a more limited scale, are implemented.

Spring 2025 Regulatory Agenda

In September 2025, the SEC released its Spring 2025 Regulatory Flex Agenda, reflecting a focus on deregulation and streamlining disclosure. Most notably, the agenda introduced the following topics at the “proposed rule stage”:

Enhancement of Emerging Growth Company Accommodations and Simplification of Filer Status for Reporting Companies

The Division is considering amendments to expand accommodations for emerging growth companies and “to rationalize filer statuses to simplify the categorization of registrants and reduce their compliance burdens.”

Rationalization of Disclosure Practices

The Division is considering amendments to “rationalize disclosure practices to facilitate material disclosure by companies and shareholders’ access to that information.” This topic may relate to the SEC chair’s goal of deregulation, particularly with respect to executive compensation disclosure requirements. It is expected that, as with the modernization and simplification amendments adopted by the SEC during President Donald Trump’s first term, these proposed rules may encompass more than just executive compensation disclosure rules. 

Shareholder Proposal Modernization

The Division is considering amendments to modernize Exchange Act Rule 14a-8 to reduce compliance burdens on companies and introduce rule updates since its last amendments. These proposed amendments, together with the pause in the Rule 14a-8 no-action letter process in the 2026 proxy season and SLB 14M, as discussed above, may signal a fundamental shift in the process for excluding shareholder proposals as well as the permissible content of such shareholder proposals. 

The agenda identified the expected timeline for these proposed rules as April 2026, but this timeline does not guarantee when the SEC will act on these matters, if at all. However, even if the SEC acts on these proposals in April 2026, any proposed rules would not likely become final until late 2026 or 2027. Companies should continue to monitor developments in the SEC’s rulemaking, as 2026 will likely be a pivotal year for deregulation and rule changes.

Key Highlights

Focusing on regulations applicable to non-government agencies, we have summarized the key updates as follows:

• Establishment of a new independent supervisory agency, the PDPC, to oversee personal data protection (Article 1-1).
• Introduction of new data breach notification requirements, including mandatory reporting to the PDPC and affected individuals (Article 12).
  • Under the current PDPA, non-government agencies must notify the individual to whom the personal data pertains upon becoming aware that personal data they hold has been stolen, altered, damaged, lost, or leaked. The new Amendments further stipulate that, if the incident meets certain reporting criteria, non-government agencies must also report to the PDPC.
  • In addition, non-government agencies are required to take immediate and effective remedial measures to prevent the escalation of the incident, record relevant facts, impacts, and measures taken, and retain related records for PDPC inspection.
  • The PDPC will establish detailed regulations governing the content, methods, time limits, scope of reporting, contingency measures, record preservation, and other related matters for the notifications or reports.
  • Penalties for non-compliance with reporting to the PDPC range from NT$20,000 to NT$200,000, with additional fines of NT$20,000 to NT$200,000 imposed for each failure to rectify.
• Enhanced security measures for personal data files and contingency planning (Article 20-1)
  • Under the current PDPA, non-government agencies that maintain personal data files must implement security measures to prevent personal data from being stolen, altered, damaged, lost, or leaked.  Competent authorities may designate non-government agencies to establish a security and maintenance plan for personal data protection and rules on disposing personal data after the termination of business.
  • In the future, regulations concerning the maintenance of personal data file security, management mechanisms, measures to be adopted, and other related matters will all be prescribed by the PDPC instead.
  • In violation of Article 20-1, non-government agencies will be subject to penalties ranging from NT$20,000 to NT$2,000,000, with additional fines ranging from NT$150,000 to NT$15,000,000 for each failure to rectify.
• The PDPC is empowered to conduct administrative inspections and enforce corrective actions (Article 22)
  • The PDPC, as a new independent supervisory agency, will take over the responsibility of conducting administrative inspection in the future. If the PDPC determines that non-government agencies may be in violation of the PDPA, or deems it necessary to review the agency’s compliance, it may notify non-government agencies or relevant personnel to present their views, provide necessary documents, data, or items, or take other cooperative measures; or it may directly dispatch personnel to conduct an inspection. During an inspection, personal data that may serve as evidence may be retained or copied.
  • Non-government agencies must not evade, obstruct, or refuse without legitimate reason. Otherwise, penalties ranging from NT$20,000 to NT$200,000 will be imposed.

Conclusion

Companies should closely monitor any guidance and regulations published by the PDPC or relevant authorities in the future and consider the necessary actions to fully align their operations with the requirements of the Taiwan government.

Our firm is positioned to help companies navigate these complex and evolving regulations and can assist if you require further advice on complying with these new regulations. Should you have any questions, please do not hesitate to contact the authors listed above.

In the event that the secretary deems a contractor’s remediation plan insufficient, or if the secretary and the contractor are unable to resolve the underperformance dispute during the 15-day negotiation period, the secretary is directed to immediately “secure remedies for the Secretary that will expedite production, prioritize the United States military, and return the contractor to sufficient performance, investment, prioritization, and production, to the maximum extent permitted by law,” including through actions under Defense Production Act authority.³

The order further requires the secretary to ensure that future defense contracts include prohibitions on stock buybacks and corporate distributions during periods of underperformance—including contract noncompliance, insufficient investment, or insufficient production speed—as determined by the secretary. Future contracts will also stipulate restrictions on tying executive incentive compensation to “short-term financial metrics” like cash flow or earnings per share.⁴

The EO grants broad authority to the Secretary of War and does not prescribe a specific definition for “contractor” or “defense contractor,” nor does it limit application of the order to certain companies based on any identified criteria other than “large” or “major”—also undefined terms. As written, the order would apply to all companies, foreign and domestic, that contract with the Department of War (DOW). 

The Trump administration has previously expressed its frustration with the defense industrial complex’s corporate buyback practices, with senior DOW officials raising concerns that defense contractors are using federal funds to purchase shares of their own company’s stock rather than investing in research and development or improving production and supply chain capabilities.⁵

In December 2025, Secretary of Defense Pete Hegseth gave a speech reiterating his priority to “transform” the defense acquisition system and “rapidly accelerate” production capabilities, a sentiment shared by President Trump and directed at both the federal procurement bureaucracy and the private contractors who supply materials, equipment, and technology to every facet the US government.⁶ In a November 2025 speech, Hegseth previously called for the largest defense manufacturers in the country to invest more of their capital into increasing production volume and accelerating delivery.⁷

This EO marks a notable shift in DOW policy by prioritizing military readiness and the defense industrial supply chain over corporate stockholder obligations and the financial interests of major defense contractors, with US Assistant to the Secretary of Defense for Public Affairs and Pentagon spokesperson Sean Parnell stating that the DOW’s obligation was to “warfighters, not Wall Street.”⁸ The broad authority granted to the secretary to investigate, identify, negotiate, and enforce the EO, along with the requirements for future defense contracts, will have significant implications for large defense contractors and companies that contract with the US government around the world. 

The legal and regulatory professionals at the firm are actively monitoring updates in federal contracting and procurement policies and are eager to assist in navigating ongoing changes in this area. 

As explained below, the 2025 Opinion concludes that covered EWA (Covered EWA) is not credit for Regulation Z purposes, any fees associated with Covered EWA would not be finance charges under Regulation Z, and expedited delivery fees and tips usually will not be finance charges for EWA that is not Covered EWA. 

On 15 January 2025, the CFPB had rescinded a 10 December 2020 advisory opinion on EWA products (the 2020 Opinion).¹ The 2025 Opinion is similar to the 2020 Opinion in that they both exclude Covered EWA products from the definition of “credit” for Regulation Z purposes, but the 2025 Opinion improves on the 2020 Opinion in some important ways. In this article, we summarize the scope and impact of the 2025 Opinion, contrasting it with the 2020 Opinion in some cases. 

Covered EWA Transactions Do Not Result in Regulation Z “Credit” Being Extended

The 2025 Opinion states that Covered EWA is not “credit” for Regulation Z purposes. The 2025 Opinion correctly states that Regulation Z defines “credit” as “the right to defer payment of debt or to incur debt and defer its payment.” The 2025 Opinion concludes that Covered EWA does not provide these rights and therefore is not “credit” because Covered EWA “offers workers access to money that they are owed by virtue of work that they have already performed.”

However, in order to make this work, Covered EWA must include all of the four following characteristics:

• Covered EWA transactions may not exceed the “accrued cash value of the wages the worker has earned up to the date and time of the transaction.” 

This ensures that the EWA only provides workers access to funds that are already owed to the worker. The 2025 Opinion strengthens this element of Covered EWA by requiring that the determination of the accrued cash value of wages that the worker has earned at the time of the transaction be determined “based upon payroll data that evidence the amount [and not] based on other information, such as worker representations or on estimates or predictions of accrued wages.”

While it might seem that satisfying this element should be enough in itself to establish that no credit is being extended with the Covered EWA, the CFPB apparently concluded that this would work only if the worker never had any personal liability to the EWA provider for the amount of the Covered EWA transaction. That would explain the other three required characteristics of Covered EWA, as explained below. In each case, we provide an abbreviated description of the characteristic and then quote it in full.

• The provider must use a “payroll process deduction” to be repaid for the EWA transaction: 

“The provider uses a payroll process deduction in connection with the worker’s next payroll event. In a payroll process deduction, payment instructions received and acted upon by the payroll processor (or by the employer itself if it does not use a processor) enable the EWA provider to receive accessed amounts without debiting the consumer’s regular transaction account after the consumer is paid. A transfer to the provider from any of the consumer’s regular transaction accounts after the payment of wages into that account is not a payroll process deduction.”

The 2025 Opinion indicates that this characteristic helps to ensure that no debt to the provider is created: 

“With Covered EWA, there is no liability or obligation sufficient to create a debt because the provider, by engaging with the consumer’s employer or its payroll processor, makes a payroll process deduction for the pay period in which the wages have been accrued, and reserves no recourse against the consumer if that deduction falls short of the amount of the EWA transaction….” 

• The provider must warrant to the worker, in effect, that it cannot and will not attempt to collect the Covered EWA transaction amount from the worker:

“Before providing Covered EWA, the provider [must] clearly and conspicuously explain[] and warrant[] to the worker that it: (a) has no legal or contractual claim or remedy, direct or indirect, against the worker in the event the payroll process deduction is insufficient to cover the full amount of a Covered EWA transaction, including no right to take payment from any of the consumer’s regular transaction accounts; and (b) will not engage in any debt collection activities related to Covered EWA, place a Covered EWA transaction amount as a debt with or sell it to a third party, or report to a consumer reporting agency concerning Covered EWA.”

• The provider may not base its decision whether to provide a Covered EWA transaction on the worker’s creditworthiness: 

“The provider [may] not directly or indirectly assess the credit risk of individual workers, including through obtaining and reviewing credit reports or credit scores about the individual workers.”

Thus, all four of the required characteristics of Covered EWA are intended to ensure that a Covered EWA transaction does not result in an extension of credit for Regulation Z purposes. 

Any Fees Associated With Covered EWA Would Not Be Regulation Z “Finance Charges” 

The CFPB’s rationale for this conclusion is clear and logical. Under Regulation Z, a “finance charge is the cost of consumer credit.” Because Covered EWA is not credit, the 2025 Opinion states that “any fees charged in connection with Covered EWA cannot be finance charges.” 

This a significant improvement over the 2020 Opinion, under which, in order to have Covered EWA, employees generally could not make any payment, voluntary or otherwise, to access EWA funds or otherwise use the Covered EWA program, and under which neither the provider nor its agents could solicit or accept tips or any other payments from the employee.²

Certain Expedited Delivery Fees Associated With Non-Covered EWA Transactions Are Not Regulation Z “Finance Charges”

The 2025 Opinion first explains that, to the extent any non-Covered EWA products are credit, fees associated with them “can be finance charges.”³ The 2025 Opinion then explains that, to qualify as a finance charge, “a charge must be either ‘an incident to’ or ‘a condition of’ an extension of credit and be ‘imposed directly or indirectly’ by the creditor.” 

The expedited delivery fees in connection with non-Covered EWA products that are the focus of the 2025 Opinion are fees for the expedited delivery of EWA funds to the worker. The key factors for excluding these fees from the Regulation Z definition of “finance charge” appear to be these:

• The worker likely must have a reasonable means to receive EWA funds without payment of an expedited delivery fee.
• The EWA service obtained without payment of an expedited delivery fee likely cannot be significantly different from the service received when the fee is paid, except for expedited delivery of the EWA funds.

When these factors are satisfied, then the 2025 Opinion provides that, “in the normal course,” the expedited delivery fees in connection with non-Covered EWA products are not finance charges. The CFPB notes, however, that “to the extent that an EWA provider does impose expedited delivery fees on a consumer’s receipt of funds of earned wages, those fees could qualify as finance charges” (emphasis added). Whether such imposition is occurring would depend on the facts and circumstances of the provider’s practice. By way of example, the 2025 Opinion states that if an EWA provider “makes it too difficult for consumers to select the un-expedited delivery of EWA funds, the resulting expedited delivery fees may effectively be imposed.” We interpret this to mean that a fee is “imposed” if the fee is not voluntary or the consumer is not given a reasonable opportunity to avoid the fee.

Certain Tips Associated With Non-Covered EWA Transactions Are Not Regulation Z “Finance Charges”

The CFPB’s basic conclusion as stated in the 2025 Opinion is that a bona fide tip, because it is voluntary, is not imposed by the EWA provider and therefore cannot be a finance charge. However, “[t]o the extent tipping for EWA services is not voluntary, however, tips can be ‘directly or indirectly imposed’ by providers and thus qualify as finance charges.” This is again a facts-and-circumstances analysis. The 2025 Opinion states that “if the provider makes it too difficult to avoid tipping,” the resulting consumer payment may be a finance charge.

Next Steps

EWA products will need to be reviewed on a case-by-case basis to determine whether such products are Covered EWA, and fees associated with non-Covered EWA products will need to be reviewed on a fee-by-fee basis to determine if such fee is a finance charge. Finance charges will need to be disclosed in compliance with Regulation Z. 

It also will be necessary to consider state laws, regulations, and applicable regulatory guidance. The 2025 Opinion only considers Regulation Z, but a number of states regulate at least some forms of EWA products.

Congress Rejects Budget Cuts at NASA

A minibus (a bipartisan, conferenced, package of legislation) released on 5 January 2026, provides US$24.4 billion for NASA for fiscal year 2026, well above the White House’s proposal of US$18.8 billion. In addition to restoring nearly all proposed funding cuts to NASA’s science program, the bill includes:

• US$7.6 billion for the Artemis program to establish the first long-term presence on the moon;
• Full funding for the Nancy Grace Roman Space Telescope for a 2027 launch, outfitted with imaging cameras 100 times larger than the Hubble Telescope;
• US$500 million for the nuclear-powered rotorcraft mission, Dragonfly, to Saturn’s moon, Titan; and
• US$2.2 billion for climate monitoring and the Earth System Observatory.

Newly Proposed US Mission Authorization Process 

The Office of Space Commerce (OSC) officially launched public comments on their newly proposed one-stop shop for the authorization of novel space activities.¹ OSC has removed the previously stated 22 December 2025 deadline and is accepting comments on a rolling basis.²

Ensuring American Space Superiority 

President Trump, on 18 December 2025, signed Executive Order 14369, “Ensuring American Space Superiority”³ directing agencies across the federal government to work together to streamline procurement, establish new space security strategies, ensure a necessary workforce to support the US space industry, and set a wide breadth of new space policy directives and goals that build on Executive Order 14335, Enabling Competition in the US Commercial Space Industry,⁴ including:

• Deploying nuclear reactors on the moon and in orbit, including a lunar surface reactor ready for launch by 2030;
• Returning Americans to the moon by 2028 through the Artemis program;
• Establishing initial elements of a permanent lunar outpost by 2030;
• Enabling commercial launch services and prioritizing lunar exploration;
• Developing and demonstrating prototype next-generation missile defense technologies;
• Accelerating acquisition reform, integrating commercial space capabilities, and enabling new market entrants; and
• The implementation of a new space security strategy.

Order 14369 also revokes former President Joe Biden’s Executive Order 14056, which set the purpose, membership, and functions of the National Space Council, and revises Space Policy Directive 3 by removing “free for all” language in the National Space Traffic Management Policy.

Our Policy and Regulatory practice lawyers routinely monitor regulatory shifts and are available to help the space industry navigate this rapidly changing policy landscape, and advocate for needed changes.

While most of the interim final policy remains the same, the final EJ policy includes a handful of notable updates.

First, DEP altered the criteria for identifying EJ Areas, which are the census tracts in which the EJ policy applies. In the interim final policy, only those “census block groups with a PennEnviroScreen score above 80” were included in the policy. Under the final policy, census block groups that meet either one of the following criteria are considered EJ Areas:

1. “Census block groups with a PennEnviroScreen score equal to or above the 80th percentile score.
2. Census block groups lacking overall scores due to data gaps, but with the highest 5 percent of PennEnviroScreen Pollution Burden Scores.”³

The additional criterion expands the geographical reach of the EJ policy in certain areas of the Commonwealth, meaning more projects will likely need to comply with the final EJ policy’s enhanced public participation requirements. Interested persons can determine whether specific locations qualify as EJ Areas using DEP’s PennEnviroScreen mapping tool.

Second, DEP clarified that it plans to regularly update both the substantive methodology for determining EJ Areas and the underlying data that is fed into PennEnviroScreen. Substantive changes to DEP’s methodology will be subject to a public comment period; however, “updates to data alone for those indicators already included won’t include a formal public comment period.” It will be important to keep abreast of potential changes to the substantive criteria to take advantage of the ensuing comment period and to regularly check PennEnviroScreen to confirm that periodic data updates have not changed the contours of relevant EJ Areas.

DEP also released an updated version of it PennEnviroScreen Methodology Documentation,⁴ which explains in detail the methodology behind the PennEnviroScreen tool. This additional document, an updated version of its 2023 counterpart,⁵ includes a number of minor updates to DEP’s PennEnviroScreen methodology, which result in further variation in identified EJ Areas.

The final EJ policy demonstrates Pennsylvania’s continuing commitment to EJ at a time when the federal government is scrutinizing state EJ policies that hinder development.⁶ The firm’s Environment, Land, and Natural Resources practice group is closely following state and federal EJ developments throughout the United States (see our 2 December 2025 EJ Update) and is ready to work with clients to understand how these and other changes may impact permitting timelines and future projects in Pennsylvania and other states across the nation.

Key Takeaways

Rule 16.1’s Purpose

The new rule provides MDL transferee courts with an optional roadmap for early case management. After the Judicial Panel on Multidistrict Litigation (JPML) consolidates actions into an MDL, the transferee court is encouraged (but not required) to take three actions aimed at effective MDL case management. First, the transferee court “should schedule an initial management conference to develop an initial plan for orderly pretrial activity in the MDL Proceedings.” Fed. R. Civ. P. 16.1(a). Second, prior to the initial management conference, the transferee court “should” order the parties to submit a pre-conference report that addresses critical issues such as consolidating pleadings, discovery, pretrial motions, and the appointment of leadership counsel. Fed. R. Civ. P. 16.1(b). Third, after the initial conference, the transferee court “should” enter an initial case management order addressing the matters in the pre-conference report. Fed. R. Civ. P. 16.1(c). 

Early Vetting of Claims

Rule 16.1 sets the stage for early scrutiny of claims by requiring parties to outline how and when they will exchange information supporting their claims and defenses. This is designed to curb the widespread filing of unverified or unsupportable claims that have plagued MDL dockets in recent years. Indeed, as explained in the Committee Notes, “after taking account of whether the party whose claim or defense is involved has reasonable access to needed information—the court may find it appropriate to employ expedited methods to resolve claims or defenses not supported after the required information exchange.”

Perspective of the Parties

The rule specifically calls for the “parties’ initial views on various matters” in the pre-conference report. Fed. R. Civ. P. 16.1(b)(3). This includes the parties’ views on “discovery, including any difficult issues that may arise,” pretrial motions, and “whether the court should consider any measures to facilitate resolving some or all actions before the court.” Fed. R. Civ. P. 16.1(b)(3). By soliciting counsel’s input on matters during the initial stages of litigation, the rule ensures that considerations from both sides inform the transferee court’s initial case management order.

Judicial Discretion

While Rule 16.1 provides a helpful framework, it does not impose mandatory obligations on transferee courts. Indeed, the rule uses conditional phrases such as “should” and “in the court’s discretion” throughout, and the Committee Notes confirm the rule is intended as guidance rather than a mandate. See Fed. R. Civ. P. 16.1(a), (c), and Committee Notes. Its effectiveness, then, will depend on judicial willingness to implement the rule’s recommendations.

Looking Ahead

As of December 2025, there were over 340,000 cases consolidated across 157 active federal MDLs.¹ For years, the absence of clear procedural rules in MDLs led to ad hoc management and inconsistent vetting of individual claims. Rule 16.1 changes that dynamic. By introducing a structured framework and equipping transferee courts with tools to enhance case oversight from the outset, Rule 16.1 is a positive step in bringing order and efficiency to MDL proceedings. However, because the rule is discretionary, its effectiveness will ultimately depend on whether the transferee court chooses to enforce its provisions and turn optional guidance into meaningful action.

New Laws for 2026

Family Neonatal Intensive Care Leave Act

Effective 1 June 2026, the Family Neonatal Intensive Care Leave Act (NICLA), Public Act 104-0259, requires employers with more than 15 employees to provide for unpaid leave while any child of an employee is a patient in a neonatal intensive care unit (NICU). Employers with 16 to 50 employees must provide up to of 10 days of unpaid NICLA leave and employers with more than 50 employees must provide up to 20 days of unpaid NICLA leave. A “child” is defined as an employee’s son or daughter who is a biological, adopted, or foster child, a stepchild, a legal ward, or a child of a person standing in loco parentis.

NICLA leave is unpaid and is in addition to any leave provided under the Family and Medical Leave Act (FMLA). Employees must first exhaust their FMLA leave entitlement and are then able to use NICLA leave if their child remains in the NICU. Similar to the FMLA, employees may take leave on a continuous or intermittent basis. However, employers may not require an employee to use any accrued paid time off prior to using NICLA leave although employees may elect to do so. Employers may require NICLA leave be taken in minimum increments of no less than two hours. 

During NICLA leave, employers must maintain an employee’s health insurance benefits and following NICLA leave, an employee must be returned to their former position or a substantially equivalent one with no loss of benefits held or accrued prior to taking leave. Employers may request reasonable verification of the length of the employee’s child’s stay in the NICU, but may not request any information protected under the Health Insurance Portability and Accountability Act of 1996 or other law. As is customary under employment laws, employees are protected from discrimination, harassment, or retaliation for exercising their rights under the NICLA.

Workers’ Rights and Worker Safety Act

Passed in August 2025, the Workers’ Rights and Worker Safety Act, Senate Bill 1976 (SB 1976), is aimed at preserving federal workplace safety standards in Illinois. SB 1976 provides that, if at any point after 28 April 2025, the United States Secretary of Labor revokes or repeals any previously promulgated federal Occupational Safety and Health Act (OSHA), Fair Labor Standards Act, or Coal Mine Health and Safety Act standards, the Illinois Department of Labor (IDOL) will adopt a statewide standard incorporating the previous federal standard as it existed prior to the US Secretary of Labor’s action. In addition, should the US Secretary of Labor amend or interpret any federal standard in a way that results in the standard becoming “less effective in providing safe and healthful employment and places of employment,” IDOL will take action to preserve the federal standard at it previously existed.

While SB 1976 does not define what it means for a federal workplace safety standard to become “less effective,” a press release from the Office of Governor JB Pritzker makes clear that the overarching intent of the SB 1976 is to ensure that long-established worker protections remain intact in Illinois in the event of any change to the substance or enforcement of federal safety standards.

Amendments to Existing Illinois Laws

Illinois Workplace Transparency Act

Beginning 1 January 2026, employers will need to carefully review all new, amended, and extended employment agreements to ensure compliance with amendments made to the Illinois Workplace Transparency Act (WTA). Previously, the WTA broadly prohibited any employment agreement from restricting an employee’s ability to report allegations of unlawful employment practices (discrimination, harassment, or retaliation) to officials for investigation. House Bill 3638 (HB 3638), which was signed into law on 15 August 2025, amended the definition of an “unlawful employment practice” to include not only discrimination, harassment, and retaliation, but also any violation of laws or rules enforced by IDOL, the Illinois Labor Relations Board, the US Department of Labor, OSHA, and the National Labor Relations Board. As such, beginning 1 January 2026, new and amended employment agreements must not restrict an employee’s ability to report violations of not only discrimination and harassment laws, but also laws and rules related to other employment issues such as collective bargaining, and wages and hours. HB 3638 also broadly forbids employment agreements from having any terms that restrict an employee’s ability to engage in “concerted activity,” defined as the right to collectively bargain, participate in labor organizations, and collectively discuss work-related issues like wages and benefits.

HB 3638 also prohibits employers from including any of the following unilateral terms in employment agreements: (1) terms shortening or purporting to shorten applicable statutes of limitations; (2) terms applying non-Illinois law to an Illinois employee’s claims; or (3) terms requiring that a venue outside of Illinois adjudicate an Illinois employee’s claims. Employers are still free to include such terms if they are mutual, i.e., negotiated in good faith for consideration in order to obtain or retain employment, and if the agreement makes express affirmations regarding the employee’s rights to report unlawful employment practices and to engage in concerted activity. However, any failure by the employer to ensure that such terms are mutual will result in a rebuttable presumption that the term is unilateral, against public policy, and should be void and severable from any otherwise enforceable contract. 

With respect to settlement and separation agreements, HB 3638 requires that for any employee promise of confidentiality related to alleged unlawful employment practices (other than violations of an employee’s right to engage in concerted activity, which can never be subject to a confidentiality agreement) to be enforceable, the confidentiality provision must be supported by distinct, bargained-for consideration that is separate and apart from any consideration provided for a release of claims or any other terms. Additionally, while confidentiality must be the “documented preference” of the employee, employers may not unilaterally put such a term in the agreement. 

Finally, HB 3638 makes clear that not only can employees testify concerning unlawful employment practices in courts and other more “traditional” venues, but also in arbitration hearings, as well as depositions taken in connection with any proceeding. HB 3638 also provides that employees are entitled to consequential damages in addition to attorneys’ fees for violations of the WTA, as well as for successfully defending any action for breach of a confidentiality agreement pursuant to the WTA.

Illinois Human Rights Act

Artificial Intelligence in Employment

Effective 1 January 2026, Illinois House Bill 3773 (HB 3773) amends the Illinois Human Rights Act, (IHRA) to expressly prohibit employers from using artificial intelligence (AI) that “has the effect of subjecting employees to discrimination on the basis of protected classes.” Specifically, Illinois employers cannot use AI that has a discriminatory effect on employees, “[w]ith respect to recruitment, hiring, promotion, renewal of employment, selection for training or apprenticeship, discharge, discipline, tenure, or the terms, privileges, or conditions of employment.”

HB 3773 also requires employers to notify employees and applicants when using AI during recruitment, hiring, promotion, renewal of employment, selection for training or apprenticeship, discharge, discipline, tenure, or when the use could affect the terms, privileges, or conditions of employment. The Illinois Department of Human Rights (IDHR) has not yet published a final rule implementing HB 3773.¹ However, Illinois employers should consider working with counsel to prepare these mandatory disclosures now to ensure compliance with HB 3773 by 1 January 2026.

Please see our blog post.

IDHR Fact-Finding Conferences 

Pursuant to Senate Bill 2487 (SB 2487), effective 1 January 2026, IDHR investigators will no longer be required to hold fact finding conferences as part of every investigation into charges of discrimination brought under the IHRA. Instead, fact-finding conferences will take place only at the discretion of the IDHR or if the complainant and the respondent submit a written request within 90 days after the charge is filed and the parties agree in writing to grant the IDHR an additional 120 days to complete its investigation. Additionally, under SB 2487, the Illinois Human Rights Commission may impose specific civil enforcement penalties on employers “to vindicate the public interest”. The maximum penalty depends on the employer’s history of prior violations ranging from US$16,000 to US$70,000. 

Illinois Victims’ Economic Security and Safety Act

The Illinois legislature passed House Bill 1278 (HB 1278) to amend the Illinois Victims’ Economic Security and Safety Act, which provides certain protections for employees who are victims of domestic violence, sexual violence, gender violence, or any other crime of violence. Effective 1 January 2026, employers must permit employees to use employer-issued electronic devices, such as cellular phones or laptops, to record incidents of domestic violence, sexual violence, gender violence, or other crimes of violence committed against themselves or their family or household members. Under HB 1278, employees must be allowed to access any recordings that are made using employer-issued devices and employers are barred from disciplining or retaliating against employees who make these recordings. Employers should review current technology and electronic device policies for compliance with HB 1278.

Employee Blood and Organ Donation Leave Act

Effective 1 January 2026, the Employee Blood and Organ Donation Leave Act (BODLA) will provide protected, paid leave for part-time employees in order to donate an organ. While the BODLA already allows full-time employees to take leave for both blood and organ donation, House Bill 1616 (HB 1616) amends the BODLA to provide up to 10 days of organ donation leave within any 12-month period to part-time employees as well. Employers must calculate the daily average pay earned by a part-time employee in the two months prior to the leave in order to determine compensation for any leave days used. Employers with 51 or more employees are subject to the BODLA’s requirements.

Nursing Mothers in the Workplace Act

Under the current Nursing Mothers in the Workplace Act (NMWA), Illinois employers with at least one employee are required to provide reasonable break time for employees to breastfeed or express breast milk for a period of up to one year after the child’s birth. Employees must be relieved of all duty and the break time may run concurrently with any break time already provided to the employee. Effective 1 January 2026, Senate Bill 0212 (SB 0212) will require that those breaks be paid at the employee’s regular rate of pay, unless doing so would create an “undue hardship” as defined in the IHRA. The IHRA defines “undue hardship” as “prohibitively expensive or disruptive” when considered in light of various factors, including the nature and cost of the accommodation needed; the impact of the accommodation upon the operation of the facility; and the overall size and financial resources of the employer. Pursuant to SB 0212, employers may not require employees to use paid leave for breaks or otherwise reduce their compensation for time spent expressing milk. Employers should review the lactation policies and modify them accordingly to comply with the amended NMWA. 

Military Leave Act (Previously the Family Military Leave Act)

Senate Bill 0220 amends the newly renamed Military Leave Act (previously the Family Military Leave Act) to require all employers with 51 or more employees to provide up to eight hours of paid leave per month, not to exceed 40 hours per year, to employees who participate in funeral honors details. Such leave must be paid at the employee’s regular rate of pay and available without first requiring exhaustion of other accrued leave. Employees qualify for this leave if they are (1) trained to participate in funeral honors details and (2) are either a retired or active member of the armed forces (including the Illinois National Guard) or an authorized provider of funeral honors details or registered member of an authorized provider. While employers may require reasonable notice of the need for leave, as well as confirmation from the relevant veteran’s service organization or other official notice, leave can only be denied when minimum staffing levels are necessary to ensure safety, specifically at care facilities such as nursing homes.

Child Care Act of 1969

House Bill 3439 (HB 3439) amends the Child Care Act of 1969 to require that every employee or volunteer of a day care center authorize and undergo a criminal background check investigation once every five years. HB 3439 establishes a background check program to be administered by the Illinois Department of Early Childhood (IDEC), through which day care centers can hire probationary employees or volunteers after receiving a qualifying result from IDEC. While on probationary status, and until full clearance of the background check, the employee or volunteer must be supervised at all times by a fully qualified and cleared individual.

Next Steps

Employers should carefully review their employment agreements, policies, and practices to ensure compliance with these new requirements. Our lawyers in the Labor, Employment and Workplace Safety practice will continue to monitor for implementing rules, additional amendments, and other updates.

Massachusetts Wage Transparency Act in Effect

The Massachusetts Wage Transparency Act took effect in 2025. Under the law, as of 29 October 2025, Massachusetts employers with 25 or more employees are required to disclose pay ranges in all job postings and to current employees or applicants upon request, including for remote and hybrid roles tied to Massachusetts worksites.

Employers must also submit equal employment opportunity reports to the Secretary of the Commonwealth, and noncompliance can result in escalating penalties, with a two-day grace period to correct violations through October 2027. 

Recommended actions include conducting pay equity audits, updating job postings and descriptions, implementing policies for pay range disclosures and anti-retaliation, and training HR staff and managers on compliance and communication regarding pay transparency. 

For more information, check out our alerts on the law:

• Massachusetts Joins Growing Number of States With a Pay Transparency Law
• What Employers Should Do Before 20 October 2025 to Prepare for Massachusetts’ Pay Transparency Law

Massachusetts Paid Family and Medical Leave Update: Benefit Cap Increase for 2026

For calendar year 2026, the maximum weekly benefit amount available under the Massachusetts Paid Family and Medical Leave¹ program will increase to US$1,230.39. This reflects the annual adjustment tied to the state average weekly wage. 

Contribution rates will remain unchanged for 2026: large employers (those with 25 or more covered individuals) will continue to contribute 0.88% of eligible wages, while small employers will continue to contribute 0.46% of eligible wages. 

Employers should ensure their payroll systems reflect the updated benefit cap while maintaining existing contribution rate calculations for the upcoming year.

Proposed Minimum Wage Increase Legislation

Massachusetts lawmakers continue to consider proposals that would raise the minimum wage beyond US$15.00 per hour, which is the minimum wage in effect since 2023. 

One such proposal, Senate Bill S.1349², would incrementally increase the minimum wage from US$15.00 to US$20.00 per hour by 2029 (with potential indexing thereafter) and would also adjust the tipped minimum wage upward as part of its framework. 

Given these ongoing legislative efforts, employers should monitor potential minimum wage changes throughout 2026 to ensure timely compliance planning and payroll adjustments if a new law is adopted.

Massachusetts Noncompete Update: Litigation Watch List

The body of Massachusetts Noncompetition Agreement Act³ (MNAA) case law continues to develop, especially around what constitutes sufficient consideration under the MNAA.

In 2026, employers should keep an eye on the following pending litigation for potential clarity around this key provision of the MNAA:

Boyd et al. v. The Boston Beer Company, Inc., No. 1:25-cv-13618 (D. Mass. Dec 1, 2025) 

A pending lawsuit has raised questions about what qualifies as adequate “other mutually agreed-upon consideration” under the MNAA. In Boyd et al. v. The Boston Beer Company, Inc.⁴, a recently filed class action, former employees challenge the enforceability of noncompete agreements supported by only US$3,000 in post-employment consideration. In Boyd, the plaintiffs argue that the MNAA should not be read to allow employers to offer as consideration less than it would have to pay as garden leave under the law. Boyd is currently pending in US District Court for the District of Massachusetts. 

Anaplan Parent, LP v. Brennan, No. 2584-CV-02350 (Mass. Super. Ct. Sept. 11, 2025)

Another recent case, which is currently on appeal, addressed who may enforce a noncompete under the MNAA. In Anaplan Parent, LP v. Brennan⁵, the Massachusetts Superior Court denied the plaintiff-parent’s motion for a temporary restraining order and preliminary injunction, finding that, under the MNAA, only the employee’s actual employer—not a parent company or related entity—may sign and enforce a noncompete tied to employment.

The court rejected the plaintiff-parent’s arguments that corporate affiliation permits enforcement, emphasizing the statute’s strict construction. That decision is now on appeal to the Massachusetts Appeals Court.⁶

Though neither case has been finally decided and, once decided, neither case will be binding authority, because MNAA case law is in its early stage of development, employers should audit existing noncompete agreements to assess compliance with the MNAA and assess the potential risk to enforceability based on the arguments made in Boyd and Anaplan Parent LP. Employers should also monitor Boyd and Anaplan Parent for developments in 2026.

The lawyers of our Labor, Employment, and Workplace Safety practice regularly counsel clients on the issues discussed herein and are well-positioned to provide guidance and assistance to clients on these significant developments.

While the HFIAA expands the scope of Section 16(a) to include directors and officers of FPIs for the first time, it does not extend Section 16(a) reporting obligations to shareholders who beneficially own more than 10% of an FPI’s registered equity securities.

Compliance Requirements

As of the 18 March 2026 effective date, directors and officers of FPIs will be required to comply with the following Section 16(a) reporting obligations:

• File an initial ownership report on Form 3 if serving as a director or officer of an FPI as of 18 March 2026;
• File a Form 3 within 10 calendar days of appointment if becoming a director or officer of an FPI after 18 March 2026;
• Ensure timely initial ownership filings in connection with an FPI initial public offering, including filing Form 3 promptly following the effectiveness of the registration statement;
• Report most changes in beneficial ownership on Form 4 within two business days of the transaction, including purchases, sales, grants, or other reportable equity transactions (e.g., equity compensation grants and sales to cover exercise price payments and tax-withholding obligations);
• File an annual Form 5, if applicable, within 45 days after the end of the FPI’s fiscal year to report transactions eligible for deferred reporting or to confirm that no Form 5 filing is required; and
• Obtain and maintain EDGAR Next access credentials in order to make required filings, including completing any necessary onboarding or authorization steps in advance.

Potential SEC Exemptive Relief

HFIAA also authorizes the SEC to exempt, on a conditional or unconditional basis, any person, security, or transaction from these reporting requirements if the SEC determines that the laws of a foreign jurisdiction impose substantially similar disclosure obligations. At this time, there is no guidance regarding how the SEC will evaluate comparability, whether exemptions will be granted on a jurisdiction-wide or class basis, or whether relief will be available only in limited circumstances.

Foreign Private Issuers Remain Exempt from Short Swing Profit Liability

Section 16(b) of the Exchange Act provides for the disgorgement of profits from matching purchases and sales of securities within a six-month period. However, directors and officers of FPIs will remain exempt from Section 16(b) as HFIAA amends only Section 16(a).

Next Steps

Identify Section 16 Officers

Officers subject to Section 16 are defined in Rule 16a-1(f) under the Exchange Act and include the issuer’s president; principal financial officer; principal accounting officer (or, if there is no such accounting officer, the controller); any vice president in charge of a principal business unit, division, or function (such as sales, administration, or finance); any other officer who performs a policy-making function; and any other person who performs similar policy-making functions for the issuer. FPIs should identify which of their officers qualify as officers for Section 16 purposes. In many cases, an FPI’s Section 16 officers will be the same as the officers reported in its annual report on Form 20-F. However, in certain circumstances, differences may exist between an FPI’s Section 16 officers and the officers reported on Form 20-F.

Enroll in EDGAR Next

In order to file Forms 3, 4, and 5, directors and officers must be enrolled in the EDGAR Next reporting system. Companies should therefore identify which officers and directors require enrollment and coordinate with them to complete the process prior to the commencement of Section 16 reporting obligations on 18 March 2026.

Education and Logistics

FPIs should establish internal policies and procedures to ensure that directors and officers make timely Section 16 filings. Directors and officers should also be informed of these obligations, including that all Section 16 reports are publicly available on EDGAR. Although the filing obligations rest with the individuals, issuers and their counsel commonly assist with preparing and submitting the filings, often pursuant to powers of attorney authorizing designated persons to act on a director’s or officer’s behalf. FPIs should therefore implement appropriate procedures, such as obtaining powers of attorney where applicable, and consider providing internal training to educate directors and officers on the reporting requirements and potential consequences.

Insider-Trading Policy

Since directors and officers of FPIs will be subject to Section 16(a), FPIs should review and consider adopting insider-trading policies that mandate internal reporting of trades and support compliance with Section 16(a). This may include instituting pre‑clearance procedures for director and Section 16 officer transactions to help ensure timely filings.

Initial Form 3

Each director and officer of an FPI must file an initial report on 18 March 2026, disclosing all equity securities of the FPI beneficially owned as of that date.

Under the no-action relief, investment advisers launching new private funds offered solely to qualified eligible persons (QEPs) (including qualified purchasers under the Investment Company Act of 1940) do not need to register as CPOs or CTAs and existing CPOs/CTAs may withdraw from registration, subject to the conditions outlined below. Investment advisers that currently rely on other exemptions from CPO registration may be able to avail themselves of the no-action relief instead. For example, investment advisers that manage private funds pursuant to the “de minimis” exemption from CPO registration under CFTC Regulation 4.13(a)(3) may decide to rely on the QEP Exemption relief to avoid the need to monitor compliance with the de minimis threshold or to enhance these funds’ use of futures and swaps without any restrictions. As noted below, Staff will not require a registered CPO that determines to rely on the relief to offer investors a right of redemption, making reliance on the relief all the more attractive. 

The relief will be a welcome change for many sponsors of 3(c)(7) funds, but the relief is only available to investment advisers registered with the Securities and Exchange Commission (SEC) who file Form PF.  As a result, the relief will not be available to exempt reporting advisers or to smaller SEC-registered investment advisers (i.e., those that do not file Form PF). 

The conditions of the relief include: 

• The person is currently or would be required to register as a CPO with the CFTC or relies on other registration relief in CFTC Regulation 4.13;
• The person is registered with the SEC as an investment adviser;
• Interests of the relevant pool are exempt from registration under the Securities Act of 1933 and sold without marketing to the public in the U.S. (unless the pool is offered pursuant to Rule 506(c));
• The person reasonably believes that each investor meets the QEP definition pursuant to CFTC Regulation 4.7(a)(6), either at the time of the investment or at the time the person relies on the no-action relief; 
• The person files Form PF with respect to the pools covered by the no-action relief and the CFTC receives Form PF; and 
• The person complies with parts of Regulation 4.13(b), except for the notice filing requirement and the timing requirement for such notices. The person must submit a notice filing to Staff via email at mpdnoaction@cftc.gov and annually affirm that it qualifies for the relief.

Notably, CPOs that avail themselves of the no-action relief are not required to provide a right of redemption to investors in the relevant pool. 

We acknowledge the contributions to this publication from our associate Martina Sandoval Iriarte.

Artificial intelligence (AI) and machine learning has developed rapidly over the past few years and its usage has also increased exponentially. Businesses are now more ready to tap these modern technologies with the view to augment existing processes and automate mechanical tasks.

In Singapore, the Economic Development Board has supported this shift in line with goals for Singapore to be a heavily AI-powered economy. However, the use of AI in functions that had traditionally required human input could raise various practical concerns, including that of potential discrimination. In Singapore, these concerns are particularly pertinent in the employment law context with the passing of the Workplace Fairness Act 2025 (WFA), which codifies the requirement that employers make employment decisions fairly and without engaging in discriminatory behaviour. To ensure compliance with the WFA, Singapore employers must ensure that they take steps to mitigate against the risks posed by AI before deploying AI in its employment decision processes.

This article provides an overview of the discrimination concerns posed by AI recruitment tools and highlights why Singapore employers looking to deploy AI in their recruitment or employment decision-making processes should only do so with the requirements under the WFA in mind. The article also discusses some safeguards that Singapore employers can consider implementing to strengthen their compliance with the WFA.

Problems with AI

Under Singapore law, there is no statutory definition for “artificial intelligence”. However, AI can generally be understood as any combination of machine capability aimed at approximating some aspect of human autonomous cognition.

One common difficulty with most current AI tools is the lack of transparency of what goes on between an input and an output—this is because the internal workings of a system are usually not fully traceable, hence making the system somewhat of a black box and making it difficult to explain with a measure of specificity how the output was derived.

Modern AI systems are largely trained on large data sets, and an AI system’s ultimate output is typically generated based on weightings and predictions that the system self-develops. While it is possible for developers to implement rules and provide a lawful objective for an AI system, flaws observed in existing AI systems have included the AI system employing a potentially “unlawful” approach to generating outputs. An AI developer will often not even be able to fully pinpoint how a system will actually generate an output for particular inputs.

Connected to the abovementioned “explainability” issue is the issue of discrimination by AI. While AI developers would typically try to implement rules for a system to avoid discriminatory behaviour, the difficulties in proving and tracing the exact weightings leading to an output can make it more difficult to prevent inadvertent discrimination. While computers and machine learning are not on their own discriminatory, they are trained on data sets that may contain hidden biases. When the algorithms of an AI system engage in machine learning, they develop their own processing patterns, which may inadvertently reinforce biases contained in historical datasets. For example, consider an AI system built to filter job candidate resumes for a software engineer role that is trained on resumes of existing software engineers, and assume that individuals comprising the pool of existing software engineers coincidentally comprises largely of males. An AI system may then interpret from the data that successful candidates are those with key phrases in their resume that happen to be more common for male applicants (e.g., boys’ swim team or boys’ school) and apply this as a criteria to identify individuals who are “suitable” candidates. This would mean that female candidates who do not have those key phrases more common for the male gender in their resumes may be filtered out, which would clearly be discriminatory. Care is needed when deploying AI tools to ensure this kind of inadvertent discrimination does not occur.

WFA

Businesses looking to introduce AI in their processes often start out with implementing AI into their human resource functions and while there have not been any publicly reported cases of such uses in Singapore, globally the deployment of AI in recruitment functions such as candidate resume sorting is becoming more common. In other jurisdictions, this process has involved AI models being trained to review and filter current job applicant resumes by observing patterns in resumes of historically successful job applicants and identifying current job applicants that are likely to be successful based on those patterns—similar to the example provided above.

The WFA, which has been passed into legislation by Parliament but which is only expected to commence in 2026 or 2027, provides that it would generally be discriminatory for an employer to make an employment decision that adversely affects an individual on the ground of a protected characteristic. “Employment decisions” are statutorily defined as covering all decisions made by an employer during the hiring, employment and dismissal or termination stages of an employee’s employment. Meanwhile, “protected characteristics” in the WFA refer to the following:

1. Age
2. Nationality
3. Sex
4. Marital status
5. Pregnancy
6. Caregiving responsibilities
7. Race
8. Religion
9. Language ability
10. Disability
11. Mental health condition

Where discrimination is made out under the WFA, it would be for an employer to show that there was no discrimination or that one of the statutory exceptions apply. This means that the obligation to eliminate bias in employment decisions and prove the absence of bias has now been codified into law. Previously, there was no such legal obligation and the requirement that employers make employment decisions fairly was only set out in the Tripartite Guidelines on Fair Employment Practices, which does not have force of law and instead operates on a “comply-or-explain” basis.

Under the WFA, employers using AI in their employment processes would need to ensure that their AI system produces outputs that are traceable and that can be proofed and sufficiently checked by the employer before any employment decision is taken. Too much dependance on an AI model in employment decisions could cause issues for employers in light of the potential for unexplained reasoning and discriminatory outcomes as outlined above. As the WFA makes it the responsibility of an employer to ensure the fairness of an employment decision regardless of the tools or methods deployed in arriving at such decision, the use of AI in employment processes must be approached with caution and (at this stage) the ultimate decision should still involve human oversight or review, and the AI system should merely serve as a guide for the ultimate human decision makers to consider in their decision making process.

What We Can Do to Assist

We can assist with reviewing the use of proposed AI tools employers may be looking to test or deploy in their Singapore recruitment processes, and advise on safeguards and best practices employers should implement to ensure compliance with the WFA ahead of its commencement.

On 4 December 2025, the European Commission published proposals for the further development of capital market integration and supervision within the European Union. The proposals include, among other things, a so-called master amending directive concerning the Alternative Investment Fund Managers (AIFM) Directive, Undertakings for Collective Investment in Transferable Securities (UCITS) Directive, and Markets in Financial Instruments Directive (MiFID) II, as well as a master amending regulation concerning a variety of EU regulations (including the Markets in Financial Instruments Regulation (MiFIR). An overarching goal is stronger EU harmonization, which will be achieved, for example, by shifting rules from directives to regulations, new delegated acts, and more powers for the European Securities and Markets Authority (ESMA).

One of the main focuses of capital market integration concerns the cross-border distribution of funds. The EU distribution passport will be abolished in its current form. Cross-border distribution is to be more closely linked to product approval and will take place via an EU data platform of ESMA. This is intended to avoid potential obstacles from the authorities of the member states. The premarketing and de-notification rules will also be simplified. In particular, the 18- and 36-month blocking periods for possible future fund distribution will be eliminated. The notification process for the manager’s passport will be accelerated (shortening deadlines). Further facilitations concern the transfer of management functions to regulated group companies. In the future, this will no longer be subject to outsourcing requirements.

The authorization procedures for funds are to be further harmonized. In addition, the granting of permission to provide ancillary services will be facilitated. Finally, an EU passport for depositaries will also be introduced such that, in the future, depositaries from other member states can also be appointed for alternative investment funds (AIFs). At the UCITS product level, the investment limits for investments in simple, transparent, and standardized securitizations and the issuer limits for index-tracking UCITS will be increased.

The European Commission’s proposals will now enter the legislative process and be further negotiated with the European Parliament and the European Council.

Pension Reform Act 2025: ELTIFs as a Key Investment Instrument

The draft of the Pension Reform Act 2025 for the first time systematically brings European Long-Term Investment Funds (ELTIFs) into focus for private retirement provision. They shall be expressly recognized as permissible investment vehicles for the new return-driven pension scheme. At the same time, the draft takes up the expanded scope of the ELTIF Regulation 2023/606: This includes broader asset allocation, easier access for retail investors, and more flexible redemption rules, making ELTIFs regulatorily attractive for the mass market.

The draft is currently in the early parliamentary process as a ministerial draft. Final adoption is planned for the coming months. The new pension system deliberately lacks a capital guarantee, positioning ELTIFs as long-term return components with accepted illiquidity. For fund providers and asset managers, this opens up new sales channels via pension custody accounts, greater attractiveness of semi-liquid structures, economies of scale with standardized products, and increased importance of cost control, transparency, and reporting. 

Outsourcing to Cloud Providers: BaFin Applies ESMA Guidelines on Outsourcing to Cloud Providers

On 1 December 2025, the Federal Financial Supervisory Authority (BaFin) announced that it will apply the guidelines of ESMA on outsourcing to cloud providers, dated 30 September 2025. These provide guidance, in particular, on identifying, managing, and monitoring risks associated with outsourcing to cloud providers. 

As early as 2021, ESMA had published guidelines addressed to institutions active in the financial market. However, these are now regulated by the Digital Operational Resilience Act (DORA). 

The guidelines published in September 2025 now only apply to depositaries of AIFs that are not financial institutions and are not subject to DORA.

Influence of Investors on the Management of Investment Funds

In March 2025, BaFin submitted a “Guidance Note on the Influence of Investors on Investments and Divestments of Investment Funds” for consultation. The draft provided for significant restrictions regarding the extent of regulatory permissible influence of individual investors or investor groups (in particular regarding the issuance of instructions, veto rights, and consent requirements), as well as extensive documentation obligations for the involved management companies. After profound legal concerns were raised against the draft, it is now reported that BaFin will no longer pursue the issuance of the guidance note.

Already in July 2025, the Federal Fiscal Court (Bundesfinanzhof, BFH) in a decision (VIII R 18/22) determined for the purposes of the Investment Tax Act (Investmentsteuergesetz, InvStG) of 2004 that the definition of “investment funds” in section§ 1, sentence 2, of the Investment Act (Investmentgesetz, InvG), which applied until 21 July 2013, does not require external management in a way that the asset management by the fund manager must be shielded from any influence by the investors. In the context of the Capital Investment Code (Kapitalanlagegesetzbuch, KAGB), however, it should also be noted that according to the “Guidelines on Key Concepts of the AIFMD” of ESMA, dated 13 August 2013 (ESMA/2013/611), a collective investment undertaking is, in case of doubt, not given if the investors—as a group—have extensive ongoing discretionary or control powers over operational matters relating to the day-to-day management of the undertaking’s assets. 

Simplifications Regarding the Holder Control Procedure

Due to an amendment to the Regulation on Notifications under section 2c of the German Banking Act and section 17 of the Insurance Supervision Act (Inhaberkontrollverordnung) (InhKontrollV), certain simplifications for the holder control procedures that must be followed—in particular when acquiring, changing, or giving up a significant holding in credit institutions, financial services institutions, and insurance companies—are in effect as of 25 November 2025. In May 2025, BaFin had submitted a draft “Regulation on the Simplification of Holder Control Procedures and Certain Personal Notifications” for consultation. 

The simplifications particularly concern documents and declarations that have previously been submitted by the notifier; even if these are more than two years old, they do not have to be resubmitted if they are still valid and are still available to BaFin (or the competent state supervisory authority to which they were previously submitted for another reason) (§ 16 para. 1 InhKontrollV, new version). Further simplifications concern the obligation to submit declarations and documents on reliability (§ 9 InhKontrollV) and CVs (§ 10 InhKontrollV) in multilevel ownership structures. Companies in the middle layers of a group only have to submit the relevant declarations and documents if BaFin expressly requests them (§ 18 para. 7 InhKontrollV, new version); for companies at the top of the group, BaFin may waive the submission requirement (§ 18 para. 8 InhKontrollV, new version). Of particular importance for foreign parties is the simplified recognition of foreign certificates of good conduct or equivalent documents (§ 9 para. 8 InhKontrollV, new version). 

Resolution of the European Parliament on Artificial Intelligence in the Financial Sector

On 25 November 2025, the European Parliament adopted a resolution on the impact of artificial intelligence (AI) on the financial sector. The resolution also provides an overview of how AI is changing the EU financial sector. It is noted that AI is widespread, especially in back-office tasks, but its use in high-risk areas such as credit assessment and risk assessment in insurance is increasing. The European Parliament highlights both the opportunities—such as improved fraud detection and customer service—and the risks, including issues with data quality, discrimination, and data protection concerns. The European Parliament emphasizes the need for human oversight of AI systems and calls for robust data governance and clear regulatory guidelines.

The European Parliament calls on the European Commission to provide clear and practical guidelines to avoid regulatory overlaps and to support responsible AI innovation while maintaining strong consumer protection. 

ASIC Issues Fines for Misleading Sustainability Claims 

On 6 November 2025, the Australian Securities and Investments Commission (ASIC) announced enforcement actions against two major superannuation funds, for alleged greenwashing in their investment portfolios. 

One superannuation trustee was fined AU$37,560 after ASIC alleged advertisements on search platforms between April 2021 and December 2024 overstated the trustee’s commitment to eliminating carbon emissions. ASIC alleged the trustee contravened section 12DB(1)(a) of the ASIC Act because the statements represented that the trustee had a commitment to remove "all" investment in carbon emissions, however the trustee had no basis to make the representation, as it did not have a commitment during the relevant period to remove all investments in carbon emissions by 2050, rather only a target of net zero scope 1 and 2 carbon emissions across its investment portfolio, by 2050. ASIC Deputy Chair Sarah Court noted that such representations may have denied consumers the opportunity to make informed decisions regarding their superannuation provider. 

The other superannuation trustee was penalised AU$18,780 in relation to alleged misleading statements published in its 2023 Annual Report. The report stated, among other things, that manufacturers of tobacco products were “excluded entirely” from its investment strategy. ASIC considered this to be a representation that the trustee excluded all investments in manufacturers of tobacco products from the fund's portfolio. However, contrary to this representation, during certain periods, the trustee held investments in tobacco manufacturers indirectly through its international fixed income portfolio.

These actions form part of ASIC's broader regulatory campaign targeting greenwashing and misleading sustainability claims across the superannuation and financial services sector. 

ASX Proposes Amendments to Listing Rules in Response to Mandatory Sustainability Reporting

On 31 October 2025, the Australian Securities Exchange (ASX) released Compliance Update no. 12/25, announcing the release of a consultation paper on proposed amendments to ASX Listing Rule 17.5 following recent changes to the Corporations Act 2001 (Cth). The Corporations Act now requires mandatory annual sustainability reporting for certain listed entities, potentially expanding the scope of Listing Rule 17.5 to include suspension of the listed entity's securities for late lodgement of sustainability reports.

The ASX seeks to maintain the current approach, whereby mandatory suspension under Listing Rule 17.5 will only apply if an entity fails to lodge its annual directors’ report, statutory financial report, or auditor’s report by the due date. Late submission of sustainability reports would not trigger automatic suspension, preserving market stability while ensuring compliance with new statutory requirements. As such, a listed entity's failure to lodge a sustainability report on time will not automatically suspend trading in that entity's securities, but it will still be a breach of the Corporations Act and ASX rules.

Entities required to prepare sustainability reports must lodge them by the statutory due date for annual reporting documents under the Corporations Act and ASX Listing Rules.

CSIRO Releases Australian Carbon Dioxide Removal Roadmap

On 6 November 2025, Australia’s Commonwealth Scientific and Industrial Research Organisation (CSIRO) unveiled a roadmap to achieving large-scale carbon dioxide removal (CDR) by 2050 (Roadmap). The Roadmap outlines strategies to remove up to 330 megatonnes (Mt) of CO² annually, exceeding the 133–200 Mt required to meet Australia’s Paris-aligned net zero targets. This initiative aims to address residual emissions from hard-to-abate sectors. 

The Roadmap highlights emerging and novel technologies such as direct air capture, biomass carbon removal and storage, ocean alkalinity enhancement, and 'enhanced rock weathering' i.e. using silicate rocks to accelerate chemical reactions to absorb CO². These methods leverage Australia’s unique geographic and resource advantages, including vast mineral deposits and renewable energy potential.

Economic and infrastructure challenges remain, with the Roadmap acknowledging the high costs for novel CDR technologies. However, international pilot projects are demonstrating feasibility and cost-reduction pathways. Strategic development of the CDR sector could open export opportunities through carbon credit generation, diversifying Australia’s economy and strengthening trade ties. 

The Roadmap underscores the need for coordinated investment, regulatory frameworks, and community engagement, particularly with indigenous organisations.

Australia and Canada Sign Joint Declaration of Intent on Critical Minerals Collaboration

On 1 November 2025, Canada and Australia signed a landmark Joint Declaration of Intent (JDI) to enhance collaboration in the critical minerals sector. The JDI outlines key objectives, including strengthening cooperation across the critical minerals value chain, facilitating public investments in mutually beneficial projects, and fostering commercial partnerships and research collaborations. It also aims to address policy challenges faced by producer nations and ensure that emerging standards-based markets account for the unique challenges of high-standard critical minerals producers like Canada and Australia. 

This partnership is expected to bolster supply chain resilience, promote sustainable practices, and support the development of advanced technologies for processing, refining, and recycling critical minerals. Both nations have committed to sharing best practices on environmental, social, and governance (ESG) standards, traceability, and permitting processes, further aligning their sustainability goals. 

The collaboration is intended to be a step towards securing and diversifying global critical minerals supply chains, which are essential for defence applications, clean energy technologies, and advanced manufacturing. Implementation of the JDI will commence with a ministerial meeting within six months, followed by annual reviews to monitor progress and establish concrete work plans.

Australian Human Rights Commission Recommends Civil Penalties for Breaches of the Positive Duty to Eliminate Sexual Harassment

The Australian Human Rights Commission (AHRC) released its Speaking from Experience Report (Report) in June 2025, which made 11 recommendations to address workplace sexual harassment. The target areas of the recommendations are:

• Information;
• Safety within the workplace;
• Victim-survivors being heard;
• Access to support after being harassed; and
• Justice and accountability.

As part of the Report's justice and accountability recommendations, the AHRC recommended the introduction of civil penalties for employers or persons conducting a business or undertaking (PCBUs), as defined in the Sex Discrimination Act 1984 (Cth), for failing to meet their positive duty to prevent sexual harassment in the workplace. 

This positive duty was introduced in December 2022, requiring PCBUs and employers to take reasonable and proportionate steps to eliminate discrimination on the grounds of sex in a work context, sexual harassment in connection with work, sex-based harassment in connection with work, conduct that creates a workplace environment that is hostile on the ground of sex, and related acts of victimisation.

Anti-Slavery Commissioner Releases 2025-2028 Strategic Plan

On 22 October 2025, the Anti-Slavery Commissioner released its Strategic Plan for 2025-2028, setting the direction for Australia's response to modern slavery. The plan is built around four interconnected priorities, each with clear objectives and initiatives. Those key priorities are:

• Focus on survivors and people with lived experiences: Ensuring that people with lived experience of modern slavery are at the heart of policy, service design, and leadership, with a focus on survivor-led approaches and accessible support.
• Strengthen law and policy: Advocating for more robust legal and policy frameworks, including reforms to the Modern Slavery Act 2018 (Cth) and improved coordination across government, to better prevent and address modern slavery.
• Promote due diligence in business and government: Supporting and encouraging organisations to identify and address modern slavery risks in their operations and supply chains, with an emphasis on effective due diligence and stronger procurement practices.
• Improve access to justice and remedies: Advancing proactive, evidence-based approaches to identify victims, strengthen criminal justice responses, and ensure survivors can access meaningful remedies and support.

VIEWS FROM ABROAD

New Zealand Government Announces Reforms to Its Climate Related Disclosure Regime

On 22 October 2025, the New Zealand Government announced reforms to its mandatory climate related disclosure (CRD) regime. The rationale for the reform, viewed as a "commonsense change" by Commerce and Consumer Affairs Minister Scott Simpson, includes to reduce the costs and burdens of compliance on listed issuers, to reinvigorate capital markets, and to remove CRD obligations as a deterrent to New Zealand's Exchange listings. 

Climate Reporting Entities (CREs) with 30 June 2025 balance dates are still required to lodge statements by 31 October 2025.

Key changes to the New Zealand climate reporting regime, include, amongst others:

• Higher reporting threshold: An increase to the mandatory climate reporting threshold for listed issuers, from NZ$60 million market capitalisation to NZ$1 billion. Entities below this threshold may consider continuing to report on a voluntary basis.
• Removal of managed investment schemes (MIS): MISs are no longer required to report, reflecting feedback consultation from fund managers and investors that disclosures were not useful or meaningful for investment decisions in products.
• Reduced liability of directors: Directors are no longer deemed personally liable for entity breaches or unsubstantiated representations in climate related statements.
• Flexibility in threshold: Monetary reporting thresholds for CRD regime may be raised by Order in Council. 

Legislation introduced by the Financial Markets Conduct Amendment Bill 2025 (NZ) is expected to come into effect in 2026.

New Zealand's Financial Markets Authority has advised it will grant an interim exemption and "no action" relief from reporting requirements to all CREs affected by the proposed changes, which are expected to amend current reporting obligations. The "no action" to breach approach will begin from 1 November 2025 and applies to failed preparation, lodgement, or any other obligation under Part 7A of the Financial Markets Conduct Act 2013 (NZ).

It will be interesting to see if such reforms are adopted by comparable jurisdictions.

US Supreme Court Has Been Requested to Halt California's Climate Reporting Laws

On 14 November 2025, several business groups, led by the US Chamber of Commerce and other major corporations, petitioned the US Supreme Court to halt the implementation of California’s new corporate climate disclosure laws while ongoing litigation is resolved. These laws represent one of the most ambitious state-level transparency regimes in the US, requiring thousands of companies to publicly report greenhouse gas emissions and disclose climate-related financial risks from early 2026.

The laws mandate annual emissions reporting for companies with over US$1 billion in revenue, covering both direct and indirect emissions across the value chain and require biennial disclosures of material financial risks from climate change for companies earning more than US$500 million. The US Chamber of Commerce estimates that these requirements could affect an estimated 5,000 companies operating in the state. Both measures include civil penalties for non-compliance.

Petitioners contend that the laws compel speech in breach of the First Amendment and risk distorting public discourse, warning of irreparable harm if the requirements take effect before legal challenges are resolved. The State of California government argues that the mandates fall within its authority to regulate commercial disclosures, with state counsel highlighting the policy objectives of transparency and climate action.

The outcome of this Supreme Court petition may have ongoing implications for the standards for climate-risk reporting elsewhere within the United States.

The authors would like to thank graduate Eboni Sydes and seasonal clerk Sophie Mossenson for their contributions to this alert.

Existing whistleblower statutes

Employees who raise concerns about AI use in clinical labs and diagnostics may be protected by the following laws²: 

The Occupational Safety and Health Act

Employees who report that AI tools are creating an unsafe work condition or jeopardize patient safety may be protected under the Occupational Safety and Health Act (OSH Act), which requires employers to maintain safe working conditions for their employees.³ For example, a lab technician who reports that an AI-driven diagnostic tool put a patient’s safety at risk because it produced inaccurate cancer test results may be afforded protection under the OSH Act. Failure to properly handle such reports can trigger Occupational Safety and Health Administration investigations, citations, and penalties. 

The Health Insurance Portability and Accountability Act 

Employees who report that AI tools are mishandling protected health information (PHI) may be protected under the Health Insurance Portability and Accountability Act (HIPAA). AI systems that access, process, or generate PHI must comply with HIPAA’s Privacy and Security Rules, which prohibit the use and disclosure of PHI without patient authorization, except for treatment, payment, or healthcare operations. Failure to properly handle such reports can result in privacy-related lawsuits and investigations by the Office for Civil Rights. For example, a case pending in the US District Court for the Northern District of California, San Francisco, Sloan v. Verily Life Sciences LLC,⁴ concerns a former executive who is alleging that his employer retaliated against him after he reported HIPAA breaches involving unauthorized use of patient data by AI systems. 

The False Claims Act

Employees who report that AI tools are misclassifying tests and thereby generating fraudulent bills to Medicare or Medicaid may be protected under the False Claims Act (FCA).⁵ The FCA imposes liability on any person who submits a false or fraudulent claim for payment to the federal government. For example, if an AI diagnostic test misclassifies normal results as “abnormal,” this error could cause the provider to order additional tests that are not medically necessary and bill the unnecessary tests to Medicare, which could constitute a false claim under the FCA. Failure to properly handle such FCA reports may lead to monetary penalties.

State Whistleblower Statutes

Finally, many state laws also protect employees who report legal violations or public health risks associated with AI use. The Trump administration’s recent Executive Order, Ensuring a National Policy Framework for Artificial Intelligence, aims to establish a national AI policy framework and preempt conflicting state AI laws.⁶ Employers should maintain compliance with current state mandates while monitoring federal guidance and litigation.

Proposed AI Whistleblower Statute

Congress is considering the bipartisan AI Whistleblower Protection Act (S.1792, H.R.3460), which was introduced on 15 May 2025, by Senators Chuck Grassley (R-IA) and Chris Coons (D-DE) in the Senate and Representatives Jay Obernolte (R-CA) and Ted Lieu (D-CA) in the House of Representatives. The bills were referred to the Senate Health, Education, Labor and Pension and House Energy and Commerce Committees, each with at least one cosponsor on the committee of jurisdiction, which increases the likelihood of committee consideration. Various whistleblower and AI groups have voiced their support for the bills, including the National Whistleblower Center,⁷ the Center for Democracy and Technology, and the Government Accountability Project. While the proposed legislation is not limited to the healthcare industry, the bill would make it illegal to retaliate against current and former employees and independent contractors who report AI security vulnerabilities or violations, including those that create risks to patient safety, data privacy, or regulatory compliance. 

Best Practices

Healthcare employers are at the intersection of AI innovation and increasing regulatory oversight. As AI continues to reshape healthcare diagnostics, whistleblower protections will likely expand, both legislatively and through enforcement. Proactively preventing retaliation claims can reduce legal risk and strengthen employee trust in AI-related changes.

Best practices include: 

Develop Reporting Policies and Retaliation Protections

Maintain up-to-date policies on reporting AI-related errors, including policies for protections against retaliation.

Create Robust Reporting Channels

Establish internal systems for employees to raise concerns about AI tools confidentially, with documented investigation protocols.

Maintain Clear AI Governance Policies

Define how AI tools are implemented, validated, and monitored. Establish clear frameworks for accountability, transparency, fairness, and safety. Assign responsibility for quality assurance and compliance.

Train Supervisors and Managers

Educate leaders on how to respond appropriately to complaints, emphasizing nonretaliation obligations under federal and state law. 

Audit Vendor Contracts

Ensure contracts with AI providers include compliance, quality control, and liability-sharing provisions.

Document Corrective Actions

When issues are raised, record all investigations and remediation efforts to demonstrate good faith compliance.

Risk Management

Conduct regular audits, risk assessments, and bias testing of AI systems. Monitor performance and address issues promptly. Organizations must conduct regular risk assessments, vulnerability scanning, and penetration testing for AI systems. Technical safeguards include encryption, access controls, and data anonymization.

Our Labor, Employment, and Workplace Safety lawyers regularly counsel clients on a wide variety of topics related to emerging issues in labor, employment, and workplace safety law, and they are well-positioned to provide guidance and assistance to clients on AI developments.

The study is the preeminent examination of M&A transactions, utilized internationally by practitioners, investment bankers, corporate development teams, and other advisors. It examines the prevalence of specified provisions in publicly available private target M&A transactions. The transactions analyzed in the 2025 Private Target Deal Points Study were in the middle market, with purchase prices ranging between US$25 million and US$900 million; purchase prices for a majority of deals in the data pool were below US$200 million.

Although the 139 deals in the 2025 study reflect a broad swath of industries, technology and healthcare together made up over 20% of the deals. Deals structured as purchases of substantially all of the target’s assets comprised 21% of the study sample, with the remainder consisting of either equity purchases or mergers.

Of the study sample, 42 deals signed and closed simultaneously, whereas the remaining 97 deals had a deferred closing some time after execution of the definitive acquisition agreement.

The 2025 study contains some additional data points not included in prior iterations. Look for the “new data” flags to easily spot the new material, which includes:

• Transaction Expenses as part of Post-Closing Adjustment. The 2025 study tracks how often transaction expenses are taken into account in the post-closing purchase price adjustments.   
• Existing Fact or Condition as part of MAE definition. The 2025 study reflects how often deals that include the definition of material adverse effect (MAE) specify that a fact or condition existing at the time of signing the acquisition agreement could constitute an MAE.  
• Control of Defense of Third-Party Claims – Failure to Adequately Defend and Government Authority Involvement. The 2025 study has a data point on how often the failure or inability to adequately defend a claim could result in a loss of the indemnifying party’s right to control defense of that claim. The 2025 study also adds a similar data point on claims involving government regulatory authority. 
• Fraud as a Stand-Alone Indemnity. The 2025 study tracks how often fraud is included in purchase agreements as a stand-alone indemnity.

The 2025 study also contains refreshed data points presented in prior iterations; notable updates include the following:

• Earnouts: Earnouts became less prevalent and displayed some buyer-friendly features. The use of earnouts declined from 26% during the period covered by the 2023 study to 18% during the period covered by the 2025 study). Earnouts are often used to address valuation gaps, and this data point suggests those gaps narrowed somewhat during the period covered by the 2025 study.
• Representations and Warranties Insurance (RWI): The use of RWI increased compared to the prior study: 63% of deals in the 2025 study referenced RWI (our proxy for whether a transaction utilized RWI) as compared to 55% in the 2023 study.  
• No Survival Deals: Deals that provide representations and warranties do not survive closing increased from 30% in the prior study to 41%. This increase is likely related to the increase in RWI deals.
• Indemnification for Actual vs. Alleged Breaches: Indemnity coverage for alleged breaches increased from 17% from to 27% in this year’s study; this appears to also be driven by an increase in RWI deals.
• Single vs. Double Materiality Scrape: The use of double materiality scrapes increased from 69% in the prior study to 82%. Again, this increase appears to be related to the increase in the use of RWI.

Please join us in extending a huge thank you to everyone who worked so hard on this study—from leadership and advisors to issue group leaders and working groups—all of whom are recognized in the credits pages.

For more information, there will be an In the Know webinar with the ABA’s chairs and issue group leaders providing analysis and key takeaways from the results of the 2025 Private Target M&A Deal Points Study—watch for details on time and date from the ABA.

To learn more about the study or receive a copy, please contact Jessica Pearlman.

In litigation, everything comes down to evidence—what you can prove, what you can verify, and what holds up under scrutiny. The same principle now applies to artificial intelligence (AI) adoption in legal practice. The critical questions are not about whether outside counsel use AI, but how they measure its value, whether their lawyers have mastered the necessary skills, and whether they can collaborate with you through AI-powered workflows.

Beyond Hours Saved: Building a Multidimensional Value Case

The 2025 Legal Industry Report surveyed over 2,800 legal professionals and found that individual lawyer use of generative AI increased from 27% in 2023 to 31% in 2024. Yet many corporate legal departments report that when they ask outside counsel about AI capabilities, the conversation focuses on tools rather than outcomes.¹ 

The key question is whether AI creates measurable value across multiple dimensions. Time savings alone does not tell the full story. Consider cycle time—not just task duration but how quickly work moves through completion and review. AI that compresses both execution and review cycles fundamentally changes matter velocity. Then there is adoption velocity: Is the solution used consistently across the team? Can the approach scale from securities litigation to commercial disputes? Quality metrics—error rates, revision cycles, client feedback—tell you whether efficiency comes at quality's expense. And finally, how is any time savings applied to enhance services to the client, and can this be quantified? 

The firms that differentiate themselves are not just deploying AI; they are building evidence across this spectrum. Not “we saved 1,000 hours last quarter” but “our discovery response cycle time decreased 60%, lawyer adoption reached 85%, the approach scaled across four practice groups, client satisfaction scores increased 15 points, and with the reduction in time we were able to offer guidance on a future product development roadmap.” This multidimensional proof transforms AI from a technology story into a business value story.

Why Validation is the New Core Competency

The 2025 Legal Industry Report found that 77% of lawyers using AI deploy it for legal research, with 82% reporting increased efficiency.² Research from Ari Kaplan Advisors found litigation professionals saying “[t]he days of first-year or junior associates conducting transcript analysis are over, and this type of work is best suited to generative AI.”³ This isn't about replacing lawyers—it's fundamentally changing what lawyers spend their time doing.

For junior lawyers, developing expertise when AI handles foundational work requires new capabilities: systematic citation verification to catch hallucinations, prompting AI to generate alternative positions, analyzing AI summaries to identify what was missed, and comparing outputs against internal guidelines to ensure consistency. These validation skills build judgment through rigorous quality control.

For all lawyers, the challenge is developing critical thinking about what AI tools are good at and where they fail. Understanding which tasks benefit from AI assistance and which call for human judgment requires experimentation and the discipline to deploy freed time toward strategic thinking rather than simply handling more volume.

The ABA Model Rules require lawyers to maintain technological competence, including understanding of AI tools.⁴ But competence is not just knowing how to use AI—it is developing critical thinking about tools’ effectiveness, knowing how to verify outputs, challenging assumptions, and improving upon AI-generated work.

Strategic Value: Beyond Efficiency to Partnership

Forward-thinking litigation practices are using AI in two complementary ways: providing better strategic intelligence internally and collaborating more effectively with clients.

On the intelligence side, litigation practices are leveraging AI to analyze their own institutional knowledge across departments or groups at scale.⁵ This means mining years of matter data to identify patterns in case outcomes, analyzing advice given across similar matters, extracting fees and settlement data to improve early case assessment, and combining internal experience with external knowledge about judges and opposing counsel to provide more informed strategic guidance.⁶ This institutional intelligence becomes a competitive advantage.

On the collaboration side, firms and clients are developing interoperability models where legal teams and client stakeholders establish joint workflows and solutions.⁷ Some litigation practices are creating matter-specific digital workspaces where all critical evidence, key documents, and strategic analysis exist in one AI-enabled environment accessible to both teams.⁸ Instead of providing segmented advice on individual matters, these models allow firms to save time on routine tasks, establish workflows across matters, and use their expertise to advise an enterprise more holistically.⁹ 

The strategic value comes from combining both approaches. When firms can bring institutional intelligence to early case assessment—showing clients what similar matters actually cost, timeframe, and what strategies proved effective—while simultaneously incorporating collaborative tools throughout the matter, the relationship transforms.¹⁰ 

Nearly half of general counsel now express a preference for working with law firms that use AI, with many general counsels citing the use of appropriate technologies as a criterion when selecting external legal partners.¹¹ For in-house counsel evaluating litigation counsel, the questions become: Can you bring institutional intelligence from your prior matters to inform our strategy and planning? Can we work together using AI-powered tools that keep us connected to case development? 

The Verdict

Whether documenting results, building capabilities, or creating strategic advantage, successful AI adoption in litigation shares a common trait: the ability to generate evidence of value. The firms that can show their work—with metrics demonstrating how AI-powered workflows deliver better outcomes, how their training ensures quality does not suffer, and how their strategic use of AI provides competitive advantage—are not just more efficient, they are positioning themselves as litigation partners who bring valuable capabilities worthy of a long-term relationship.

The new Guidance sets out six scenarios where the SFO may assess a compliance programme. A key addition is where an organisation will have a defence of ‘reasonable procedures’ for the purposes of the failure to prevent fraud offence under s.199 of the Economic Crime and Corporate Transparency Act 2023 (ECCTA). A significant portion of the Guidance focuses on the ECCTA defence, which is discussed in detail below. 

The Guidance also touches on the circumstances when a monitor may be appointed as part of a deferred prosecution agreement (DPA).

When Might Evaluation be Necessary 

The SFO has set out six scenarios specifying when a compliance programme may be assessed. These mostly build on the previous edition of the Guidance and introduce an ECCTA-based scenario. The scenarios arise in the following circumstances: 

• When deciding whether an organisation should be prosecuted.
• When considering whether to enter into a DPA, and if so, whether it should encompass compliance terms or a monitorship.
• When an organisation charged with failure to prevent bribery under s.9 Bribery Act 2010 has a defence of ‘adequate procedures’.
• When an organisation charged with failure to prevent fraud under s.199 ECCTA 2023 has a defence of ‘reasonable procedures’.
• When determining whether the existence and nature of a programme could constitute a relevant factor for the purposes of sentencing.

How the Defence to s.199 ECCTA Offence Fits into the Regulatory Framework

The offence of failure to prevent fraud came into effect in September 2025, which in turn brought in the defence of having reasonable procedures to prevent fraud. It is also a defence under ECCTA to show it was reasonable to not have any procedures in place at all. This is in contrast to the Bribery Act, which requires adequate procedures in all circumstances. Organisations relying on the defence will have the burden of proving the existence of the procedures or the lack of need for them.

The SFO will assess the effectiveness of the procedures rather than the fact there is a compliance programme in place, indicating that the control measures aimed at preventing fraud will be at the forefront of their investigation. 

The Guidance sets out six principles, which should inform the preventive procedures. They are similar to those accompanying the failure to prevent bribery guidance, save for the distinction between ‘reasonable’ and ‘adequate’, discussed below.

‘Adequate’, ‘Reasonable,’ and ‘Effective’

The SFO has stressed that beyond the individual guidance under the Bribery Act and ECCTA, there are no further directions on how to interpret ‘reasonable’ and ‘adequate’.

The effectiveness of compliance programmes will depend on the size, industry, and risk profile of each organisation. Organisations have discretion to decide on a strategy that must be effective in practice and not just a paper exercise. Accordingly, there is an expectation that an organisation’s compliance programme will be tailored to the specific organisation, proportionate to the risks it faces and reviewed on a regular basis.

In addition, the SFO refers to the equivalent US and French guidelines to aid organisations in deciding the appropriate approach. For instance, the Department of Justice guidelines might be particularly useful when carrying out a holistic review of a compliance programme by asking the following questions:

• Is the programme well designed?
• Is the programme applied in good faith, adequately resourced, and empowered to function effectively?
• Does the programme work in practice?

What Makes a Compliance Programme Effective: Practical Considerations

The SFO is clear that simply having controls and procedures in place is not sufficient to demonstrate that a compliance programme is effective. The focus is on practical results of the processes and controls, and how they influence actions undertaken by the organisation.

Such a holistic approach would mean that isolated failures do not necessarily render the programme ineffective.

Additionally, the SFO will consider if compliance measures had sufficient systems to prevent circumvention. It should be considered if a compliance programme can be bypassed, and if so, how this can be prevented going forward.

DPA Monitorships 

The Guidance notes that organisations eligible for a DPA will most likely already have a functional compliance programme. As such, the need to appoint a monitor will be carefully assessed on the individual facts, especially considering the costs involved. 

This approach signifies that monitors can be appointed if appropriate in the particular circumstances and are not default elements of DPAs.

Concluding Remarks

The Guidance stresses the importance of having a tailored, effective compliance programme focused on anticipating and mitigating risks. ‘Effectiveness’ is defined by reference to results, rather than focusing on the internal workings of a particular programme. With the failure to prevent fraud offence recently added to the regulatory landscape, organisations must proactively prevent compliance breaches from occurring.

The new Guidance forms part of a recent wider updating of procedures by the SFO, including the Updated Corporate Cooperation Guidance and the Joint SFO–Crown Prosecution Service Corporate Prosecution Update.

Against this backdrop, organisations should ensure their compliance programmes can stand up to regulatory scrutiny. Our experienced team can help you develop an effective programme, tailored to your organisation’s needs. If you have any questions or would like to further discuss how you can improve your compliance programme, please do not hesitate to contact the authors listed above. 

While PAGA actions have long posed a host of challenges for employers with employees in California, the landscape has become even more complex with the rise of overlapping PAGA claims. As PAGA litigation continues to proliferate, employers increasingly face multiple suits brought by different employees, covering the same time period, and asserting the same alleged Labor Code violations. Brown reinforces that courts have both the authority and tools to manage parallel and duplicative PAGA litigation efficiently, including by approving a global settlement in one action that extinguishes the other through the doctrine of claim preclusion.

Importantly, Brown provides practical support for employers so they can strategically sequence stays, amendments, and settlement approvals to achieve finality in one action while foreclosing parallel claims.

Overview of the Brown Case 

Dave & Buster’s (D&B) faced two separate PAGA lawsuits from two different employees as outlined below:

First Action (Andrade v. Dave & Buster’s Mgmt. Corp., Inc. (Andrade))² 

In Andrade, an employee sued for standard wage-and-hour violations under the California Labor Code (unpaid overtime, unpaid wages, and missed meal periods and rest breaks) against D&B, only. 

Second Action (Brown)

Subsequently, a second employee, Brown, filed a standalone PAGA claim with similar allegations to Andrade’s as well as a claim for unpaid vacation pay³ against D&B and two affiliated entities.

After obtaining a stay of the second-filed Brown lawsuit, D&B reached a comprehensive settlement in Andrade. Andrade then amended the PAGA notice and the PAGA complaint to include the vacation pay claim and additional entities named in the Brown action. After the trial court approved the settlement, D&B successfully moved for judgment on the pleadings, arguing that the settlement’s claim-preclusive effect barred the overlapping suit as the actions involved the same parties and the same causes of action. 

In siding with D&B, the court applied the doctrine of claim preclusion, which bars subsequent lawsuits when the first lawsuit has: (1) the same cause of action; (2) the same parties, or those in privity; and (3) a final judgment on the merits. 

The court’s reasoning demonstrated that the scope of the Labor and Workforce Development Agency (LWDA) notice in the settling action is pivotal in this determination. In affirming the trial court’s decision, the court distinguished Lacour v. Marshalls of Cal.,⁴ which was procedurally identical, but differed in one important aspect: the LWDA notice in the settling action did not include the same violations raised in the subsequent action that it sought to extinguish. 

As in Brown, Lacour involved an employer who invoked claim preclusion based on an earlier PAGA settlement to extinguish the PAGA claims raised in a subsequent action. However, unlike Brown, the competing PAGA actions differed with respect to the scope of the underlying LWDA notices. The first action addressed only off-the-clock work claims, while the subsequent action involved a broader array of wage and hour violations not alleged in the first notice. Consequentially, the Lacour court held that the settlement in the prior action could not preclude the claims in the subsequent action since the settling plaintiff was only authorized to settle claims raised in their own LWDA notice. 

By contrast, in Brown, the parties to Andrade avoided this result by amending the LWDA notice and PAGA complaint to include the vacation pay claims and the parties not originally alleged in the initial notice. This ensured that the settlement addressed the full scope of alleged violations (i.e. same cause of action and same parties) and thus triggered claim preclusion for the second action. 

Brown also challenged Andrade’s standing to settle the expanded PAGA claims. Specifically, Brown argued that Andrade’s amended notice and complaint violated PAGA’s 65-day waiting period, as Andrade filed her amended complaint only 35 days after filing the amended notice. However, the Court of Appeal disagreed, characterizing the shortened wait time as a “harmless defect.” The Court of Appeal held that while pre-filing notice is a condition of suit, there is nothing in the statute that suggests the 65-day period applies to amended notices. Even if it did, the Court of Appeal determined that Andrade “substantially complied” because the LWDA received notice before the amended complaint was filed, which was the core purpose of the notice requirement. 

A Practical Roadmap: The Brown Court Endorses a Strategic Approach to Overlapping PAGA Claims 

Although Brown was not framed as a how-to guide for employers facing overlapping PAGA actions, the Court of Appeal’s opinion effectively provides one. When combined with two recent decisions—Shaw v. Superior Ct. of Contra Costa Cnty.⁵ (second-filed PAGA action, which contains same or similar PAGA claims can be stayed under the doctrine of Exclusive Concurrent Jurisdiction or the court’s inherent authority) and Turrieta v. Lyft, Inc.⁶ (overlapping PAGA plaintiff lacks standing to intervene or object to a PAGA settlement approved by the trial court), Brown outlines a potential roadmap for employers: 

• Move to stay the second-filed action;
• Settle the first-filed action broadly; 
• Amend the PAGA notice and complaint to include any nonoverlapping claims; 
• Obtain court approval; and 
• Move for judgment on the pleadings on the second-filed action.

PAGA Reforms—A Note of Caution

Effective 1 July 2024, the California Legislature enacted significant reforms to PAGA, which limited the ability of PAGA plaintiffs to bring claims only to labor code violations for which the plaintiff personally suffered. The Brown decision was based on the pre-reform PAGA framework, which broadly applied to any labor code violation suffered by the PAGA plaintiff or similarly situated aggrieved employees during the one-year PAGA period. It remains to be seen how the limiting nature of the legislative reforms may impact the LWDA’s determination to get involved at the amendment stage or how trial courts may react to expanding the claims or statutes of limitations of the initially filed PAGA notice. 

Conclusion

The Brown decision confirms that employers can effectively manage overlapping PAGA claims through strategic settlements and procedural motions. The lawyers of our Labor, Employment, and Workplace Safety practice regularly counsel clients on the issues discussed herein and are well-positioned to provide guidance and assistance to clients on these significant developments.

The FCA’s findings highlight examples of good and bad practices which can be adopted when identifying, mitigating and managing risk. They are particularly important to firms, money laundering reporting officers (MLROs), senior managers and professionals in the risk assessment and financial crime prevention areas.

The BWRA and CRA systems were assessed against the regulatory backdrop comprising of Money Laundering Regulations 2017, Financial Crime Guide, Senior Management Arrangements, Systems and Controls, Joint Money Laundering Steering Group guidance and Financial Action Task Force guidance.

FCA’s Findings 

The FCA found that many firms’ BWRAs and CRAs are unsatisfactory. BWRAs were identified as untailored to the specific business circumstances and focussed on generic risks. The FCA found that senior management often had a limited awareness of financial crime risks–for example, focusing on fraud but omitting money laundering, sanctions or bribery risks.

Further, the FCA found that many firms were unable to explain how they managed risk, as well as not updating processes in line with business growth.

Below, we discuss how businesses can comply with the regulatory requirements and adopt ‘good practice’ as set out by the FCA.

Good Practice: Understanding, Mitigating and Managing Risk

Understanding and Identifying Risk

• Risk assessments should consider both internal and external factors. 
• Risks are to be assessed by business area. Firms should take account of their business model, industry and key stakeholders, including customers. The latter is particularly important considering the FCA’s focus on conducting a separate CRA alongside the BWRA.
• To maintain an accurate assessment, a BWRA should be conducted on a regular basis, ideally annually.
• It is crucial that senior managers have a sound understanding of the various forms of financial crime risks and appropriate legal advice can help firms guard against a broad range of risks.

Mitigating Risk

• Keeping a record of informed actions is key. Firms should document measures which resulted from identifying risks – firms should be able to show a clear link between risk assessment and decision making.
• To mitigate future risks, firms should develop a compliance plan which accurately reflects their growth strategy. Businesses which quickly expand their product offering and client base should make sure that their controls and processes continue to remain appropriate throughout their growth.
• Customer risks identified in a CRA can be mitigated by undertaking customer due diligence and transaction monitoring. It may be helpful to critically assess the business’s broader value chain.

Managing Risk

• The FCA places a strong emphasis on governance and oversight. Accordingly, senior management should review the BWRA and CRA and play an active role in related discussions. It is also beneficial to document input from the firm’s MLRO.
• Appropriate governance extends to formally documenting risk assessment methodologies, followed by a discussion between the key decision-makers. These models and methodologies should be regularly assessed to make sure they address the dynamic regulatory and risk landscape.
• Having made the necessary updates to keep the BWRA and CRA up to date, it is important to carry out reviews and testing of the new, enhanced assessments.

Concluding Remarks

The risk landscape is becoming increasingly complex, whether firms operate domestically or internationally. The FCA has set out a clear expectation that firms should be proactive in identifying risks unique to their business, as well as taking appropriate steps to mitigate them.

In addition, the singling-out of the CRA suggests that the FCA expects firms to place significant weight on customer risks.

Our experienced team can help you understand the various financial crime risks and how they can be managed, as well as how to comply with the FCA’s requirements. If you have any questions or would like to know how your business can comply, please do not hesitate to contact the authors of this alert.

Although the EO does not outright ban states from adopting laws to regulate AI, it empowers federal agencies to take aggressive steps to counter State measures deemed excessive or inconsistent with federal policy. At the center of this effort is the creation of an “AI Litigation Task Force” within the Department of Justice, which must be established within 30 days. This Task Force will identify and challenge State AI laws that conflict with the Administration’s objectives, focusing on statutes that compel AI models to “alter their truthful outputs” or mandate disclosures that may infringe on constitutional rights. Task Force challenges are expected to invoke the Commerce Clause, federal preemption principles, and First Amendment protections. The Task Force will consult regularly with senior White House advisors to determine which State laws warrant challenge. 

The EO also directs the Secretary of Commerce to publish, within 90 days, an evaluation of State AI laws considered “onerous” or inconsistent with federal policy. States identified in this report may lose eligibility for remaining funding under the Broadband Equity Access and Deployment (BEAD) Program, and agencies are instructed to consider conditioning discretionary grants on States agreeing not to enforce conflicting State laws. In addition, the EO calls on the Federal Communications Commission (FCC) to consider adopting federal reporting and disclosure standards that preempt conflicting State requirements and directs the Federal Trade Commission (FTC) to issue a policy statement clarifying that State laws mandating deceptive conduct in AI models are preempted under the FTC Act. Finally, the Administration will develop legislative proposals for a uniform federal AI framework that expressly preempts conflicting State laws, while preserving State authority over child safety, infrastructure, and procurement.

This move follows earlier failed attempts to impose a moratorium on State AI regulation through legislation, including proposals tied to the summer reconciliation process and the National Defense Authorization Act. With Congress unable to reach consensus, the Administration turned to executive action to advance its policy goals. 

While the EO sets an ambitious course, it raises significant legal questions. The President cannot unilaterally override State laws—that authority rests with Congress. Conditioning federal funds on State compliance may face constitutional challenges, and directives to agencies like the FCC and FTC to create preemptive standards may invite litigation over statutory limits. The Administration will likely argue that fragmented State rules burden interstate commerce and undermine national security, while States are expected to defend their laws as necessary for consumer protection and to combat discrimination.   

The regulatory landscape for AI is shifting rapidly. Companies that operate across multiple jurisdictions should anticipate increased federal litigation targeting restrictive State AI laws and prepare for evolving compliance obligations. These developments also create a unique opportunity for businesses to influence the shape of future AI policy.

Our team is actively monitoring this space and advising clients on how these changes may impact their operations. If your company wants to stay ahead of the curve—or play an active role in shaping the national AI framework—we encourage you to engage with our group. We can help you assess risk, develop compliance strategies, and position your organization to participate in policy discussions that will define the future of AI regulation.

The calendar is a compilation of the House and Senate schedules in a color-coded format showing periods when the House and Senate are expected to be in session during 2026. The calendar is a useful planning tool to help government relations professionals and constituents engage with Members of Congress and their staff.

Please click here to download a printable version of the 2026 US Congressional Calendar. For a digital interactive version, click here.

As these dates are subject to change, this calendar will be updated accordingly.

Directed under Executive Order 14335, “Enabling Competition in the Commercial Space Industry,”³ OSC’s Mission Authorization Plan will offer a unified process for novel space industry missions to obtain a “space commerce certification.”

Under the plan, a novel space activity will be able to opt-in to OSC’s program instead of the traditional parallel interagency licensure process. OSC will identify “light-touch commitments” that an applicant must make to protect fundamental national interests, conduct a due diligence review, and circulate the application to the federal interagency community with firm review deadlines. Finally, OSC will issue a “space commerce certification” for the operation. 

OSC intends for this certification to be sufficient to satisfy the Federal Aviation Administration’s payload review process and the Federal Communication Commission’s non-frequency space requirements for licensure: in other words, a first-of-its-kind single-agency review process for novel activities. 

OSC is seeking feedback from industry on all aspects of the plan including, among other things, what types of missions should be able to opt-in, what condition commitments should be developed, timelines, and what is needed ensure OSC’s plan works for industry.

Our Policy and Regulatory lawyers routinely monitor regulatory shifts and are available to help the space industry engage with OSC and navigate this rapidly changing regulatory landscape, and advocate for needed changes.

Extended Telehealth Flexibilities 

Division F, Title II of the CR includes Section 6208, which extends certain Medicare telehealth flexibilities through 30 January 2026. Although the telehealth provisions in the CR do not contain an express-retroactive effective date, the Centers for Medicare & Medicaid Services (CMS) has confirmed the extension applies retroactively as part of its issuance of updated telehealth FAQs. The FAQs are dated 14 November 2025, but were released on 20 November 2025, and at the time of this publication, the URL includes a reference to 26 November 2025, suggesting that they have been updated since the initial release.

Updated Telehealth FAQ on Practitioner Home Addresses

CMS’s updated FAQ also clarifies enrollment requirements for practitioners who furnish telehealth services from home. In FAQ 15, CMS confirms that distant-site practitioners may deliver telehealth services from their home, and in many cases are not required to report their home address on their Medicare enrollment application. Practitioners who provide telehealth services from home but maintain a separate physical-practice location do not need to enroll their home address; they may continue to enroll and bill using their physical-practice location as if the encounter were furnished in person. 

CMS explains that virtual-only telehealth practitioners, whose sole practice location is their home, must report their home address as a practice location. CMS instructs these practitioners to designate the home address as a “home office for administrative/telehealth use only” on their enrollment application, which will allow CMS to suppress the street address from the provider’s profile page on the CMS Care Compare website. Practitioners may also contact the Quality Payment Program service center to request suppression of additional identifying information, including the address and photo number, from the page.  

The issuance of this FAQ through guidance is consistent with CMS’s statement in the Calendar Year (CY) 2026 Medicare Physician Fee Schedule Final Rule (CMS-1832-F) (Final Rule), where CMS noted that “in the future any updates to this policy will be issued via subregulatory guidance.” CMS also noted in the Final Rule “that a separate Medicare enrollment is required for each State in which the practitioner furnishes and intends to bill for covered Medicare services.”

CMS Guidance on Processing Telehealth Claims

Following expiration of the flexibilities on 1 October 2025, CMS instructed Medicare Administrative Contractors to return certain telehealth claims pending congressional action. CMS has issued guidance explaining how those claims should be handled in light of the CR’s retroactive extension of telehealth flexibilities. CMS notes that the claims are now payable, provided they otherwise meet all Medicare coverage and billing requirements, and practitioners may resubmit them. CMS also confirms that practitioners may submit any other telehealth claims they had held in anticipation of possible legislative action. 

CMS further encourages practitioners to identify beneficiaries who were charged out of pocket for telehealth services furnished during the lapse period, but that are now retroactively payable. In these cases, CMS instructs practitioners to refund any overpayments to beneficiaries and instead submit the applicable claims to Medicare. 

Key Considerations for Providers

• Certain Medicare telehealth flexibilities have been retroactively restored through 30 January 2026. 
• CMS issued updated FAQs on telehealth, including addressing when practitioners’ home addresses must be listed and how they may be suppressed from CMS’s public-facing websites.
• Medicare telehealth claims returned during the lapse with CARC 16 or RARC M77 are now payable and may be submitted if they meet applicable Medicare requirements. 
• Providers should identify beneficiaries billed during the lapse, submit the claims to Medicare, and refund any overpayments to beneficiaries.

Our Healthcare and FDA practice group routinely assists health systems, hospitals, and other providers with legal advice on enrollment, digital health, and reimbursement matters. Contact the authors of this article or another one of our healthcare and FDA practice group lawyers for assistance with any of these important issues.

United States and United Kingdom Sign Nuclear Memorandum of Understanding 

On 18 September 2025, US President Donald Trump and UK Prime Minister Keir Starmer signed a Memorandum of Understanding (18 September MOU) aimed at “enabl[ing] collaboration towards joint opportunities of mutual interest in strategic science and technology disciplines, including artificial intelligence (AI), civil nuclear, fusion, and quantum technologies.”¹ Many observers see nuclear power (both fission and fusion) as essential to meeting the enormous power needs of AI infrastructure. 

The 18 September MOU represents a major development in trans-Atlantic collaboration in the nuclear power and AI space, as it affirms the joint allied interest in advancing these technologies and builds upon existing deals between the United States and United Kingdom. The 18 September MOU, though, is not legally binding and does not alter existing agreements. Cooperation under the 18 September MOU is intended to take place within existing national legislative frameworks and international obligations, and it does not commit the participants to expenditure of funds. Even so, it jointly sets science and technological advancement as a top shared priority as the allies race to maintain technological hegemony. 

Importantly, the 18 September MOU complements another recent trans-Atlantic regulatory agreement. On 15 September 2025, the US Nuclear Regulatory Commission (NRC) and the UK Office for Nuclear Regulation signed a Memorandum of Understanding (15 September MOU) that renews the processes for the exchange of information and interagency cooperation and builds upon the longstanding regulatory partnership that began in 1975.² Pursuant to the 15 September MOU, the partnering agencies will jointly work to expedite the deployment of next-generation nuclear technologies by doing the following:

Targeting reactor design reviews within two years and nuclear site licensing within one year;

• Splitting specific aspects of regulatory reviews while maintaining appropriate due diligence and independent decision-making;
• Recognizing and building upon the regulatory assessments of each other to avoid duplication; and
• Focusing on technologies that are already in or are ready to enter the licensing process in the United States and United Kingdom.³ 

This bilateral agreement builds on the existing trilateral memorandum of cooperation between the United States, the United Kingdom, and Canada, under which the parties agreed to “share best practices and experience reviewing advanced reactor and SMR technology designs.”⁴ The United States and the United Kingdom maintain a Section 123 Agreement under the Atomic Energy Act, which allows for civil cooperation between US and UK companies on “technical exchanges, scientific research, and safeguards discussions” in furtherance of shared nuclear energy ambitions.⁵ 

Italy

In February 2025, the Italian government took the first step in adopting a measure to allow the development of nuclear reactors in the country.⁶ The measure, which was approved by the Italian Council of Ministers in early October 2025 and still requires approval by the Italian parliament, would end a four-decade ban on nuclear technology passed by nationwide referendum in 1987.⁷ The law would mandate the establishment of a sustainable nuclear power program and national nuclear safety authority, promote scientific and technological research, and support adherence to European decarbonization and energy independence policy priorities.⁸ The United States has maintained a Section 123 Agreement with the European Atomic Energy Community (Euratom) since 1996, which includes all European Union countries. 

The Philippines

In early October, the Philippines Department of Energy took the next step in implementing the country’s nuclear power program. The recent Department Circular, issued by the Secretary of Energy on 2 October 2025, provides the “Policy Framework for the Integration of Nuclear Energy in the Country’s Generation Mix.” The circular outlines the guiding principles and framework for the initial commercially developed and operated nuclear power plant in the country, the Pioneer NPP, and subsequent NPPs. Under this framework, the government commits to “endeavor to provide a conducive industry environment for the commercial development” of nuclear power in the Philippines. The framework establishes policies and commitments to ensure the commercial viability of these facilities while, at the same time, committing to environmental sustainability, consistent with the Philippines’ obligations under the Paris Agreement, and the protection of public health and safety.⁹ 

This framework builds on the establishment of the Philippine Atomic Energy Regulatory Authority in June 2025 and work with the OECD Nuclear Energy Agency (NEA) to deploy nuclear energy in the country.¹⁰ The United States signed a Section 123 Agreement with the Philippines in 2024.¹¹ 

Vietnam 

In June 2025, the Vietnam National Assembly formally designated nuclear power as a national strategic priority and established a regulatory framework to support and advance reactor development.¹² Earlier in the year, Vietnam set ambitious energy generation targets by 2030, seeking to add nearly 200 GW over the next five years.¹³ The targets, part of a new national power plan, would require over US$130 billion in total investment, and include plans to build and operate new nuclear reactors with a capacity up to 6.4 GW between 2030 and 2035.¹⁴ 

The Vietnamese government has signaled interest in foreign partnerships to aid in the development of new nuclear generation facilities, including potential collaborations with Russia, Japan, South Korea, France, and the United States.¹⁵ Vietnam and the United States maintain a Section 123 Agreement signed in 2014.¹⁶ 

Ghana

Over the last year, Ghana has taken several positive steps towards being the first African nation to deploy small modular reactors (SMRs) in an effort to reduce reliance on fossil fuels. In March 2025, Ghana entered into framework agreements with NuScale and Regnum Technology Group, in collaboration with Japanese nuclear firms, to construct SMRs in the country.¹⁷ Ghana has set a goal to integrate 1 GW of power into the grid by 2034, and state officials have called nuclear power “a necessity for Ghana’s economic future.”¹⁸ In addition to the US and Japanese SMRs, Ghana also entered into a partnership with the China National Nuclear Corporation to build a large reactor with a 1,200 MW capacity.¹⁹ The United States does not currently maintain a Section 123 Agreement with Ghana but is “currently in negotiations” with the Ghanian government to sign a deal permitting civil nuclear cooperation.²⁰ 

Czech Republic

In June 2025, the Czech Republic government announced a deal with Korea Hydro and Nuclear Power (KHNP) to construct two nuclear reactors in the country.²¹ These reactors are both expected to become operational for trial by 2038. The Czech Republic has six operational nuclear reactors that supply more than a third of the country’s electricity and has prioritized nuclear and renewable energy as a critical generation source as the government targets a 2033 phaseout of coal energy generation.²² The United States signed an additional memorandum of cooperation in civil nuclear research with the Czech Republic in 2013.²³ 

Poland

In April 2025, Polish state-owned nuclear developer PEJ announced a deal with Westinghouse and Bechtel to advance the development of three AP100 reactors in Poland.²⁴ The three reactors would become the first operational nuclear energy facilities in Poland. US Secretary of Energy Chris Wright called the agreement a “significant milestone” and a “first of a kind intergovernmental agreement” that would create tens of thousands of jobs and bolster Polish energy security.²⁵ 

Our Energy, Infrastructure, and Resources team is closely monitoring these developments and stands ready to help clients navigate through this quickly evolving legal and policy landscape. 

In a recent decision issued on 16 October 2025 in appeal No. 980 of 2025, the Abu Dhabi Court of Cassation (Court of Cassation) held that an arbitration agreement contained in a main contract (Main Contract) between the employer (Employer) and main contractor (Main Contractor) extended to the parties to related contracts, notwithstanding that those contracts did not contain an arbitration agreement and did not expressly incorporate by reference the arbitration agreement in the Main Contract, as required by Article 7(b) of United Arab Emirates (UAE) Federal Law No. 6 of 2018 on Arbitration (UAE Arbitration Law). 

Article 7(b) of the UAE Arbitration Law provides that contracting parties can incorporate by reference an arbitration agreement in another document provided such reference is clear so as to make the arbitration agreement part of the parties’ contract. This has been interpreted by the UAE courts to require contracting parties to expressly refer to, and incorporate, the arbitration agreement itself. A general reference to the document in which the arbitration agreement is located is not sufficient. 

Background Facts

The Employer and Main Contractor entered into the Main Contract (which contained an arbitration agreement) for construction works. Subsequently, the Employer and Main Contractor executed a series of tripartite addendums to the Main Contract with subcontractors—who were not parties to the Main Contract—for additional works. Those tripartite addendums referred to the terms and conditions of the Main Contract and stated that they shall remain in full force and effect. However, the addendums did not explicitly incorporate by reference the arbitration agreement in the Main Contract. 

A dispute arose between the parties, which led to the Main Contractor filing proceedings before the Abu Dhabi Court of First Instance against the Employer, various subcontractors and the project consultant (Project Consultant)—who was not a party to any contract—for payment of amounts due. The Main Contractor’s claims arose out of both the Main Contract and the tripartite addendums to the Main Contract. The Employer and two subcontractors submitted that the claims should be dismissed on jurisdictional grounds due to the arbitration agreement in the Main Contract. The other subcontractors argued that the claims should be dismissed on the merits, and the Project Consultant took the position that it did not have standing to be joined as a defendant as it was only the Employer’s representative on the project. The Abu Dhabi Court of First Instance dismissed the claims and upheld the jurisdictional objection. That finding was upheld by the Abu Dhabi Court of Appeal (Court of Appeal). 

The Main Contractor appealed the decision of the Court of Appeal to the Court of Cassation. On the issue of jurisdiction, the Main Contractor argued that the subcontractors were not signatories to the Main Contract, and the tripartite addendums concluded with the subcontractors had not incorporated by reference the arbitration agreement in the Main Contract. Therefore, the Main Contractor was entitled to bring its claims against them in court. With regard to the Employer, the Main Contractor took the position that it was entitled to have its claims against all parties heard together in the courts, rather than having the dispute divided between different forums. 

Judgment of the Court of Cassation

The Court of Cassation dismissed the appeal, with the effect that all the claims had to be determined in arbitration. In dismissing the appeal, the Court of Cassation held that claims asserted against multiple defendants can be so connected—whether because of the subject matter of the dispute or the cause of action—as to justify joining the claims in a single case and avoiding conflicting judgments. In this case, the Court of Cassation relied upon the fact that the claims arose out of both the Main Contract and the addendums thereto, that the Main Contractor had a key role in all of the contracts and that the addendums all referred to and generally incorporated the terms and conditions of the Main Contract to find that the arbitration agreement in the Main Contract applied to all parties, notwithstanding that there was no express incorporation by reference of the arbitration agreement in the Main Contract, as required by the UAE Arbitration Law. 

Analysis

The onshore UAE courts have historically adopted a very strict approach to the validity of arbitration agreements. In previous cases, the onshore UAE courts have held that the interests of justice may require disputes arising out of separate but related contracts (not all of which contain arbitration agreements) to be determined together by the onshore courts, thereby rendering nonbinding an otherwise valid and enforceable arbitration agreement. See, for example, our prior alert on Dubai Court of Cassation Case No. 290/2021 here.

In appeal No. 980 of 2025, the Court of Cassation took a different approach and held the arbitration agreement in the Main Contract extended to parties to related contracts. Although the Court of Cassation’s decision turned on a specific set of facts, it highlights the importance of drafting construction contracts in light of the terms of any other related contracts to ensure certainty and consistency regarding the dispute-resolution forum. 

About The Firm

Our Litigation and Dispute Resolution practice has a long history of acting as counsel on high-stakes international arbitration and litigation mandates. Our lawyers in Dubai have extensive experience advising on litigation and arbitration with respect to complex, high-value disputes in the UAE and wider Middle East region.

• The California Air Resources Board (CARB) provided extensive clarifications on first-year reporting requirements, how it will determine which entities are subject to these regulations, and previewed the upcoming rulemaking for these regulations.
• The Ninth Circuit issued a significant ruling in California Chamber of Commerce v. California Air Resources Board, temporarily staying enforcement of SB 261. 

Combined, these developments provide clarity in some respects and greater uncertainty in others, continuing to leave potentially regulated entities without clear guidance as to how to comply as they prepare for upcoming reporting deadlines. Below we summarize CARB’s latest guidance, the Ninth Circuit decision and key considerations for covered and potentially covered entities as they prepare for the first year of reporting.

SB 253: Greenhouse Gas (GHG) Emissions Disclosure

Initial Reporting Deadline and Applicable Reporting Year

CARB proposed an initial SB 253 reporting deadline of 10 August 2026, applicable only to the first reporting year. The company’s fiscal year will dictate which year of emissions data should be reported:

• Fiscal years ending between 1 January 2026 and 1 February 2026 → Report using data from the fiscal year ending in 2026
• Fiscal years ending 2 February 2026 and 31 December 2026 → Report using data from the fiscal year ending in 2025 (can report using data from the fiscal year ending in 2026 if such data exists)

This framework ensures companies would have at least six months after the end of their fiscal year to prepare their GHG emissions disclosures.

Reporting Requirements

CARB provided several important clarifications concerning how to report under SB 253:

• Companies that were not collecting or planning to collect emissions data at the time CARB issued its 5 December 2024 enforcement notice are not required to report emissions within the first reporting cycle in 2026. These companies should submit a letter to CARB stating they did not submit a report and confirming they were not collecting data or planning to collect data at the time the enforcement notice was issued.
• Use of the Scope 1–2 reporting template circulated by CARB on 10 October 2025 is voluntary for the first reporting cycle in 2026. Templates will be updated during subsequent rulemaking discussed below.
• CARB will accept a report prepared annually by the company that includes GHG Scope 1 and 2 emissions disclosures to comply with initial 2026 reporting requirements.

Assurance Requirements

CARB confirmed that assurance is not required for the first reporting cycle in 2026; however, there are some outstanding questions that were not specifically addressed, including:

• Whether a company must submit a letter if it reports emissions but omits assurance; and
• Whether entities that initially did not plan to obtain assurance in December 2024 but subsequently began assurance efforts must obtain assurance for 2026 reporting.

Overall, CARB appears to be generally focused on companies’ efforts and planned efforts existing on the date of its December 2024 enforcement notice for first-year reporting under SB 253. It is likely that additional guidance and regulations will dictate subsequent reporting requirements.

SB 261: Climate-Related Financial Risk Disclosure

Reporting Requirements

CARB issued updated minimum disclosure requirements guidance on 18 November 2025, largely reiterating its expectations for initial reports and emphasizing consistency with the TCFD framework. Companies may satisfy SB 261 reporting requirements by linking to an existing TCFD-compliant report, even if not drafted specifically for SB 261 purposes. Although SB 261 centers on climate-related risks, CARB stated entities may voluntarily include disclosures on climate-related opportunities at their discretion. CARB encouraged companies still developing their climate-risk programs to disclose how climate-related risks may relate to the business and any gaps, limitations, or assumptions in their assessment processes.

Reporting Timeline and Procedure

CARB confirmed that the extended regulatory rulemaking timeline does not affect first-year reporting. Although CARB will keep the docket open from 1 December 2025 to 1 July 2026, reports are expected to be final as of 1 January 2026. The extended docket is intended as an administrative accommodation for submitting links—not for substantive amendments. On 1 December 2025, CARB posted the link to the docket on its website. However, as further discussed below, this reporting deadline is subject to further refinement based upon the Ninth Circuit US Chamber of Commerce decision.

Proposed CARB Rulemaking and Reporting Thresholds

CARB confirmed that its proposed rulemaking will address (1) the SB 253 first-year reporting deadline, (2) key definitions that will govern which entities must report under both SB 253 and SB 261, and (3) fee provisions.

Reporting Thresholds: Who Must Report

CARB confirmed that it will incorporate the definitions of “revenue” and “doing business in California” that it initially proposed in the summer 2025. It will incorporate the definition of revenue from California Revenue and Taxation Code § 25120(f)(2), which generally includes the “gross amounts realized (the sum of money and the fair market value of other property or services received) on the sale or exchange of property, the performance of services, or the use of property or capital... in a transaction that produces business income... recognized... under the Internal Revenue Code...” This definition is not limited to revenue generated in California but covers the total gross annual revenue generated by the company. Revenue will be verified based upon tax returns submitted to the California Franchise Tax Board (FTB). For SB 261, which requires reporting once every two years, applicability will be determined using the lower revenue figure of the prior two fiscal years.

“Doing business in California” is partially based upon California Revenue and Taxation Code § 23101(b)(1)–(2). A company will be found to be “doing business in California” if:

• It is organized or commercially domiciled in California; or
• It has annual sales in California exceeding the inflation-adjusted $735,019 threshold (2024), using standard sales-assignment rules and including sales made by an agent or independent contractor of the company.

Parent/Subsidiary Considerations

Parent–subsidiary relationships do not determine regulatory applicability. Each entity will be reviewed independently. When evaluating revenue, if a subsidiary and parent submit a unitary tax filing to the FTB, its revenue will be considered jointly. Conversely, each entity’s revenue will be considered separately if they file separately. Subsidiaries may request a parent to report on their behalf, but CARB did not clarify:

• Whether a subsidiary may rely on a parent’s report when the parent is not itself in scope; 
• How multiple subsidiaries using a parent’s report should alert CARB for docketing; and
• Whether a parent that is subject to reporting requirements must report for all subsidiaries as well (i.e. subsidiary emissions under SB 253).

CARB will consider a company a “subsidiary” if the company has an ownership interest in or control of the first entity by direct corporate association. CARB also referenced the GHG Protocol Corporate Standard to guide the scope of organizational boundaries subject to reporting requirements under SB 253.

Proposed Exemptions

CARB confirmed that the following exemptions will be included in the proposed rulemaking:

• Non-profit or charitable organizations (IRC tax-exempt)
• Entities whose only California contact consists of teleworking employees
• A business entity whose only business within California consists of wholesale electricity transactions

This is in addition to the following statutory exemptions:

• Government entities (including majority-owned enterprises)
• Foreign entities
• Insurance companies (regulated by the California Department of Insurance or out-of-state equivalents)

Fee Regulations

CARB will also include fee regulations in the proposed rulemaking and provided a general update regarding the proposed fee structure:

• CARB intends to use a flat fee structure, dividing program costs among regulated entities.
• Fee invoices will be issued in 2026, with fee assessments occurring 10 September 2026.
• Entities subject to both SB 253 and SB 261 must pay two separate fees.
• Each covered subsidiary will receive its own assessment, though a parent may make a consolidated payment.

Process and Timing

Rulemaking will be considered by the CARB Board for approval at a hearing in the first quarter of 2026. CARB will release its draft rulemaking at least 45 days prior to the hearing. For purposes of SB 261 reporting, companies within the scope of that regulation should consider the information from the 18 November 2025 CARB workshop as the final regulations for the initial reporting period. After review and approval of this preliminary rulemaking, CARB will consider additional regulatory updates in subsequent rulemaking to address, at a minimum, the following issues under SB 253:

• Data assurance requirements
• Further enforcement provisions
• Recurring reporting deadline beyond 2026
• Reporting templates

CARB is also soliciting feedback on the 15 Scope 3 categories that are most used by companies today or most helpful for investors and consumers.

Ninth Circuit Ruling

In California Chamber of Commerce v. California Air Resources Board, the Ninth Circuit granted an injunction to the enforcement of SB 261 until it rules on the pending appeal. Notably, the Ninth Circuit did not grant the requested injunction concerning SB 253. This means that California cannot enforce SB 261 until the Ninth Circuit decides the appeal of the lower court’s decision, which denied issuance of a preliminary injunction. The Ninth Circuit is currently scheduled to hear oral arguments on 9 January 2026. This will provide at least a temporary reprieve of reporting requirements. However, this pause may only last as long as it takes for the Ninth Circuit to issue an opinion. The length of any pause will depend upon (1) how long it takes for the Ninth Circuit to issue a final decision on the preliminary injunction; (2) the result of the decision; (3) whether the decision is appealed to the U.S. Supreme Court; and (4) whether the U.S. Supreme Court issues a stay pending appeal in the event of any such appeal. On 1 December 2025 and in response to the injunction granted by the Ninth Circuit, CARB posted on its website that it will not enforce SB 261 against companies that do not post and submit climate-related financial risk reports by the 1 January 1 2026 statutory deadline.

Conclusion

Given the significance of the developments regarding SB 253 and SB 261 over the past few weeks alone, entities should continue to monitor any guidance and regulations from CARB and follow the pending appeal before the Ninth Circuit as a new SB 261 reporting deadline could follow shortly after a decision. The firm is positioned to help companies navigate these complex and evolving regulations and assist throughout the reporting process.

WOTUS is a crucial concept that defines the bodies of water subject to regulation under the CWA. Among other things, it determines when developers or landowners must obtain federal CWA permits for actions that affect wetlands and waters. The inclusion (or not) of an area as WOTUS determines when American industry, farmers, states, and landowners are required to seek CWA permits for activities such as dredging, filling, or discharging that may impact such waters. Changes to WOTUS that may reduce the scope of federal coverage will place greater emphasis on corresponding state regulations, which vary significantly concerning how closely they follow the federal regulations and, in some cases, provide distinct grounds for state water regulation.

The Sackett decision cemented a narrow interpretation of WOTUS, and the final rule must conform with that framework. Still, ambiguities will remain, particularly in the definition and application of “relatively permanent” waters and wetlands with a “continuous surface connection” to such waters. Public comments on the proposed rule close on 5 January 2026.

Proposed Rule Highlights

The proposed rule is the agencies’ latest attempt to align the definition of WOTUS with the US Supreme Court’s 2023 decision in Sackett v. EPA.² The Sackett decision significantly narrowed the scope WOTUS, holding that federal CWA jurisdiction reaches only “relatively permanent waters” (e.g., streams, river, lakes) connected to traditional navigable waters and wetlands with a “continuous surface connection” to such waters.³

A key feature of the proposed rule is a new limiting concept of “wet season,” applicable to the proposed rule’s definitions of “relatively permanent” and “continuous surface connection.”⁴ The proposed rule requires that during the “wet season” surface hydrology must “be continuous,” otherwise the CWA does not apply.⁵ The preamble to the proposed rule describes the agencies’ interpretation of “wet season,” but the proposed rule itself does not define the term. 

The rule also removes “interstate waters” as an independent basis for CWA jurisdiction. Interstate waters must fall within the enumerated list of WOTUS (e.g., “relatively permanent, standing or continuously flowing bodies of water” (such as streams, oceans, rivers, and lakes) and wetlands that are connected and indistinguishable from such water bodies) to be covered under the CWA.

It also defines numerous terms such as “relatively permanent,”⁶ “tributary,”⁷ “continuous surface connection,”⁸ “excluded ditches,”⁹ excluded “prior converted cropland,”¹⁰ and excluded “waste treatment systems.”¹¹

Although the rule attempts to add clarity about what kind of wetlands will be covered, the undefined term “wet season” will likely lead to more questions, challenges, and disparity in application between states. Ultimately, as federal coverage ebbs and flows, it will likely fall to the states to determine the level of protection granted to their waters. 

Some States Fill the Gap, Others Roll Back Regulations

Many states rely on the CWA and its regulations as their only form of wetland protection for state waters. Others, such as California, Pennsylvania, Washington, and Virginia already have comprehensive regulatory programs. States have also responded to Sackett and the instability of the WOTUS rule by changing their laws: New Mexico and Colorado have responded by expanding protections and programs, while states such as Tennessee have rolled back their laws.

Source: K&L Gates LLP

States Already Protecting Waters Beyond the Scope of CWA Jurisdiction

Many states already have comprehensive water protection and permitting schemes that apply to all waters within the state, including and beyond those covered by federal definitions.¹² For instance, Pennsylvania’s “Clean Streams Law” extends protections to all “waters of the Commonwealth,”¹³ and its Dam Safety and Encroachments Act¹⁴ continues current wetland protection standards and permitting requirements without regard to whether wetlands qualify as WOTUS.

In Virginia, the State Water Control Law has implemented requirements beyond the CWA since 2000 with the goal of protecting and restoring the quality of Virginia’s waters. The law requires permits for actions affecting state waters and covers pollution control, water conservation, and management, with penalties for violations.¹⁵ Virginia defines “state waters” as “all water, on the surface and under the ground, wholly or partially within or bordering the Commonwealth or within its jurisdiction, including wetlands.”¹⁶ Where wetlands are defined as “those areas that are inundated or saturated by surface or groundwater at a frequency and duration sufficient to support, and that under normal circumstances do support, a prevalence of vegetation typically adapted for life in saturated soil conditions.”¹⁷

Similarly, in California, “waters of the state” are defined broadly as “any surface water or groundwater, including saline waters, within the boundaries of the state.”¹⁸ Both waters of the state and wetlands are protected and regulated under the Porter-Cologne Water Quality Control Act by the State Water Resources Control Board and Regional Water Quality Control Boards, responsible for water quality protection and permitting activities that can affect water quality. The California Department of Fish and Wildlife is responsible for permitting streambed alterations of state waters. 

States Expanding Protections

Southwestern states were some of the most severely affected by Sackett; according to the New Mexico Legislature, approximately 90–95% of “waters” in the state lost protections, prompting the legislature to pass Senate Bills 21 and 22.¹⁹ The bills expand the New Mexico Water Quality Act to protect surface waters no longer covered by federal law. They also give New Mexico authority to seek the EPA’s approval to become the 48th state to gain authorization for surface water permitting,²⁰ and address polluted groundwater that falls outside federal Superfund program jurisdiction.

Similarly affected, Colorado is also expanding state regulations to address gaps left by Sackett. The state legislature directed the Water Quality Control Commission to establish dredge-and-fill permitting and mitigation rules by 31 December 2025 to protect state waters not otherwise protected by federal law. The outcome will be Regulation No. 87, which is expected to be finalized by 31 December 2025.

The California Legislature is also considering additional regulations to further protect California state waters to address a perceived rollback in protections due to the Sackett decision and Trump administration policies.²¹ The proposed regulations would explicitly extend protections to state waters no longer covered under federal law.

States Rolling Back Protections 

Tennessee has a robust state program but changed its wetlands protections during its 2025 legislative session in response to Sackett.²² These amendments to the Tennessee Water Quality Control Act establish new categories of wetlands with varying regulatory triggers for each. The thresholds for needing a state permit for altering isolated wetlands have been changed so that some isolated wetlands can be altered with no regulatory oversight as long as there is no water quality impact, and the trigger for needing a state permit for altering isolated wetlands has been limited.

conclusion

Comments on the proposed WOTUS rule are being accepted until 5 January 2026. The Final Rule will take effect 60 days after it is published in the Federal Register. The EPA and USACE will also hold two hybrid public meetings during the comment period. Information on the public meetings can be found here. 

The Proposed Rule adds several exemptions to the existing reporting requirements, which are intended to “maintain important reporting on PFAS, consistent with statutory requirements, while exempting reporting on activities about which manufacturers are least likely to know or reasonably ascertain."¹ Specifically, the Proposed Rule would exempt the following activities from PFAS reporting:

De Minimis Concentrations

This exemption would eliminate reporting requirements for PFAS in mixtures or articles when the PFAS concentration is under 0.1%.

Imported Articles

This exemption would eliminate reporting requirements for PFAS imported as part of an article from the reporting requirement. Using the definition in 40 CFR 704.3, the Proposed Rule defines articles as:

“a manufactured item (1) which is formed to a specific shape or design during manufacture, (2) which has end-use function(s) dependent in whole or in part upon its shape or design during end use, and (3) which has either no change of chemical composition during its end use or only those changes of composition which have no commercial purpose separate from that of the article, and that result from a chemical reaction that occurs upon end use of other chemical substances, mixtures, or articles; except that fluids and particles are not considered articles regardless of shape or design.”

Byproducts, Impurities, and Non-Isolated Intermediates 

This exemption would also eliminate reporting for PFASs manufactured as byproducts, impurities, or non-isolated intermediates, as each is defined by existing regulation:

Byproducts

Byproducts are “a chemical substance produced without a separate commercial intent during the manufacture, processing, use, or disposal of another chemical substance(s) or mixture(s).”²

Impurities

Impurities are chemical substances unintentionally present with another chemical substance.³ This unintentional presence distinguishes impurities from byproducts where the produced PFAS is an intended part of the manufacturing process. Unlike byproducts, impurities lack independent commercial purpose, and they are not manufactured for distribution.

Non-Isolated Intermediates

Non-isolated intermediates are substances produced and contained within a closed system during the manufacture of another chemical substance. There is no effort to remove these substances from the system or to store, package, or transport them.⁴

Research and Development (R&D) Chemicals

The Proposed Rule would exempt PFAS manufactured or imported in small quantities for R&D purposes.⁵

In addition to these proposed exemptions, the Proposed Rule would again modify the submission deadline. Namely, the submission period would open 60 days after the final rule’s effective date and remain open for three months. This is now the third time the EPA has delayed the reporting deadline, which was originally set for May 2025, then January 2026, and most recently for October 2026. The Proposed Rule would eliminate the reporting deadline for small manufacturers reporting exclusively as article importers since they would not be required to report under the “imported articles” exemption.

Additionally, the Proposed Rule seeks to clarify elements of the reporting format by eliminating OECD-harmonized template reporting for exposure-related information that is also reported in “fielded data elements.” The Proposed Rule would also update the category names for “specific consumer and commercial products” under 40 CFR 705.15(c)(4) and would revise the “product category code names associated with CC217 through CC221 and CC305” to better identify covered articles and materials.

Finally, in addition to seeking public comment on the proposed exemptions and modifications discussed herein, the EPA requests feedback on two specific questions:

1. Should EPA amend the scope of reportable chemicals?
2. Should EPA modify any assumptions or cost savings calculations in its Economic Analysis?⁶

The Proposed Rule can be found here. Our Emerging Contaminants group is tracking critical and evolving developments for newly regulated contaminants on our Emerging Contaminants webpage. The Emerging Contaminants webpage is also where you can find a listing of our lawyers able to assist you in navigating and managing these issues.

Federal

In June 2025, a coalition of almost two dozen nonprofits, tribes, and local governments sued the US Environmental Protection Agency (EPA) for terminating over 400 grants under the Environmental and Climate Justice (ECJ) Block Grants program created under the Inflation Reduction Act (Public Law No: 117-169) (IRA), arguing that the grant terminations were unlawful. The plaintiffs contended that the termination violated the Administrative Procedure Act as arbitrary and capricious, contravened the Presentment Clause and separation of powers, and disregarded Congress’ directive to fund the grants. 

In July 2025, California Attorney General Rob Bonta co-led a multistate coalition of 20 attorneys general in submitting an amicus brief supporting the plaintiffs in this class action lawsuit. Among other points, the amicus brief argued that the termination of the program disproportionately harms marginalized and historically disadvantaged communities, undermining the core purpose of Congress’s instruction to EPA when it passed the IRA.

In a 29 August 2025 opinion, US District Judge Richard Leon of the District of Columbia denied the plaintiffs’ motion for a preliminary injunction, saying: “Put simply, I cannot order the Government to reinstate contracts and pay money due on them.” (emphasis in original). Pointing to decisions from earlier this year by the US Supreme Court pertaining to Department of Education grants and grants from the National Institute of Health, Judge Leon also dismissed the case, agreeing with EPA that the suit belonged before the US Court of Federal Claims. 

The majority of plaintiffs appealed Judge Leon’s decision to the US Court of Appeals for the DC Circuit on 16 September 2025. Plaintiff’s emergency motion for an injunction pending appeal was denied as the court found “that harm to the plaintiffs if the grant funds were returned to the Treasury was not irreparable.”

As this legal dispute plays out, Congress’s rescission of all unobligated funding under the ECJ Block Grants program as part of the One Big Beautiful Bill Act (Public Law No.: 119-21), increases the potential difficulty plaintiffs may face in quickly reinstating their grants.  

Multistate EJ Guidance

In response to the rollback of EJ under the Trump Administration earlier this year,¹ many states have recommitted to EJ protections through a multistate EJ guidance. Specifically, in June 2025, a coalition of state attorney generals from 13 states² issued the “Multi-State Guidance Affirming the Importance and Legality of Environmental Justice Initiatives.” This document aims to identify sources of legal support for state EJ laws and to provide assurances to stakeholders that EJ practices remain legal despite the Trump Administration’s efforts to curtail them.

The “Multi-State Guidance” challenges the Trump Administration’s labeling of EJ as “illegal discrimination,” locating support for EJ in a variety of federal statutes and the US Constitution. Specifically, the document finds key support in:

• The US Constitution:
  • The Tenth Amendment: Granting states the power to pass laws that advance “Public health, safety, and welfare.”
  • The Equal Protection Clause of the Fourteenth Amendment: Barring state and local governmental entities from discriminating based on race or sex.
  • The First Amendment: Barring the government from conditioning benefits on the waiver of free speech rights.
• Civil rights statutes, including:
  • Title VI of the Civil Rights Act of 1964: Preventing those receiving federal funds from discriminating based on race, color, and national origin. 
  • Section 504 of the Rehabilitation Act, the Age Discrimination Act of 1975, and Title IX of the Education Amendments of 1972: Preventing federal funding recipients from discriminating on the basis of disability, age, or sex, respectively.
  • Title VIII of the Federal Fair Housing Act: Outlawing public or private discrimination on the basis of race, color, religion, sex, familial status, or national origin in activities related to housing.
• Federal environmental laws, such as the Clean Air Act’s requirement for public notice and public comment.
• Nonprofit laws that prevent the revocation of 501(c)(3) status by presidential executive order or directive.
• Treaty obligations to Native American tribes.

In addition to laying out what they see as the legal basis for EJ, and based on this analysis, the state attorneys general provide a “non-exhaustive [list of] examples of work that public entities, non-profit and philanthropic organizations, and businesses lawfully undertake to advance environmental justice.” These activities fall into several broad categories:

• Education, technical assistance, and funding support
• Public engagement and participation
• Burden identification and analysis
• Preventing and mitigating pollution exposures
• Climate readiness and resilience 
• Enforcement and remedies

In sum, the multistate guidance seeks to offer stability and assurance to stakeholders by providing clarity on the EJ strategies and resources that remain available to communities in the wake of the federal repeal of EJ initiatives. 

Alaska

The One Big Beautiful Bill Act (OBBBA), the Republican reconciliation effort passed in July 2025, has impacted US energy and natural resource development across states and industries. Alaska is one state in particular that is positioned to experience a significant change in energy policy as a result of OBBBA. Two key OBBBA provisions—mandatory lease sales in Alaska and an adjustment of revenue sharing rates—have drawn attention from Alaska’s tribal communities, both for their potential to stimulate economic development and for the increased risk of negative environmental impacts that development could bring. 

Specifically, OBBBA directs the secretary of the interior to conduct oil and gas lease sales in certain sections of Alaskan land over the next 10 years, repealing the Biden Administration’s limitation on oil and gas leasing on millions of acres in Alaska and restoring leasing policies established under the first Trump Administration. In addition, OBBBA provides an adjustment of future revenue splits from oil and gas royalties between Alaska and the federal government. This change will result in additional revenue to the Alaska Permanent Fund, which provides cash dividends directly to Alaska residents, along with state and local governments and support services. 

Responses to the changes in OBBBA from Native American organizations in Alaska have been mixed. Some Native American groups have shared their appreciation for the OBBBA’s reversal of Biden administration land policies, stating that the previous administration ignored “Alaska Native self-determination” by withdrawing millions of acres of Alaskan land from development and eliminating avenues of Tribal tax revenue. Other Tribal organizations in Alaska opposed OBBBA and have expressed serious concerns that the “aggressive” oil, gas, and coal development directed in the bill puts “ecologically sensitive and culturally significant” lands at risk. Tribal groups have argued that increased carbon emissions from new oil and gas developments, combined with local pollution from energy infrastructure, will exacerbate the already-significant environmental risks. 

California

Earlier this year, the state of California filed a lawsuit against the city of Tulare, a small city south of Fresno, for alleged violations of the California Environmental Quality Act (CEQA). The suit, filed in January by Attorney General Rob Bonta, claims that Tulare improperly approved a zoning ordinance that allows the development of cold-storage facilities in light and heavy industrial zones. Tulare approved the zoning ordinance in 2024 without conducting an environmental review under CEQA, claiming that the ordinance was exempt from the law’s requirements. Bonta’s suit argues that these cold-storage facilities could pose increased “air pollution and cancer risks” in “a previously racially-segregated community that is now one of the most pollution-burdened and disadvantaged communities in the State.” The case was disposed on 29 April 2025. Notwithstanding, the litigation highlights the state’s efforts to put pressure on a local government to fulfill its legal obligations to mitigate potential environmental harms to residents.

Colorado

This summer, Colorado’s Environmental Justice Action Task Force (Task Force) sought nominations for communities facing environmental inequities to analyze and improve health impacts. The Task Force was originally created on 2 July 2021 with the passing of HB21-1266. Housed in the Colorado Department of Public Health and Environment (CDPHE), the main goal of the Task Force is to propose recommendations to the general assembly on how to address EJ inequalities, particularly in disproportionately impacted communities. On 14 November 2022, the Task Force published a final report detailing their work and findings over the previous year. In this report, the task force recommended that CDPHE develop a branch of the department to conduct environmental equity and cumulative impact analyses (EECIA) across the state. This recommendation led to the passing of HB24-1338 on 28 May 2024. 

HB24-1338 created an Office of Environmental Justice (the Office) housed within CDPHE. This Office specifically oversees the development process of EECIAs in selected geographic areas of Colorado with the goal of understanding how environmental factors affect the health and well-being of Colorado residents. When selecting these areas, the Office must choose disproportionately impacted communities, particularly those affected by a heightened exposure to environmental contaminants. Other factors in this selection process include the proportion of low-income families, the percentage of people of color, and locations with a history of environmental racism. Once these areas are selected, the Office will partner with an academic institution or another third-party to develop an EECIA, which involves hiring a contractor to perform scientifically rigorous analyses recommended by the Task Force. Some of these recommendations include increasing oversight at petroleum refineries, improving the response of the Air Pollution Control Division to air pollution complaints, and analyzing the cumulative impacts of pollution in the air, water, and soil of these communities. Within nine months of completing the EECIA, CDPHE will prepare a report identifying its findings and recommending resources to address environmental inequities. 

The impact of these EECIA analyses is intended to help direct funds and resources from the state level to the local level to address issues for communities most exposed to environmental stressors, such as pollution and extreme heat conditions.

Illinois

The Illinois Environmental Protection Agency (Illinois EPA) is drafting proposed statutory language to formally codify the agency’s EJ policy and associated environmental permitting review procedures. Illinois EPA is proposing to limit the enhanced permitting review process to census tracts scoring in the 25th percentile or higher based on certain environmental indicators, with the underlying data to be updated every three years. 

At the same time, several proposed EJ bills have yet to pass, including SB1307 and SB1686, which propose to amend the Illinois Environmental Protection Act and the Illinois Environmental Justice Act respectively, and the bills remain in Assignments (Committee) after the first readings. Against this backdrop, the Illinois Pollution Control Board opened a docket for interested parties to submit proposals for procedural regulations to “provide guidance to the Board when considering EJ issues, including the selection of screening tools for identifying areas of EJ concern, in its proceedings.” Illinois EPA, the Illinois Attorney General and various environmental interest groups have submitted comments. 

The proposed legislation follows a 24 March 2025 EPA announcement that Illinois EPA had satisfied its obligations under the February 2025 Informal Resolution Agreement, which was issued to resolve allegations that Illinois EPA engaged in discriminatory permitting processes. Under the Informal Resolution Agreement, Illinois EPA committed, among other objectives, to “implement[ ] enhancements to its permit review process” and “ensure [Illinois] EPA’s public involvement process will be available to all persons[.]” 

Under the current EJ policy, permitting actions in “areas of EJ concern”—defined as “a census block group with a low-income and/or minority population greater than twice the statewide average”—are subject to stricter scrutiny and heightened public participation requirements. Illinois EPA currently utilizes a GIS mapping tool, known as EJ Start, to determine areas of EJ concern within the state.

Massachusetts

Enacted under Senate Bill 2521 in August 2024, the Environmental Justice Trust (Trust) was signed into Massachusetts’ state budget following a joint proposal by Attorney General (AG) Andrea Joy Campbell, Representative Brandy Fluker-Oakley, and Senator Adam Gomez. Funded through civil penalties that are received in judgments and settlements from state cases involving the Massachusetts Environmental Protection Division, the Trust seeks to benefit community health by using these funds to address economic, environmental, and health-related burdens frequently faced by residents in disadvantaged communities. The Trust will help to address longstanding disparities in environmental health faced primarily by lower-income communities in Massachusetts. 

The Trust is funded by the penalties accrued from cases against:

• Companies that illegally emit or emit beyond permitted amounts, toxins and other pollutants into the air; 
• Contractors who expose employees to asbestos during demolitions; 
• Companies that discharge pollutants into local rivers and streams either illegally or beyond the scope of their permits; and 
• Entities that wrongfully destroy essential areas of wetland and green spaces that increase flood potential in surrounding communities. 

The Trust allows monies to be directed at impacted communities to address financial burdens caused by violations, rather than the monies going into the commonwealth’s general fund. The money in the Trust will specifically be used to restore impacted natural resources, investigate environmental pollution or harm caused to local property, benefit the overall health of the affected community, and provide support to academic or government-funded research to further identify environmental protection and conservation measures in these areas. 

On 27 January 2025, the AG’s Office announced that the first payments of a consent judgment against four companies, totaling US$155,000, would be placed into the Trust. More recently, on 8 September 2025, a local Massachusetts company reached an agreement with the AG’s Office for a settlement of US$300,000 in civil penalties, of which US$150,000 will be deposited into the Trust for a violation of the Massachusetts Clean Air Act and illegal asbestos removal. On 10 September 2025, the AG’s Office announced another settlement agreement with a Massachusetts based company for US$115,000 in penalties, with US$55,000 going into the Trust, for illegally handling, removing, and storing asbestos.

Maryland

On 17 July 2025, Governor Wes Moore signed the Valuing Opportunity, Inclusion, and Community Equity Executive Order (The VOICE Order). The VOICE Order, which went into effect immediately, creates the Interagency Environmental Justice and Equity Advisory Council (the Council), which will strive to create a unified front among the state’s agencies to deal with the issue of environmental inequity. Made up of representatives from 14 state agencies appointed by the governor, the Council will coordinate state efforts, track relevant spending, and perform several other tasks to advise the agencies on advancing the governor’s EJ priorities. For example, the VOICE Order requires agencies to use Maryland’s EJ mapping tool, MDEnviroScreen, to “track and address disparities related to environmental hazards, exposures, risks, health outcomes, investments and benefits.”

Critically, the Council is tasked with developing enhanced public participation plans for communities with EJ concerns potentially affected by certain resource extraction, waste management, and industrial and manufacturing processes and activities. The Council will also provide technical assistance to localities in developing and implementing EJ programs and making concrete recommendations to the governor regarding how to best address disparate environmental health impacts caused by state action.

Michigan

On 1 July 2025 and 22 July 2025, Senate Bill 479 and House Bill 4742, entitled the “Protecting Overburdened Communities Act,” was introduced to amend Michigan’s Department of Environment, Great Lakes, and Energy (EGLE) environmental permitting review process. The law would require EGLE to consider the cumulative impact of all pollutant types associated with a potential project. Additionally, the bill would require the agency to account for the greater risk of harm that social and economic factors have on communities. EGLE will use its EJ screening tool, MiEJScreen, to assess projects for environmental risk. If EGLE finds a negative impact on overburdened communities without a compelling need for the project, it has authority under the legislation to deny a permit application. Further, the policy requires permit applicants to give their community 60 days’ notice for a public hearing on the permit and prepare a project impact statement. Applicants must publish the information in at least two community newspapers, including a local non-English paper.

The bill was referred to the House Committee on Natural Resources and Tourism and the Senate Committee on Energy and Environment in July and has not progressed further as of the date of this publication.

New Jersey

On 8 October 2025, the New Jersey Appellate Division held oral arguments on the New Jersey Department of Environmental Protection’s (NJDEP) adoption of N.J.A.C. 7:1C (the Rules), which implement the Environmental Justice Law N.J.S.A. 13:1D-157 to -161 (the EJ Law).

Petitioners focused on aspects of the Rules that they argue go beyond the authority granted to NJDEP under the EJ Law, such as the Rules’ application to “zero population blocks”, and the Rules’ definitions for terms such as new facility, existing facility, expansion, and geographic point of comparison. Petitioners and amici further raised the lack of predictability that the Rules provide, particularly in terms of timing of the EJ process and NJDEP’s application of the EJ stressors, which petitioners noted were implemented in the EJMAP tool without being properly subject to administrative procedures. 

In response, NJDEP argued that the department reasonably and permissibly filled in the gaps provided in the law using its expertise. NJDEP and its amici also argued that the Rules’ definitions meet the plain language test and are consistent with defined terms in other NJDEP regulatory programs. The court pressed NJDEP on a number of issues including the Rules’ threshold for measuring the contribution of adverse cumulative stressors, NJDEP’s development of its EJMAP, and the fact that the Rules do not factor economic considerations. 

The court has taken the matter under advisement for further consideration.

Conclusion

Our EJ Task Force continues to closely monitor developments in this rapidly evolving area, including the updates highlighted above. As the EJ focus continues to evolve, businesses—particularly those operating in overburdened communities—should remain vigilant and track policy shifts and enforcement trends at both the federal and state levels. Staying informed and proactive is essential to managing risk and aligning with emerging compliance expectations. The firm is ready to work with clients to understand how these and other changes may impact their businesses. 

In this context, the Priorities reflect a step toward coordinating this Commission’s programmatic goals across divisions, indicate a sustained examinations presence by the SEC, notwithstanding recent changes in the enforcement environment, and provide helpful focus areas for registrants as they revisit and bolster their compliance programs in preparing for potential examinations.

Overview of Key Examination Priorities

With respect to investment advisers, the Division’s examination staff will focus on: 

• Adherence to advisers’ duty of care and duty of loyalty obligations as fiduciaries, particularly with regard to services provided to retail investors;
• Consistency of disclosures and recommendations with advisers’ fiduciary obligations, such as remaining impartial in the face of conflicts of interest, considering relevant product factors in providing investment advice, and seeking best execution;
• Higher-risk or higher-cost products, such as alternative investments; complex investments, such as exchange traded funds (ETF) wrappers on less liquid underlying strategies, option-based ETFs, leveraged or inverse ETFs; and products with high commissions relative to similar products; 
• Consistency of investment recommendations with product disclosures and clients’ investment objectives, risk tolerance, and backgrounds, with emphasis on elderly investors and those saving for retirement, advisers to certain private funds, and products sensitive to market volatility;
• Advisory services and business practices with additional risks, such as dually registered advisers, advisers using third parties for account access, and advisers that have merged or consolidated with existing advisory practices; and
• Overall effectiveness, enforcement, and implementation of compliance programs.

With respect to registered investment companies, the examination staff will focus on:

• Compliance programs, disclosures, filings (e.g., summary prospectus), and governance practices;
• Fund fees and expenses, and any associated waivers and reimbursements;
• Consistency of portfolio management practices and disclosures with statements about investment strategies or approaches, fund filings, marketing materials, and the amended Names Rule (after the now-postponed compliance date);
• Funds that participate in mergers or similar transactions, use complex strategies, or have significant holdings of less liquid or illiquid investments with focus on valuation and conflicts of interest; and 
• Funds with novel strategies or investments (e.g., funds with leverage vulnerabilities).

With respect to broker-dealers, the examination staff will focus on, among other things:

• Compliance with financial responsibility rules, including the net capital rule, the consumer protection rule, and related operational resiliency programs and liquidity management;
• Trading practices, including equity and fixed income trading; order routing and execution; and Regulation SHO; and
• Retail sales practices, including compliance with Regulation Best Interest in connection with product recommendations (with respect to complex products in particular), conflict mitigation, and Form CRS disclosures.

The following specific risk areas are examination priorities, as applicable to each registrant:

• Cyber security, with focus on governance, data loss prevention, access controls, and incident response, including risks associated with artificial intelligence (AI);
• Regulation S-ID and Regulation S-P in connection with identity theft prevention, fraudulent transfers, or customer information safeguards;
• Emerging financial technology risks, including in connection with automated investment tools, AI, trading algorithms, and related disclosures and controls;
• Regulation Systems Compliance and Integrity for incident response and vendor risk management; and
• Anti-money laundering programs.

Enforcement Considerations

The Priorities suggest that actions the Division of Enforcement (Enforcement) have brought under Chairman Atkins will continue as a focus of examinations in 2026. For example, recent enforcement actions against registered actors have focused on issues affecting retail investors, including disclosure failures. Also consistent with enforcement trends, the Priorities omit prior years’ standalone section on crypto-assets, further reinforcing the pull-back in digital asset enforcement. 

At the same time, the Priorities make clear that a retreat by Enforcement in certain areas does not mean that the Commission will not focus on those areas in an examination. Specifically, the SEC recently filed dismissals of two of the more novel types of civil enforcement actions it filed under the previous administration. On 11 July 2025, the SEC announced dismissal of the first enforcement action against an investment adviser based on alleged violations of the Liquidity Rule under the Investment Advisors Act of 1940,² and on 20 November 2025, the SEC announced it would dismiss its civil enforcement action against an issuing company alleging securities law violations relating to cybersecurity vulnerabilities. Nevertheless, liquidity of investment companies and cybersecurity are noted in the Priorities.

The underlying premise of the Priorities—that examinations should be constructive and transparent rather than a “gotcha exercise”—mirrors Chairman Atkins’ statements in connection with the SEC’s enforcement approach.³ Similarly, the Chairman has expressed an intent to work with industry participants to address technical issues short of an enforcement action, focusing on remediation and dialogue. Such conversations are likely to happen in the examination context.  

Registrants should not interpret this tone as a relaxation of standards. Rather, they should use the Priorities as a guide for strengthening their compliance programs and seek to engage constructively with examiners to resolve issues before they escalate. Prompt remediation of deficiencies identified during exams may reduce the likelihood of an enforcement action.

CMS’s Policy Is Governed by the Applicable Statute

When CMS determines the rate for separately payable drugs in its annual rulemaking, the OPPS statute gives CMS two options for setting these rates: 

1. The agency can conduct a survey of hospitals’ drug acquisition costs and set reimbursement rates taking the survey into account; for this option, reimbursement rates may vary by hospital group. 
2. Absent a survey meeting specific statutory requirements, CMS must set reimbursement rates based on “the average price” charged by manufacturers for the drug as calculated and adjusted by CMS; for this option, reimbursement rates may not vary across different hospital groups.

If CMS chooses to conduct a drug acquisition cost survey, the statute requires the survey include “a large sample of hospitals that is sufficient to generate a statistically significant estimate of the average hospital acquisition cost for each [covered drug].” CMS may then vary reimbursement rates by hospital group based on “relevant characteristics,” upon “taking into account the hospital acquisition cost survey data.”

Reduced OPPS Reimbursement Rates for 340B Hospitals

Historically, CMS has not conducted the required OPPS survey, and, prior to 2018, CMS reimbursed all hospitals for OPPS drugs based on ASP plus 6%. On 13 November 2017 however, CMS issued the 2018 OPPS final rule, reducing the reimbursement rate for OPPS-covered drugs to ASP minus 22.5% for 340B covered entities. CMS did not conduct a survey in implementing the new 340B-specific reimbursement rates, resulting in a challenge by AHA and others. On 15 June 2022, in American Hospital Association v. Becerra, the US Supreme Court unanimously held that the 340B covered entity-specific rate was unlawful because CMS was required to conduct a valid acquisition cost survey before targeting 340B hospitals for reduced reimbursement. American Hospital Association v. Becerra, 596 U.S. 724 (2022). To remedy the unlawful cuts, CMS paid a lump sum to bring previously adjudicated claims to the lawful ASP plus 6% reimbursement rate and has reimbursed all 340B hospital claims at ASP plus 6% moving forward. 

OPPS Survey Confirmed for Calendar Year 2026

The 2026 OPPS Final Rule confirms that CMS intends to vary OPPS drug reimbursement across certain hospital groups by conducting the survey mandated by statute. CMS indicates it is not limiting the survey to varying reimbursement based on 340B status alone and includes examples of other characteristics that may be used to vary reimbursement (i.e., hospital size, location, urban vs. rural status, and teaching hospital status). CMS intends for the survey to be completed in time to inform reimbursement rates for the 2027 OPPS rule. 

CMS is aware that hospitals are considering whether to respond to the survey. CMS agrees that the statute itself does not mandate specific consequences on hospitals for failing to respond but nevertheless believes that the statute implicitly imposes the obligation on hospitals to complete the survey. To avoid a situation where hospitals rationally decide not to take on the burden of completing the survey, CMS resorts to what could only be described as threatening nonresponders. CMS claims that the lack of a response is still “meaningful data” that can drive payment decisions. For example, CMS might take failure to respond to the survey as confirmation that a hospital does not have meaningful additional costs, and, as such, the hospital’s drug costs should not be paid separately but rather should be packaged into the payment for the associated service. Another potential alternative CMS is considering is to attribute to such a hospital the lowest acquisition cost reported by a similarly situated hospital. CMS has also suggested that it might look at supplemental data from other sources, even though there is no provision in the statute for such an approach. Ironically, CMS’s consideration of supplemental information exclusively when setting the ASP minus 22.5% rate was a main factor considered by the Supreme Court in the American Hospital Association v. Becerra decision. CMS has suggested that it would be premature, however, to commit to a specific penalty for failure to complete the survey until the survey process is completed.

Some may find it hard to square CMS’s proposed penalties with the text of the statute. The statute requires CMS to “tak[e] into account the hospital acquisition cost survey data” when setting the payment rate for separately payable drugs. When CMS discerns “relevant characteristics” in data that help explain correlations, CMS can vary reimbursement for a specific group. A nonresponding hospital, in contrast, demonstrates the absence of data, from which no pattern can be discerned. Arguably, opting not to respond is more properly viewed as an “action” and not a “characteristic.” Many hospitals may conclude that, just as with American Hospital Association v. Becerra, CMS is likewise interpreting the statute to reach an outcome, rather than adhering to the statute’s plain meaning. Yet hospitals must also keep in mind that nothing prevents CMS from implementing a policy that is ultimately unlawful, resulting in the imposition of penalties for some period of time until a court overturns any policy that exceeds CMS’s statutory authority.

Hospitals Face a Difficult Choice

Notwithstanding all of CMS’s protestations to the contrary, completing the survey will require significant effort. A lot of the work required cannot be automated and will be manual, given the pervasive nature of lagged discounts, and will require intricate calculations. For 340B covered entities, there is additionally the fear that the data will be used to cut much-needed reimbursement. A rational hospital might opt not to participate if it did not believe that there would be significant negative consequences. The issue a hospital will face is determining what its peers will do. If the response rate is below what is statistically necessary, then the plain meaning of the statute does not allow CMS to use the data to revise its payment policies. However, each hospital will need to decide if it individually is willing to risk the potential consequences CMS set forth in the Final Rule for not responding. In other words, CMS has created a “prisoner’s dilemma.” Each hospital will need to decide whether to minimize its own exposure to the proposed negative consequences by responding or take a chance that the survey is invalidated by an industrywide inadequate response rate.

Some actions available to hospitals will be:

• Respond fully;
• Disregard the survey; or
• Respond to the survey only to state that the hospitals’ costs are not minimal, but that the hardships in responding preclude the full response CMS is seeking. By doing so, the hospital could thwart CMS’s objective of attributing zero cost to a nonresponding hospital.

Of course, most hospitals will not consider this to be an easy decision. Hospitals, especially 340B covered entities, should consult with their advisors and peers to make the decision that is most appropriate for them.

The travel risk management (TRM) market in Italy concerns a specific segment of companies and workers. In 2021, Italian companies abroad numbered approximately 25,491, employing over 1.7 million people, generating a turnover of around €552 billion, and operating in 175 countries (source: ISTAT). However, the majority (80–90%) of these employees are “local hires” meaning personnel directly employed in foreign countries under local contracts. Personnel sent from Italy, who are the focus of TRM, constitute 10–20% of the total. Of these, approximately 10–15% are temporary transferees on short-term assignments, while 5–10% are expatriates or seconded personnel with ad hoc contracts or long-term detachments. The sectors most affected by these dynamics include Manufacturing, Oil and Gas, Offshore, Mining, Construction, consulting firms, engineering, auditing, and non-government organizations and cooperatives operating in high-risk areas.

Despite the lack of specific official data on the growth of the TRM sector, it is estimated that ap-proximately 84,000 Italian workers, primarily from small and medium enterprises operating in “high-risk” sectors such as Oil and Gas, Mining, Construction, Energy, and Maritime, could generate incremental costs for regulatory compliance. These costs are estimated to be between €15,000 and €150,000 annually for a company with 10–50 expatriates. The estimated maximum overall expenditure ranges from €110–€260 million. This expenditure includes training, vaccinations, insurance policies, security and logistics services, as well as audits and certifications. The regulatory change would represent a natural evolution of the ISO 31030:2021 guidelines on TRM, already implemented by large Italian multinationals for over 30 years, and incorporated into the Italian Society of Occupational Medicine guidelines in 2024.

Over the last 20 years, the growth of this market has been linear and continuous, except during the recent COVID-19 pandemic. The imminent adoption of more stringent guidelines and the growing awareness of risks associated with a highly unstable and constantly changing international and geopolitical context suggest an increase in investments in this area.

The Current Scenarios of “Global Work” and the New Requirements for Safety and Security

The current global economic system has brought about a profound change in productive activities that often cross-national borders: not only are raw materials, industrial products, and technologies transferred abroad, but qualified human resources are transferred as well.

This is the phenomenon of international labor migration, also referred to as international mobility, which has been known in large companies for a long time but has accelerated dramatically in the last decade.

Italian companies of large, medium, and small size are called upon to implement projects, and to activate or participate in construction sites all over the world, including the so-called emerging countries of the intertropical belt. The production sectors involved are the most diverse: construction, energy, telecommunications, and others.

Workers, therefore, move from their countries of origin to perform “delocalized” work in geographical areas in which they encounter physiological maladaptation and “new health and safety risks” in the workplace, different from and in addition to those present in the country of origin. In this way, the need for employers to ensure the health and safety of their workers seconded on overseas assignments becomes pre-eminent.

The international context imposes on companies operating abroad the confrontation with health risks of infectious and noninfectious nature, extreme climatic factors, local contexts often geopolitically unstable and health facilities not adequate to the standards of the country of origin. The very length of stay, short (days or weeks) or extended (months or years), represents an additional element to be considered to protect the health and safety of employees.

Identifying Solutions

Companies are confronted with new protection obligations and new responsibilities compared to the “ordinary” and more familiar ones provided in carrying out activities in Italy. There is a need to deepen the reference standards and to find application tools to accompany, harmonizing them with their own organization and production sector.

The Italian Regulatory Framework on Protection Obligations and Responsibilities for Labor Activities Abroad

The norm-foundation of worker protection is Article 2087 of the Civil Code, according to which “The entrepreneur is obliged to adopt in the exercise of the enterprise the measures that, according to the particularity of the work, experience and technique are necessary to protect the physical integrity and moral personality of the workers.”

This employer obligation, to which the legislation refers, has wide application perspectives and requires the diligent fulfillment of safety obligations to workers, and is also inclusive of keeping abreast of preventive knowledge regarding the work activity carried out abroad.

In addition, D. Lgs 81/08, known as the “Testo Unico” for safety in the workplace, contains guidance on acquiring the necessary methodology for risk assessment for work activities abroad and guidance on infectious risk. 

The standard contains ways to identify preventive measures that are known to safety professionals with specific expertise on working abroad.

Complementing the regulatory foundations, the Ministry of Labor’s Commission, (No. 11 /2016) on the subject of employer obligations for the protection of employees working abroad, dispels any interpretative doubts: “ the Commission considers that the employer must assess all risks including potential and peculiar environmental risks related to the characteristics of the country where the work performance is to be carried out, such as, by way of example, the so-called “aggravated generic risks”, related to the geopolitical situation of the country (e.g., civil wars, attacks, etc.) and the health conditions of the geographical context of reference not considered abstractly, but which have the reasonable and concrete possibility of occurring in correlation with the work activity performed”.

In this sense, the recent State-Regions Agreement released in April 2025 implemented Article 37, paragraph 2, of the Consolidated Safety Act, sets out in detail the training paths dedicated to and necessary for the employer to acquire an adequate level of competence in safety. It provides for general training of at least four hours and specific training, with duration varying between 4–12 hours depending on the company’s risk level, which, of course, includes the specific risks associated with carrying out activities abroad in territories that present particularly critical risks for workers’ health and safety.

At the outcome of litigation for serious injuries of workers occurring in high-risk geographical areas (from serious infectious disease to personal injury), the rulings highlight the relevance of employer liability.

The need for worker protection has as reference figures the Head of the Prevention and Protection Service, the occupational health company doctor (OHCD), and the corporate functions that manage the company’s work activity abroad, also making use of qualified external support on the subject of risk assessment, personal safety, or medical emergencies with the need for medical repatriation to Italy.

The ”Travel Risk Management-Guide for Organizations” (ISO 31030:2021), is a key reference for companies operating globally. This standard provides a structured framework for identifying, assessing, and mitigating risks associated with business travel, enabling organizations to take proactive preventive measures and ensure timely action in the event of an incident or emergency.

ISO 31030 is the essential guide outlining the critical factors to be considered in both risk analysis and the planning and implementation of prevention and management strategies.

This configures in travel risk management (TRM), a process resulting from a clear and detailed understanding of the factors that can influence the dynamics of risk management, broadly divided into two categories: so-called “external” risks and “internal” risks.

“External” risks include: the political, socioeconomic, religious, and legal environment of the destination country; the level of crime; the quality and reliability of transportation and communications; environmental factors; potential health risks; and the quality of the healthcare and housing system. “Internal” risks include: types of business travel; technical and human resources available for risk management; internal processes; corporate governance; organizational structure, roles, and responsibilities.

The path indicated by TRM enables companies to have detailed policies to define corporate strategies for (i) TRM and adoption of procedures for risk prevention and mitigation; (ii) definition of roles and responsibilities, as well as staff training programs. In this way, a clear corporate system of reference is built, enabling the company to protect the health and safety of its employees during missions abroad.

In these activities, the company profiles that manage safety and health protection, provided for by Legislative Decree 81/08—RSPP, OHCD, dedicated company functions—can avail themselves of consulting support from public or private facilities of proven competence and professionalism, which assist them in the assessment and management of risks related to working abroad.

A further application tool is represented by the September 2024 Guidelines of the Italian Society of Occupational Medicine (SIML), which focus on the articulated and specific aspects of health protection of Italian workers abroad and the mention of application tools that enable companies to fulfill their regulatory obligations punctually.

The “Professional Orientation Document for the Competent Physician: Practical-Management Aspects for Workers Abroad” represents a milestone in harmonizing scientific knowledge and experience and makes available indications on the health protocols to be adopted, consistent with international best practices and the company’s protection needs.

The document provides the health contribution to the process of risk assessment for work activity in critical geographical areas, highlighting the relevance of factors that can determine damage to the health of the worker working in that context and absent in the national territory (climate, infection vectors, general hygienic conditions). This is the aspect that requires the employer to extend its position of guarantee even regarding the “specific” risks of working abroad and, ultimately, to integrate the prevention measures adopted in the national territory of Italy.

The perimeter outlined by ISO 31030 and the SIML Guidelines makes available to employers and safety professionals the compliance parameters to be followed to structure an effective TRM policy aimed at minimizing travel-related health and safety risks for workers. These parameters are now commonly recognized internationally and represent a solid reference for the company to assess liability in case of litigation.

From Country Risk Assessment to Workers Health Surveillance: Implementation of the TRM Plan and Application Model

The risk assessment for working abroad, supported by the methodological indications of the SIML guidelines and ISO 31030, considers the geographical area and the country of destination with all its variables (climate, infection vectors, level of health care, geopolitical stability) and thus defines the so-called “country risk.” It follows with a progressive pathway for the health surveillance of personnel i.e., periodic medical checks according to country- or destination-specific health protocols, based on the parameters identified by the risk assessment.

It is necessary to identify within the company, with the support of the OHCD, functions of reference for the management of expatriate workers, which allow to manage the organization of the “TRM prevention system”, as suggested by the International Labor Office back in 1985.

A benchmark example of medical surveillance is the health protocols applied in the Oil and Gas industry. This production activity has additional and important international references for the protection of workers’ health and allows for the exemplification of the health surveillance procedure, which, with commitment of company resources varying in relation to the number of workers employed in overseas activities, allows for an articulation of this surveillance activity into lines of action and organizational phases.

The employer, through the Medical Officer (MO), is responsible for the activation of health surveillance and vaccination protocols.

Employees are taken in charge by the company’s occupational health specialist and included in the health surveillance program provided for by Legislative Decree 81/08, with the aim of assessing their psychophysical condition and ability to cope with the mission and perform work activities safely. At the end of the health checks, a judgment of suitability for the specific task performed abroad will be made, as required by the Consolidated Safety Act.

From a methodological point of view, the health surveillance intervention is divided into three operational phases: 1) pre-departure phase, 2) phase covering the span of the stay abroad, and 3) phase following return from the mission.

The relevant operational health phase is the one prior to the worker’s departure, which includes the delicate assessment of suitability for work under conditions different from those in the country of origin.

The MO must establish, in consultation with the relevant company functions: 

• Relations with national and international public health agencies (international vaccination centers);
• Contacts with diplomatic representations of destination countries to obtain up-to-date information on conditions in the areas where the work will take place (e.g., Viaggiare Sicuri Travel Advisory Portal); and
• Internal information systems to access up-to-date sources of noninfectious hazards from different geographic areas (e.g., ProMED's Weekly Pulse).

These activities can be supported by qualified contracted specialist facilities, which make available updated “country risk reports” and other information tailored to the needs of individual companies, thus reducing the commitment of company resources.

In addition, the health surveillance program requires the MO to:

• Know the work destination quickly;
• Provide an appropriate health care program for clinical examinations, targeted laboratory and instrumental tests, and vaccinations;
• Provide a pre-trip counseling program focused on the country to which the resource is to travel by signing an appropriate training and information form and adding it to his medical record; and
• Complete the program at least two weeks ahead of the employee’s departure.

Health protocols used for work abroad, in addition to the standard defined by SIML and the various international guidelines (Oil and Gas UK Medical, OGP IPIECA, Norwegian Center for Maritime Medicine), may include modulations with additional examinations in relation to the subject’s age, pathological conditions present, and possible high physical activity (work at high altitude or high heat stress conditions). Particular attention should be paid to evaluation of the cardiovascular, respiratory, and neuropsychological systems to identify subjects with pre-existing conditions (e.g., heart disease, hypertension, asthma, diabetes, allergies, epilepsy, anxiety, or depression) as well as vulnerable subjects related to special conditions or carriers of acute or subacute conditions.

The other steps of the worker’s pre-travel health assessment are:

• Recognition of vaccination status and adjustment of vaccinations in relation to the areas of destination according to the corresponding vaccination schedules. Legislative Decree 81/08 provides with art. 279 of Title X (biohazard) for the provision of effective vaccines to nonimmune individuals by the employer;
• Review of prescription drugs that may be taken (to plan adequate stocks, to change schedules and dosages in case of multiple time zones). In developing countries, counterfeiting of drugs is widespread and often the active ingredient is completely absent. It is therefore important to guarantee a safe medical supply chain;
• Possible prescription, including transport arrangements, of drugs to prevent or treat specific conditions (such as motion sickness or altitude sickness syndrome, cold illness, traveler’s diarrhea, etc.) to support clinical situations in the absence of a referring physician in the country where the work will be performed;
• Arrange for possible malaria prophylaxis and the most suitable skin repellent for insect bite prevention; and
• Health education and information on behaviors and precautions to prevent frequent travel illnesses. Company computer networks are important supports for making health information and behavioral precautions available to workers in relation to different geographical areas of destination.

During the stay abroad, in case of illness or injury or both of the employee on the mission, it is necessary to have prepared a health care plan with access to local medical facilities with acceptable standards, including the possibility of medical evacuation to the home country or to another country with adequate standards. These measures can also be acquired through qualified and contracted professional partners.

The third phase of health surveillance, to be activated upon return from travel, differentiates the pathway for asymptomatic and symptomatic workers.

In the former, monitoring is general clinical and based on any risky behavior during the stay, subject to any health issues that may still be incubating, especially for short-term stays (<1 month).

In symptomatic workers, diagnostic investigations after careful history taking will be guided by the predominant clinical symptoms and signs (fever, diarrhea, intense headache, splenomegaly, jaundice, etc.) with subsequent referral to specially contracted specialist facilities.

Guidance for Companies with Employees Operating Abroad

For companies with personnel abroad, the safety of internationally mobile workers is an imperative burden. Adaptation to the stringent regulatory perimeter can be implemented by following the application guidelines provided in the Society of Occupational Medicine Guidelines (SIML Guidelines), which incorporate the principles of ISO 31030.

The implementation of a Travel Risk Management (TRM) plan guides the company in incorporating into its organization the tools to deal with the possible criticalities of international travel.

The many variables of risks that affect working abroad can be addressed with TRM in order to ensure the safety and security of employees. The plan provides for appropriate adaptations to diversified production realities—small, medium, and large—and allows for standardization of prevention procedures.

The employer, with the support of the competent doctor, the Head of the Prevention and Protection Service, and the relevant company functions, can determine compliance processes also making use of professional partners experienced in TRM.

Employer responsibility is protected by codified company procedures consistent with the national and international regulatory framework, SIML Guidelines, and ISO 31030.

The documentation and traceability of prevention activities—risk assessment carried out, health surveillance applied with eligibility for work abroad and vaccinations, training and information provided—make it possible to demonstrate the fulfillment of regulatory obligations in the case of adverse events e.g., accidents, illnesses, other critical events.

With these enforcement methods, the employer overcomes the concept of responsibility and represents himself as a guardian of his employees’ well-being. His ability to manage risks, take preventive measures, and ensure adequate care results in an increase in corporate reputation values and builds an important pillar of business continuity in the company.

On 29 October 2025, the Federal Cabinet (Bundeskabinett) adopted the draft of the Fund Risk Limitation Act (Fondsrisikobegrenzungsgesetz). The planned law is intended primarily to implement the amendments concerning the Alternative Investment Fund Managers (AIFM) Directive. We reported on the changes proposed in the consultation draft in our August Newsletter. Compared to the August draft, the government draft includes several changes.

The proposal to amend the calculation of thresholds for so-called sub-threshold AIFMs has been dropped. Background: small management companies (Kapitalverwaltungsgesellschaften, KVGs) that manage assets only up to a certain threshold (sub-threshold) only need to register with the Federal Financial Supervisory Authority (Bundesanstalt für Finanzdienstleistungsaufsicht, BaFin) and comply with less stringent requirements. The calculation of these thresholds based on market values of assets (instead of book values as before), which was included in the consultation draft, has been removed in the government draft. Likewise, the stricter organizational requirements for registered KVGs with loan-originating funds, which were considered in the consultation draft, have also been removed.

For closed-ended retail funds, the investment options have been expanded to include investments in units of open-ended retail funds and special AIFs (domestic, EU or foreign), provided that they pursue a comparable investment policy. The question of possible transitional provisions for implementing the new rules for existing funds (e.g., the introduction of new liquidity management tools) was not addressed in the government draft.

EU Commission Adopts Delegated Regulation on LMTs

On 17 November 2025, the EU Commission adopted the Delegated Regulation with regulatory technical standards (RTS) further specifying the characteristics of liquidity management tools (LMTs). The AIFM Amending Directive requires that open-ended funds select at least two LMTs and include them in their fund rules. The RTS shall set out further details on the design of LMTs.

The European Securities and Markets Authority (ESMA) had published its Final Report on these RTS on 15 April 2025. Compared to the Final Report, the version adopted by the EU Commission includes some changes. For example, in relation to the redemption gate LMT it is now also permitted that the activation threshold triggering the redemption restriction may relate to either the fund level or the investor level. For the redemption fee, it was clarified that implicit transaction costs (e.g. price discounts) considered when setting the fee may be estimated to the best extent possible.

While the requirements implemented through the Fund Risk Limitation Act (Fondsrisikobegrenzungsgesetz) from the AIFM Amending Directive (Level 1) will apply to all funds from 16 April 2026, the detailed LMT requirements under the RTS (Level 2) will apply to existing funds only from 16 April 2027.

Proposal to Amend the EU Disclosure Regulation

On 20 November 2025, the EU Commission published a proposal to amend the Sustainable Finance Disclosure Regulation (SFDR). The SFDR currently governs disclosure obligations for sustainability-related information (ESG) in relation to certain financial products and services. The SFDR has previously been criticized as impractical and its required disclosures as lacking meaningfulness.

The proposal replaces the current disclosure obligations under Articles 6, 8, and 9 SFDR (which vary depending on ESG characteristics) with a new product categorization: products with transition-related objectives (Art. 7 SFDR-E), products with integrated sustainability factors (Art. 8 SFDR-E) and products with sustainability-related objectives (Art. 9 SFDR-E). Each category is subject to specific requirements. All three categories require a 70% allocation to the respective ESG strategy. Certain knockout criteria must also be observed. Disclosure obligations regarding principal adverse impacts (PAIs) at the entity level (e.g. management company level) shall be removed and the concept shall largely be abandoned at the product level as well.

SFDR requirements will no longer apply to portfolio management and investment advisory services. Special AIFs that admit only professional investors will also not have to apply the product categorization rules. Transitional provisions include, among other things, that closed-ended existing funds will be exempt from the new SFDR rules. The proposal also provides for the adoption of several Delegated Acts to further specify ESG requirements.

ESMA Final Report on Open-Ended Loan-Originating Funds

On 21 October 2025, the European Securities and Markets Authority (ESMA) published its Final Report on the regulatory technical standards (RTS) for open-ended loan-originating funds. The AIFM amending Directive introduces harmonized requirements for loan-originating funds. ESMA has the mandate to develop Level 2 measures for open-ended loan-originating funds. The corresponding consultation was published by ESMA on 12 December 2024.

Compared to the RTS proposed during the consultation, liquidity requirements for open-ended loan-originating funds have been somewhat relaxed. Instead of prescribing a specific liquidity buffer, the RTS now leave it to the discretion and responsibility of the management company to maintain sufficient liquidity based on expected loan repayments to the fund. In addition, liquidity stress tests are now required only annually instead of quarterly as previously proposed.

The EU Commission now has three months to decide on the adoption of the RTS.

ESMA Final Reports on Insider Lists

On 21 October 2025, the European Securities and Markets Authority (ESMA) published its final report on the draft Implementing Technical Standards (ITS) regarding the expanded use of the simplified format for insider lists.

ESMA had released a Consultation Paper on 3 April 2025, proposing new rules for the content of insider lists for all issuers in new ITS. The consultation period ended on 3 June 2025. Compared to the Consultation Paper, ESMA made no significant changes to the templates for insider lists in the Final Report.

The draft ITS consolidates the existing five templates for insider lists into three: two templates for event-based and permanent insider lists applicable to non-SME issuers and SME growth market issuers in Member States that opted out of the simplified regime; and one template for SME growth market issuers under the simplified regime, covering persons with regular access to inside information.

Other key elements of the final report concern “simplifications of data requirements.” ESMA maintained its view that all issuers should provide the national identification number of insiders and, if not applicable, their date of birth. Data fields were simplified to minimize the entry of personal data; for example, fields for private phone numbers and home addresses were removed.ESMA also added a recital on “external service providers,” clarifying that issuers may designate a single contact person per provider as the central point of contact, while the provider remains responsible for maintaining internal insider lists.

Regarding “requirements for format and retention,” issuers under Art. 18(1) of the Market Abuse Regulation (MAR) must maintain insider lists electronically, version-controlled, access-restricted and audit-proof. SME growth market issuers under the simplified regime may use non-electronic formats, provided that completeness, confidentiality, and integrity are ensured.

The Final Report, including the final ITS draft, has been submitted to the European Commission for adoption. The Commission has the usual three-month period for review and approval.

BaFin Circular on Members of Management Bodies as well as Administrative and Supervisory Bodies pursuant to the KWG

On 22 October 2025, the Federal Financial Supervisory Authority (Bundesanstalt für Finanzdienstleistungsaufsicht, BaFin) published the new “Circular on Members of Management Bodies as well as Administrative and Supervisory Bodies pursuant to the KWG” (also referred to as the Fit and Proper (FAP) Circular). The circular explains the professional and personal requirements for individuals appointed as managing directors or as members of administrative or supervisory bodies, and provides an overview of the associated notification obligations, including the documents to be submitted. Furthermore, it provides a number of forms to facilitate the submission of notifications to BaFin by the supervised entities. The circular replaces and consolidates the previous guidance notes on managing directors pursuant to the German Banking Act (Kreditwesengesetz, KWG), the German Payment Services Supervision Act (Zahlungsdiensteaufsichtsgesetz, ZAG) and the German Capital Investment Code (Kapitalanlagegesetzbuch, KAGB), as well as on members of administrative and supervisory bodies pursuant to the KWG and KAGB, in order to avoid future duplication and to implement common European guidelines that BaFin had announced it would adopt into its administrative practice. In addition, it contains instructions for completing forms and administrative procedures, and takes into account requirements from the German Risk Reduction Act (Risikoreduzierungsgesetz, RiG). The publication of the new Circular followed a consultation during which BaFin made a clarification in particular regarding waiting periods when a person moves from the management board to the supervisory body, stipulating that, as a rule, a cooling-off period of at least two years should be observed in order to adequately address potential conflicts of interest.

This term, the Supreme Court will reconsider Humphrey’s Executor and decide whether Congress may insulate independent agency heads from the president’s control. The practical implications are significant, including increased presidential oversight of regulatory decisions made across independent agencies such as the Federal Reserve System, the Securities and Exchange Commission, the Federal Trade Commission (FTC), the National Labor Relations Board (NLRB), and many others. Depending on how the Supreme Court rules in the pending cases, businesses may have to reassess how they interact with these agencies in the regulatory process. 

Humphrey’s Executor and Removal Authority

Although the president has clear constitutional authority to remove executive agency heads (such as the Secretary of State), Congress has long sought to restrict the removal power as it relates to leaders of “independent” boards and commissions—those agencies that Congress has structured to be more insulated from presidential control. To that end, Congress has often imposed “for cause” restrictions on the president’s ability to remove the heads of these independent agencies.² The Supreme Court validated this approach in Humphrey’s Executor, where it upheld a law that prevented the president from removing FTC members except in cases of “inefficiency, neglect of duty, or malfeasance in office.”³ That decision—which was seen as a check on President Roosevelt—established that Congress could limit the president’s removal authority for independent agencies, which function as quasi-legislative or quasi-judicial bodies.⁴

Nearly a century later in Seila Law LLC v. CFPB, the Supreme Court refused to extend Humphrey’s Executor to the Consumer Financial Protection Bureau (CFPB), noting that the CFPB’s single director held significant “executive” power, unlike the “New Deal-era” FTC’s “multimember” expert panel.⁵ The Court also suggested that it might rule differently on Humphrey’s Executor today.⁶ That shift aligns with the Supreme Court’s growing support for the unitary executive theory—a theory that has been advanced by multiple presidents for many years—under which the president has direct and sole control over the entire executive branch based on Article 2 of the Constitution, which states that “[t]he executive Power shall be vested in a President of the United States of America.” 

Legal Challenges to President Trump’s Exercise of Removal Authority

In recent months, President Trump has fired several independent agency heads, directly challenging Congress’s limits on his removal power. The president signaled his position early in his term, when the Justice Department told Congress that it would no longer defend “for-cause” removal rules and would urge the Supreme Court to overrule Humphrey’s Executor. ⁷

These firings have affected more than a dozen independent agencies, sparking a wave of litigation. Bound by Humphrey’s Executor, lower courts have rejected the firings for violating Congress’s for-cause removal provisions. But given the Supreme Court’s treatment of emergency requests in these cases, many expect the Court to ultimately agree with the president and find that statutory for-cause removal restrictions are unconstitutional.

One key case is a Humphrey’s Executor déjà vu, involving President Trump’s firing of FTC Commissioner Rebecca Slaughter—the same position at issue in the landmark decision. President Trump dismissed Slaughter via an email, citing her service as “inconsistent” with the administration’s priorities.⁸ Slaughter filed suit, and the district court ordered her reinstatement. The government appealed to the D.C. Circuit, requesting a stay of her reinstatement, but the request was denied.⁹ The government then asked the Supreme Court for an emergency stay, which the Court granted in a 6-3 ideological split (thus preventing Slaughter’s reinstatement while the case is litigated). The majority provided no explanation, prompting a dissent by Justice Kagan, joined by Justices Sotomayor and Jackson, who warned against using the Court’s emergency docket to “reshape the Nation’s separation of powers” by shifting authority from Congress to the president. 

The Supreme Court also took the unusual step of granting certiorari before judgment, allowing the Court to directly review the district court’s decision.¹⁰ The Court will hear Slaughter’s case in December 2025, and has directed both sides to address whether Humphrey’s Executor should be overruled. Meanwhile, the Court has blocked the reinstatement of several other officials who are similarly contesting their at-will terminations, including from the Consumer Product Safety Commission (CPSC), Merit Systems Protection Board, and the NLRB.¹¹

The Supreme Court took a slightly different tack for the president’s for-cause removal of Lisa Cook from the Federal Reserve Board, declining to immediately grant the government’s request to remove her during litigation. Instead, Cook remains in office, with arguments on the government’s stay request scheduled for January 2026.¹² The difference in approach could suggest that the Court’s reconsideration of Humphrey’s Executor will impact independent agencies differently, depending on each agency’s composition and functions. Even if some for-cause protections are deemed constitutional, thorny questions will remain about the scope of review and deference granted to the president in making requisite findings for removal.

What Lies Ahead for Independent Agencies and Those They Regulate

Stakeholders in government and industry are closely watching, with many expecting the Supreme Court to use the Slaughter and Cook cases to redefine the president’s authority over independent agencies. As shown in the Quick Guide to Independent Regulatory Agencies, there are dozens of independent agencies that currently enjoy for-cause and other congressional protections. The future of these protections (and potentially the very structure of these agencies) is uncertain. If Humphrey’s Executor is overturned, these agencies may be brought under direct presidential control. Treating more of these independent agencies like traditional executive agencies could lead to: (1) rapid policy swings, as regulatory priorities shift with each new administration; (2) enforcement volatility tied to current political trends; and (3) greater external influence on agency decision-making. But with such shifts may also come increased accountability to voters and the political process.

Many businesses are directly regulated by independent agencies such as the CPSC, the Equal Employment Opportunity Commission, the FTC, the NLRB, the Surface Transportation Board, and several others.¹³ The manner in which these agencies regulate industry could dramatically change, depending on whether the Supreme Court overrules Humphrey’s Executor and which agencies are affected by the Court’s new approach to the president’s removal authority. As a result, businesses may have opportunities to advocate more directly for their regulatory prerogatives. 

Our quick guide to independent regulatory agencies identifies 30 such agencies and provides a top-line summary of their composition, the statutory “for cause” removal protections Congress has put in place for their leaders, and the current status of those protections. This guide is a resource for understanding how the Court’s upcoming decisions in this area may affect the independent agencies that most directly regulate your industry. 

View our quick guide here. 

From 27 September 2026, all websites and physical shops in the EU selling goods of any type to consumers will be required to prominently display a new mandatory notice reminding consumers about their legal guarantee rights. This extends beyond categories such as electronics and appliances and applies to clothing, shoes, accessories, furnishings, décor, toys, beauty products, and more.

Consumer brands and resellers should therefore carefully review their guarantee policies in EU Member States now to ensure compliant processes and terms are in place and point of sale materials and online copy are prepared and distributed in time for the go-live date next year. This alert considers the key requirements and how they differ from the position today.

Legal Guarantee v Commercial Guarantee

Before we dive into the new Regulation and what it means for your business, it is important to ensure that different types of guarantees are understood. There are two distinct types of guarantees, namely, legal guarantees and commercial guarantees. 

Legal Guarantees

Legal guarantees (also known as “statutory warranty rights”) are mandatory legal protections for consumers imposed by statute in the event a product does not conform to the mandatory requirements, including not complying with its description or if it has a defect during the legal guarantee period. These rights are enshrined in EU consumer protection law and cannot be excluded by the seller. The Sales of Goods Directive (EU) 2019/771 entitles consumers to a minimum of two years’ legal guarantee following purchase, with some Member States (including Spain and Portugal) providing for longer periods of protection. During the legal guarantee period, a consumer may require the direct seller of a nonconforming product to repair or replace it free of charge and, in some circumstances, to provide a price reduction or a refund. In some EU Member States, whilst the law initially provides for a “no questions asked” approach (i.e. a presumption that the defect/nonconformity was present on purchase), after the first 12 months the onus shifts to the consumer to prove this. Thus, in those markets a legal guarantee can become more difficult for a consumer to rely upon in practice after the first year. 

Commercial Guarantees

Commercial guarantees (also sometimes referred to as “manufacturer warranties” or “durability guarantees”) are optional, enhanced rights sometimes offered by traders in their discretion. These are additional to the consumer’s rights under its legal guarantee—for instance, longer protection, broader coverage (not just covering manufacturing defects but also wear and tear or certain forms of damage by the consumer or loss), or extra entitlements (e.g. replacement during repair, drop-off at any authorised dealers, etc.). Commercial guarantees can be offered free-of-charge or for a fee. Importantly, a commercial guarantee does not exclude the consumer’s legal rights imposed by law. Additionally, a commercial guarantee must offer some further rights for the consumer that go above and beyond the mandatory legal guarantee. A reseller cannot simply restate the consumer’s legal rights, since this could mislead a consumer who may be led to believe the seller is offering something better than its competitors when it is actually standard and automatic. The Sales of Goods Directive (EU) 2019/771 states that the conditions of a commercial guarantee should be clearly set out in an accompanying statement where a manufacturer or trader offers a commercial guarantee.

There is often some confusion among shoppers and traders alike about consumers’ entitlements under these separate guarantees. Additionally, there is broad inconsistency across websites regarding how legal guarantee rights are presented and explained to consumers (if at all). The new Regulation aims to address these weaknesses, equip consumers with clearer information about their rights, and compel noncompliant sellers to avoid shirking their duties when something goes wrong.

Harmonised Notices and Labels for Guarantees

The new Regulation introduces harmonised notices and labelling for all products sold across the EU and aims at introducing a set of uniform product markings across the EU. 

These include:

A Mandatory Harmonised Notice on the Legal Guarantee

As depicted below and downloadable as a pdf here, a mandatory harmonised notice on the legal guarantee clearly states what the consumers’ legal guarantee rights are and provides high-level guidance on how a consumer can make a claim under the legal guarantee for nonconforming goods. The mandatory harmonised notice will need to be prominently displayed in all retail premises, both online and offline, across the EU. 

^{Image Source: European Union Website}

An Optional Harmonised Label for Certain Free-of-Charge Commercial Guarantees if Offered by the Manufacturer or Seller

This is depicted below and available here. This label is only intended to be used where a company offers a free guarantee that lasts longer than the minimum legal guarantee period and covers the entire product. The idea behind this label is to demonstrate to consumers that the manufacturer has sufficient trust in its products’ durability to guarantee that the goods will maintain their expected functionality and performance through normal use for the number of years specified on the durability guarantee label (shown as “XX” in the draft label). The full terms of the commercial guarantee must still be set out in the brand’s commercial guarantee statement.

^{Image Source: European Union Website}

As explained above, the commercial guarantee needs to be enhanced/in addition to the mandatory legal guarantee, and the enhancement doesn’t have to be in terms of duration necessarily. 

What are the Sanctions for Getting This Wrong?

Sanctions will be covered by national legislation of each Member State. It is also important to note that consumer protection organisations will be alive to the new requirements and may initiate their own investigations.

Time to Sharpen the Pencil

• Now is the time to (re)assess any “guarantees” that your company is offering, to ensure that:
• You (or the direct resellers of your products) are respecting consumers’ legal guarantee rights;
• Any commercial guarantees being offered are clear and meet the above requirements; and 
• Your physical and online points of sale and those of your partners gear up to comply with the new Regulation’s notice requirement. 

This reform also presents an opportunity to showcase the trust you have in your products (and stand out from your competitors) by displaying an additional product durability label going forward. 

Our team regularly advises consumer brands on their obligations under consumer protection and product compliance laws, including guarantee obligations and policies, and remains available to assist if you need any support with these.

The Division cited resource and timing considerations along with a large volume of pending registration statements and other time-sensitive filings following the recent government shutdown as the reason for taking this action. The Division also noted there is an extensive body of guidance on shareholder proposal no-action requests that is available to both companies and proponents.

The Division will, however, continue to consider no-action requests under Rule 14a-8(i)(1), which focuses on whether a proposal is improper under applicable state corporate law. This exception under Rule 14a-8(i)(1) is consistent with recent remarks by SEC Chairman Atkins questioning whether precatory (nonbinding) proposals are proper subjects for shareholder action under Delaware law. In light of the limited guidance on this question, the Division will continue to evaluate these specific no-action requests. All other bases for exclusion (ordinary business, personal grievances, procedural deficiencies, false or misleading statements, duplication and resubmissions) will not receive informal Division reviews.

The Division’s statement reminds companies that, pursuant to Rule 14a-8(j), they must notify the SEC and proponents of their intent to exclude a shareholder proposal from their proxy materials no later than 80 calendar days before filing a definitive proxy statement. However, the notification will be for information purposes only, and companies are not required to obtain a no-action letter from the Division in order to exclude a shareholder proposal. Companies should submit their notifications through the online shareholder proposal form on the SEC’s website. 

Under this new process, if a company wishes to receive a response to its notification that it intends to exclude a shareholder proposal pursuant to a basis other than Rule 14a-8(i)(1), the company or its counsel must include in its 14a-8(j) notification “an unqualified representation that the company has a reasonable basis to exclude the proposal based on the provisions of Rule 14a-8, prior published guidance, and/or judicial decisions.” In response to the unqualified representation, the Division will issue a letter indicating that, based solely on that representation, the Division will not object if the company omits the shareholder proposal from its proxy statement. The “no objection” letter, however, will not evaluate the adequacy of the company’s or counsel’s representation or express a view on the basis or bases the company intends to rely on in excluding the proposal from its proxy materials. 

In light of this significant change to the shareholder proposal process, companies will need to carefully evaluate the merits of any shareholder proposal exclusions and the likely response from the proponent. With the SEC no longer acting as a “referee” in these situations, companies will have additional flexibility in deciding whether to exclude shareholder proposals but at the same time will bear a greater responsibility in making those determinations. As a result, there may be an elevated risk of litigation, as proponents may be more likely to challenge an exclusion in court if they believe the company’s exclusion was unjustified. Companies should work closely with legal counsel in analyzing shareholder proposals and document the steps taken in the decision-making process and bases for excluding any shareholder proposal.

Signaling a new era of shared accountability for the full lifecycle of products, the Draft Plan pushes broad, systemic change across industries and supply chains and would apply to a broad range of materials. The Draft Plan seeks to maximize the highest and best use of materials and products before they are managed as “waste.” On a high level, it calls for eliminating waste at the design, sourcing, manufacturing, and distribution stages; keeping existing materials and products in use for as long as possible; and responsibly recycling remaining materials. In doing so, it sets the stage for significant statutory and regulatory changes that will build upon those already being implemented by CalRecycle.

Businesses should act strategically and proactively now to influence California’s waste-reduction policies and position themselves for future developments.

Plan background and structure

In the 2023 Budget Act (SB 101), the California Legislature directed CalRecycle to develop a Zero Waste Plan by 1 January 2026 that evaluates the effectiveness of existing waste programs, identifies new strategies for addressing statewide solid waste and edible food recovery goals, and provides recommendations for any legislative changes needed to meet these goals. CalRecycle recently shared the Draft Plan for public comment. Although lacking inherent legal authority, the final plan will be nonetheless significant as it will display CalRecycle’s preferred legislative policies and its intended approach to regulatory implementation moving forward.

The Draft Plan is organized into eight focus areas, representing themes deemed necessary for advancing zero waste. Within the focus areas there are five “strategic pillars” addressing systemic changes needed for materials management and waste prevention, and three “cross-cutting foundations” that support implementation:

The Draft Plan outlines 15 recommendations that are intended to be applied to all materials and products and that are inclusive of both upstream and downstream interventions. For each recommendation, the Draft Plan identifies primary avenues for implementation, details initial steps, and names key parties. 

The Draft Plan includes a 2045 timeline scenario for implementing the recommendations, while acknowledging that numerous external factors will influence the pace and scale of its rollout. 

The Future of California Law and Policy

The Draft Zero Waste Plan puts forward a comprehensive set of proposals aimed at making statutes and regulations foundational to California’s transition to a zero waste, circular economy. Falling primarily under the “Policy and Regulation” pillar but reinforced throughout other strategic and cross-cutting areas, numerous proposals collectively provide a detailed roadmap for potential statutory and regulatory reform. 

Overall, the Draft Plan emphasizes proactive, cross-agency, and upstream interventions as core to California’s strategy for establishing a circular economy. The Draft Plan explicitly notes that an effective shift to zero waste may require statutory expansion of CalRecycle’s authority, particularly for materials or systems currently outside its legal mandate. Cross-agency action and inter-agency mandates will also necessitate statutory authorization.

Adopting a Circular-First Framework Based on a Materials Management Hierarchy 

The Draft Plan proposes the creation of a legal framework that prioritizes the highest and best use of materials, shifting focus upstream to redesign, reduction, and reuse before recycling and disposal. To accomplish this objective, it calls for the alignment of statutes, regulations, and policies across agencies to allow for coordinated materials management and collaboration, even for materials not under CalRecycle’s current authority. 

The Draft Plan proposes that new or modified compliance obligations incorporate circular design principles that extend product life; include source reduction requirements to use less materials; support product reuse, repair, and refurbishment; expand opportunities for materials management by changing the function of the product or material; and ensure materials considered to be recycled are returned to use. Implementing such a comprehensive framework would necessitate expanding CalRecycle’s current authority.

Refining Existing Statutes and Regulations for Highest and Best Use

The Draft Plan proposes a review of current policies, programs, regulations, and statutes to identify and revise areas that misalign with highest and best use principles—focusing on definitions, incentives, and requirements. The purpose of such a review would be to eliminate gaps, overlaps, and conflicting statutory and regulatory language and to promote cohesive and sustainable waste management systems. This proposal would likely result in modified definitions and enhanced reporting requirements, among other changes.

Establishing New Statutory Requirements and Shared Responsibility Frameworks

The Draft Plan proposes the development of cross-agency frameworks, including new statutory requirements where necessary, to clarify shared responsibility in circular materials management. It notes the need for collaboration to address overlapping policies for certain complex or nontraditional waste streams, such as agricultural materials, construction and demolition materials, and universal wastes. New statutes to support shared responsibility, agency assignments, and program design would likely be necessary.

Adopting Policies to Address High Priority Material Streams

The Draft Plan proposes the adoption of statewide policies to address sources of high volume or valuable waste or both, and materials of concern. Representative materials listed in the Draft Plan include energy transition materials, lithium-containing products, wood, and contamination in the organics stream. The Draft Plan acknowledges that not all materials and products have viable recycling or composting solutions available and identifies a number of specific materials as having “solution gaps,” including disaster debris, wind turbines, and medical waste.

Developing More Extended Producer Responsibility Programs

As a programmatic legislative tool, the Draft Plan recommends modeling new statutes on Extended Producer Responsibility (EPR) to shift product management burden upstream and provide for compliance, enforcement, and redesign obligations. CalRecycle currently oversees numerous statewide stewardship programs, including those for textiles, beverage containers, batteries, pharmaceuticals and sharps, mattresses, carpet, and paint. The state legislature adopted the Plastic Pollution Prevention and Packaging Producer Responsibility Act (SB 54) in 2022, significantly expanding the scope of California’s EPR regulations to include product packaging and plastics. After Governor Gavin Newsom rejected the original SB 54 implementing regulations for being too burdensome on businesses, CalRecycle is currently drafting revised regulations to implement those requirements and is expected to finalize such rulemaking in early 2026. The Draft Plan proposes to build from this existing regulatory framework with the development of more EPR programs, specifically suggesting a program for low volume, hard-to-recycle products, identifying solar panels as an example of such a product. 

Using Programmatic Legislative Tools and Market Mechanisms

The Draft Plan recommends redesigning statutes on funding mechanisms to reduce CalRecycle’s reliance on landfill tip fees and allow for inflation adjustments, to expand grant and loan eligibility, and to align funding mechanisms and financial incentives with highest and best use principles. It also proposes an alignment of market signals through statutory fees to disincentivize disposal, in particular increasing landfill fees overall or creating new fees specific to materials with strong reuse or recycling markets with proceeds earmarked for circular infrastructure and enforcement. The Draft Plan posits that the public sector can incentivize circular behavior through the waste prices under their control. 

Data and Monitoring Requirements

The Draft Plan proposes an expansion of statutory reporting requirements to ensure the collection of accurate, meaningful data, including data on various materials flows from materials recovery facilities and self-haulers, as well as data on provided services and participation rates from municipalities. It also proposes integrating all data into a public platform to enable the detection of barriers and patterns, enhanced decision-making, and identification of circular opportunities. Mandating specific data may require adding or amending statutes.

Next Steps and Recommendations

Businesses should take strategic, proactive steps now to shape California’s approach to waste minimization and to prepare for what might lie ahead. Key actions to take could include:

• Engage with Regulators: submit comments on draft policies and proposed rulemakings; attend CalRecycle stakeholder sessions.
• Develop a Waste Reduction Roadmap: align internal goals with 2030/2045 benchmarks.
• Conduct a Waste Impact Assessment: map waste streams and benchmark performance against the proposed zero waste targets.
• Evaluate Packaging and Product Design: phase out single-use and nonrecyclable materials; establish recyclable packaging and single-use service ware products; prepare for new labeling and material mandates.
• Plan for Extended Producer Responsibility: assess exposure to current and future EPR obligations and model participation costs.
• Ensure Compliance with Organic Waste Requirements: strengthen food recovery systems and organic waste tracking.
• Track Funding Opportunities: identify potential grants and partnerships to support innovation and compliance.

The proposals set forth in the Draft Zero Waste Plan portend expanded legal requirements and increased enforcement pressure for the regulated community. Early movers have the potential to gain a strategic edge in shaping the evolving landscape.

Those seeking assistance with regulatory impact assessments, comment drafting, or compliance strategy development should contact the authors or another member of our Environment, Land, and Natural Resources practice group.

Regardless of the cutting-edge nature of artificial intelligence (AI), its recent popularity has led to an age-old problem of how to legally market products featuring it. Deceptive claims regarding AI have been dubbed “AI washing” and can invite both enforcement and civil lawsuits.

In a minute or less, here is what you need to know.

Government Watchdogs Are Already on the Prowl

The Federal Trade Commission (FTC) has led the charge among enforcers rooting out AI washing. In September 2024, the FTC announced Operation AI Comply, a law enforcement crackdown on actors relying “on artificial intelligence as a way to supercharge deceptive or unfair conduct that harms consumers.”¹ The FTC’s announcement included details of actions it had taken against companies that, according to the FTC, had “seized on the hype surrounding AI” and were “using it to lure customers into bogus schemes.”²

One such actor was DoNotPay, which made the lofty claim that it offered, for US$49.99 a month, a subscription service to “the world’s first robot lawyer.”³ According to the FTC, DoNotPay claimed that its “AI lawyer” could perform “legal services such as drafting ‘ironclad’ demand letters, contracts, complaints for small claims court, challenging speeding tickets, and appealing parking tickets.”⁴ The FTC disagreed. 

The FTC’s investigation uncovered that DoNotPay had not, among other things, trained its AI “on a comprehensive and current corpus of federal and state laws, regulations, and judicial decisions or on the application of those laws to fact patterns,” and had neither itself tested nor employed attorneys to test “the quality and accuracy of the legal documents and advice generated” by its product.⁵ FTC and DoNotPay ultimately entered into a consent agreement requiring a monetary payment as well as notice to its customers that, among other things, it “did not have sufficient proof of our claims that DoNotPay operates like a human lawyer when it generates demand letters and initiates cases in small claims court” and it had “stopped making these claims and will not make them in the future unless we have adequate proof.”⁶

Despite signals of a deregulatory environment under the current administration, enforcement has not slowed on the AI-washing front. 

In April 2025, the SEC and DOJ jointly announced civil and criminal securities and fraud charges against Albert Saniger, founder and former CEO of mobile shopping application Nate.⁷ Saniger allegedly induced over US$40 million in investments with promising claims about Nate’s use of AI to autonomously process online purchases when, in reality, Nate “relied heavily on teams of human workers—primarily located overseas—to manually process transactions, mimicking what users believed was being done by automation.”⁸

In August 2025, the FTC issued an order prohibiting Workado from making misleading statements about its “product’s effectiveness at detecting content generated or altered by” AI.⁹ Workado sold a subscription service that purported to use AI to determine whether written content, including marketing content, is AI-generated. The FTC also ordered Workado to, among other things, notify its customers of the FTC’s position that Workado lacked proof for its claims about the accuracy rate of its product and specifically that Workado would not in the future “make claims about the accuracy of our AI content detection tools unless we can prove them.”¹⁰

Private Actors Are Also Jumping into the Fray

Though at the moment less common and less developed than those in the enforcement sphere, suits by private actors also have been filed over alleged AI washing. 

For instance, investors have sued over public statements about the development of AI-related product features. In September 2024, software company GitLab’s investors sued regarding alleged misrepresentations about the incorporation of AI in the company’s products.¹¹ These types of securities lawsuits are on the rise. A clearinghouse run by Stanford Law School tracking securities litigation logged seven AI-related cases in 2023, 15 in 2024, and already 12 just halfway through 2025.¹²

Consumers have also jumped into the fray. For example, in March 2025 a consumer class complaint was filed against Apple regarding alleged misrepresentations about Siri’s AI capabilities.¹³

Lessons Learned—Thus Far

As AI becomes more common, so too will lawsuits challenging claims made about its use. Companies would do well to put practices in place to minimize the risk of that litigation and set themselves up to best defend against it. The following are some early lessons gleaned from litigation and enforcement activity: 

The Fundamentals Still Apply

AI may be new and trendy, but tests to measure whether marketing is legal remain the same. Current practices to prevent and defend against claims of misrepresentation still apply.

Know Your AI

Even if the legal tests remain the same, AI is complex and evolving at lightning speed. Invest the time and effort to understand the capabilities, limitations, and use cases for your AI. Document these efforts carefully so that any claims made about your AI are supported.

Align Your Legal and Marketing Teams

Ensure any AI-related claims proposed by technical or marketing teams are vetted by legal teams with sufficient technical competency to understand the claims made and how they compare with the actual capabilities of your product.

Distinguish Present and Future

Limit specific claims to the now existing, not aspirational, capabilities and use cases of your AI. Clearly delineate aspirational claims as forward-looking statements expressing hopes of how your AI might perform in the future.

Monitor Claims Made

Establish an audit system whereby marketing claims, both existing and aspirational, are regularly evaluated and updated for accuracy. This is especially important given the breakneck pace at which AI is developing, where even accurate claims can quickly become outdated and potentially misleading.

As companies rush towards the shining light that is AI, their statements are going to be scrutinized by both regulators and class action plaintiffs. Our attorneys can assist in assessing and mitigating these litigation and enforcement risks. Now is the time to prepare.

• Hiring and Firing
• Training, Notices, and Information Requests
• Leaves of Absence
• Labor
• Wage and Hour
• Litigation, Claims, and Enforcement

Hiring and firing

AB 858: Rehiring and Retention of Displaced Workers

AB 858 extends the sunset date for COVID-19-related employee recall and reinstatement rights to 1 January 2027. 

Background

In 2021, California Labor Code Section 2810.8 was enacted to protect employees in the hospitality and business services industry (including, but not limited to, hotels, event centers, and employers that provide maintenance services) who were laid off due to COVID-19. Under the law, covered employers must:

1. Offer available positions in writing to qualified employees who:
   1. Worked for the employer for six months or more in the 12 months preceding 1 January 2020; and 
   2. Were laid off “due to a reason related to the COVID-19 pandemic.” 
2. Prohibit retaliation or adverse action against employees asserting their rights under these provisions.

Section 2810.8 was originally set to expire on 31 December 2024. 

In 2023, SB 723 broadened eligibility by extending recall rights to any employee: 

1. Who was employed by the employer for six months or more; 
2. Whose most recent separation from active employment by the employer occurred on or after 4 March 2020; and 
3. Whose separation was due to a reason related to the COVID-19 pandemic.

SB 723 also created a presumption that a separation due to a lack of business, reduction in force, or other economic, non-disciplinary reason is related to the COVID-19 pandemic unless the employer establishes otherwise by a preponderance of the evidence. SB 723 extended the repeal date to 31 December 2025.  

AB 858 now further extends the sunset date to 1 January 2027, maintaining recall and reinstatement rights for affected employees in the hospitality and business services sectors through that date.

AB 692: Employment Contract Repayment Prohibition

AB 692 creates Business and Professions Code section 16608 and Labor Code section 926, which prohibits employers from including or requiring workers to sign employment-related contracts that impose financial penalties, repayment obligations, or fees tied to the termination of employment. Specifically, employers, training providers, or debt collectors may not require workers to repay debts, end forbearance, or pay any “quit fee,” retraining fee, or other penalty if the worker’s employment ends. Limited exceptions apply for certain tuition repayment agreements for transferable credentials, government loan programs, approved apprenticeship programs, and discretionary signing bonuses meeting detailed fairness criteria. 

A contract that violates these prohibitions is deemed a restraint of trade and is void as contrary to public policy. Workers or their representatives may bring civil actions to enforce the law, with available remedies including actual damages or US$5,000 per worker (whichever is greater), injunctive relief, and recovery of attorney’s fees and costs.

SB 617: California Worker Adjustment and Retraining Act

The California Worker Adjustment and Retraining Act (WARN) prohibits employers from implementing a mass layoff, relocation, or termination at a covered establishment without providing prescribed written notice to affected employees, the Employment Development Department, and other local agencies. The WARN notice must comply with all elements specified in 29 U.S.C. § 2101, et seq.

SB 617 introduces new WARN notice requirements related to coordination of workforce services and public assistance programs:

Coordination of Services

Employers must indicate in the WARN notice whether they: (1) plan to coordinate services, such as a rapid response orientation, through the local workforce development board; (2) plan to coordinate services through a different entity; or (3) do not plan to coordinate services with any entity. If the employer chooses to coordinate services, it must arrange services within 30 days from the date of the WARN notice.  

Rapid Response Activities

Regardless of whether the employer chooses to coordinate services, the WARN notice to affected employees must include the following description of rapid response activities offered by the local workforce development board: “Local Workforce Development Boards and their partners help laid off workers find new jobs. Visit an America’s Job Center of California location near you. You can get help with your resume, practice interviewing, search for jobs, and more. You can also learn about training programs to help start a new career.”

CalFresh Information

WARN notices must also include a description of the statewide food assistance program known as CalFresh, the CalFresh benefits helpline, and a link to the CalFresh Internet website.

Employer Contact Information

WARN notices must include a functioning email and telephone number of the employer for contact.

Amendments to FEHA Regulations Regarding Use of AI in Employment

Effective 1 October 2025, the California Civil Rights Department finalized amendments to the Fair Employment and Housing Act (FEHA) regulations regarding the use of AI and automated-decision systems (ADS) in employment decisions (AI Regulations).¹

Under the revised regulations, it is unlawful for an employer to use ADS in a manner that results in discrimination against applicants or employees. ADS is defined as a “computational process that makes a decision or facilitates human decision making regarding an employment benefit” that “may be derived from and/or use artificial intelligence, machine learning, algorithms, statistics, and/or other data.”² Pursuant to the AI Regulations, ADS can perform the following non-exhaustive list of tasks:

1. Conduct computer-based assessments or tests (such as puzzles or games) that make predictive assessments about an applicant/employee that measure skills, dexterity, reaction time, personality traits, aptitude, attitude, cultural fit, or screen or recommend an applicant or employee.
2. Direct job advertisements or other recruiting materials to targeted groups.
3. Screen resumes for particular terms or patterns.
4. Analyze facial expressions, word choice, and/or voice in online interviews.
5. Analyze employee or applicant data acquired from third parties. 

Employers may reference reasonable, well-documented anti-bias testing, audits, or other proactive measures as part of a defense to discrimination claims, including evidence of the quality, efficacy, recency, and scope of such efforts. However, employers remain liable for discriminatory outcomes even if the ADS is developed or administered by a third-party vendor that conducts recruiting, application screening, hiring, or other employment decisions on the employer’s behalf. 

Additionally, applicants and employees must receive pre-use and post-use notices explaining when and how ADS tools are used, what rights they have to opt out, and how to appeal or request human review. The amended regulations also expand record-keeping obligations, requiring employers to retain ADS-related documents and data for at least four years. 

TRAINING, NOTICES, AND INFORMATION REQUESTS

SB 294: The Workplace Know Your Rights Act

SB 294 requires employers to provide a standalone written notice to all employees by 1 February 2026, and on an annual basis thereafter, outlining specific constitutional, employment, and labor rights, including the right to notice of immigration-agency inspections and rights under the Fourth and Fifth Amendments. Employers must distribute this notice in the language normally used to communicate with employees and ensure it is received or accessible to employees within one business day of transmission. The California Labor Commissioner will develop and post a model notice template, available in multiple languages, by or before 1 January 2026. 

Additionally, by 30 March 2026, employers must offer employees the option to designate an emergency contact and to specify whether that individual should be notified if the employee is arrested or detained. For employees who elect notification, the employer must notify the employee’s designated emergency contact if the arrest or detention occurs at the workplace. If the arrest or detention happens outside of work, the employer must notify the emergency contact only if the employer has actual knowledge of the employee’s arrest or detention.

Employers are prohibited from discharging, threatening to discharge, demoting, discriminating, or retaliating against employees for exercising their rights under SB 294. Violations of SB 294 may result in civil penalties of up to US$500 per employee for each violation. For violations concerning the emergency contact requirements, penalties can range from US$500 per employee for each day the violation continues, up to a maximum of US$10,000 per employee.

SB 303: Bias Mitigation Training

SB 303 creates Government Code § 12940.2 to clarify that an employee’s assessment, testing, admission, or acknowledgment of their own personal bias when made in good faith and solicited or required as part of employer-provided “bias mitigation training” does not, by itself, constitute unlawful discrimination under the FEHA. The statute defines “bias mitigation training” to include education and activities aimed at recognizing conscious and unconscious thought processes and implementing strategies to mitigate their impact (e.g., assessments, workshops, toolkits, and tracking). The intention behind SB 303 is to encourage employers to conduct such trainings; however, the law does not shield discriminatory conduct or decisions unrelated to the training.

SB 464: Strengthening Pay Data Reporting Requirements

Under current law, private employers with 100 or more employees must file an annual Pay Data Report with the California Civil Rights Department (CRD) no later than the second Wednesday in May each year, covering the preceding calendar year. Employers that engaged 100 or more workers through labor contractors must also submit a separate report identifying those contractors. The report requires disclosure—by establishment, job category, race, ethnicity, and sex—of (i) the number of employees; (ii) the mean and median hourly rate; and (iii) the total hours worked. Data is organized into 10 standard job categories and corresponding federal pay bands, with employee counts determined by a designated snapshot period between 1 October and 31 December. Reports are submitted through the CRD’s online portal and certified by an authorized corporate officer. Individual-level data are expressly confidential and not subject to disclosure under the California Public Records Act except as necessary in enforcement proceedings. The CRD may publish only aggregated, anonymized statistics. If an employer fails to report, the CRD may seek a court order compelling compliance, and a court may impose a civil penalty—currently a discretionary sanction that can be shared between the employer and any non-cooperative labor contractor.

SB 464 strengthens this framework in five principal respects:

Mandatory Civil Penalties

Courts are required—not merely permitted—to impose civil penalties whenever the CRD requests enforcement against a non-filing employer.

Segregation of Demographic Data

Employers and labor contractors are required to maintain demographic data separately from general personnel files to enhance privacy and reduce risk of misuse. 

Expanded Job Categories

Beginning 1 January 2027, private-sector reporting increases the number of job categories from 10 to 23, aligning more closely with the federal Standard Occupational Classification structure and enabling finer analysis of pay disparities.

Inclusion of Public Employers

Starting with reports due in May 2027, public employers with 100 or more employees—including state agencies, courts, the California State University system, and political subdivisions—will become subject to equivalent pay-data reporting obligations. Public-sector reports must include, on a voluntary-disclosure basis, information regarding race, ethnicity, disability, veteran status, gender, gender identity, and sexual orientation, organized by civil-service pay-scale categories.

Transparency and Privacy Clarifications

The bill codifies legislative findings restricting public access to raw employer filings while reaffirming CRD authority to publish aggregate reports that safeguard individual confidentiality.

SB 513: Personnel Records

Under California Labor Code section 1198.5, employers are required to make available for inspection all personnel records relating to an employee’s performance or any grievance concerning the employee. SB 513 expands this requirement to include employees’ education and training records. For purposes of this law, “education or training records” include all of the following: 

1. The name of the employee.
2. The name of the training provider.
3. The duration and date of the training.
4. The core competencies of a training, including skills in equipment or software.
5. The resulting certification or qualification.

Section 1198.5 makes it a crime for an employer to violate these requirements.

LEAVES OF ABSENCE

SB 590: Paid Family Leave Expansion to Designated Persons

California’s Paid Family Leave (PFL) program currently provides up to eight weeks of partial wage replacement for employees who are caring for ill family members, bonding with a new child, or handling a military-related exigency. 

Effective 1 July 2028, SB 590 expands PFL benefits to cover employees caring for a “designated person”—an individual related by blood or with a relationship equivalent of a family relationship. 

When an employee first requests benefits to care for a designated person, the employee must: (1) identify the designated person; and (2) attest under penalty of perjury either how they are related by blood to the designated person or how their relationship is the equivalent to a family relationship. 

Labor

AB 288: Expansion of PERB’s Authority

The federal National Labor Relations Act (NLRA) established a comprehensive statutory scheme regulating unfair labor practices between employers and labor organizations affecting interstate commerce and vests the National Labor Relations Board (NLRB) with power to conduct union elections and prevent unfair labor practices. California’s Public Employment Relations Board (PERB) previously had jurisdiction only over public sector employers, their employees, and the labor organizations that represent those employees. Currently, the NLRB and PERB do not have concurrent jurisdiction.

Effective 1 January 2026, AB 288 expands PERB’s jurisdiction, enabling it to oversee private sector employers, their employees, and the unions that represent those employees in circumstances where the NLRB is unable to act or where the NLRB has “expressly or impliedly ceded jurisdiction.” In doing so, AB 288 grants PERB the authority to provide impacted private sector employees and their labor organizations the right to petition PERB to certify election, decide unfair labor practice charges, issue bargaining orders, order parties to arbitration, and order other appropriate remedies, including injunctive relief and penalties. 

The purpose of AB 288 is to ensure that private sector employees are not impacted by any legal challenges to the NLRB’s jurisdiction over those employees. AB 288 will likely face legal challenges to its enforceability, and K&L Gates Labor, Employment, and Workplace Safety lawyers will provide timely updates as they arise.

AB 1340: Transportation Network Company Drivers Labor Relations Act

AB 1340 sets forth the Transportation Network Company Drivers Labor Relations Act (the Act), which provides transportation network company (TNC) drivers with the opportunity to self-organize or to designate representatives of their choice (e.g., labor organizations) in order to bargain with TNCs, to prevent or promptly resolve disputes between TNCs and their drivers, to engage in concerted activity (e.g., strikes and picketing), and to improve the working conditions of TNC drivers. “Transportation network company” or “TNC” is defined as a person or company that “provides prearranged transportation services for compensation using an online-enabled application or platform to connect passengers with drivers using a personal vehicle.” 

The Act directs PERB to oversee and enforce the Act, including ensuring fair elections and resolving unfair labor practice charges. The Act sets forth the notice requirements, timelines, processes, and procedures related to the relationship between TNCs, their drivers, and the labor organizations representing their drivers. It also requires TNCs to provide quarterly information to PERB to facilitate the purpose of the Act.  

Wage and Hour

SB 642: Strengthening Pay Equity Laws

SB 642 amends Labor Code section 432.3 and 1197.5 to enhance pay-equity and transparency requirements. Under existing law, employers are prohibited from discriminating against employees of an opposite sex by paying them less for substantially similar work. SB 642 replaces “opposite sex” with “another sex” to make the law inclusive of nonbinary individuals. The bill also extends the statute of limitations for pay equity claims from two years to three years, and employees can now seek back pay for the entire period of time in which a violation occurred, up to a maximum of six years. 

When defining pay equity, the bill includes all forms of compensation under the term “wages,” such as salary, bonuses, stock options, and allowances for things like travel expenses.

AB 1514: ABC Test Exemption for Licensed Manicurists and Commercial Fishers

California generally applies the “ABC test” to determine whether a worker classifies as an employee or independent contractor. This classification has far-reaching implications on employers for purposes of wage and hour compliance, unemployment insurance, and various other obligations imposed on employers in California. Under existing law, certain occupations and professions are temporarily exempted from the ABC test. These occupations are instead governed by the more employer-friendly, multifactor “Borello test” to determine employment status. AB 1514 extends existing exemptions to the ABC test for licensed manicurists (until 1 January 2029) and commercial fishers (until 1 January 2031). These workers remain subject to the more flexible Borello test during their exemption periods provided that certain conditions are met (e.g., manicurists must control their scheduling, rates, and books of business). The statute also requires state labor agencies to report misclassification complaints and investigations in the nail salon industry by 1 June 2026. 

SB 648: Employee Gratuities

SB 648 amends Labor Code section 351 to strengthen protections regarding tipped employees. It prohibits employers and agents from taking, collecting, or withholding gratuities. It grants the California Labor Commissioner new enforcement powers, including the ability to investigate tip theft, issue citations for violations, and file civil actions to recover withheld gratuities. Additionally, the bill requires that, if a patron pays a tip by a credit card, the full amount indicated as a tip must go to the employee, without deductions for credit card processing fees. Moreover, the bill requires that tips be paid no later than the next regular pay date and requires employers to maintain records of all tips and make them available to the Division of Labor Standards Enforcement (DLSE) for inspection.

LITIGATION, CLAIMS, AND ENFORCEMENT

SB 261: DLSE Enforcement of Wage Judgments

SB 261 strengthens the enforcement of wage judgments issued by the California Labor Commissioner. Under existing law, Labor Code sections 96 and 98 authorize the Labor Commissioner to adjudicate wage claims and issue legally enforceable orders, decisions, or awards when an employer fails to pay earned wages.  

Effective 1 January 2026, SB 261 authorizes the imposition of civil penalties of up to three times the amount of any unpaid judgment, including interest, if the final judgment remains unpaid 180 days after the appeal period expires. SB 261 also mandates that courts award reasonable attorneys’ fees and costs to prevailing plaintiffs in enforcement actions, whether initiated by the employee, the Labor Commissioner, or a public prosecutor.

In addition, SB 261 extends joint and several liability for these penalties to successor employers, ensuring that business reorganizations or sales cannot be used to avoid responsibility for unpaid wage judgments.

AB 250: Revival of Statute of Limitations on Sexual Assault Claims

AB 250 amends the Code of Civil Procedure section 340.16 to revive certain claims to recover damages suffered as a result of a sexual assault that would otherwise be time-barred by the statute of limitations. Under AB 250, a plaintiff may bring a revived sexual assault claim (if previously barred) by alleging that they were sexually assaulted, one or more entities are legally responsible for damages resulting from the assault, and an entity or its representative covered up or attempted concealment of a prior allegation of sexual assault.

SB 477: Revisions to the FEHA’s Enforcement Procedures

Under existing law, individuals alleging FEHA violations must file a verified complaint with the CRD before initiating a civil action. The CRD investigates and may pursue conciliation or litigation on behalf of the complainant. During this period, the statute of limitations for filing a civil lawsuit is tolled until the CRD issues a closure notice or files its own civil action.

Currently, the CRD must issue a right-to-sue notice within one year (for individual complaints) or two years (for group or class complaints) unless it files suit. Complainants then have one year from the closure notice to file a civil action. FEHA also authorizes the CRD to bring group or class complaints where a discriminatory practice affects multiple individuals, but it has never expressly defined that term. 

SB 477 changes several key features of the FEHA as follows: 

Defines “Group or Class Complaint”

SB 477 codifies, for the first time, a definition of “group or class complaint” to include any complaint alleging a pattern or practice of unlawful conduct. This clarification ensures that systemic discrimination claims fall squarely within the CRD’s group-complaint authority and provides a clearer procedural basis for multi-complainant enforcement actions.

Tolling Statute of Limitations Period

The new law expands the circumstances under which statutory filing periods are tolled. Specifically, starting 1 January 2026, tolling will apply: 1) during any appeal within the CRD following issuance of a closure notice, extending through one year after the CRD provides written notice that the appeal has been resolved; 2) during the pendency of any petition to compel CRD action; and 3) while a written tolling agreement between the complainant and the CRD is in effect, provided the agreement is executed prior to the applicable deadline.

Deferral of Right-to-Sue Notices

Where a complaint is related to a director’s complaint or a group or class complaint, the CRD must now defer issuance of right-to-sue notices until all related administrative proceedings, civil actions, and appeals have been fully resolved. This provision allows the CRD to coordinate the resolution of interrelated claims and prevents premature individual filings that could disrupt ongoing enforcement efforts.

Elimination of Venue Restrictions in Housing Cases.

SB 477 removes FEHA’s county-specific venue limitations for housing discrimination lawsuits, which previously restricted venue to where the alleged violation occurred, where the relevant records are maintained, or where the respondent resides. Plaintiffs may now file such actions in any appropriate venue under general California venue rules, affording greater flexibility for housing discrimination claimants.

AB 1523: Court Ordered Mediation

Under existing California law (Code of Civil Procedure § 1775 et seq.), courts may order a civil action to mediation only where the amount in controversy does not exceed US$50,000. This statutory cap reflects the California legislature’s long-standing intent to reserve mandatory mediation for lower-value disputes where expedited resolution can serve both judicial efficiency and the parties’ economic interests. AB 1523 raises the mediation eligibility ceiling from US$50,000 to US$75,000 starting 1 January 2027 and includes specific eligibility criteria to ensure that court-ordered mediation is invoked only when appropriate. 

Our lawyers invite employers to contact our team below for further information about compliance with and, where appropriate, implementation of these California employment laws. Subscribe to The Essentials series to stay updated on critical developments here. We look forward to serving you and your team.

In summer 2025, UK consumer protection and review organisation Which? and research provider London Economics published a policy research report analysing the use of environmental claims on almost 10,000 products in the United Kingdom (Report). The research—carried out using artificial intelligence—compared the sample against the principles in the Competition and Markets Authority’s (CMA) Green Claims Code (Code), which aims to ensure environmental claims are clear, accurate, and not misleading for consumers.

This alert considers the Report findings, which showed the prevalence of problematic green claims being used by brands in the United Kingdom. Using real-life case studies, we also highlight the common mistakes that businesses should avoid when crafting their marketing materials and labels, to avoid the increasing legal risks associated with greenwashing allegations in the United Kingdom and European Union.

The Research Report and Key Findings

The Report found that 22% of the 8,800 products sampled contain green claims in their descriptions. To assess compliance with the Code, a framework was developed based on five of the six core principles of the Code, as follows:

1. Claim must be truthful and accurate;
2. Claim must be clear and unambiguous;
3. Any comparison must be fair and meaningful;
4. Claim must be substantiated; and
5. Claim must consider the full lifecycle of the product or service (particularly in relation to clothing).

Each of these principles involved several tests.

The Report found that Code noncompliance may be widespread. 62% of products containing green claims failed tests relating to at least two of the principles above. Green claims relating to cleaning products, electronics and accessories, and personal care and hygiene products showed the highest risk of noncompliance. 

Case Studies and Potential Issues Raised

We highlight below a handful of helpful case studies analysed in the Report.

Example 1: Delphis Floor Cleaner 

The product’s description claimed that it was “made from highly biodegradable, renewable and sustainable ingredients,” but did not explain how or why. The Report suggested that this was likely to breach two principles of the Code:

• Claims must be clear and unambiguous: here, the statement of environmental benefit was vague and general; and
• Claims must be substantiated: here, the claim did not contain supporting evidence, and did not signpost to consumers where they could find specific information.

As a result, this claim was regarded as likely to mislead consumers and therefore noncompliant with the Code. 

Example 2: KIT & KIN Hypoallergenic Eco Nappy Pants

This product was found to include multiple problematic green claims. The ingredients list included technical terms like “oxo-biodegradable material,” “bio-based SAP,” and “mass balance,” without explaining what these terms mean. The description also claimed that the product was “the most accredited eco nappy on the market,” that it used “sustainable, all plant-derived materials in contrast to most standard nappy pants,” and that it was “produced in a carbon neutral factory.” 

The Report concluded that KIT & KIN’s description was unlikely to comply with three core principles of the Code:

• Claims must be clear and unambiguous: this used scientific or technical terms not easily understood by the average consumer with no explanation;
• Comparisons must be fair and meaningful: here, the brand did not allow consumers to verify the comparison by directing them to the information upon which it was based; and
• Claims must be substantiated: there was no signposting or links to evidence to support the carbon neutral claim.

Example 3: Seasalt Cornwall Men’s Blazer

This brand described a men’s blazer as “organic” but included no recognised certifications or information about the percentage of cotton that is organic. The Report indicated that while this fact does not necessarily amount to noncompliance with the principle that claims must be truthful and accurate, it was likely to be problematic compared to claims that provide more information. 

The Report observed that food and beverage products are less likely than other products to use unsubstantiated “organic” claims, as these products are already required by law to obtain a specific organic certification for any “organic” claims and are therefore more restricted in what they can say in their advertising. However, other products—including textiles—are not subject to such legal restraints and are therefore more likely to use “organic” claims inappropriately. 

Example 4: Charlie Bingham Lasagne

The description of this food product did not comply with the principle that comparisons must be fair and meaningful, as it claimed to use “30% less cardboard” but did not make clear what this was being compared against (e.g., a specific product or other microwave lasagnes). Therefore, consumers could not verify the claim’s accuracy.

Example 5: Kellogg’s Special K Cereal Bar

In contrast, Kellogg’s claim that its cereal bars use “less packaging” was found to be compliant because:

• It clearly identified that this was a 6.86% reduction compared to a previous pack by Kellogg’s of the same weight;
• It included the specific measurements as supporting evidence; and
• It included a link to information on the Kellogg’s website forming the basis of the comparison.

Example 6: Adidas 7/8 Leggings

Adidas stated that its 7/8 leggings were made using “85% recycled polyester,” implying that this material is better for the environment. However, the description did not acknowledge the negative environmental impacts of its use, such as the release of microplastics and non-biodegradability if clothing ends up in landfill. 

This claim was unlikely to comply with the principle that claims must consider the full lifecycle of the product or service, as the Code states that brands must not suggest a product is greener than it is by ignoring another aspect of its lifecycle. 

This principle illustrates the high bar set by the CMA for the use of green claims, and its policy to curtail marketing statements that could lead consumers to purchase an item because of a belief it has low environmental impacts, without having the full picture.

Practical Tips to Comply With the Code

The Report, the Code, and sector-specific guidance (notably the CMA’s Green Claims in Fashion guide) provide practical guideposts for brands developing advertising campaigns including green claims. The CMA expects that marketing teams will consult its Code to ensure compliance, otherwise risking fines under the new Digital Markets, Competition and Consumers Act 2024 which prohibits misleading advertising (including misleading environmental claims), investigation by the Advertising Standards Authority, or litigation brought by customers or competitors. 

Below we summarise key questions you should always ask to ensure that your green claims are compliant and that you stay on the right side of the regulations. 

1. Is our claim truthful and accurate?
   1. Have we included any conditions or caveats to the claim?
   2. Have we backed up organic claims with a specific organic certification? Have we included the percentage of organic material?
2. Is our claim sufficiently substantiated?
   1. Do we have solid, objective evidence to back up what we are claiming?
   2. Have we included links or references to the supporting evidence? 
3. Is our claim clear and unambiguous?
   1. Are we using any generic, broad claims (e.g., “environmentally friendly,” “eco,” “sustainably sourced”)? Replace with more specific, precise language. (Note that—besides the risk of being regarded as too vague—in the European Union, such claims are now largely prohibited. See our previous alert here.)
   2. Are we using any scientific or technical language? If so, can this be easily understood by the average consumer? Can we use nontechnical language instead? If not, have we provided a clear explanation? 
4. Are any comparisons fair and meaningful?
   1. Have we indicated how the information forming the basis of the comparison can be accessed? 
   2. Can consumers independently verify the comparison themselves? 
5. Do our green claims consider the full lifecycle of the product or service (particularly in relation to clothing)? If we are claiming that an item of clothing is made from recycled materials, is there a risk that we are omitting key details about the negative trade-offs of the material used?

Our team would be pleased to support you in training marketing and legal departments on practical dos and don’ts for environmental claims, crafting risk matrices, and reviewing proposed claims for compliance.

Legislative Abrogation of RGGI Rule

RGGI is a multistate compact among certain Northeastern states that seeks to reduce power sector greenhouse gas emissions through the operation of a cap-and-trade program. Operators of fossil fuel-fired power plants in RGGI states are required to purchase allowances, either through quarterly auctions or the secondary market, to offset their carbon dioxide emissions. In 2019, then-Governor Tom Wolf issued an Executive Order directing the Pennsylvania Environmental Quality Board (EQB) to institute a rulemaking implementing RGGI in Pennsylvania. The EQB finalized that rule in 2022. Thereafter, in 2023, the Commonwealth Court declared the RGGI rule to be an unconstitutional tax adopted without legislative authorization and enjoined the rule’s implementation.¹ The Shapiro administration appealed the Commonwealth Court decisions to the Pennsylvania Supreme Court, where the appeals remain pending. 

The Budget Bill now legislatively abrogates the RGGI rule. On 13 November, the Commonwealth filed applications to discontinue its appeals with the Pennsylvania Supreme Court.² 

Permit Streamlining and Tracking

The Budget Bill also includes several important permitting reforms that are intended to expedite and enhance transparency of key permit programs in the Commonwealth.

First, the Budget Bill establishes new permitting transparency requirements for all state agencies. Each state agency must, within 90 days, make publicly available on their website a list of permits they administer accompanied by information listed in the bill and update it annually. All state agencies must also establish a permit application tracking system, viewable online, that provides the processing time, the dates associated with the stages of the process, an estimated time for each incomplete portion of the permit, and the identity of the assigned state agency employee.

Second, the Budget Bill makes additional permits issued by the Department of Environmental Protection (DEP) eligible for review under the previously adopted SPEED program. Storage tank site specific installation permits, short-term construction mining general permits, and concentrated animal feeding operation permits are all now SPEED-eligible.

Third, the Budget Bill establishes “deemed approval” deadlines for certain DEP permits, including (1) general plan approvals and general permits issued pursuant to the Air Pollution Control Act (APCA) and (2) renewals of coverage under certain National Pollutant Discharge Elimination (NPDES) general permits. 

For general plan approvals and general permits under APCA, DEP must identify any technical deficiencies within 20 days of submission. If the applicant addresses each deficiency within 25 days of submission, DEP must issue a final determination on the application within 30 days of submission, unless the applicant agrees to extend the 30-day deadline by a maximum of five additional days. If DEP does not meet this 30-35-day deadline, the application is deemed approved.

Similarly, for renewals of certain NPDES general permits, DEP must identify any technical deficiencies within 40 days of submission. If the applicant addresses each deficiency within 50 days of submission, DEP must issue a final determination within 60 days of submission, unless the applicant agrees to extend the 60-day deadline. If DEP does not meet its deadline, the application is deemed approved. The categories of NPDES general permits that are subject to this framework are:

1. Discharges of storm water associated with industrial activities;
2. Discharges from small-flow treatment facilities;
3. Discharges from petroleum product contaminated groundwater remediation systems; and
4. Wet weather overflow discharges from combined sewer systems. 

The new deemed approval deadlines have the potential to significantly expedite the permit process for entities seeking coverage under the relevant general permits. It will be of paramount importance for these applicants to submit complete and technically adequate permit applications, and timely respond to any identified technical deficiencies, in order to take advantage of the expedited permit review time frames—and avoid equally expeditious permit denials.

Conclusion

The Budget Bill represents another incremental step forward in instituting meaningful permitting reform in Pennsylvania, building off of the July 2024 SPEED Act and Governor Shapiro’s November 2024 Permit Fast Track Program. The Budget Bill’s abrogation of the RGGI rule also comes as a welcome development for many in the business community. Notably, the Pennsylvania Chamber of Business and Industry released a statement praising both of these aspects of the Budget Bill. As with all legislation, the ultimate impact of these reforms will turn in large part on how they are implemented in practice, and, of course, how they will withstand the legal challenges that will almost certainly follow. Members of business and industry who rely on the environmental permits covered by the Budget Bill to operate on a daily basis will need to closely monitor what courts have to say about these legal challenges to avoid operational disruptions. 

Click here to view our table, which chronologically details these developments and captures the key takeaways from these publications.

How We Can Help

We are closely monitoring the developments emerging throughout Western Australia, our local team can advise at any and all stages of defence-sector engagements.

The authors would like to thank graduate Amy Lawrance for her contributions to this alert.

The Commonwealth Department of Finance will implement new Commonwealth Procurement Rules (CPRs) on 17 November 2025. These rules govern how Commonwealth entities procure financial and nonfinancial goods and services.

The CPRs prioritise procurement from Australian businesses and SMEs.

While the primary goal of the CPRs remains achieving value for money, Commonwealth entities are now required to consider the ethical character of a supplier.

While the changes to the CPRs are generally favourable to Australian business, prospective Commonwealth suppliers must ensure that their operations adhere to sufficient ethical standards. Such standards include:

• Labour regulations, including ethical employment practices; 
• Workplace health and safety regulations;
• Environmental impact targets; and
• Supply chain standards as set out in the Modern Slavery Act 2018 (Cth).

What are the CPRS?

As mentioned, the Department of Finance is due to vastly reform the existing CPRs on 17 November 2025.

In short, the CPRs regulate how government entities procure goods and services. They are designed to ensure that government entities uphold the highest standards of ethics and probity, without lessening competition.

We have summarised the key aspects of the 2025 CPRs, which will shape government procurement processes going forward.

Prioritising Australian Business

For the first time, the CPRs have introduced requirements to prioritise Australian businesses in procurements. This is a departure from the 2024 CPR's 'non-discrimination' requirement, which did not afford Australian business with exclusive invitations to procurement opportunities.

Non-corporate Commonwealth entities must only invite Australian businesses to make submissions for procurements valued between AU$10,000 and the relevant procurement thresholds (other than procurements of construction services) unless an exemption is documented.

The procurement threshold for non-corporate Commonwealth entities (excluding construction) has been raised from AU$80,000 to AU$125,000. This expands the range of procurements for which preferential rules for Australian businesses apply.

The 2025 CPRs provide a clear definition of 'Australian business', which provides much needed clarity to the originally silent eligibility requirements in the 2025 CPR. Appendix B of the 2025 CPRs defines 'Australian business' as:

“a business (including any parent business) that:

1. Has 50% or more Australian ownership, or is principally traded on an Australian equities market;
2. Is an Australian resident for tax purposes; and
3. Has its principal place of business in Australia.”  

Enhancing Opportunities for Small and Medium Enterprise

Not only must noncorporate government entities prioritise Australian business, certain Commonwealth Panels  must invite only SMEs to make submissions for procurements with an expected value below AU$125,000 (having first met Indigenous Procurement Policy Priorities).

The definition of SME has been refined to include the employees of an associated entity. The new test focuses on the “real substance, practical reality, and true nature” of the employment relationship, considering factors such as whether the employer can elect to offer or not offer work and whether the employee can elect to accept or reject work.

Achieving 'Ethical' Value for Money

The core rule for the CPRs remains the same: achieve a value for money outcome.

However, the 2025 CPRs specify that price is not the sole factor in assessing value for money. Officials must also consider relevant nonfinancial costs and benefits of each procurement submission, including a supplier's historic performance and ethical conduct.

In response to the 2022-23 Procurement Complaints Handling Performance Audit by the Attorney General, relevant officials must undergo all reasonable enquires for all tenderers for any procurement to ensure that the relevant tenderer's practices are compliant with:

• Labour regulations, including ethical employment practices;
• Workplace health and safety regulations; and
• Environmental impact targets.

This is a change from the 2024 CPRs, where some procurements were exempt from the aforementioned audit requirements. 

Some Rules Remain the Same

Several key provisions remain unchanged from the 2024 CPRs. These provisions continue to ensure consistency and reliability in procurement processes for Commonwealth entities. The following rules have not been altered:

Commonwealth Supplier Code of Conduct

The requirement to include the Commonwealth Supplier Code of Conduct in all contracts remains unchanged. This ensures that suppliers adhere to ethical standards and maintain integrity in their dealings with Commonwealth entities.

Payment Terms

The standard payment terms outlined in the CPRs continue to apply, ensuring timely and fair compensation for goods and services provided under Commonwealth contracts.

Subcontractor Disclosure Requirements

Entities are still required to disclose any subcontractors involved in the procurement process. This transparency is crucial for maintaining accountability and ensuring compliance with procurement standards.

Verification and Compliance Requirements

The standard verification and compliance requirements remain in place, ensuring that all parties involved in procurement adhere to the necessary legal and regulatory standards.

Contract End Dates and Reviews

The rules regarding the specification of contract end dates and the requirement for regular contract reviews have not been modified. These provisions ensure that contracts are managed effectively and remain relevant throughout their duration.

Limited Tender Conditions

The conditions under which limited tenders may be conducted remain consistent with the previous rules. This includes specific circumstances where limited tenders are permissible, ensuring that procurement processes remain fair and competitive.

Ethical and Probity Standards

The ethical and probity standards required in procurement activities continue to be a cornerstone of the CPRs. These standards ensure that procurement is conducted with integrity and fairness, safeguarding public trust in Commonwealth procurement activities.

These unchanged rules provide a stable foundation for procurement activities, ensuring that while new reforms are introduced, the core principles of transparency, fairness, and accountability are maintained.

What Should Businesses Do?

It is more important than ever that Australian businesses are compliant with ethical standards and regulations if they wish to take advantage of the changes to the CPRs.

For further assistance in navigating the regulatory framework, please reach out to your K&L Gates contact. 

ASIC Commences Proceedings Against the Responsible Entity of an ESG Investment Fund for Misleading Conduct

On 3 October 2025, the Australian Securities and Investments Commission (ASIC) initiated civil penalty proceedings against a responsible entity (RE) in the Supreme Court of New South Wales, alleging significant governance failures and misleading conduct concerning its Environmental, Social and Governance (ESG) investment fund (Fund).

ASIC's allegations centre on the RE's failure to act with the requisite care and diligence as the responsible entity of the Fund. The Fund's Product Disclosure Statement (PDS) stated that investments would be made in companies that aim to be positive for society and for the environment and aim to avoid investments in harmful activities. However, ASIC contends that the RE failed to act with care and diligence by:

• Not reviewing the Fund’s underlying investments to ensure they aligned with its PDS;
• Not identifying or managing ESG-related risks in its compliance documents;
• Not following its own risk management framework, including PDS review procedures; and
• Not engaging an ESG expert to monitor the Fund.

ASIC also alleges that the RE breached its compliance plan by failing to record and lodge investor complaints and by not addressing concerns about investments in major mining, oil, and gas companies that conflicted with the Fund's stated objectives. This lack of oversight and transparency is seen as a breach of the RE's governance duties.

ASIC Deputy Chair Sarah Court emphasised the importance of robust governance frameworks for ESG funds, stating that entities must ensure their sustainability-related claims are well-founded and transparent. This case marks ASIC's fourth greenwashing civil penalty action, highlighting the regulator's proactive stance in holding entities accountable for alleged ESG-related misrepresentations.

Major Australian Bank Provides AU$2 Billion in Green Business Lending

On 6 October 2025, a major bank in Australia (Bank) announced that it had provided more than AU$2 billion in 'green business lending' as part of a commitment to deliver AU$80 billion in environmental financing between FY2024 and FY2030.

The AU$2 billion green finance package is in response to burgeoning demand for sustainable investments across various sectors, including electric vehicles, sustainable agriculture, and energy-efficient property upgrades. The Bank contends this funding has facilitated the adoption of emissions-reducing technologies and energy-efficiency upgrades, particularly among small and medium-sized enterprises, which are now accessing sustainable finance options previously reserved for larger corporations.

Queensland Government Unveils its 2025 Energy Roadmap

On 10 October 2025, the Queensland Government released its Energy Roadmap 2025 (Roadmap), outlining a strategic plan for the state's energy sector over the next five years. A significant focus of the Roadmap is the continued role of coal in Queensland's energy mix.

Despite the global shift towards renewable energy, the Roadmap indicates that state-owned coal generators will operate at least until the end of their technical lives, with potential extensions based on system needs, asset integrity, and economic viability. This approach suggests that coal will remain a key source of energy generation in Queensland throughout the 2030s and into the 2040s.

The Roadmap's emphasis on coal is partly due to the state's reliance on coal-fired power, which currently supplies more than 60% of Queensland's total energy demand. The Queensland Government has committed AU$1.6 billion through the Electricity Maintenance Guarantee to ensure the reliability of these assets. This investment aims to maintain state-owned coal assets and ensure they can operate as needed into the future.

However, the Roadmap also acknowledges the need for a transition towards more sustainable energy sources. It highlights the importance of private sector investment in renewables, gas, and storage to achieve a balanced energy mix that supports affordability, reliability, and sustainability.

In summary, while the Roadmap continues to support coal as a significant energy source, it also sets the stage for increased investment in renewable energy and storage solutions, aiming to balance the state's energy needs with environmental sustainability goals.

ASX to Disband its Corporate Governance Council

On 16 October 2025, the Australian Securities Exchange (ASX) announced the disbandment of its Corporate Governance Council (Council) following an unsuccessful attempt to revise its corporate governance principles earlier this year. The decision was influenced by an independent review that identified the Council's structure as cumbersome and unable to achieve consensus among its 19 members. The Council, which included representatives from business, investor, and superannuation groups, faced criticism earlier this year for its inability to agree on the 5th edition of its Corporate Governance Principles including whether to recommend that boards report on diversity characteristics beyond gender, such as sexuality, age, indigenous heritage and disabilities.

Such changes were supported by various institutional investor and financier groups but resisted by the director community–emblematic of a deepening fissure on 'ESG' issues between stakeholder vs director-centric governance.

In response to these challenges, the ASX will now assume primary responsibility for establishing guidelines on key governance issues, such as board structure, risk management, disclosure requirements and executive remuneration. The Council will be replaced by a secretariat within the ASX, overseen by a smaller advisory group. This advisory group will hold regular meetings to address emerging governance issues and conduct formal reviews every four years, marking a shift from the previous ad-hoc approach.

The dissolution of the Council and the establishment of a new governance structure aims to streamline decision-making processes and foster the development of balanced governance principles. The Business Council of Australia welcomed the ASX's move and plans to also consult its members on improving corporate governance practices.

View From Abroad

European Parliament Votes to Scale Back Sustainability Reporting and Due Diligence Laws

On 13 October 2025, the European Parliament's Legal Affairs Committee voted to revise the European Union's (EU) sustainability reporting and due diligence regulations, marking a shift in corporate accountability standards. The agreement, part of the EU Commission's Omnibus I initiative, proposes substantial reductions in the scope of the Corporate Sustainability Reporting Directive (CSRD) and the Corporate Sustainability Due Diligence Directive (CSDDD).

Under the new framework, the CSRD would apply only to companies with at least 1,000 employees and an annual revenue exceeding €450 million, a notable increase from the previous threshold of 250 employees. The CSDDD would apply to only those firms with at least 5,000 employees and a turnover of more than €1.5 billion, effectively excluding smaller enterprises from these requirements. This adjustment reflects a strategic move towards a "risk-based approach" in due diligence.

The European Parliament will soon commence tri-lateral negotiations with the European Council and the European Commission with a view to reach a final agreement on the revised rules by the end of 2025. However, the revised rules are not anticipated to be implemented until 2026.

United Kingdom Plans to Create 400,000 Clean Energy Jobs by 2030

On 19 October 2025, the United Kingdom's Government published its Clean Energy Jobs Plan, aiming to create 400,000 new roles by 2030 to boost the clean energy sector and address the growing demand for skilled workers in this field.

Central to the plan is a comprehensive workforce upskilling initiative, which includes the establishment of five new Technical Excellence Colleges. These institutions will focus on training young people for essential roles in the clean energy sector, such as electricians, welders, and engineers. Additionally, the plan allocates £20 million to retrain oil and gas workers for new clean energy roles, assisting a smoother transition for those affected by the shift towards renewable energy.

The plan also emphasises job quality, with new labour protections and a Fair Work Charter focussed on working conditions and pay. This includes extending employment protections to offshore renewable workers and embedding workforce criteria in energy-sector grants.

The hearing revealed broad bipartisan agreement that clarity on digital asset taxation is needed, but deep divides remain over how to balance fairness, enforcement, and US competitiveness. 

Senators and witnesses addressed several issues during the hearing, including: 

• The pros and cons of a de minimis exception from taxation when digital assets are used to buy a cup of coffee or a similar small purchase;
• Parity of treatment of digital assets with financial instruments, like stocks, commodities, and loans;  
• Whether digital assets derived from staking or mining are taxable at the time the digital asset is awarded or at the time the digital asset is disposed of;
• Competition in the global market and the sourcing of digital asset income; 
• The need for certainty and simplicity juxtaposed against the complexity of the blockchain and the digital asset space; and
• Privacy concerns.

Witnesses differed in their opinions on these issues but agreed on the importance of clarity in the tax code, warning that outdated rules risk driving innovation abroad. Lawrence Zlatkin, vice president of tax for Coinbase, cautioned that requiring reporting on billions of small stablecoin transactions would overwhelm both taxpayers and the IRS. Andrea Kramer, founding member of ASKramer Law, argued that de minimis exemptions could subsidize crypto in ways unavailable to other asset classes. Jason Somensatto, director of policy for Coin Center, further cautioned the SFC that unclear rules and a loss of US competitiveness could allow foreign regimes to seize a competitive edge. Annette Nellen, chair, digital assets tax task force, American Institute of CPAs, emphasized that clarity requires carefully defining key terms such as “digital assets,” “actively traded,” and “commodity” so that taxpayers and practitioners can comply with confidence.  

The policy implications of digital assets is an increasingly popular topic in the White House and on Capitol Hill. The hearing comes on the heels of several other recent and notable developments in this policy space:

• The day before the hearing, the Treasury Department and the IRS released its 2025-2026 Priority Guidance Plan (PGP), identifying and prioritizing the tax-related issues that Treasury/IRS will work on through 30 June 2026, via regulations, revenue rulings, revenue procedures, notices, and other published administrative guidance. The PGP lists 105 areas where Treasury/IRS will focus their resources, centering on five key areas. Digital assets is one of these key areas. 
• On 23 January 2025, President Trump issued Executive Order 14178, establishing the President’s Working Group on Digital Asset Markets (Working Group), and directing the Working Group to submit a report to the President recommending regulatory and legislative proposals that advance the policies established in the order.  
• On 30 July 2025, the Working Group released a report pursuant to EO 14178, “Strengthening American Leadership in Digital Financial Technology,” identifying many of the same issues impacting digital assets that were considered during the SFC’s hearing. The report includes many policy recommendations.
• In July 2025, President Trump signed the GENIUS Act into law, enacting a legal and regulatory framework for stablecoins in the United States. The GENIUS Act passed both chambers of Congress with significant bipartisan support. Also in July, the House passed the CLARITY Act, a digital assets market structure bill. The Senate is currently working on its version of a market structure bill. 
• Again in July 2025, Sen. Cynthia Lummis (R-WY), a key player in cryptocurrency policy, introduced legislation reforming the tax treatment of digital assets. The bill includes sections on de minimis gains from the sale or exchange of digital assets, lending agreements, wash sales, mark-to-market election, mining and staking, and charitable contributions. 
• Rep. Max Miller (R-OH) subsequently released an outline of a framework for the taxation of digital assets. The outline closely resembles Sen. Lummis’s bill, including the addition of a provision on qualified retirement plans. Rep. Miller is expected to introduce legislative text soon. He is also a member of the House Ways and Means Committee’s Oversight Subcommittee, which held a hearing on the taxation of digital assets in July. 
• In 2021, Congress passed the Infrastructure Investment and Jobs Act (IIJA). Late in the Biden administration, the Department of Treasury and the Internal Revenue Service issued the Gross Proceeds Reporting by Brokers that Regularly Provide Services Effectuating Digital Asset Sales final regulations (known colloquially as the DeFi broker rule), implementing a digital assets tax provision in the IIJA. Congress nullified this rule in April 2025 using its authority under the Congressional Review Act. 
• In 2023, then-SFC Chair Wyden and Ranking Member Mike Crapo (R-ID) solicited stakeholder feedback on the taxation of digital assets. In a request for input, the lawmakers wrote “The rapid emergence of digital assets has raised novel regulatory issues, including the appropriate treatment under our federal tax law. The Internal Revenue Code of 1986, as amended, draws distinctions between types of property, with no straightforward classification for digital assets.”

In preparation of the hearing, the Joint Committee on Taxation (JCT) published a document describing “selected tax issues relating to digital assets under present law,” including descriptions of several issues commonly considered in the discussion of the tax treatment of digital assets, including a mark-to-market election, wash sales, constructive sales, trading safe harbor, loans, mining and staking, charitable contributions, and the exclusion of de minimis gain upon certain dispositions of nonfunctional currency. The JCT document can be accessed here and recording of the SFC hearing can be found here. 

All indications are that interest in the treatment of digital assets from the White House and both parties in the House and Senate, as well as industry stakeholders, will continue, likely leading to further legislation and executive branch action. Please contact any member of our K&L Gates Tax practice group if you are interested in engaging on this issue and shaping the taxation of digital assets. More broadly, our cross-practice initiative on digital assets stands ready to assist regarding the full gamut of digital asset issues currently under debate. 

Outlined below are key measures set forth in the European Union’s 19th sanctions package against Russia and Belarus, which precede the European Union’s broader framework for the planned phase out of all Russian natural gas imports (pipeline and Liquefied Natural Gas (LNG)). 

Energy

A total ban on Russian LNG and a further clamp-down on the Russian shadow fleet represent the hardest sanctions yet on Russia’s energy sector. There are also tighter sanctions on Rosneft’s and Gazprom Neft’s oil and gas imports into the European Union, and further restrictions on liquefied petroleum gas (LPG).

LNG Import Ban

• Phased ban on the purchase, import, or transfer, whether directly or indirectly, of LNG originated or exported from Russia, along with associated technical assistance, brokering services, financing or financial assistance, or other services. 
• The ban will be effective from 25 April 2026 for short-term contracts and from 1 January 2027 for contracts whose term exceeds one year, and which were concluded prior to 17 June 2025. 

This represents an important step in the European Union’s efforts to further reduce Russian energy flows into Europe, particularly given Russia’s continued LNG deliveries via European ports. 

“Shadow Fleet” and Transaction Ban

In parallel, the Council has introduced additional restrictions targeting logistical and financial channels supporting Russian energy exports, including:

• The designation of 117 additional vessels linked to Russia’s “shadow fleet,” subject to a port access ban and service restrictions, bringing the total number of vessels listed under EU sanctions to 557. To evade sanctions, the Russian shadow fleet of oil tankers typically use flags of convenience, as well as intricate ownership and management structures to conceal the origins of its cargo, leading to the European Union’s imposition of targeted sanctions on specific vessels.
• Additional sanctions are imposed across the shadow fleet value chain, including on maritime registries providing false flags from Aruba, Curaçao, and Sint Maarten to shadow fleet vessels. 
• The new measures also eliminate the pre-existing exemption for Rosneft’s and Gazprom Neft’s oil and gas imports into the European Union. Neither entity can now benefit from the exemption where the transaction is strictly necessary for the direct or indirect purchase, import, or transport of oil, including refined petroleum products, from or through Russia, unless the transaction relates to the transit of oil loaded in, departing from, or transiting through Russia and the origin and owner of the goods are not Russian. The import of oil from third countries, such as Kazakhstan, and the transport of oil compliant with the Oil Price Cap to third countries, are exempted. 
• Import ban on a variant of LPG aimed at preventing the circumvention of existing LPG restrictions.

Sanctions on Energy Companies in Third Countries

The European union has also listed non-EU entities for their role in enabling Russian oil exports, strengthening the enforcement of EU sanctions’ extraterritorially. This includes sanctioning Chinese entities—two refineries and an oil trader, that are significant buyers of Russian crude oil. In addition, two oil trading companies in Hong Kong and the United Arab Emirates (UAE) are added to the scope of the transaction ban. 

Finance

Strong measures also target financial services and infrastructure, including cryptocurrencies for the first time.

• Banking and payments: No EU operator will be allowed to engage, directly or indirectly, with any of the listed banks and financial institutions in Russia, Belarus, and Kazakhstan, with five new Russian banks added to the transaction ban. In addition, new bans on Russia’s payment card and fast payment system (Mir and SBP) and related exchanges are provided.
• Cryptocurrencies and exchanges: the European Union is prohibiting the use of Russian cryptocurrency stablecoin A7A5, extending sanctions to EU operators providing crypto and fintech services that could help Russia develop its own financial infrastructure and possibly circumvent sanctions, aiming to strengthen the integrity of the European Union’s financial sanctions framework.

Trade

On the trade front, the European Union has expanded export restrictions on dual-use items, advanced technologies, and various goods critical to Russia’s military-industrial complex, as well as imposed individual sanctions on businesspersons and companies involved in supplying military goods to Russia.

• Individual sanctions (listings) of businesspersons and companies forming part of the Russian military industrial complex, and operators from UAE, China, India, and Thailand producing or supplying military and dual use goods to Russia.
• New export restrictions on additional dual use items and advanced technologies, including metals for the construction of weapon systems and products used in the preparation of propellants, not yet under sanctions.
• New export bans on items such as salts and ores, constructions materials and articles of rubber, corresponding to a value of €155 million of EU exports in 2024 prices.
• Measures targeting Russia’s Special Economic Zones (SEZs): prohibition for EU businesses to enter into new contracts with any entity established within certain Russian SEZs, essentially forcing divestment from such areas. 
• Prohibition of reinsurance: the new measures prohibit reinsurance services regarding vessels and aircraft of the Russian government or Russian persons for up to five years after their sale to third countries.
• Anti-Circumvention provisions: strengthened mechanisms to prevent the circumvention of sanctions, including extended due diligence obligations for EU companies and reporting requirements for suspected breaches.

The package arrives in the midst of a global momentum on strengthening the sanctions regimes against Russia. In the last weeks, both the United Kingdom and the United States have imposed sanctions on Lukoil and Rosneft, Russia’s two largest oil companies. The UK package also demonstrates an anti-circumvention focus, whilst the recent US sanctions focus on direct and indirect ownership by the sanctioned companies, sparking concerns among European energy facilities with Russian-held stakes.

EU Draft Regulation on Phasing Out Russian Gas

The 19th sanctions package forms part of the broader framework under the draft Regulation (COM(2025) 828), (Regulation) proposed by the European Commission on 17 June 2025, to phase out all Russian natural gas imports (pipeline and LNG) while enhancing the monitoring of energy dependencies and amending Regulation (EU) 2017/1938 on gas supply security. 

As of November 2025, the draft proposal is still undergoing the EU legislative process - the Council agreed on its negotiating position on 20 October 2025, however trilogue negotiations are yet to begin. While the sanctions package accelerates the LNG-specific timeline, closing immediate loopholes, the Regulation provides a comprehensive, longer-term structure for total gas phase-out by 2028.

Key Provisions 

Ban on New Contracts

A full ban on new or amended Russian gas import contracts (pipeline and LNG) from 1 January 2026.  

Contract Amendments

Amendments to existing contracts will only be allowed for narrowly defined operational reasons and cannot increase the volume of gas imported. Some limited flexibility is included for landlocked Member States affected by supply route changes.

Transition Periods for Existing Contracts

Short-term contracts, whose term is shorter than one year, concluded prior to 17 June 2025: permitted until 17 June 2026 or until 1 January 2028 for certain landlocked countries under specific conditions. 

Long-term contracts, whose term is longer than one year, concluded prior to 17 June 2025: permitted until 1 January 2028, limited to contracted volumes.

National Diversification Plans

All Member States must submit plans by 1 March 2026, detailing current dependencies, replacement measures (e.g. alternative suppliers, renewables, demand reduction, joint procurement), milestones for full phase-out by 31 December 2027, and potential barriers. Member States that have already completely ceased direct or indirect imports of Russian gas are exempted from this requirement. 

Authorization and Transparency

A uniform prior authorization system is introduced for both Russian and non-Russian gas imports, requiring disclosure of contract terms, volumes, amendments, and proof of non-Russian origin for mixed LNG cargoes. Importers and LNG operators must submit detailed information to customs authorities (e.g., parties, quantities, origins, delivery points), with full contracts (excluding prices) available upon request. A rebuttable presumption of Russian origin applies to gas entering via specified EU-Russia interconnection points. 

Monitoring and Enforcement

Customs authorities, the EU Agency for the Cooperation of Energy Regulators and national regulatory authorities will be given powers to request detailed contract information (excluding price) to ensure effective implementation and cooperation between Member States. 

Force Majeure Clause

The restrictions in the Regulation bans may be considered to amount to sovereign acts rendering imports unlawful, which may subsequently enable operators to invoke force majeure for contract termination, treating the prohibition as an external event beyond their control. Importers must report force majeure provisions in contracts. 

Emergency Safeguards

The Commission may temporarily suspend prohibitions via implementing acts if supply security is threatened, subject to strict conditions and consultations.

Implications For Businesses

Operators in the energy sector should closely monitor both the new sanctions package and the evolution of the future legislative proposal to phase-out Russian gas, with a specific focus on the direct consequences for oil, LNG and natural gas contracting (in particular the country of origin of these commodities), infrastructure planning, and risk assessment/compliance across the European Union. Key considerations include:

• Reviewing supply chains and business relationships for exposure to newly sanctioned entities or restricted goods;
• Updating risk assessments and internal compliance policies to reflect the latest EU requirements and screening lists;
• Monitoring for updates and guidance from EU authorities regarding the implementation and interpretation of new measures; and
• Assessing the impact on ongoing contracts, transactions, and cross-border activities.

Conclusion

This framework—combining the adopted 19th sanctions package with the evolving draft Regulation— aims to strengthen EU energy security, align with the European Economic Security Strategy, minimize circumvention risks, and increase attention on third country enablers. However, this will require continuous monitoring, as Russia is constantly adapting to sanctions restrictions, including by evolving its payment methods using digital assets and foreign currencies in response to the rubel being excluded from global payment systems. 

Implementation of the LNG import ban and related measures will require further clarification, particularly regarding reporting obligations, contract wind-down processes, and compliance mechanisms at Member States level and at a business level in terms of compliance monitoring of the value chains concerned. 

Our dedicated and highly experienced teams continue to work closely together to monitor all relevant developments and would be more than happy to provide support in relation to all related matters. Please do not hesitate to contact any of the key contacts listed below if you have any queries or would like to discuss how the recent developments may impact you.

Australia Announces Commitment to a Minimum 62% Cut in Emissions by 2035

On 18 September 2025, Prime Minister Anthony Albanese announced Australia’s commitment to a 62%–70% reduction in emissions by 2035, compared to 2005 levels. This target marks a substantial increase from the previous goal of a 43% reduction by 2030. Mr. Albanese, senior ministers, and the Climate Change Authority (CCA) emphasised that the new targets are grounded in scientific evidence and practical planning.

To support this commitment, the Australian government has unveiled an AU$7 billion climate finance package. This includes an AU$5 billion Net Zero Fund within the National Reconstruction Fund, aimed at decarbonising industries, and an additional AU$2 billion for the Clean Energy Finance Corporation (CEFC) to advance renewable energy initiatives.

The CCA, following extensive consultation and analysis, recommended a 62%–70% target, describing it as ambitious but achievable. However, achieving this goal will require halving emissions across various sectors within the next decade. This announcement follows the release of Australia’s first national climate risk assessment, which attempted to quantify the gross adverse economic effects of climate change on the Australian economy.

Industry Bodies Weigh in on Treasury’s Sustainable Investment Product Label Consultation

Multiple industry bodies have released media statements clarifying their position on the proposed Sustainable Investment Product Label regime as submissions to Treasury’s Consultation closed on 29 August 2025.

A peak body for responsible and ethical investing has stated that a one-size-fits-all product labelling regime could destabilise Australia’s superannuation system and the broader responsible investment product market. The body cautions against an overly prescriptive and rigid framework that may prevent certain high-quality and responsible investment products from qualifying as a sustainable investment product under the regime.

In particular, the body contends that Australia’s unique compulsory superannuation system with highly diversified products investing across many different industries and asset classes, means that foreign regimes are not useful analogues. The body also argues that the product labelling regime would increase costs and compliance burdens for fund managers. Instead, it calls for a robust and credible principles-based framework to function within the existing structure.

Conversely, a major Australian accounting body has called for the government to have stricter rules to govern both the naming and marketing of superannuation and managed investment products. It advocates a standardised labelling approach and mandatory disclosures to be applicable to all investment products that are marketed as Environmental, Social and Governance (ESG) products to support consumer confidence and tackle greenwashing.

In particular, the body encourages the government to follow certain examples from overseas labelling regimes, such as applying the minimum asset threshold requirement that is used in both the United Kingdom and United States. The body ultimately calls for a hybrid regulatory model that features a principles-based framework, alongside mandatory consumer disclosures, naming rules and benchmarking transparency. This would be supported by a minimum threshold requirement and a mixed evidentiary model. Although the body’s representative has acknowledged stricter rules may create additional short-term costs, it has argued that, over time, these costs would be reduced through efficiencies by market participants.

With the consultation period now closed, the Treasury will consider feedback from stakeholders. It remains to be seen how the Treasury will take on board and incorporate feedback from various stakeholders into the design of the product labelling regime.

Australia to Invest AU$1.1 Billion in 10-Year Cleaner Fuels Program

On 17 September 2025, the Australian government agreed to invest AU$1.1 billion in the development of low carbon liquid fuels as part of its Cleaner Fuels Program (Program). The Program is expected to stimulate private investment in Australian onshore production of renewable diesel and sustainable aviation fuel (SAF). By establishing a domestic SAF production industry, Australia aims to diminish its reliance on imported fuels and promote energy security and economic resilience. Australia has the resources needed to make cleaner liquid alternatives to fossil fuels, with ready access to feedstocks like canola, sorghum, sugar, and waste.

The Australian government’s decade-long commitment to low carbon liquid fuels underscores its strategic importance in achieving net-zero carbon goals. Multiple airlines have expressed strong support. Although SAF is currently more expensive than traditional jet fuel, increased domestic production is anticipated to drive prices down, making it a financially viable option for the aviation industry.

Beyond environmental benefits, the initiative is poised to create thousands of jobs in renewable energy and advanced manufacturing sectors, particularly in regions historically dependent on conventional industries. The environmental and economic impact is significant as the CEFC estimates an Australian low carbon liquid fuel industry could potentially deliver around 230 million tonnes CO2-e in cumulative emissions reduction and be worth AU$36 billion by 2050.

AI and Data Centres Create Challenges for Australia’s Emissions Reduction Targets

On 12 September 2025, the CCA published its 2035 Targets Advice in order to help inform Australia’s greenhouse gas (GHG) emissions reduction target for 2035 (Advice). As part of the Advice, the CCA noted that the energy demands from rapidly expanding artificial intelligence (AI) technologies and data centres are presenting significant challenges to Australia’s emissions reduction targets.

The CCA has recommended a reduction in carbon emissions by 62%–70% by 2035, a target that was recently accepted by the Australian government. However, this target is lower than the initial draft range of 65%–75% proposed by the CCA in 2024, reflecting concerns over the projected energy consumption intensity of AI and data centres. The CCA has identified these sectors as key “delivery risks” contributing to increased electricity demand and higher emissions than anticipated.

Data centres, which power large AI systems, are expected to consume up to 12% of the national grid’s energy by 2050, with an annual growth rate of 25%. This surge in demand underscores the need for a strategic approach to energy management, including the co-location of data centres with battery storage and investments in energy-efficient technologies.

Despite these challenges, the CCA acknowledges the potential for AI to drive energy and cost efficiencies across various sectors, including transport and manufacturing.

View From Abroad

ISO and GHG Protocol to Develop New Standards for GHG Emissions Accounting and Reporting

On 9 September 2025, the International Organisation for Standardisation (ISO) and the Greenhouse Gas Protocol (GHG Protocol) announced a landmark partnership to harmonise their GHG standards and co-develop new standards for GHG emissions accounting and reporting. This collaboration aims to create a unified global framework, simplifying processes for companies and increasing consistency for policymakers. The partnership will integrate the ISO 1406X family of standards with the GHG Protocol’s Corporate Accounting and Reporting, Scope 2, and Scope 3 Standards.

This strategic alliance aims to address the fragmentation of existing standards and to provide a coherent approach and common global language across corporate, product, and project-level GHG accounting.

The collaboration is expected to enhance the technical rigour, policy relevance, and practical usability of GHG standards.

Global consistency of relevant standards will assist investors to make informed capital allocation decisions in the energy transition process.

Denmark Becomes the First Sovereign to Issue EU-Standard Green Bonds

Denmark is the first sovereign to issue bonds under the newly developed European Green Bond Standard (EuGBS). The EuGBS is a regulatory framework designed to enhance transparency and integrity in sustainable finance and is aligned with both the EU Taxonomy and Green Bond Principles established by the International Capital Market Association.

On 23 September 2025, the Danish government issued DKK 7 billion in European green bonds maturing on 15 November 2035 under the EuGBS framework. Denmark intends to support overarching climate goals by financing the sectors driving the green transition, with 100% of the proceeds allocated to refinancing of the taxonomy-aligned environmentally sustainable activities.

Unlike previous sovereign green bonds issued under voluntary principles, EuGBS-compliant bonds require full alignment with the EU Taxonomy. This means proceeds can only be used to finance activities that meet the European Union’s criteria for environmental sustainability.

Denmark’s initiative could mark a turning point in sovereign sustainable finance, introducing a higher standard for market integrity and disclosure. As investor appetite for credible green instruments grows, Denmark’s approach provides some potential insight of how the EuGBS could eventually reshape standards within sustainable finance markets.

International corporations operating in Europe may face growing investor pressure to ensure that green financing structures comply with the EU Taxonomy. The bonds provide opportunities to assign capital with a higher certainty of environmental sustainability and integrity.

Denmark’s issuance is likely to serve as a case study illustrating how sovereign frameworks balance EU sustainability objectives with investor appeal.

The authors would like to thank graduates Jessica Lim and Dorothy Sam for their contributions to this alert.

In United States v. EES Coke Battery LLC, the United States brought an enforcement action against a coke facility, owned and operated by EES Coke Battery LLC (EES) claiming violations of the Clean Air Act (CAA).¹ The United States amended its complaint to include EES’ immediate parent, DTE Energy Services, Inc. (DTEES), and DTEES’ parent, DTE Energy Resources, LLC. (DTEER). The United States claimed that, based on involvement of the two parent companies in the operations of the subsidiary, the two companies should be considered “operators” of the subsidiary’s facility under the CAA (which imposes liability on owners and operators) and thus equally liable with the subsidiary. The court denied the companies’ motions to dismiss, and they subsequently filed this motion for summary judgment arguing that the standard corporate protections for parent companies remained in place.

The court disagreed, however, holding that liability of the parent companies was an issue of triable fact. The court relied on the Supreme Court’s decision in United States v. Best Foods, holding that while a parent company is protected from liability for the acts of its subsidiary under standard state corporate law, the parent company could still be liable as an “operator” if it was actually and actively involved in the decisions leading to the environmental liability.² The court noted that several employees of both parent companies had senior roles as to the subsidiary’s air pollution operations and participated in decisions that led to the enforcement action. The court held that this level of active involvement subjected the parent companies to liability.

In addition to the active involvement of employees of the parent companies, the court based its decision on the shared services agreement under which the companies managed the environmental activities of the subsidiary. The court quoted extensively from the shared service agreement between the subsidiary and its parent DTEES, which stated that DTEES would provide “all services as may be required to facilitate the proper management and administration of [the subsidiaries’] activities” at the facility and detailed the services to be provided. DTEES argued that the presence of the shared service agreement documented that actions taken by DTEES employees were attributable to the subsidiary, but the court disagreed, noting that Best Foods requires looking beyond corporate formalities in favor of looking at actual control. DTEER had a similar agreement with its subsidiary DTEES, which the court also held that it allowed DTEER to exercise actual control over the air pollution control activities and the ultimate subsidiary, and therefore subjected DTEER to “operator” liability.

The court found that the parent companies could not escape potential liability as a matter of law but still allowed the parent companies the opportunity to prove at trial that they did not have requisite control for liability. The court’s focus on the shared services agreements in finding that requisite control should not be ignored. Many companies have shared services agreements with their subsidiaries to provide economies of scale, whether for engineering, environmental, legal, or other services. The shared services agreements cited in the opinion may be broader than the norm by allowing parent companies to directly control subsidiary operations. In general, to mitigate risk to parent companies for their subsidiaries’ liabilities, shared services agreements should carefully define the respective roles of the parent and subsidiary to avoid that type of parent control. Companies should review and revise their shared services agreements and involvement in subsidiary decision making accordingly to reduce the risk of parent company liability. 

There has been recent controversy where ASX-listed bidders have used highly dilutive share issues to acquire a target, bypassing 15% capacity constraints and without bidder shareholder approval.

Criticism has led the ASX to release a consultation paper on 20 October 2025 which seeks submissions on how the Listing Rules should be strengthened to protect shareholders of listed bidders.

Potential changes being considered to Listing Rule 7.2 are an introduction of a 25% limit to scrip consideration that a listed bidder can issue under a regulated takeover, merger or scheme before requiring bidder shareholder approval.

The ASX is also seeking consultation on whether shareholder approval is required for a listed entity to change its admission category to a Foreign Exempt Listing or to delist from the ASX, which is of interest to foreign domiciled, dual-listed entities or entities that seek to be listed on a foreign exchange.

Stakeholders may make submissions until Monday 15 December 2025. The ASX will then issue a response. Any potential draft rule changes are expected to be published by the ASX in the first half of calendar year 2026.

More details are contained in the ASX public consultation paper Shareholder approval of dilutive acquisitions and changes in admission status: Public consultation on shareholder approval requirements under the ASX Listing Rules dated 20 October 2025 (Consultation Paper) can be found here.

Areas Invited for Comment

The Consultation Paper invites public comments on four potential areas for change:

1. Bidder shareholder approval to be required for issues of shares under takeovers and mergers;
2. Shareholder approval to be required for significant changes to the nature or scale of a listed company’s activities;
3. Shareholder approval to be required for a dual-listed company to change to ASX Foreign Exempt Listing status; and
4. Shareholder approval to be required for a dual-listed company to delist from the ASX.

Consultation Areas

Bidder Shareholder Approval for Share Issues Under Regulated Takeovers and Mergers

The ASX is proposing to reduce the limit of share issues which are exempt from requiring shareholder approval (exceptions 6 and 7 in Listing Rule 7.2).

Currently, a listed bidding company can issue up to less than 100% of its ordinary shares as consideration (or to fund cash consideration) for a regulated takeover or merger by scheme of arrangement without requiring shareholder approval. The existing limit does not apply to reverse takeovers to protect shareholders in such a transaction, which usually results in the target company acquiring a majority stake in the bidder (i.e., the bidder effectively becomes the target).

The ASX has received stakeholder representations that the current exceptions 6 and 7 in Listing Rule 7.2:

can allow listed entities to make what can be very dilutionary issues of securities for a regulated takeover or merger, without allowing the security holders who are having their holdings diluted to have a say on whether or not this should occur.¹ 

The ASX has proposed a reduction in the limit on share issues under exceptions 6 and 7 from 100% to 25% of ordinary shares on issue (excluding small entities, which it has argued should remain at 100%). This would limit the number of shares of a large, listed company (i.e., in the S&P/ASX 300 or has a market capitalisation of more than AU$300 million) can issue as consideration for a takeover or merger by scheme of arrangement transaction before having to obtain shareholder approval. 

Shareholder Approval for Significant Changes to the Nature or Scale of Activities

The Consultation Paper also seeks consultation on whether shareholder approval may be appropriate for significant transactions regulated under Listing Rule 11.1, regardless of whether it involves a dilutive issue of shares.

There is no general requirement for security holder approval of significant transactions unless they involve substantial issues of securities or disposals captured under Listing Rules 11.2, 11.4, or 10.1. Listing Rule 11.1 requires notification to ASX for significant changes in the nature or scale of activities, with ASX retaining discretion to require approval under Listing Rule 11.1.2.

ASX does not propose introducing a general approval requirement for all significant transactions, citing concerns about regulatory burden and the potential to deter listings. It also notes that such a requirement is uncommon on peer exchanges.

Amending Listing Rule 11.1 to mandate approval could undermine its role in regulating backdoor listings. The ASX invites feedback as to whether an appropriate approach may be to introduce new rules within Chapter 11, though this would require consequential amendments to existing rules and could significantly increase regulatory complexity and impact on a large number of transactions.

Shareholder Approval for Dual-Listed Companies to Change to ASX Foreign Exempt Listing Status

ASX is consulting on whether dual-listed entities should require security holder approval to change their admission category from ASX Listing to ASX Foreign Exempt Listing.

Under Listing Rule 18.9, such a change requires ASX consent and satisfaction of higher financial thresholds for satisfying the profit or asset test (unless the overseas exchange is the NZX) but not security holder approval. ASX has not previously imposed this as a condition, and no formal guidance currently exists.

Some stakeholders argue that the change can significantly affect security holder rights and should require approval. Comparable exchanges (e.g. NZX, TSX, SGX) do not mandate shareholder approval, though SGX has imposed it as a condition in some cases.

ASX’s preliminary view supports a rule change, citing the significance of the change in admission category to shareholders and the infrequency of such transactions. Approval would be by ordinary resolution, and the regulatory burden is expected to be minimal due to the high eligibility threshold for ASX Foreign Exempt Listings. The Consultation Paper cites three examples of ASX-listed entities that have changed their admission category from a standard ASX Listing to an ASX Foreign Exempt Listing between 1 July 2022 and 30 June 2025. This appears to indicate that any potential rule change:

• Would impact a foreign incorporated entity that was initially listed on the ASX under a standard ASX Listing (e.g., with CHESS Depositary Interests or CDIs quoted on the ASX) and also was listed on an overseas exchange but changed to an ASX Foreign Exempt Listing; and
• Would not impact an Australian incorporated ASX-listed entity that implements a top-hatting and redomiciliation by an Australian regulated scheme of arrangement (that does require shareholder approval) with an associated change for the new top-hatted entity to be admitted under an ASX Foreign Exempt Listing (where the new top-hatted entity us admitted to a foreign listing venue).

Shareholder Approval for Dual-Listed Entities to Delist from ASX

The ASX is consulting on whether dual-listed entities should require security holder approval to delist from ASX.

Under Listing Rule 17.11, the ASX may permit voluntary delisting without security holder approval, particularly where the entity maintains a listing on another exchange. This applies to both ASX Listings and ASX Foreign Exempt Listings.

Some stakeholders argue delisting can materially affect security holder voting and other rights and should require approval. Other exchanges (e.g., SGX, TSX, HKEx) often mandate shareholder approval for delisting, typically by ordinary resolution.

The ASX’s preliminary view favours a rule change, with approval by ordinary resolution, but suggests exemptions may be appropriate to avoid deterring foreign listings. The ASX has suggested that shareholder approval may not be appropriate for dual-listed companies that were first listed on a foreign exchange before delisting from the ASX given that securityholders may reasonably expect the foreign entity’s governance to closely reflect the rules of its overseas home exchange.

Submissions

The ASX is seeking feedback on the issues put forward in the Consultation Paper by Monday 15 December 2025. The ASX will then review and publish a consultation response and advise of its proposed way forward. Any potential draft rule changes are expected to be published by the ASX in the first half of calendar year 2026.

The use of artificial intelligence (AI) in employment decision-making is no longer a theoretical, future-tense possibility. It is here and is reshaping how employers find, assess, and promote talent. As employers’ use of AI has increased, so has the development of AI regulation at the state and local level, including in California. As discussed in K&L Gates’ 29 March 2025 alert, California took a number of steps in 2025 to regulate the development and use of AI in employment to ensure that California employers’ use of AI tools is free of discrimination and bias.¹ This alert takes a closer look at one of those recently implemented regulatory actions. On 1 October 2025, the California Civil Rights Council’s (CRC) March 2025 “Employment Regulations Regarding Automated-Decision Systems” took effect (CRC Regulations) under the Fair Employment and Housing Act (FEHA). Now, every California employer covered by the FEHA must practice algorithmic accountability when using Automated Decision Systems (ADS) and AI in employment decisions.²

The intent of the CRC Regulations is clear: innovation must serve fairness and equity, not undermine it. An AI tool’s efficiency, while powerful, cannot replace human oversight, judgment, and analysis. Under the CRC Regulations, human participation is required not only to understand how the tool impacts a candidate or employee’s opportunities but also to determine when and how to intervene when an ADS is used. 

Defining Automated Decision System

Under the CRC Regulations, an ADS is defined as:

“A computational process that makes a decision or facilitates human decision making regarding an employment benefit…derived from [or] using artificial intelligence, machine learning, algorithms, statistics, or other data processing techniques.”³ 

The CRC Regulation’s definition of an “Artificial Intelligence System” is similarly broad—any “machine-based system that infers, from the input it receives, how to generate outputs,” whether those outputs are predictions, recommendations, or decisions.⁴ 

In practice, that scope captures most of the AI-based technology now shaping employment decisions, such as:

• Resume filters that rank or score candidates;
• Online assessments measuring aptitude, personality, or “fit;”
• Algorithms targeting specific audiences for job postings;
• Video-interview analytics evaluating tone, word choice, or expression; and
• Predictive tools drawing on third-party data.

If a tool influences an employment outcome, directly or indirectly, it likely qualifies as an ADS under the CRC Regulations.

Key Compliance Duties and Risks

The CRC Regulations establish a framework that blends civil rights principles with technical oversight. Employers must now take the following steps when implementing ADS and Artificial Intelligence Systems:

Prevent Discrimination (Direct and Indirect)

It is unlawful to use any ADS or selection criteria that creates a disparate impact against a protected class under FEHA. Scrutinizing liability does not stop with the question of intent. Impact must be considered. 

Conduct Bias Testing and Audits

ADS tools must undergo anti-bias testing or independent audits that are timely, repeatable, and transparent. A single validation at launch is not enough and will not demonstrate sufficient reasonable measures. Fairness checks must be integrated as regular and systemized maintenance practices.

Provide Notice and Transparency

Applicants and employees must receive pre-use and post-use notices explaining when and how ADS tools are used, what rights they have to opt out, and how to appeal or request human review.

Assert an Affirmative Defense Through Good-Faith Efforts

Employers facing claims under FEHA may defend themselves by showing reasonable, well-documented anti-bias measures including but not limited to: audits, corrective actions, and continuous oversight. But that defense is only as strong as the evidence supporting it.

Assume Responsibility for Vendors and Agents

Employers cannot outsource accountability. Bias introduced by a vendor or third-party platform remains the employer’s legal and ethical burden.

Retain Records for Four Years 

FEHA now requires retention of ADS-related documentation for at least four years. This retention requirement includes but is not limited to: data inputs, outputs, decision criteria, audit results, and correspondence.

Through these requirements, the CRC makes it clear that, while automation in decision-making is not prohibited, employers must be responsible stewards when implementing such tools.

Practicing Algorithmic Accountability

At the crux of its framework, the CRC Regulations reflect a push towards algorithmic accountability. Algorithmic accountability requires that technology partners with human judgment. Employers cannot claim ignorance of how an algorithm operates or what data an AI tool uses. To the contrary, under the CRC Regulations, an employer that uses AI without understanding its foundation and logic now creates its own form of negligence and potential liability.

The CRC highlights the importance of retaining human input in decision-making despite the use of AI tools. At a minimum, employers must incorporate a human element at some point in the lifecycle of an employment decision to avoid running afoul of the CRC Regulations. Accountability means transparency in process, traceability in data, and intervention when fairness is jeopardized. It means partnering with AI and leveraging its strengths without surrendering ethical, legal, and managerial responsibilities. 

Best Practices

To comply with the CRC Regulations, facilitate a culture of algorithmic accountability, and reduce risk, employers should consider the following practices:

Invest in Education and Awareness

Empower Human Resources and leadership teams with foundational understanding of ADS, its potential, its blind spots, and the social dynamics it can amplify. Oversight begins with literacy.

Engage Independent Auditors

External bias audits and model validations provide both credibility and objectivity. They also strengthen an employer’s affirmative defense by demonstrating due diligence.

Adopt Continuous Review and Monitoring

Bias is not a linear risk, and it can shift as data, users, and markets evolve. Regular audits, outcome monitoring, and feedback loops should become part of daily governance. Consult with outside counsel to build an appropriate cadence of audit-related protocol.

Institutionalize Documentation

Establish systems that capture, retain, and preserve ADS-related records including but not limited to: inputs, model parameters, audit logs, and decisions. These records must be maintained for at least the required four years. 

Preserve Human Oversight

Employers should design decision flows that invite human touch, review, challenge, correction, and intervention.

The Bottom Line: Partner with AI, Do Not Defer to It

Ignorance of the law has never been a defense. Now, neither is efficiency. The CRC Regulations make clear that progress in automation must be matched by equal progress in accountability and must not replace human oversight.

Our Labor, Employment, and Workplace Safety practice group lawyers regularly counsel clients on a wide variety of topics related to emerging issues in labor, employment, and workplace safety law, and they are well-positioned to provide guidance and assistance to clients on AI developments.

US officials have celebrated the announcement, with Commerce Secretary Howard Lutnick emphasizing that the Administration “is focused on ensuring the rapid development, deployment, and use of advanced nuclear technologies. This historic partnership supports our national security objectives and enhances our critical infrastructure.”² Secretary of Energy Chris Wright called the deal a “historic partnership” that will “unleash President Trump’s grand vision to fully energize America and win the global AI race.”³ Senator Dave McCormick (R-PA) hailed the partnership as a decisive investment that “will help the U.S. maintain its AI supremacy, create new jobs in Pennsylvania, and secure the Commonwealth’s position at the center of global energy production.”⁴  

The partnership represents a continuation of the Trump administration’s efforts to bolster US nuclear generation capacity. Previously, the Administration has taken steps to support the development of advanced reactor technology and domestic nuclear fuel through federally backed pilot programs. In May 2025, President Trump issued sweeping executive orders directed at reforming nuclear licensing and testing requirements, developing nuclear capabilities on federal and military installations, and revitalizing industrial nuclear capacity.⁵  

Agreement Terms 

Under the partnership framework, the US Department of Commerce will help to facilitate the construction of new Westinghouse reactors across the country with a minimum aggregate value of US$80 billion. Once the government makes a final investment decision, it will receive a participation interest that entitles the government to 20% of cash distributions in excess of US$17.5 billion made by Westinghouse after issuance of the participation interest. In addition, if the government has made a final investment decision by January 2029 and an initial public offering (IPO) of Westinghouse at that time is expected to be valued at US$30 billion or more, the government may require an IPO and receive warrants to purchase a 20% equity stake. The arrangement also commits federal agencies to streamline permitting, regulatory review, and financing aspects, while coordinating industrial-base and workforce support.⁶  

The AP1000 Reactor

Westinghouse’s AP1000 light-water reactor is the most recently constructed nuclear reactor in the United States. Two AP1000 reactors were deployed at the 4,500 MW Vogtle Electric Generation Plant. Vogtle Units 3 and 4 came online in 2023 and 2024, and now make up the largest operating nuclear energy facility in the country. In June 2025, the Nuclear Regulatory Commission (NRC) extended the duration of the AP1000 standard design certification, which is adopted via rulemaking, to 40 years, with an expiration date of 27 February 2046.⁷ Applicants for NRC licenses to construct and operate an AP1000 may reference this certified design to simplify the licensing review and reduce the scope of any contested proceeding.⁸   

We acknowledge the contributions to this publication from our government affairs intern Thomas F. Worth.

European Commission Accepts Commitments to Address Bundling Concerns in the Tech Sector

On 12 September 2025, the European Commission (Commission) accepted legally binding commitments offered by a tech company to address concerns related to a possible abuse of dominant position by tying its communication and collaboration platform to its operating system and applications for business customers. The alleged conduct would have anticompetitively foreclosed competitors in the market for cloud-based communication and collaboration products.

Commission Imposes First Ever Fine for Incomplete Response to Request for Information in Antitrust Proceedings

On 8 September 2025, the Commission imposed a €172,000 fine on a company and its then parent company for providing an incomplete reply to a request for information during its antitrust investigation in the synthetic-turf sector. While similar fines have long been imposed in merger-control proceedings, this marks the first time the Commission has fined a company in antitrust proceedings.

Commission Notes Growing Foreign Investment Activity and Progress Toward Harmonization in its Fifth Annual Report on FDI Screening

On 14 October 2025, the Commission released its fifth annual report on the screening of foreign direct investments (FDI) into the European Union (EU) (Report). The 2025 Report highlights that investment screening has become a central component of the EU’s economic and security policy. The EU is entering a new phase in which self-resilience is prioritized alongside competitiveness and innovation, an evolution that will test the EU’s ability to balance economic openness with the need to protect strategic assets and technologies critical to European security.

Financial Affairs

Commission Sets Out Simplification Drive in Financial Services Secondary Legislation

The Commission decided to de-prioritize 115 non-essential Level 2 acts in financial services to simplify regulatory burdens for companies.

European Parliament Rejects Legal Affairs Mandate on Omnibus Proposal

Members of the European Parliament have rejected the Legal Affairs Committee’s report on the Omnibus proposal amending the Corporate Sustainability Reporting Directive and the Corporate Sustainability Due Diligence Directive.

Antitrust and Competition

European Commission Accepts Commitments to Address Bundling Concerns in the Tech Sector

On 12 September 2025, the European Commission (Commission) accepted and made legally binding commitments from a tech company (Tech Company) aimed at addressing serious competition concerns linked to its team collaboration platform. 

In July 2023, after a complaint, the Commission opened an investigation to assess whether the Tech Company’s conduct in connection with the distribution of its collaboration and communication platform (Communication Platform) violates Article 102 of the Treaty on the Functioning of the European Union, which prohibits companies from abusing a dominant market position. A company is dominant when it holds such market power that it can operate independently of competitors, customers, and ultimately consumers. 

In June 2024, after opening a second investigation based on another complaint, the Commission sent a Statement of Objections to the Tech Company with the preliminary view that the Tech Company abused its dominant position since at least 2019 in the market for Software-as-a-Service (SaaS) productivity applications for professional use by tying its Communication Platform to its core SaaS productivity applications for business customers. Tying occurs when a dominant company makes the use or purchases of one product where it has a dominant market position (i.e., the tying product) conditional on obtaining another product (i.e., the tied product). These practices may restrict consumer choice and foreclose competitors who are unable to match such distribution advantages.

The Commission found in its preliminary investigation that the Tech Company restricted competition and claimed that, for many customers, Tech Company’s Communication Platform became the go-to solution not necessarily by choice, but by design, integrated seamlessly into the tools they were already using. 

In order to address the Commission’s concerns, the Tech Company offered to: (i) increase the price difference between some of the Tech Company’s suites with and without its Communication Platform by 50%; (ii) clarify that any software offer on its websites that includes the Tech Company’s suites with its Communication Platform also displays an offer without the Communication Platform; and (iii) publish detailed documentation on interoperability and data portability for developers. 

The Commission concluded that these amended commitments adequately address its concerns and decided to make them legally binding in a commitment decision under Article 9 of Regulation 1/2003. The commitments will remain in force for seven years, except for the commitments related to interoperability, which will remain in force for 10 years.

By offering commitments, the Tech Company has avoided a potentially large fine and an infringement decision under Article 7 of Regulation 1/2003. Although the Commission decision does not constitute a finding of violation, it effectively rewrites the rules of engagement in the European software market. By decoupling the Collaboration Platform from Tech Company’s productivity suites and opening the door for competitors to integrate more seamlessly into the Tech Company’s ecosystem, the European Union (EU) aims to ensure a level playing field. The Tech Company also decided unilaterally to apply these commitments not just in the European Economic Area but also worldwide.

Commission Imposes First Ever Fine for Incomplete Response to Request for Information in Antitrust Proceedings

On 8 September 2025, the Commission imposed a fine of €172,000 on a company and its then ultimate parent entity for providing an incomplete reply to a request for information during its antitrust investigation in the synthetic-turf sector. 

In June 2023, the Commission was carrying out unannounced inspections (dawn raids) at companies active in the synthetic-turf sector. As part of the investigation, the Commission issued two requests for information (RFI) to the company. The first RFI was an informal RFI pursuant to Article 18(2) of the Regulation 1/2003 whereby the recipient is not obliged to respond. However, the recipient who decides to respond can be fined in the amount of up to 1% of a company’s total turnover in the last financial year if the information provided is incorrect or misleading. The Commission assessed and compared the information provided by the company with the information that was seized during the dawn raids and found that the company’s responses were incomplete. Providing incomplete (but not misleading) information in response to a simple RFI, though, is not subject to a fine according to Article 23(1) (a) of Regulation 1/2003. 

The Commission subsequently sent an RFI by decision to the company pursuant to Article 18(3) of the Regulation 1/2003 (RFI by Decision). The recipient of an RFI by Decision, unlike in the case of a simple RFI, must respond, and the Commission is empowered to impose fines of up to 1% of a company’s total turnover in the last financial year not only for providing incorrect and misleading information but, according to Article 23(1) (b) of Regulation 1/2003, also for incomplete information in response to an RFI by Decision and if the information is not provided within the required time limit. The Commission again found that the response to the RFI by Decision was incomplete.

The Commission launched a separate procedural investigation into the company in November 2024 that resulted in the imposition of a fine against that company and its then parent company of €172,000. According to Teresa Ribera, executive vice-president for Clean, Just and Competitive Transition: “Information requests are a vital tool to uncover antitrust infringements. If companies do not provide full and complete replies to our requests, they can compromise our investigations [...].” She also stated that the Commission will not hesitate to pursue similar cases in the future to ensure that its investigations are carried out effectively to the benefit of consumers. The Commission set the fine at 0.3% of the company’s total turnover at group level in the last financial year and granted a 30% fine reduction for cooperation as the company actively cooperated after the Commission started the infringement proceedings.

While the fine may appear limited, this is the first time that the Commission has fined a company for providing an incomplete response to an RFI in antitrust proceedings. This decision also adds to the enforcement record on the Commission’s procedural infringements. For instance, the Commission imposed fines for the deletion of electronic evidence during inspections (€15.9 million, 2024) and for breaking seals during dawn raids (€38 million, 2008; Suez Environnement, €8 million, 2011), as well as fines in merger-control proceedings for incorrect or misleading information (the highest being €110 million, 2017). Although responding to an RFI may be burdensome, companies that receive an RFI must be very careful when responding to an RFI and ensure that their replies are accurate, complete, and verified; otherwise, they will face liability if their responses are incorrect, incomplete, or misleading. 

Commission Notes Growing Foreign Investment Activity and Progress Toward Harmonization in its Fifth Annual Report on FDI Screening

On 14 October 2025, the Commission released its fifth annual report on the screening of foreign direct investments (FDI) into the EU (Report). While the Commission does not have the power to directly review foreign investments into the EU, it has initiated since 2020 a process of coordination and partial harmonization of the foreign investment review regimes by EU member states through the adoption of the EU FDI screening Regulation. Under that Regulation, member states can ask questions on FDI reviews that are notified in other EU member states, and the Commission can in some instances provide a formal opinion on certain foreign investment reviews that are notified by EU member states through the EU FDI screening mechanism.

Increased Number of Cases Notified Through the EU FDI Screening Mechanism

According to the Report, in 2024: 

• EU member states handled a total of 3,136 FDI notifications, up from 1,808 in 2023. 59% of these FDI notifications resulted in no-jurisdiction letters or received unconditional clearances, while formal screening occurred in 41% of these notifications.
• Out of the 41% FDI notifications that were formally screened: (i) the vast majority (86%) resulted in unconditional authorization decisions; (ii) 9% involved an approval subject to conditions; and (iii) 1% were blocked/withdrawn.
• 477 of the 3,136 notifications were notified by member states to the Commission under the EU FDI screening mechanism. Out of these 477 cases:
  • Other EU member states raised questions in 10% of cases.
  • The Commission issued formal opinions in less than 2% of cases.  
  • 92% of these 477 cases were closed within two weeks, while the remaining 8% underwent an in-depth (Phase II) assessment and took a considerably longer timeframe.
  • Half of the Phase II cases that underwent an in-depth assessment (4%) concerned investments in the manufacturing sector, often due to concerns about technology leakage and supply-chain security, followed by investments in the Information, Communications, and Technology (ICT) sector and the financial sector. 

2024 also marked the entry into force of new FDI screening mechanisms in Bulgaria and Ireland, bringing the total number of member states with such frameworks to 24 out of the 27 EU member states. The three remaining EU member states (Cyprus, Croatia, and Greece) that do not yet have FDI review regimes are in the process of adopting FDI review laws.

Investment Trends in 2024

In terms of original foreign investment into the EU, the Report noted the following:

• The United States remained the EU’s top foreign investor, accounting for 30% of acquisitions (597 deals, a 7% increase compared to 2023) and 37% of greenfield investments (626 projects, a 17% decrease compared to 2023).  
• The United Kingdom ranked second, representing 23% of acquisitions (451 deals) and 24% of greenfield projects (412 transactions). 
• Other notable trends included a sharp rise in acquisitions from Singapore (+85%) and Norway (+34%) and a 23% rebound in Chinese and Hong Kong investments after a decline in 2023. 

As for the destination countries for foreign investment:

• Germany was the leading EU destination for mergers and acquisitions (M&A) deals by non-EU acquirers, with 21% of all deals (a 17% increase compared to last year).
• France was the second EU destination with 13% of M&A deals.
• Poland and the Netherlands recorded the strongest growth in deal activity by non-EU acquirers, increasing 39% and 30% respectively.
• Ireland and Denmark saw declines of 26% and 9%. 

The EU manufacturing sector remained the most active sector for FDI, representing 27% of foreign M&A, followed by the ICT sector at 24%. For greenfield investments, retail dominated (31%), followed by professional, scientific, and technical activities (15%), manufacturing (13%), and ICT (10%).

Looking Ahead

The EU plans to further harmonize FDI reviews while at the same time expanding the scope of FDI reviews to outbound investments.

• The adoption of the revised FDI screening regulation is in an advanced process of adoption and is currently being negotiated before the European Parliament, the Council of the EU, and the Commission. The proposal seeks to make FDI screening mechanisms mandatory for all 27 EU member states, establish a minimum level of harmonization and a common scope of reviewable transactions, and extend screening to cover EU-based investors ultimately controlled by non-EU entities. It also aims to enhance cooperation and accountability between the Commission and national authorities. On 15 January 2025, the Commission adopted Recommendation (EU) 2025/63, calling on member states to assess potential security risks associated with EU outbound investments in semiconductors, artificial intelligence, and quantum technologies. Member states are asked to review past and ongoing transactions to identify risks of technology leakage for military or intelligence misuse and report their findings by June 2026. 

Financial Affairs

Commission Sets Out Simplification Drive in Financial Services Secondary Legislation

On 1 October 2025, the Commission published a letter to the European Supervisory Authorities (ESAs) outlining its decision to de-prioritize a significant number of Level 2 measures in the financial services frameworks. 

This initiative, part of the Commission’s broader agenda on simplification, responds to concerns from stakeholders about the growing volume of delegated and implementing acts stemming from recent legislative reforms. Existing legislative initiatives mandate the Commission to adopt more than 430 Level 2 measures across banking, insurance, securities, sustainable finance, and anti-money laundering frameworks. 

The Commission has categorized these empowerments into three groups: those with a legal obligation to act within a set timeframe; those with a legal obligation but no deadline; and those where the Commission is not legally required to act. Following consultations with the European Parliament, the Council of the EU, and ESAs, 115 empowerments have been identified as “nonessential” for the effective functioning of the underlying Level 1 acts.

To manage these, the Commission will follow a two-step approach. First, the nonessential Level 2 acts listed in the annex to its letter will not be adopted before 1 October 2027. Second, in cases where empowerments carry a legal obligation to act by a specific deadline, the Commission will propose amendments or repeals during upcoming reviews of the relevant Level 1 legislation. Many of these reviews are scheduled within the next two years.

European Parliament Rejects Legal Affairs Mandate on Omnibus Proposal

On 21 October 2025, Members of the European Parliament (MEPs) rejected the mandate adopted by the Legal Affairs Committee (JURI) on the Omnibus proposal amending the Corporate Sustainability Reporting Directive (CSRD) and the Corporate Sustainability Due Diligence Directive (CS3D). Following this rejection, MEPs are expected to table further amendments to the proposal, which will then need to be approved during the next plenary session of the European Parliament, scheduled for 13 November.

The rejection underscored widening political divisions within the European Parliament. The centrist coalition that typically secures major legislative compromises, including the European People’s Party (EPP), the Socialists & Democrats (S&D), and Renew Europe (Renew), fractured over the proposed text. While the EPP and parts of Renew backed JURI mandate as a necessary step to reduce regulatory burdens and increase legal clarity for businesses, many S&D and Green MEPs withdrew support, warning that the proposal would significantly dilute EU’s sustainability and human-rights framework. On the other side, more conservative and far-right groups argued the reforms did not go far enough in easing compliance obligations. The resulting cross-party misalignment led to the narrow rejection of the mandate, reflecting the growing polarization between calls for competitiveness and demands to preserve the integrity of the EU’s sustainability agenda. The JURI report sought to narrow the scope of both directives. It proposed reducing the number of companies subject to mandatory obligations, introducing simplified reporting templates, and limiting due diligence requirements to the largest firms only. Under the proposed changes to CSRD, mandatory reporting would apply only to companies with more than 1,000 employees and annual turnover exceeding €450 million. Smaller companies would be exempt, though they could choose to report voluntarily. Sector-specific requirements would become optional and standard reporting templates would be streamlined to focus on key quantitative indicators.

For CS3D, JURI proposal limits obligations to identify, prevent, and mitigate adverse human rights and environmental impacts to large EU companies with over 5,000 employees and turnover above €1.5 billion, as well as to non-EU companies generating more than €1.5 billion within the EU. It also introduces a risk-based approach, allowing companies to collect information from business partners only where there is a material risk of impact, replacing the previously broader data-collection duties. Enforcement would remain primarily at national level, with the civil liability regime further reduced, while potential fines would be capped at 5% of global turnover.

Once the European Parliament adopts its mandate, interinstitutional negotiations, also known as trilogues, with the Council of the EU and the Commission will begin. The institutions aim to conclude the legislative process by the end of 2025.

In issuing the letter and proposed rule, Secretary Wright explained that unprecedented and extraordinary quantities of electricity and substantial investment in the nation’s interstate transmission system are necessary to meet the Trump administration’s commitment to revitalizing domestic manufacturing and driving American artificial intelligence innovation. Secretary Wright points to the fact that electricity demand is expected to grow at an extraordinary pace due in large part to the rapid growth of large loads and the unique challenges presented by the size and speed with which data centers can be connected to the grid. Secretary Wright argues that it has become necessary to standardize interconnection procedures and agreements for large loads.

The ANOPR presents a number of principles for consideration in a large load/hybrid interconnection rule, including: 

• Limited Jurisdiction. FERC interconnection rules would apply only to direct interconnections to jurisdictional transmission facilities. 
• Large Loads. The rules would apply only to new standalone loads greater than 20 MW and loads greater than 20 MW that share a point of interconnection with new or existing generation facilities (hybrid facilities). The ANOPR seeks comments on whether a 20 MW cutoff for large loads or an alternative threshold is appropriate.
• Loads and Generation Studied Together. When possible, interconnecting large loads and hybrid facilities would be studied with generating facility interconnections, which may reduce the scope and cost of network upgrades for the interconnection customer.
• Standardized Study Procedures. Large loads and hybrid facilities would be subject to standardized deposits, readiness requirements, and withdrawal penalties. The ANOPR seeks comments on what study deposits, thresholds, commitments, or penalties should apply.
• Study Parameters. Hybrid facilities’ interconnections would be studied using the developer’s requested amount of system injection and withdrawal rights.
• System Protections. Hybrid interconnections would be required to install system protection facilities that prevent unauthorized injections or withdrawals in excess of study parameters. The ANOPR seeks comments on proposed operational limitations and technical requirements.
• Expedited Processes. Curtailable large loads and dispatchable hybrid facilities could seek expedited study procedures. The ANOPR seeks comments on recommendations for accomplishing expedited studies for curtailable large loads.
• Cost Causation. Load and hybrid facilities would be responsible for the full cost of all network upgrades identified during the study process. The ANOPR seeks comments on offsetting costs for network upgrades via a crediting mechanism.
• Self-Build for Certain Network Upgrades. Large loads and hybrids could exercise the same self-build option that is available to generator interconnection customers. 
• Co-location with Existing Generation to be Studied. An existing generating facility that enters a partial suspension to serve co-located load would be studied for system reliability impacts. The ANOPR seeks comments on the role of resource adequacy in the relevant studies.
• Transmission Service. Transmission service would be based on system withdrawal rights, reflecting the quantity of capacity and energy that is being transmitted across the transmission system to the load.
• Ancillary Services. Large loads would pay for ancillary services based on peak demand, without netting for energy supplied by co-located generation.
• Transition Plan. A transition plan would address the treatment of large load interconnections that are already being studied for interconnection. The ANOPR seeks comments on appropriate transition plans for interconnections already being studied.
• Compliance. All applicable NERC reliability standards and tariff requirements would be complied with. 

The ANOPR is intended to provide a path forward to address the urgent electric power needs of large loads. Nevertheless, the rulemaking is going to be controversial. As DOE acknowledges, FERC has never before exercised authority over the interconnection of retail loads. Such a move will likely be viewed by some as an unacceptable encroachment on states’ historic authority.

The ANOPR provides several justifications for exercising jurisdiction over these interconnections. First, large load connections are a critical component of open access transmission service that require minimum terms and conditions to ensure nondiscriminatory transmission service. Second, large load interconnections are directly affecting FERC-jurisdictional wholesale electricity rates. Third, states’ authority to regulate retail electricity sales and site data centers is undisturbed. Lastly, according to DOE, any contrary view would conflict with the Federal Power Act’s core purposes. 

Comments on the ANOPR are due by 14 November 2025, and reply comments are due by 28 November 2025.²

Ready to help

The firm’s Power practice group is closely monitoring these developments and stands ready to assist clients in navigating evolving laws, regulations, and policies governing interconnection of data centers, industrial facilities, and large loads. 

On 15 October 2025, the European Securities and Markets Authority (ESMA) and the European Banking Authority (EBA) presented their report with proposals for revising the Investment Firms Directive (IFD) and the associated regulation (IFR) (IFD Review). 

As part of the planned review of the IFD and IFR, ESMA and EBA propose, among other things, clarifications regarding the determination of own funds. This concerns the calculation of assets under management in ongoing investment advice, which are relevant for the K-factor. The requirements for variable remuneration are meant to be relaxed to some extent. It is recommended that the threshold-based exceptions for the payout restrictions regarding variable be raised to bring them into line with those in banking regulation. 

The report will be submitted to the European Commission, which in turn will present its report on the IFD review to the European Parliament and the Council.

BaFin Issues Product Intervention for Turbo Certificates

On 15 October 2025, the Federal Financial Supervisory Authority (Bundesanstalt für Finanzdienstleistungsaufsicht) (BaFin) issued the expected product intervention measure for so-called “Turbo Certificates”. It only applies to the distribution to retail investors that are based in Germany and does not generally exclude it. However, in future, higher requirements for the suitability test in the form of a semi-annual knowledge test on the functioning of turbo certificates and a ban on monetary or non-monetary benefits must be observed. In response to the comments received during the previous consultation, BaFin has extended the implementation period from the originally planned three months to eight months in order to take into account the high technical and administrative effort required by affected entities. The product intervention measure will therefore not come into force until 16 June 2026.

EU Commission Postpones Implementation of Level 2 Measures in the Financial Services Sector

On 6 October 2025, the European Commission announced that it will postpone the implementation of numerous Level 2 measures in the financial services sector. These measures, which are based on Level 1 requirements, include delegated acts and technical standards that specify existing EU regulations and directives. During the last legislative term, around 430 such Level 2 measures were adopted.

The decision not to adopt certain Level 2 measures before 1 October 2027 aims to reduce regulatory complexity and facilitate compliance for the parties concerned. This so-called "de-prioritisation" strategy is part of the European Commission's regulatory simplification agenda. The goal is to postpone nonessential requirements in order to reduce the administrative burden on market participants. At the same time, it has been announced that existing authorizations at the level of the underlying Level 1 legislation will be reviewed, with the possibility of adjusting or repealing them, if necessary.

It is important to note that only those measures with no legally defined deadlines for implementation will be postponed. This applies in particular to Level 2 measures in connection with Solvency II, the Sustainable Finance Disclosure Regulation (SFDR) and EU taxonomy.
The postponed measures also include Level 2 acts relating to the amendment of the AIFM Directive (AIFMD review). Among other things, this affects technical standards for open-ended loan-originating AIFs.

Higher Regional Court of Dresden on Content Review of Qualified Subordination Clauses in Loan Agreements

In a decision of 5 March 2025 (5 U 1392/24), the Dresden Higher Regional Court (Oberlandesgericht Dresden) ruled that so-called qualified subordination clauses with a pre-insolvency enforcement ban in loan terms of a crowdfunding platform are subject to transparency control pursuant to Section 307 (1) sentence 2 of the German Civil Code (Bürgerliches Gesetzbuch) (BGB), but not to adequacy control pursuant to Section 307 (1) sentence 1 BGB, and also provided important guidance for the legally compliant drafting of subordinated loan agreements.

The platform operator had provided standardized loan agreements on its website, which investors could use to provide capital to capital seeking companies in the form of subordinated profit-participating loans as part of an investment agreement. The plaintiff investor had argued that the provided documentation did not sufficiently explain the far-reaching effects of the pre-insolvency enforcement ban and that the loans constituted an illegal deposit business in terms of Section 1 (1) sentence 2 no. 1 of the German Banking Act (Kreditwesengesetz) (KWG).

In its ruling, the Dresden Higher Regional Court first stated that the use of the subordination clause in the investment agreement was not surprising within the meaning of Section 305c (1) BGB, as the nature of the agreement as a qualified subordinated loan was already indicated in the heading and preamble of the agreement. In the court's opinion, the provisions on the pre-insolvency enforcement ban and the qualified subordination did not violate the transparency requirement arising from Section 307 (1) sentence 2 BGB, as the investment agreement (in some cases even through the use of bold letters) made sufficiently clear that they imposed an entrepreneurial risk of loss on the lender that was equivalent to that incurred with equity capital, without at the same time granting corresponding rights to information and participation. However, in the opinion of the court, the provisions on the pre-insolvency enforcement ban and the qualified subordination were not subject to a content review in the narrower sense of an appropriateness review pursuant to Section 307 (1) BGB, as they were considered to be part of the lender's main performance obligation.

ESMA Publishes RTS on Green Bonds and ESG ratings

On 15 October 2025, the European Securities and Markets Authority (ESMA) published two final reports: the final report on regulatory technical standards (RTS) under the European Green Bonds Regulation and the final report on technical standards under the Regulation on the transparency and integrity of Environmental, Social and Governance (ESG) rating activities. 

The RTS on European Green Bonds sets out requirements for external auditors of green bonds and covers, among other things, organizational requirements, compliance, staff qualifications, data quality, and procedures for notifying ESMA of material changes to registration information.

The RTS for ESG rating activities sets out requirements for authorization, management of conflicts of interest, and transparency (disclosures).

The European Commission now has three months to decide on the adoption of the RTS. 

MiCA—RTS on Liquidity Management Published

On 3 October 2025, Delegated Regulation (EU) 2025/1264 of the European Commission, which lays down regulatory technical standards (RTS relating to the Markets in Crypto-assets Regulation (MiCA), was published in the Official Journal of the European Union.

These RTS specify the minimum content of liquidity management policies and procedures for certain issuers of:

• Asset-referenced tokens (ARTs); and
• Electronic money tokens (EMTs).

The RTS require issuers to implement comprehensive procedures for identifying, measuring, and managing liquidity risks. In addition, they provide for a contingency policy and risk mitigation tools and outline minimum requirements for liquidity stress tests.

The delegated regulation entered into force on the 20th day following its publication in the Official Journal, i.e. on 23 October 2025.

ESMA Final Report on Securities Settlement Periods

On 13 October 2025, the European Securities and Markets Authority (ESMA published its final report on the amendment of technical regulatory standards (RTS relating to the EU Regulation on Central Securities Depositories (CSDR). The revision of the CSDR, which came into force in 2024, aims to improve the efficiency of securities settlement in the EU (CSDR Refit). ESMA has a mandate to develop Level 2 measures (amendment to the delegated regulation) to improve settlement discipline and efficiency. The measures also serve to introduce a T+1 settlement deadline.

Among other things, the RTS proposed by ESMA stipulate that investment firms must ensure that professional clients acting as buyers submit their allocation and trade confirmation by 11:00 PM on the trading day at the latest in order to align operational processes with the targeted settlement cycles. The settlement instructions must then be sent to the central securities depository by 11:59 PM at the latest. Furthermore, this data must be transmitted in an electronic and standardized format. 

The EU Commission now has three months to decide whether to adopt the RTS. 

BaFin consults on Crypto Markets Notification Ordinance

On 29 September 2025, BaFin published a new ordinance on notifications and the submission of documents under the Crypto Markets Supervision Act (Kryptomärkteaufsichtsgesetz) (KMAG) and opened it for consultation. The KMAG was enacted to implement the requirements of EU MiCAR (Regulation (EU) 2023/1114) and contains provisions that need to be clarified and specified in more detail by further ordinances. The new ordinance is intended to specify the notification and submission requirements set out in Section 21 KMAG. By defining requirements as clearly as possible and using standardized forms and identical regulations across various supervisory laws (such as the German Banking Act (Kreditwesengesetz) or the Payment Services Supervision Act (Zahlungsdiensteaufsichtsgesetz)), BaFin aims to establish a low-effort reporting system also for the crypto sector. The consultation is open until 29 October 2025, and the ordinance is scheduled to enter into force on 1 January 2026.

Abstract 

For all forms of dispute resolution, it is a case of “adapt or die.” Conventional domestic construction arbitration in the United Kingdom has all but vanished, with most construction disputes now resolved in adjudication. Over the course of the next ten years, global projects will contend with increased competition for resources against the backdrop of growing populations and escalating pressures of climate change, while companies and their lawyers grapple with political change and the opportunities (and risks) that artificial intelligence (AI) will bring. Whether or not you are a fan of international arbitration in its current format, it will inevitably change in the next decade. Our panel will therefore explore how arbitration can adapt and stay relevant for its users, against the backdrop of the social, political and technological changes and challenges that it will face between now and 2035. In particular, we will look at how arbitration might harness AI to enhance, economise and expedite proceedings while avoiding the generation of fictional data and deepfakes.

Introduction

AI is the topic of the moment, and rightly so. For many, the authors included, AI represents the fourth industrial revolution.¹ If it has not started to do so already, AI will soon disrupt and change global economies and societies in a profound way. It is shaping energy policy,² it is playing a role in warfare³ and it is already appearing in a courtroom near you.⁴ Arbitral tribunals will need to get comfortable, and quickly, with using AI in arbitration–harnessing its strengths while avoiding its pitfalls.

Huge advances in the capabilities of large language models (LLMs) are accelerating the pace of change within the AI industry. No one is immune to its impact. Even lawyers, often reticent to change, are scrambling to get to grips with the library of platforms that are now marketed as game-changers in our work. As of September 2024, LexisNexis reported that more than 80% of lawyers use or plan to use AI in their work,⁵ a figure set only to increase. Lawyers now need to invest in the right tech stack and must learn how to deploy it effectively. Firms which resist this change will find themselves losing out to their more innovative competitors.⁶

Nowhere is this pressure more obvious than in the world of disputes and in particular international arbitration, where rising fees provoke concerns for clients across the globe. The 2024 GAR-LCIA roundtable⁷ discussed at length the notion that international arbitration had “lost its way,” with spiralling costs, delays and lengthy submissions being criticised. While the complexity of disputes and the volume of information required to decide them appears to be increasing,⁸ the search for procedural and cost efficiency requires parties and their counsel to seek solutions which achieve better results in a more proportionate way. AI will surely help to achieve that. The potential competitive rewards for those that push themselves to the cutting edge could be significant.⁹

It is not only lawyers who will need to contend with the advent of AI in arbitration, but also legislators and arbitrators. Only five weeks before this conference, and our discussion of this topic, the International Centre for Dispute Resolution (ICDR) announced its launch of an AI-based arbitrator for documents-only construction cases.¹⁰ How quickly parties and legislators adopt AI arbitration remains unclear, not least because doubts must exist as to the enforceability of AI-written awards, given legislation in several jurisdictions which expressly¹¹ or impliedly,^{12 13} requires an arbitrator to be a person, i.e., a human.

There are huge opportunities with AI; there is a lot it can help lawyers do better. As much as practitioners need to invest in the right tools, however, they must also invest in the people that will be using them, encouraging them to incorporate AI into their practices in a way that is not only appropriate, efficient and innovative, but that is also ethical and meets the high standards required by the legal profession. Any lawyer utilising AI must be conscious of the quality of both the input and the output, as well as the limitations of the platforms. The risks in AI can be enormous, whether the cause be negligent or malicious.

Here we discuss both the opportunities and risks for the international arbitration community as it embraces AI. The message is clear: while technology may revolutionise how we conduct disputes, the revolution only works if the people using the tools know what they are doing.

Opportunity 

LLMs are ideal tools for the complex tasks required of them by international arbitration:

• First, the training of the model gives it an incredibly powerful frame of reference to draw from when answering queries. When the generic training data is paired with legal-specific data, the resulting products can be extremely valuable.¹⁴
• The ability to ingest and analyse large amounts of data quickly makes AI tools an incredibly powerful means of increasing efficiency, doing what would take a human reviewer hours or more in a matter of minutes in a more predictable way.¹⁵ 

AI has the potential to revolutionise all parts of the international arbitration life cycle and the work of practitioners, experts and tribunals alike. It will allow participants to complete tasks at all stages of a case with greater efficiency and accuracy, finding added value whilst also reducing the cost of individual actions. Many of the issues that have been identified by the arbitration community can be in part addressed by AI. The following are a few of the areas where AI can support international arbitration.

Predictive analytics

When a dispute is contemplated, a client may wish to consider its position and its prospects of succeeding if the matter were to proceed to arbitration. Using AI, key documents can be analysed for an assessment of the likely strengths and weaknesses of various case strategies. Where parties use a legally trained AI database which has been trained to understand the concept of legal precedent, the ability to use AI to stress-test legal arguments may be an invaluable tool in helping a party to decide whether it is worthwhile pursuing a matter to arbitration or whether it is better to seek a commercial solution through negotiation or alternative dispute resolution.

This model of predictive analytics has been embraced by the International Chamber of Commerce (ICC) and the Permanent Court of Arbitration as being of assistance to parties in coming up with the most effective legal strategies.^{16 17 18} In construction disputes, the American Society of Civil Engineers in 2023 tested the ability of AI to analyse and predict the outcomes of disputes that had already been decided in adjudication and concluded that the AI predicted the real result with 95% accuracy.¹⁹ Such a use for AI can help clients who wish to consider their position before approaching external counsel; however, there is a limit to the reliability of the (albeit evidence-based) output of AI given constraints in precedent ingestion and the unpredictability of opposing counsel’s arguments. The authors therefore doubt whether AI can ever truly substitute the judgment and experience of expert counsel when evaluating the likelihood of success of a case. 

Arbitrator selection is a natural extension of this use case for AI in arbitration. AI solutions may provide parties with the ability to research in depth the candidates for appointment in their disputes. AI may be able to collate information on an arbitrator’s previous awards or decisions—if those can be fed into a database—and it will also be able to search online for any public comments or publications that an arbitrator may have made on a particular issue. Such intelligence will allow parties to consider both their likely chance of success with an individual candidate. It will help parties to identify the arguments that might be likely to hold sway with a particular arbitrator and the likelihood of achieving a successful damages award based on the available facts and information.^{20 21 22 23 24}

The key limitation of AI-assisted predictive analytics is the volume and quality of the data that it is using to make its predictions. One obvious restriction is the limit on the number of awards that an LLM might be able to review for the purposes of populating its database as to the decision-making of an arbitrator. An attraction of commercial arbitration is its privacy and confidentiality, with many awards not being published. Of major institutions, only ICSID publishes full awards, with others including the ICC, ICDR, LCIA and SIAC publishing only limited, redacted or summarised awards.²⁵ The disclosure of information regarding awards, including the names of arbitrators, experts and counsel, raises questions of data protection and confidentiality which may limit attempts to broaden the spectrum of disclosures. 

As such, the utility of predictive analytics may be limited in a world where arbitration maintains its privacy. Further, the available dataset for AI is likely to be restricted largely to written material, thereby omitting a potential wealth of oral and nonverbal information about an arbitrator–and, in particular, about what that arbitrator finds persuasive. According to the well-known behavioural scientist Professor Albert Mehrabian, face-to-face communication is made up of three main elements: nonverbal behaviour, tone of voice, and words. According to Professor Mehrabian,²⁶ words, body language and tone of voice account for 7%, 55% and 38% of effective communication, respectively. 

Within that context, if AI is only able to review 7% of the available dataset around a person’s communications, we must conclude that AI is not seeing the whole picture. The authors therefore do not consider that AI can supplant the experience of counsel who have sat face-to-face with an arbitrator and watched them listen to and evaluate evidence and submissions in a hearing room. AI is a tool to help human evaluation, not replace it.

Document review

Collecting and reviewing documents can be an expensive and time-consuming exercise, particularly in complex scientific, technology or construction disputes, where data volumes can be vast. Although technology-assisted review has been in use in e-discovery for many years, AI-enabled discovery tools are a hot topic in the legal world as vendors release their solutions to the market. 

An obvious question arises as to whether AI can replace first-level human reviewers, allowing arbitration teams to focus on the substance of a dispute rather than the binary decision-making of whether a document is “relevant” or not. However, vendors offering e-discovery solutions are still learning about the true utility of AI tools. In circumstances where e-discovery and AI review tools remain largely untested by the majority of practitioners, it may be difficult to justify to many clients–even those in the construction sector–the costs associated with licensing and deploying an AI review tool in circumstances where lawyers will still need to review the output in any event. This is because arbitration rules, evidential rules and ethical rules regulating legal practitioners have not yet evolved to the point where a human is no longer required to attest to the nature of a documentary search undertaken.

The investment required in up-skilling teams to be capable of effective “prompt engineering” required to use AI-enabled e-discovery can appear a difficult decision to justify from a time and cost perspective. Whether clients are willing to pay for such up-skilling and offer up their documents to allow teams to be trained is unclear. Nevertheless, prompt engineering can be refined and improved by allowing the uploading of small test-batches of documents to an AI database so as to allow e-discovery systems to be refined. Doubts also remain as to whether AI tools currently available are capable of handling matters with a large number of issues in dispute. For example, if there are numerous claims for variations within a construction dispute, it may be that the number of issues exceeds the capabilities of the platform–with the result that old-fashioned keyword searches may become necessary.

Within construction disputes, however, expert and professional advisory firms have been developing use-cases for these AI-assisted e-discovery tools, which are capable of ingesting large amounts of data. This has been used to develop better ways to handle the complex and data-heavy claims often seen in construction projects, including using AI in the collation of data around delay and disruption,²⁷ with the goal of reducing the time and cost of document review. Moreover, these seek to use the plain-language, context-based approach of LLMs to search on a more holistic basis for evidence that relates to these claims rather than blunt keyword searches which may miss a particular nuance in the document set. For example, just searching for the word “delay” is not going to pick up an email chain where parties discuss needing “an extra day”. The way AI tools review data means that an AI system is more likely to pick up both types of documents when flagging for relevance.

Like lawyers, expert witnesses will be equally susceptible to the pressure to innovate in order to maintain relevance and competitiveness. The experts’ facility with and ability to use AI may become a key consideration for law firms who are looking to appoint experts on disputes. Those that are willing to embrace AI in their analysis will naturally rise to the top.

Removing the human aspect of any first-level document review is not without its drawbacks. The first-level review in any e-discovery exercise–even one which has used a certain level of “machine learning” within a document-hosting and review engine–has been an area where junior lawyers within dispute resolution teams have “cut their teeth” on large cases. By learning how documents apply to the pleadings, witness statements and expert reports, junior lawyers gain the opportunity to understand how case theory develops and gives them an insight into the commercial operations of their clients. Removing junior lawyers’ opportunity to conduct first-level reviews will have consequences for their development and risks de-skilling them if this aspect of disclosure is not properly managed. Re-skilling lawyers so that they can analyse the results of AI-assisted e-discovery brackets (i.e., getting humans to conduct a second-level review) will be important to ensure that junior lawyers continue to learn about case theory and how to sift for truly relevant information. 

Research 

AI has a particularly strong use case in legal research, subject to the risks which are discussed in Section III, below. Clients with the budgets to access legally trained AI platforms may be able to dispense with outside counsel services for some research questions that they would ordinarily outsource. Being able to access complex legal analysis in a matter of moments rather than spending on junior lawyer research time may give clients enough of a steer to give them comfort in their decision-making. As such, research conducted by law firms will likely be confined to more nuanced, challenging questions of law which are not simply defined or answered. Given the ability of a large number of–at least institutional–clients to conduct their own initial research, firms will need to demonstrate clearly their “value-add” by their expertise in complex matters. 

However, as the large–and growing–number of hallucinated case citations show, there are substantial risks in clients relying on open-sourced LLMs as their case-law source. Many law firms, instead, are collaborating with well-respected industry publishers who have a closed-source LLM working alongside those industry-publishers’ case-law databases. With the right coding–and with specialist lawyers then interrogating the research–this type of hybrid, or limited AI may prove the best of both worlds. Law firms may still handle legal research, but when doing so will harness the power of an LLM to materially reduce the time spent trawling through case headnotes based on merely an index or a Boolean search.

Summarisation and drafting

AI has proved itself to be very useful in ingesting large amounts of data, whether that be multiple documents or long documents, and presenting summaries of that data which allows for quick understanding of their contents. This particular skill has a number of applications for international arbitration, including condensing long documents into a short summary that allows lawyers to assess their relevance, or taking a series of documents and then sorting and creating a précis of those documents in a chronology.

The taking of evidence will also become an AI-assisted endeavour. Witness interviews have long been an exercise in notetaking and remembering the nuance to be able to craft appropriate and helpful proofs of evidence. Video conferencing platforms, now common, are almost all equipped with AI-assisted transcription capabilities. Subject to security concerns, being able to generate an AI generated transcript of a meeting can speed up the process of generating witness summaries and proofs of evidence while also ensuring that vital information is not missed. 

Nevertheless, AI transcription remains a work in progress. It routinely misses or mishears text, and often contains errors, particularly when specific and unique information is being discussed. AI transcription is limited only to certain languages (for instance, the authors have not seen a reliable AI transcriber that operates in Arabic), requires good internet connections and good microphones, and also relies on slow and clear diction. But in a limited way and at a low cost, they provide a certain level of accuracy that will allow the reviewer to revisit and get the gist of a conversation rather than having to create a note of the meeting from scratch. 

When coupled with a summarisation tool, it is possible to create an AI-generated proof of evidence that can materially streamline the process of evidence-taking. Indeed, in light of recent criticisms from the English courts²⁸ about witness statements failing to comply with English procedural law²⁹ as to the requirement for a witness statement to refer to “matters of fact of which the witness has personal knowledge that are relevant to the case”, there is a temptation to think that witness statement drawn from a verbatim AI transcript might be the best way to ensure procedural compliance. However, as the English courts have also said, “the best approach for a judge to adopt in the trial of a commercial case is, in my view, to place little if any reliance at all on witnesses’ recollections of what was said in meetings and conversations”.³⁰

In the authors’ experience, memories are seldom sufficiently linear or reliable to allow for a verbatim transcript of a witness’s recollections to be produced as a witness statement in a case. While an AI transcript will help the witness’s voice to be communicated in an authentic way, achieving an accurate and useable witness statement will still require a detailed review of the documents. For the time being, useful and workable witness statements will still require the direction of a lawyer to help guide the witness to focus on relevant facts and documents in a chronological and thematic way, rather than simply relying on one person’s ephemeral recollections.

Hearings

AI has the potential to revolutionise how hearings are conducted. Technology now pervades hearings: electronic bundles, live transcripts and hybrid video feeds are the norm in arbitration in a post-COVID world. The next stage is to use AI during a hearing both to reduce cost and to increase efficiency in what is an all-consuming stage. AI transcription, as discussed above, could become an incredibly powerful tool once its accuracy rate improves. AI’s sweet spot in analysing and summarising data means it is in prime position to quickly review a hearing transcript to pick out key themes relevant for future preparation and also any inconsistencies in the testimony given by witnesses or experts that can be seized upon to a party’s advantage. Being able to quickly analyse evidence given on the stand against written statements is a game changer that will allow teams to use technology to gain an advantage during trials. In cases where there are multiple witnesses and experts, client representatives can obtain regular updates on the progress of the hearing and may notice key points which may warrant further reflection. In that scenario, using AI to quickly turn around a summary analysis following receipt of a daily transcript may give technologically literate teams the edge.

Risks

• The highest profile risk when using AI, about which practitioners and clients may be preoccupied, is the problem of hallucinations–principally of hallucinated (i.e. fictional) case-references. Stories from jurisdictions around the world have already shown how lawyers can get themselves into a lot of trouble when using LLM research tools without proper scrutiny. As at the date of this article, there are already 358 cases worldwide in which a hallucinated case reference has been created by AI.³¹ Here are some high-profile examples.
• In England and Wales:
  • A junior barrister was handed a wasted costs order for relying on five authorities that did not exist. The barrister has been referred to the Bar Standards Board for disciplinary action, and the High Court considered whether their conduct amounted to contempt of court.³²
  • 45 citations within a witness statement drafted by a solicitor were found to be false in some way, including 18 which did not exist at all. The solicitor was referred to the Solicitors Regulation Authority for disciplinary action.³³
• In the United States:
  • A law firm and an individual attorney received a joint sanction of US$5,500 and a mandatory requirement to attend a course on the dangers of AI after filing a brief containing fake quotations and nonexistent authority.³⁴
  • Three attorneys received public reprimands from the court for making false statements following the submission of two motions which contained fabricated citations. They were removed from the case and reported to the Alabama State Bar.³⁵
• In Canada:
  • A lawyer with over 30 years of experience relied on fabricated cases in a memorandum submitted to the court. The court stated that “counsel who misrepresent the law, submit fake case precedents, or who utterly misrepresent the holdings of cases cited as precedents, violate their duties to the court”.³⁶

A seasoned practitioner will understand that the phrase “don’t trust, always verify” means that even human generated research should be properly vetted and stress tested to ensure accuracy not only of the answer but of the sources themselves. When it comes to using AI for research, tools that are specifically designed for legal practitioners are likely to yield more trustworthy results than open source LLM platforms. This is because “guard rails” have been developed around the training data collated for legal industry AI tools. Nevertheless, this is not an automatic guarantee of accuracy; checking source materials and conducting searches independently in legal databases for cited materials is vital for avoiding the embarrassment and potential sanctions from falling into the fake case-citation trap.  

Moreover, not only do sources require verification, but the answer to a research question generated by AI should not automatically be trusted to be correct. It is a well-known problem with LLMs that they will prefer to answer in the affirmative–i.e. to give you the answer that you want and to avoid telling you no. This is why it is so important to stress test the reasoning that has been given to you by the AI to ascertain whether it is a sound and defensible response. Even AI tools which are legally trained will sometimes use the wrong source material, or material that does not provide sufficient support for a proposition, to give an affirmative answer so as to please the user rather than answering in the negative or avoiding giving an answer at all. For example, you should check whether an answer comes from a valid case citation or whether it has come from a precedent document or template that has no legal force. The latter might be included in a legal database as part of the training data of a platform–and it can therefore still become a hallucinated response.

Senior lawyers need to understand how LLM platforms work and the type of results that are likely to be generated, so that they can properly supervise the juniors working for them and especially the next generation trainees, paralegals and junior lawyers. For them, using AI will be as normal as using email was to most senior lawyers at the start of their careers. It is likely that the next generation of lawyers will use AI far more readily than any other generation of practitioner. Being able to properly supervise and train these lawyers to spot the pitfalls of using AI when conducting “manual” research will be vital to ensure that there is not a drop in the quality of the supervision given to these junior lawyers, and therefore to the quality of their work product and ultimately the service to clients. 

Perhaps even more troubling than accidental reliance on fake citations is the potential deliberate use of falsified evidence in legal proceedings. The alarming quality of so-called deepfakes, which seek to use the image or voice of somebody to generate something that that person has not actually said or done, poses an extreme risk to dispute resolution since the veracity of evidence may become increasingly questionable.³⁷ 

When faced with a document that one party alleges is fraudulent (or which appears questionable), how does an arbitral tribunal carry out the task of ascertaining the veracity of the evidence? While tools exist which claim to be able to spot deepfakes, testing has shown that these platforms are not yet reliable when it comes to spotting falsified evidence and therefore of limited utility in these circumstances.^{38 39 40} If a tribunal cannot rely on technology to ascertain whether something has been created by AI, how can it equip itself to make that decision? Should it simply decide that the document in question holds no weight? Should it seek submissions from the parties on the issue? Should it engage forensic analysis? The answer to this will need to be one for each tribunal depending on the specific circumstances in each case. 

Nevertheless, being alive to the evidential issues that AI can cause is already important, and will only become more so as the levels of AI content within arbitration increases. Within that context, the Global Investigative Journalism Network has released a guide to detecting AI-generated content,⁴¹ in which it identified seven categories of AI detection, and has advocated for three levels of checking based on the time available for review: a 30-second red flag check, a five-minute technical verification, and a deep investigation. 

Maintaining data security and privilege is another area where practitioners will need to be extremely careful in the adoption of AI. Lawyers will need to ensure that their LLM products do not ingest privileged material into the training data and then apply that data in a way that inadvertently waves privilege. The security arrangements even for internal LLM platforms will need to be thoroughly scrutinised in order to assess the risks attached to them. External platforms will require explicit client waivers as to confidentiality, GDPR and privilege before data can be uploaded to a public LLM, given the public and accretive nature by which LLMs gather, store and share data. More importantly, however, when it comes to AI e-discovery, commentators have expressed that the use of such technology needs to be tested before the courts, and guidance and principles laid down to ensure that they can be utilised effectively without the risk of disclosing privileged information such as review logs and prompting. 

Given the plain language nature of prompting will bring review protocols closer in line with case strategies, there is a danger that using AI too liberally or without proper consideration of privilege may result in accidental over-disclosure of one’s strategy to the other side. AI in e-discovery may have its place for the time being in an initial internal review stage where the initial universe of documents is analysed for relevance to the dispute and key documents. However, when the disclosure requests and Redfern schedules are in play, it is likely that the use of AI will be limited to avoid over-disclosure, and those who use it should proceed with caution to ensure that they do not give away more than they would want using search terms.

Regulations and procedures

As noted above, there is a growing call for arbitrators to use all the powers at their disposal to better control arbitration, while clients are calling for their lawyers to be innovative in their approach to dispute resolution. AI will prove itself to be a catalyst to this increased focus on the efficacy and efficiency of arbitration, if all parties involved look to use the tools at their disposal appropriately. 

To that end, discussions regarding the use of AI in arbitration are likely to become part of the early conversations both with clients and, more importantly, with opposing counsel and the tribunal. Seeking to set the parameters for the use of AI is likely to become part of the negotiation of the terms of reference or first procedural order of an arbitration as parties seek to use the tools to their advantage whilst catering for ethical and legal obligations. 

As arbitral institutions issue more guidance and rules on the use of AI, and national courts develop their approach to the use of AI in court proceedings, there will be a more detailed body of guiding principles that will help arbitrators to establish the boundaries for effective AI use. Guidelines already exist from certain arbitral institutions which provide guidance on what they consider to be effective governance of AI in international arbitration. Two major developments are as follows:

• Silicon Valley Arbitration & Mediation Center⁴² were first-movers, consulting on their guidelines which were published on 30 April 2024. Among the provisions contained within the guidelines, there are provisions:
  • For parties and their representatives to demonstrate competence and diligence in the use of AI, and a respect for the integrity of the arbitration and the evidence used within it, placing a duty on practitioners to ensure that they understand the tools that they are using and safeguard against the inappropriate use of those tools either by a failure to interrogate the output from the AI, or by using AI in a way which harms the integrity of the arbitration, including by falsifying evidence.
  • For arbitrators, by forbidding the delegation of the decision-making function of their mandate to AI, and ensuring the integrity of the proceedings by avoiding information outside of the record being introduced through AI, and by ensuring the verification of sources.
• The Chartered Institute of Arbitrators (CIArb) has issued guidelines⁴³ which set out both the benefits and risks of AI in arbitration, recommendations for the proper use of AI, and addressing arbitrators’ powers to give directions and rulings on the use of AI by parties in arbitration. The CIArb guidelines can be distinguished from the ICDR AI-arbitration product mentioned in paragraph 4, above, since they prohibit decision-making being delegated to AI. Instead, the CIArb guidelines provide arbitrators with tools by way of a template agreement on the use of AI in arbitration, and a template procedural order on the use of AI in arbitration. These templates allow for agreement of parameters for establishing either (i) which tools can be used by counsel, or (ii) which functions and tasks AI can be used for. It also provides a list of obligations on the parties to ensure that they understand the tools that they are to use, their limitations, and the impact of their use including ethical/bias concerns, confidentiality and data security, and a duty not to mislead. The template protocol also provides governance for so-called “High Risk AI Use”, described as a use-case that risks a breach of privacy/confidentiality or data security obligations, the potential to undermine procedural integrity, or the potential to assert a nonhuman influence on the award.

Further publications have been issued by other global institutions, with many law firms and barristers chambers also now providing their own guidance on the use of AI in arbitration. As governments and international bodies issue laws and regulations on the use of AI (including the EU’s AI Act), and national courts issue not only judgments on the use of AI but also guidance and practice directions on how it should be used in court, practitioners and arbitrators will need to stay abreast of their legal and regulatory obligations. This will help them to ensure that their use of AI in arbitration complies not only with the relevant arbitral rules governing their dispute, but also the law of the seat of the arbitration, the governing law of the arbitration, and indeed their own professional obligations.

Conclusion

If we are to meet the challenge that AI sets for us and also meet the expectations of our clients as they evolve alongside the development of these tools, it will not be enough to stick with “tried and tested”, nor will it be sufficient to rely on specialists or younger team members who have more experience and facility in using AI technology. As the famous computer pioneer Admiral Grace Hopper observed, when commenting on the future of data processing as far back as 1976, “the most dangerous phrase a [data processing] manager can use is ‘We’ve always done it this way.’”.⁴⁴ Arbitrators, experienced practitioners, experts and all levels of the legal profession–both in house and private practice–must make sure that they learn and appreciate the impact that AI is having and will have on how disputes are to be conducted. They need to learn this because AI is already here. Failing to understand it will not only mean being left behind, but may also run the risk of being caught out.

Prior to Law No. 2 of 2025 Concerning the Dubai International Financial Centre (DIFC) Courts (New DIFC Courts Law)—a law which consolidates and updates the legal framework of the DIFC Courts—the DIFC Court of Appeal (Court of Appeal) in Carmon Reestrutura-engenharia E Serviços Técnios Especiais, (Su) LDA v Antonio Joao Catete Lopes Cuenda [2024] DIFC CA 003 (Carmon) had confirmed that the DIFC Courts have jurisdiction to issue a freezing order in support of foreign court (or arbitral) proceedings even where the prospective judgment debtor has no assets in the DIFC. The Court of Appeal held that it was sufficient that the foreign proceedings may give rise to a judgment capable of recognition and execution by the DIFC Courts. 

Following the introduction of the New DIFC Courts Law, the DIFC Court of First Instance (Court of First Instance) in Nadil v Nameer [2025] DIFC CFI (Nadil) rejected an application for a worldwide freezing order on the basis that there was no “direct asset link” to the DIFC. Permission to appeal was granted in part on the basis that the Court of First Instance failed to consider Article 15(4) of the New DIFC Court Law, which expressly addresses the jurisdiction of the DIFC Courts to hear and determine applications for interim and precautionary measures related to claims or arbitral proceedings brought outside the DIFC. 

Recent Decision of the DIFC Court of Appeal

The question of whether the DIFC Courts have jurisdiction to issue freezing orders in aid of foreign court proceedings that may yield a judgment that is enforceable in the DIFC Courts was recently revisited by the Court of Appeal in (1) Trafigura PTE LTD (2) Trafigura India PTV LTD v (1) Mr Prateek Gupta (2) Mrs Ginni Gupta [2025] DIFC CA 001 (Trafigura). In this case, the Court of First Instance had refused to issue a United Arab Emirates (UAE)-wide freezing order against assets of the respondent located onshore in the UAE (not in the DIFC) on the basis that the DIFC Courts lacked jurisdiction and power to make such an order in the light of the New DIFC Courts Law. 

One key issue in dispute was the interpretation of Article 15 of the New DIFC Courts Law, which provides (based on the published English translation of the original Arabic text) that the DIFC Courts have jurisdiction to hear and determine applications for interim or precautionary measures related to claims “brought outside the DIFC seeking suitable precautionary measures within the DIFC”. Although the Court of Appeal ultimately found that nothing turned on the different translations, the parties agreed that the most accurate translation of Article 15(4) is that the DIFC Courts have jurisdiction to hear and determine applications for interim or precautionary measures related to claims “brought outside the DIFC provided that suitable precautionary measures are taken within the DIFC”. 

The Court of Appeal in Trafigura had no difficulty determining that Article 15(4) encompasses interim measures sought in the DIFC in aid of proceedings which could yield a judgment capable of being recognised and enforced in the DIFC—without any requirement for assets to be located in the DIFC.

The Court of Appeal further confirmed that the reasoning and public policy considerations behind the decision in Carmon remained valid and unaffected by the New DIFC Courts Law. In this regard, the Court of Appeal highlighted a passage from the judgment in Carmon which provides that the DIFC Court of First Instance “has power to grant interim remedies under Pt 25 of the [Rules of the DIFC Courts], including freezing orders which extend to freezing orders restraining a party from dealing with any assets whether located within the jurisdiction or not […]. Those powers are available to prevent the Court’s jurisdiction being thwarted. That includes its jurisdiction to recognise and enforce foreign judgments. That jurisdiction may be thwarted if a party to a foreign proceeding seeks to dissipate its assets in advance of an apprehended judgment which might be susceptible to recognition and enforcement in the DIFC.”

Analysis

This is a welcome development that resolves the uncertainty introduced by the judgment in Nadil. It further confirms the DIFC Court’s expansive approach, informed by public policy, to questions of jurisdiction. 

About the firm

Our Litigation and Dispute Resolution practice has a long history of acting as counsel on high-stakes international arbitration and litigation mandates. Our lawyers in Dubai have extensive experience advising on litigation and arbitration with respect to complex, high-value disputes in the UAE and wider Middle East region.

“Special deduction allowance for qualified production property” significantly decreases the present value of capital expenditure investment in facilities and reduces barriers to entry for inbound investment.

A new super depreciation deduction for qualified production facilities in the One Big Beautiful Bill Act (OBBBA)¹ could provide a significant incentive to locate certain manufacturing, production, and refining operations in the United States. The provision would benefit qualifying nonresidential real property located in the United States, as well as possessions, including inbound investments. In some cases, the deduction would offset the cost of tariffs on imported machinery and equipment, mitigating tariff impacts.

Section 70307 of OBBBA, “Special Depreciation Allowance for Qualified Production Property,” adds new Code Section 168(n), allowing the cost of a production, manufacturing, or refining facility to be deducted in the year placed in service. Normally, such a facility would be depreciable over a period of 39 years. Only the cost attributable to the portion of the facility that is integral to the qualified production activity is fully deductible. Other parts of the facility that house nonmanufacturing, production, or refining activities, including office space, research space, etc., are subject to regular depreciation rules. 

Qualified production activity is defined to mean the manufacturing, production, or refining of a qualified product. For this purpose, “production activity” is limited to agriculture and chemical production. Manufacturing and refining activity are not specifically defined but appear intended to be broad in scope as long as they produce a “qualified product,” which is any tangible personal property (other than a narrow exception for food produced and sold on-site, as in a restaurant). Substantial transformation of the property comprising the product is required, similar to a requirement to qualify for the Section 45X Advanced Manufacturing Production Tax Credit. 

Construction on the facility must begin after 19 January 2025 and before 1 January 2029. The facility must be placed in service before 1 January 2031. Although the general rule is that original use of the facility must begin with the taxpayer, in certain circumstances acquisition of a used facility during the construction period is eligible, but the facility cannot have been previously used for qualified production activity nor used by the taxpayer prior to the acquisition. In cases where an “act of God” delays the placed-in-service date, an extension may be allowed.

The taxpayer must elect to claim the special deduction. There may be situations where this is not as advantageous as it might seem. For example, if a business has large losses, the deduction may not be helpful. Or, if the business is subject to the corporate alternative minimum tax and the regular effective tax rate falls below 15% because of this super deduction, it may not provide much benefit. Taxpayers should thoroughly consider whether the deduction is beneficial before making the election, which is revokable only in extraordinary circumstances by the Secretary of the Treasury.

Questions regarding the implementation of the deduction are expected to be addressed in forthcoming guidance. The US Department of the Treasury (Treasury) has included Section 168(n) on its 2025-2026 priority guidance plan.² The priority guidance plan identifies tax issues to be addressed through regulations, revenue rulings, revenue procedures, notices, and other published administrative guidance in the coming year. As Treasury sorts through these consequential decisions, taxpayers should consider engaging with Treasury to identify questions and provide comments to help shape guidance so the requirements to claim the deduction are clear.

Please contact any of the authors of this article for further information regarding this potentially powerful deduction and how to submit comments. 

The proposed legislation follows recent executive and regulatory actions last month that aim to significantly reshape the visa process, including a Presidential Proclamation issued (Proclamation) that imposed a $100,000 entry fee on H-1B workers.¹ The Proclamation also directed the Department of Labor (DOL) to initiate rulemaking to revise prevailing wage standards to align with the administration’s policy goals of restricting H-1B usage. Additionally, the Department of Homeland Security (DHS) issued a proposed rule to implement a new weighted H-1B cap lottery selection process (H-1B Proposed Rule), which would prioritize higher-salaried positions over entry-level roles.²

What The Legislation Proposes

H-1B Program

The Visa Reform Act includes an obligation to pay H–1B workers no less than the highest of (1) the local prevailing wage for the occupation, (2) the median wage for all workers in that occupation, or (3) the median wage for skill level 2 according to the DOL’s most recent wage data. This change would discourage the use of the H-1B for entry-level positions. 

Further, employers would be required to post the H-1B position on a new DOL website for at least 30 days prior to filing a petition. Such posting must include full position information including compensation details, job duties, and application procedures, in an effort to notify US workers. Additionally, the Visa Reform Act prohibits employers from filing an H-1B or L-1 petition for a position in which US workers were laid off within 180 days before or after the filing. The proposed legislation also caps H-1B/L-1 holders to no more than 50% of the employer’s workforce. Additionally, employers would no longer be permitted to outsource or place H–1B employees at third-party client sites without prior DOL approval through a formal waiver process.

By proposing to replace the current random lottery with a wage- and merit-based selection system, the Visa Reform Act conflicts with the H-1B Proposed Rule, giving preference to foreign nationals with US STEM advanced degrees and petitions offering a salary equal or greater than wage level IV, followed by US graduates with advanced or bachelor’s degrees, and employers demonstrating strong compliance records and participation in E-Verify. 

In what is likely an effort to heighten the scrutiny and oversight of the business visitor category, the Visa Reform Act would eliminate the possibility to qualify for the classification with experience equivalent to a bachelor’s degree and B-1 in lieu of H-1B visas.  

Additionally, the DOL would gain subpoena authority and be required to conduct annual audits of at least 1% of all H–1B employers, with a focus on significant H–1B users (those with over 15% of their workforce on H–1B status). Violations could carry significant penalties, including fines of up to $150,000 per violation, back pay for affected workers, mandatory disbarment from future filings, and whistleblower protections for employees who report violations.

L-1 Program

The bill also targets the L–1 program which regulates intracompany transfers. Under the Visa Reform Act, L–1 employees working in the US for more than a year would also have to be paid no less than the prevailing, median, or skill-level 2 wage, similar to the proposed H–1B requirements. Employers would be prohibited from assigning L–1 workers to third party sites for more than one year without a waiver and must show that such placements do not result in the displacement of US workers.

New office L-1 petitions would be subject to a higher level of scrutiny. Such petitions would now be required to include submission of a business plan with the original request and demonstrate full compliance with the business plan at the time an extension is requested.

For L-1B petitions, the Visa Reform Act includes a new and narrower definition of specialized knowledge requiring the employer to demonstrate that such knowledge is clearly unique and is not readily available in the US labor market. The L-1B beneficiary must be a key person with knowledge that is critical for company performance and such knowledge is protected from disclosure through patent, copyright or company policy. The Visa Reform Act also includes expedited adjudication by DHS and processing by the US Department of State of petitions and visa applications for blanket petitions. 

Employers would be required to provide employees and beneficiaries with copies of petitions and communications filed with federal agencies within 21 days upon request, ensuring that foreign workers receive informational brochures detailing their rights, wage protections, and reporting options.

Finally, the Visa Reform Act includes additional enforcement provisions whereby DHS would be empowered to conduct annual L-1 audits and impose penalties for noncompliance. The proposed legislation also includes a cooperation clause with the US Secretary of State to assist in verifying the existence and operation of the organization outside of the US for purposes of approving an L-1 petition.

The Visa Reform Act has been introduced in the Senate and referred to the Judiciary Committee, which is chaired by Sen. Grassley, with Sen. Durbin serving as the ranking member. Sens. Grassley and Durbin also recently sent letters to ten major US employers in the tech, finance, and retail sectors, requesting information about their use of H-1B visas in the light of recent layoffs of American workers. 

While Sens. Grassley and Durbin have introduced similar reform proposals since 2007, bipartisan interest in the issue has grown. Sens. Bernie Sanders (I-VT), Tommy Tuberville (R-AL), and Richard Blumenthal (D-CT) are original cosponsors of the bill. 

Employer Takeaways

Although the legislation is not yet law, its bipartisan sponsorship suggests growing momentum for reform. Employers should monitor the progress closely and consider conducting internal compliance reviews in anticipation of potential changes. Companies can make their views known by contacting their elected representatives to express how the proposed changes could impact their business and workforce planning.

As this is a rapidly evolving legal landscape, employers should monitor additional developments over the coming days and weeks. As always, our Immigration and Public Policy and Law practice groups will continue to track the legislation and provide updates as it progresses. Our team is also available to assist with outreach and engagement efforts. If you have any questions, please contact the authors listed above. 

Following the law’s July 2024 passage, the Massachusetts Office of the Attorney General (AGO) released FAQs² and held a webinar³ to clarify employers’ obligations and provide guidance. This alert summarizes the law’s key provisions, as clarified by the AGO.⁴

Who is a Covered Employer?

Employers with at least 25 employees whose primary place of work was in Massachusetts during the prior calendar year are subject to the law’s pay transparency requirements. 

An employee’s “primary place of work” means the location where the employee performs the majority of their work. The AGO adopted this definition from the Massachusetts Earned Sick Time Law FAQs.⁵

How Should Employers Count Employees?

To determine whether they meet the 25-employee threshold, employers must count all individuals who performed services for wages, remuneration, or other compensation, including full-time, part-time, and seasonal workers, whose primary place of work is in Massachusetts.

This includes (1) remote or hybrid employees located in Massachusetts who work for an out-of-state employer, and (2) out-of-state remote or hybrid employees whose primary place of work is Massachusetts (e.g., they report to or are assigned a Massachusetts worksite). 

Employers should calculate their headcount once a year by averaging the number of employees on the payroll across all pay periods within that same year.

What Are the Pay Range Disclosure Requirements?

Employers must disclose the pay range in any advertisement or job posting for any position where the primary place of work is in Massachusetts. Similar to employee headcount, this includes any positions that can be performed remotely by employees whose primary place of work is Massachusetts, either because they are located in Massachusetts or are located out-of-state but are assigned or report to a Massachusetts worksite.

Employers also must disclose the pay range of such positions:

• To employees who are offered promotions or transfers to new positions with different job responsibilities; and
• On request, to an employee who already holds an employment position with the organization or to an applicant for such position, even if there is no vacancy in that role.

How Is “Pay Range” Defined?

In stating the minimum and maximum annual salary or hourly wage for a position, the range may extend from the lowest to the highest annual salary or hourly wage the employer “reasonably and in good faith” believes at the time of the posting it would pay for the advertised job, promotion, or transfer opportunity.

For commission-based positions, the commission range the employer reasonably expects to pay for the position must be included in the job posting.

The law does not require the posting to contain bonus or benefits information.

What Are Employers’ Pay Reporting Obligations? 

In addition to the pay disclosure obligations, employers covered under the law also must comply with pay reporting requirements. Employers who are required to submit equal employment opportunity (EEO) reports to the Equal Employment Opportunity Commission are also required to submit the same reports to the secretary of the commonwealth as well, according to the schedule outlined below:

What Are the Consequences for Non-Compliance?

Covered employers who do not comply with the law or retaliate against employees for seeking to exercise their rights under the law can be subject to the following penalties:

• Warning for the first offense;
• A fine of up to US$500 for the second offense;
• A fine of up to US$1,000 for the third offense; and
• Additional penalties under M.G.L. Ch. 149, § 27C(b)(1-2) for the fourth offense and subsequent offenses.

The law is enforced by the AGO and there is no private right of action under the law. However, the pay data disclosed under the law can provide employees with support for a wage-based discrimination claim. Employees also may bring claims under the Massachusetts Equal Pay Act.

Through 29 October 2027, employers who receive notice from the AGO of any violation(s) will have a two business-day grace period to correct said violations to avoid a fine.

Recommendations for Employers

Before the pay disclosure requirements of the new law take effect, employers should take the following steps:

1. Determine whether their company is covered under the pay transparency law by calculating the number of employees whose primary place of employment is in Massachusetts.
2. Conduct a pay equity audit and identify and correct any pay disparities. The increased availability of pay information is likely to increase the risk of claims under Massachusetts’ Equal Pay Law. Employers facing such claims are protected if they have conducted self-evaluations of their pay practices and taken meaningful steps to eliminate wage disparities before claims.
3. Use the results of the pay equity audit or a pay analysis and market research to develop pay ranges for all positions, and ensure those ranges are what is expected to be paid for the role.
4. Update job postings for Massachusetts-based roles to include pay ranges and ensure the job postings accurately reflect the job duties and educational and experience requirements of the role.
5. Audit and, if necessary, update job descriptions and job titles to ensure they accurately reflect the positions being described.
6. Implement policies regarding how pay ranges are set and adjusted, how requests for pay range disclosures will be addressed by the company, and anti-retaliation provisions.
7. Set a schedule to analyze/audit and update pay ranges. 
8. Train human resources staff and managers on appliable policies and laws, including (i) how to discuss pay ranges with candidates and employees, (ii) how to respond to pay range requests from existing employees, (iii) avoiding asking for prior salary history until after a job offer is made, and (iv) refraining from retaliation or bias in pay discussions.

An equitable charge typically arises by agreement between the parties, under which the charged property is made liable for or is appropriated to secure the performance or discharge of the relevant contractual obligation.

On 20 February 2025, in a decision of Lundberg J, the Supreme Court of Western Australia in the matter of Edwards Industrial Products Pty Ltd v Thwin and Zaw [2025] WASC 48 declined to grant the plaintiff the relief it sought under a charging clause. At issue was whether a charging clause in the contract to lease ceased to have effect upon the execution of the formal lease, which did not contain a similar term.

This case note considers the court’s interpretation of the relevant charging clause, through its application of the established principles relating to equitable charges, the doctrine of merger and entire agreement clauses.

Underlying Facts

The facts of the case are uncontroversial. The action concerned a lease arrangement over a commercial property in Kenwick (Property). The plaintiff (Lessor) was the owner of the Property, and the defendant (Lessee) leased the Property to run a business of repairing bumpers.

On 16 April 2014, the parties executed a contract to lease the Property (Contract to Lease). The Contract to Lease appears to have been a standard REIWA form where details are inserted and blanks are completed. Six weeks later, on or around 1 June 2014, the parties executed a formal lease concerning the same Property (Lease). In or about November 2019, after the Lease had expired, the Lessor sent the Lessee a letter claiming moneys due under the Lease. The Lessee did not pay the money, and on 20 November 2019, the Lessor lodged an absolute caveat against the Lessee’s residence, claiming an interest as chargee.

Charging Clause

In this case, the relevant clause in dispute was clause 7.2 of the Contract to Lease, which read as follows:

7.2  The Guarantors and the Lessee jointly and severally agree to charge any other land in which they have a partial or full interest as owner both now and at any time in the future in favour of the Lessor as security for repayment of any money due and payable to the Lessor under the lease. If a Lessee is in default of its obligations pursuant to the lease, the Guarantor and the Lessee agree that the Lessor will be entitled to register an absolute caveat against their land until the default is remedied (the ‘Pleaded Equitable Charge’).

Importantly, there was no equivalent clause within the Lease itself, and such absence was the central issue addressed in the case.

Issues Arising at Trial

Two primary issues (which this article frames into questions) arose at trial being (at [13]–[15]):

• Firstly, did clause 7.2 of the Contract to Lease immediately give rise to the Pleaded Equitable Charge?
• Secondly, and in the event that an equitable charge arose upon execution of the Contract to Lease, did the charge survive and form part of the formal Lease, or did the charge cease to exist upon execution of the Lease?

Principles of Construction

The court identified that the issues raised required an application of the orthodox principles of contract construction. Relevantly, the court restated (at [32]–[34]):

• The proper construction of a commercial contract is to be determined objectively having regard to its text, context and purpose;
• The contract will be given a businesslike interpretation on the assumption that the parties intended to produce a commercial result; and
• Where a commercial transaction is implemented by various instruments, all of the contracts or documents may be read together to ascertain their proper construction, at least where they are executed contemporaneously or within a short period.

Furthermore, where parties to an existing contract enter into a further contract which varies the original contract, the determining factor is always the intention of the parties as disclosed by the later agreement (at [35]). As identified by Taylor J in Tallerman & Co Pty Ltd v Nathan’s Merchandise (Victoria) Pty Ltd (1957) 98 CLR 93 at [22], it may be material to determine whether:

• The effect of the second contract is to end and replace the first contract; or
• The effect of the second contract is to leave the first contract standing, subject to the alteration.

Equitable Charge

The court discussed the common law regarding equitable charges. His Honour noted that charges are creatures of equity and are only enforceable in equity (at [36]). Further, there is no transfer of title or possessory title in the charged property (at [38]). Relying on Morris Finance Ltd v Brown [2017] FCAFC 97 (Morris Finance Ltd v Brown), His Honour restated that the right or remedy of a chargee is the enforcement of the charge by judicial order for sale (with an ancillary order for possession) or the appointment of a receiver (at [36]–[38]). Although the court did not cite the following quote from Morris Finance Ltd v Brown, it provides a helpful explanation of the concept of a charge (at [38]):

The chargee has no self-help remedy… but must obtain the assistance of a court of equity to realize or enforce the charge. Usually, upon default a chargee is entitled to an order for sale, although given that an equitable jurisdiction is being invoked there may be discretionary aspects to the exercise of that jurisdiction.

The requirements to establish an equitable charge, as restated by Derham AsJ in Morris Finance Ltd v Commonwealth Bank of Australia, are as follows:

• An intention to create a charge;
• If over land, the presence of writing;
• The existence of definite ascertainable property, including future property, over which it is contemplated that the charge will exist; and
• Consideration (where necessary) (at [39]).

As to the first requirement, there (crucially) needs to be a manifestation by the parties of an immediate intention to charge, and not merely a promise to charge in the future (at [40]).

Doctrine of Merger

The court found that it is well established that where parties to a simple contract later execute a deed for the purposes of carrying out their agreement, the simple contract will be discharged and become “merged” in the deed. His Honour stated that this doctrine will preclude the parties from invoking their previous agreement for the purposes of modifying the later contract (at [49]).

Entire Agreement Clauses

The court observed that entire agreement clauses come in different shapes and sizes. As a general proposition, such clauses are intended to achieve contractual certainty about the terms agreed by the parties and nullify prior collateral agreements relating to the same subject matter (at [75)].

Plaintiff Lessor’s Submissions

The Lessor submitted that all of the requirements for the creation of an equitable charge had been satisfied. It claimed that even a contractual clause which states a party “will charge” property may nonetheless still create an immediate charge.

They also submitted that the doctrine of merger did not apply so as to extinguish the Pleaded Equitable Charge.

As to the operation of the entire agreement clause, the Lessor distinguished the charging clause from the other terms in the Contract to Lease, in that, the charge arose upon execution of the Contract to Lease. Whereas none of the other terms of the Contract to Lease had any effect until the Lease was executed.

It is on the above basis that the Lessor sought declaratory relief and orders, including a declaration that the Pleaded Equitable Charge was granted by the Contract to Lease, that the charge secured payment obligations owed by the Lessee, and the charge attached to the private residential property (at [21]-[25]).

Defendant Lessee’s Submissions

The defendant’s main argument was that the charging clause was not included in the formal Lease. They contended that if the court found that an equitable charge did arise under clause 7.2, the Contract to Lease merged in the making of the Lease (i.e., the Contract to Lease was extinguished). Lastly, it was submitted that the “real completed contract” was to be found in the Lease alone, and the Contract to Lease could not be used to enlarge or modify the Lease (at [26]–[30]).

Court’s Judgement

Was Clause 7.2 Effective to Create the Pleaded Equitable Charge?

The court found that the plaintiff failed to demonstrate the first element identified in Morris Finance Ltd v Commonwealth Bank of Australia and thus did not establish an equitable charge (at [92]). The court reinforced that there needed to be an immediate intention to create a charge and that a statement of future intention will not be sufficient (at [85]). His Honour found that the terms “agree to charge” and reference to “money under the lease” indicated an objective intention that the charge would become effective once the Lease had been executed (at [87]). In His Honour’s opinion, in the circumstances where a later instrument replaces an earlier instrument, the significance of the phrase “agree to charge” takes on a “strong flavour of futurity” (at [89]). The court also accorded significance to the subsequent language used in the clause, which referred to the “lease” rather than the “contract”, which was the language used in some other clauses (at [90]). Therefore, it was not intended to be an immediately operative provision.

Did the Pleaded Equitable Charge Continue Following the Execution of the Lease?

If the court was wrong in that conclusion and the Contract to Lease had created the Pleaded Equitable Charge, the question then became – did the charge survive the execution of the Lease (at [98])? His Honour concluded that the real completed contract was the formal Lease itself, which was intended to wholly replace the Contract to Lease (at [119]). In coming to this conclusion, it found among other things that:

• The Contract to Lease was a simple contract which was objectively intended by the parties to be overtaken by a formal lease instrument (at [102]);
• The charging clause was not incorporated in a schedule which sets out mandatory terms to be incorporated into the formal Lease (at [104]);
• The charging clause was not included in the formal lease, and no equivalent clause was included, this omission was of real significance (at [107]);
• The Contract to Lease would only be binding until the execution of the Lease (at [108]);
• The parties agreed that the covenants in the Lease, once executed, would take priority over the terms of the Contract to Lease (at [109]);
• The formal Lease was prepared by solicitors pursuant to a process by which the parties were permitted to include and remove further terms, and the plaintiff – Lessor – had a stronger bargaining and drafting position (at [110]);
• No evidence had been adduced to explain the omission of the charge from the Lease (at [111]); and
• The Lease incorporated an entire agreement clause (at [113]).

The court also observed that to require the parties to search through the prior, largely superseded agreement would be commercially impractical and likely generate confusion (at [123]). Therefore, the court declined to grant the plaintiff the relief which it sought.

Importance of the Decision

This decision is a reminder that the miscellaneous provisions at the end of an agreement serve a purpose and do inform the court’s interpretation of the agreement.

The decision emphasises the importance of either:

• Incorporating the terms of a preliminary agreement or earlier contract in the subsequent more formal agreement; or
• Advising the client that certain terms of the preliminary agreement or earlier contract have not been included in the subsequent more formal agreement and taking the client’s instructions in that regard.

It underscores crucial lessons for practitioners involved in drafting commercial contracts, particularly charging and entire agreement clauses. It reinforces the importance of precise contract drafting and cautions practitioners against using language which may indicate a future intention or obligation in a charging clause, as opposed to an immediate intention or obligation.

Expressions such as “agree to charge”, “will charge” or “shall charge” are to be avoided, unless that is the intent. But if an immediate intention to charge is intended, then include additional wording which clearly demonstrates the immediate intention to charge.

Reflecting upon the decision, it should be considered if language such as “hereby charge with immediate effect” should be used to more easily conclude that the charge is intended to immediately come into force and effect.

Given the rights available to a charge holder, the charge itself must strictly comply with the test at law to create a valid charge and ambiguity in a charging clause is likely to be interpreted against the charge holder.

Charges should not be granted lightly. Landowners and grantors often fail to appreciate the powers that the law grants a chargee.

Where land is mortgaged, the mortgage typically requires prior consent of the mortgagee before a charge can be granted. The failure to obtain that consent is usually a breach of the mortgage.

As noted in this decision, where there has been a default, the charge holder can seek an order for the sale of the charged property.

Recent enforcement actions 

Colorcon

In its most recent enforcement decision, OFSI imposed a £152,750 fine on UK-registered Colorcon for making payments to accounts held at sanctioned banks when closing its Moscow office. Out of the 123 payments made, only 44 were permitted under a general licence for companies winding down their Russian operations—the total amount transferred in breach was £128,277.

Whilst Colorcon’s employees were not sanctioned, the fact that they held accounts at sanctioned banks meant that the transfers made funds available to Designated Persons (DPs).

Colorcon notified OFSI of the breaches four months after their discovery. Although OFSI acknowledged the company’s full disclosure and subsequent cooperation, the delay meant the disclosure could not be considered prompt. Accordingly, a 35% discount was applied to the penalty instead of the maximum 50% available for voluntary disclosures.

Vanquis Bank

On 8 September 2025, OFSI issued a Disclosure Notice—a form of nonmonetary penalty—against Vanquis Bank Limited (Vanquis) for making funds available to a DP.

The day before notifying Vanquis of the DP’s details, OFSI prewarned it that a suspected customer was to be designated under terror financing risks. Despite receiving a prenotification from OFSI, the bank did not restrict the customer’s account for eight days following the designation. During that time, the DP managed to withdraw £200 in cash and made a £8.99 transaction. Vanquis notified OFSI of the breach 13 days after the designation. 

OFSI concluded that a Disclosure Notice was a proportionate response due to Vanquis’s voluntary reporting and cooperation, as well as the low value of the breach. However, OFSI remarked that Financial Conduct Authority (FCA)-regulated bodies are expected to understand sanctions risks and employ appropriate control measures.

Markom Management 

On 31 July 2025, OFSI published a £300,000 penalty notice against UK-incorporated Markom Management Limited (MML) regarding a payment of £416,590 to a DP.

MML forms part of the Markom Group, which includes Markom Management Cyprus (MMC). Following an overpayment involving MMC, MML instructed Gazprombank to transfer RUB 33 million (or £416,590) from MMC’s account to the DP’s account. This payment made funds directly available to a DP, designated for their financial connections to those involved in the destabilisation of eastern Ukraine.

MML notified OFSI eight months after the breach, which was identified as a result of third-party activity. The breach was aggravated by MML’s lack of policies or controls to manage sanctions risks related to informal transactions within the Markom Group. 

Key compliance lessons

The recent enforcement action in the United Kingdom highlights lessons to be learned by those subject to compliance with the UK sanctions regime, including:

• Regularly reassess your sanctions compliance policies and processes so that they adequately address your level of exposure to sanctions risks. Having a compliance process will not be a mitigating factor if it is not fit for purpose.
• Do not solely rely on third parties to undertake your sanctions screening without knowledge or understanding of their processes.
• Apply screening to both internal and external transactions.
• Disclose a breach to OFSI as quickly as possible but ensure appropriate legal advice is sought in this regard.
• If you seek to rely upon a general or special licence, ensure you identify the limits of the licence and any related reporting requirements so that you are not at risk of conducting transactions or undertaking prohibited activities outside of its scope.
• Ensure appropriate policies and procedures are in place, particularly for organisations regulated by a professional body, such as the FCA.
• Immediately take appropriate steps and screening measures if you receive a prenotification from OFSI that a customer or associate may be designated in the near future.
• Reply promptly to OFSI if you receive a request for information.

Conclusion

Considering the examples above, OFSI’s most recent decisions signal a more forceful approach to UK sanctions enforcement. Businesses are expected to be proactive in their compliance, with an emphasis placed on prompt and voluntary disclosure. 

Keeping in mind OFSI’s ongoing consultation on strengthening its enforcement powers, it is likely that compliance and reporting obligations will significantly increase in the future. Accordingly, organisations should act as soon as possible to ensure their compliance processes are adequate.

If you have any questions or would like to discuss what the sanctions enforcement regime means for you, please do not hesitate to contact the authors listed above.

If the recent decision¹ by the Regional Court in Frankfurt declining recognition of an English court’s sanction of a Restructuring Plan (RP) is upheld on appeal, it will undoubtedly call into question the RP’s continued appeal to European debtors—at least initially. 

But once the dust has settled, what will be the lasting consequences? As is often the case, the legal detail may be less dramatic than the headlines at first suggest. Our analysis is that, in many cases, a work-around will be possible, but, at the same time, we query the extent of European companies’ appetites to do so, given the ongoing development of convenient European processes facilitated by the EU Preventive Restructuring Directive (the PRD). 

This alert is of interest to European companies considering restructuring their financial indebtedness pursuant to an RP as well as to their creditors.

Background

The Elements of Aggregate’s RP and its Connections to Germany, the United Kingdom, and Luxembourg

Aggregate’s RP Terms

The RP restructured three tranches of German law governed debt. For these purposes, it is relevant to know that the senior secured class approved the RP. The subordinated class and the junior class each dissented.

The Plan Company and Its Assets

Aggregate was registered in Luxembourg and shifted its Centre of Main Interests (COMI) from Luxembourg to England specifically for the purpose of promulgating the RP. The collateral securing the debt comprised real estate assets in Germany and shares in the Luxembourg debtors.

The English Court's Ruling

In exercising its discretion to cram down the dissenting classes, the English court sanctioned the RP. 

Of more relevance for this alert is the threshold decision by the court that it had jurisdiction to hear the case on the basis that (a) the COMI shift meant there was the requisite ‘sufficient connection to the United Kingdom, and (b) the expert evidence suggested that the requisite ‘reasonable prospect’ of the RP being recognised in Luxembourg and Germany was also met. 

This latter ruling was made despite evidence being presented by a dissenting creditor to the contrary. The court mentioned as a relevant factor the overwhelming support of the senior creditors and the fact that 97% of that class had submitted to the jurisdiction of the English court pursuant to a restructuring support agreement.

The Frankfurt Court’s Decision

Fast forward 18 months, and the English court’s finding that the RP had reasonable prospects of recognition in Germany was put to the test on the application of a dissenting creditor. The Regional court in Frankfurt refused recognition. Its decision has, at once, limited and yet far-reaching commercial consequence for the parties. The consequences are limited because the decision applies only to the petitioning creditor. The consequences are far-reaching because the decision means that the compromises sanctioned by the English court will not bind the petitioning creditor in Germany. Thus, the plan company will be bound to perform its obligations to the creditor as per the original agreements, without regard to the compromises sanctioned under the RP. 

More importantly perhaps, the decision has significant consequences for the future of the RP’s appeal to European companies. The Frankfurt court explored and rejected the potential avenues for recognition on the following grounds:

RP Was Not a ‘Foreign Insolvency Proceeding’

Automatic recognition pursuant to the German Insolvency Code did not apply because the RP did not apply to all of Aggregate’s creditors.

Not a ‘Foreign Judgment’

The RP did not fall within s.328 of the German Code of Civil Procedure regarding recognition of foreign judgments, because the Regional Court held that reciprocity was not guaranteed. Specifically, the court was not satisfied that the English court would recognize and enforce a corresponding German judgment if the shoe were on the other foot. 

No Recognition Under Brussels I Regulation (Recast)

Following Brexit, this regulation ceased to apply to England and Wales, so recognition under it was not available.

The Frankfurt court’s decision was issued in a preliminary hearing in which only documentary evidence was considered. The case will now advance to a full hearing, and, at the same time, the judgment itself is probably being appealed.

The Luxembourg Court Decision

Luxembourg subordinated creditors sought to restrain the implementation of the RP in Luxembourg unless and until it was formally recognised through a Luxembourg exequatur procedure. The Luxembourg court² disagreed on the basis that, since the RP related to private, consensual acts, recognition was automatic. Formal exequatur procedure would only be required if a party sought measures of forced execution in Luxembourg (e.g., seizures, auctions) (actes matérielles d’exécution) engaging the monopoly of state coercion (article 678 Luxembourg new civil procedure code).

Two additional clarifications are of interest:

• Luxembourg law governed pledges subject to the Luxembourg law of 5 August 2005 on financial collateral arrangements, as amended, are accessory in nature—when the secured claim is released by the plan, the pledge falls with it; releasing such a pledge is not an act of public force.
• The court did not rule on the substantive validity of the RP under Luxembourg public policy—those issues could arise, if at all, in an exequatur or enforcement context.

Spotlight on the English Court’s Jurisdiction Over Foreign Companies

As alluded to above, there are two touchstones for the English court accepting jurisdiction over a foreign company. It is the second touchstone on which the Frankfurt decision has shone a spotlight:

• Firstly, the company must have a ‘sufficient connection’ to England and Wales. This is an English law-oriented test and so the Frankfurt and Luxembourg court decisions will not directly affect the English court’s approach to this touchstone. 
• Secondly, the court must be satisfied that there is a ‘reasonable prospect’ that the RP will be recognised and enforced in the jurisdiction(s) where it needs to be recognised—e.g. in the jurisdiction(s) where the company has assets or operations. In this case, the jurisdictions are Luxembourg and Germany.

As regards this second touchstone, the practice has developed whereby the court accepts expert witness evidence on the question and, in the event of differing evidence, forms a view as to whether the requisite ‘reasonable prospect’ threshold has been met. 

In the past, the threshold has been met on the basis of expert opinion alone—without necessarily having the benefit of a local court ruling on the point. If the Frankfurt court’s decision is upheld (and in view of the definitive Luxembourg judgment), the English court (and the experts providing their opinions) will now have the benefit of the actual local court’s decisions to inform the threshold test. It may be that these decisions have persuasive relevance for other European courts also.

Practical Implications for European Companies Considering a Plan

If the Frankfurt court’s decision is upheld on appeal, a European incorporated company wishing to pursue an RP will be well advised to seek an amendment to the governing law of its debt documents to English law. This obviously adds another hurdle, particularly if local banks or a wide diaspora of creditors are involved. 

Practical takeaways for deals involving Luxembourg or German elements:

For Luxembourg Law

• Map “public force” vs “private act” early: plan the implementation so that Luxembourg steps stay on the private side (no seizures or bailiff-involved enforcement).
• Align pledge mechanics with the plan: once subordinated debt is released, prepare immediate releases of any accessory Luxembourg law pledges and ensure corporate registers are updated promptly.

For German Law

There remains a high degree of uncertainty as to whether proceedings under English law will be sufficient to restructure German law indebtedness. If the German Court of Appeal upholds the decision of the Frankfurt court, the company will probably have to file for insolvency, rendering the English proceedings ineffective.

Therefore, at present and in the event that the Frankfurt Court of Appeal does not uphold the RP, it is important to achieve the highest possible level of legal certainty for a debtor company.

Direction of Travel for European Companies

German or Luxembourg debtor companies should bear in mind the following points:

• If it has creditors from EU member states, proceedings under the German StaRUG or the Luxembourg law dated 7 August 2023 on the preservation of businesses would be recommended since these processes bind creditors in each EU member state via the provisions of the European Insolvency Regulation. It is also worth noting that, compared to the RP, fees for German or Luxembourg proceedings are relatively low.
• A ‘parallel’ RP in England will be required if the debtor has English law debt documents that, for whatever reason, cannot be amended to German law. Such a parallel process may seem costly in individual cases, but if both proceedings are linked by conditions, the outcome should be satisfactory for all parties involved. 

Closing thoughts

This is a complex area of the law, and the commercial considerations are often nuanced and complex also. It may be that, by virtue of the PRD, European companies naturally choose to restructure in their home jurisdiction in any event. The firm has restructuring experience across European jurisdictions, so, to ensure all options are canvassed, be sure to speak to your contact early.

Loper Bright Enterprises v. Raimondo shook the legal world when it overturned one of the cornerstones of administrative law: the Chevron doctrine. Established by Chevron U.S.A., Inc. v. Natural Resources Defense Council, Inc., the Chevron doctrine directed federal courts to defer to an agency’s reasonable interpretation of an ambiguous statute that the agency administers.

In Part I of this series, we looked at how the federal courts have begun to implement Loper Bright one year after the seminal case; here, we dive into where things stand at the state level.

In a minute or less, here is what you need to know.

States Still Free to Go Their Own Ways

The Chevron doctrine was a rule about how courts should interpret federal law; state courts were never bound by it.¹ In overturning Chevron, Loper Bright relied purely on statutory grounds under the Administrative Procedure Act. Because of this, state courts and state agencies are not bound by this decision either. However, many states tend to look to federal law and its trends as persuasive precedent for their own legal structures. 

State of Play in the States

While at least 34 states give some level of deference to state agencies, there has been a recent trend limiting or eliminating such agency deference.² In 2025 alone, North Carolina, Missouri, Louisiana, Oklahoma, Texas, Utah, and Kentucky have either ended or significantly limited deference to state agencies. 

Generally, states are split into four general categories regarding deference practices: 

1. Fifteen states provide substantial deference to state agencies similar or stronger than Chevron. Examples include Illinois, D.C., and Massachusetts.³
2. Fourteen states provide a moderate level of deference, although with great variety. Some states use a sliding scale to determine the weight of deference, others only providing deference to the interpretation of regulations but not statues, and some add additional tests that must be met in order for deference to attach. These standards vary and there are many unique tests for states that fall under this category. For example, Connecticut provides Chevron-like deference, but only if the agency’s interpretation has been previously subjected to judicial scrutiny or is “time tested.”⁴ In North Carolina, interpretations are treated as non-binding, with deference based on the ability of the agency to persuade the court. In Michigan, interpretations are given “due consideration,” but courts must provide “cogent reasons” for overturning.
3. Four states appear inconsistent in their application of deference, with courts ruling both for deference and de novo review or declining to formally set rules of deference. Examples include Nevada and South Dakota. 
4. Eighteen states provide no deference.⁵

Despite Shift From Deference, States Remain Diverse

Even with seven states limiting deference this year, states that apply deference outnumber the states that don’t. And within the deference states, there still lies significant variation. Some states such as Illinois provide a “presumption of correctness” even in the absence of ambiguity, while others, such as Maryland, provide deference to regulatory interpretations based on a multi-factored sliding scale test. Virginia applies deference based on the ability of the agency to persuade the court based on reasoning and expertise. 

The recent shift to abolish or limit deference is also not universal. The Hawai’ian Supreme Court rejected the reasoning set forth in Loper Bright, stating: “[n]ow, the U.S. Supreme Court considers itself and other federal courts the experts on exceedingly complicated areas of American Life…In Hawai‘i, we defer to those agencies with the na‘auao (knowledge/wisdom) on particular subject matters to get complex issues right.”⁶

The Takeaway

While the abandonment of the Chevron doctrine has led many states to end or restrict deference to state agencies, there still remains significant variation in state application. This trend is not likely to change anytime soon. 

Our Administrative Law and Appellate Litigation practitioners regularly assist clients in assessing regulatory actions and legal risk in light of evolving judicial precedents.

The Essential Guide to the Jones Act, now in its third edition, describes and explains one of America’s most consequential maritime laws.

Click here to read the guide.

TSCA requires the EPA to prioritize and evaluate high-priority substances from the TSCA inventory. Risk evaluations under TSCA are primarily initiated by the EPA, either through its prioritization process or in response to manufacturer requests.¹ These evaluations are triggered by statutory requirements, emerging scientific evidence, or industry interest in clearing regulatory uncertainty around specific chemicals.²

The EPA uses risk evaluations to determine whether an existing chemical poses an unreasonable risk of injury to health or the environment—based solely on scientific risk, not costs or other nonrisk factors. These evaluations include unreasonable risks to a potentially exposed or susceptible subpopulation identified as relevant to the risk evaluation under the specified conditions of use (COUs). COUS are the circumstances under which a chemical is intended, known, or reasonably foreseen to be manufactured, processed, distributed, used, or disposed of.

The EPA initially issued its procedural framework rule in 2017 and then revised it in 2024 under the Biden administration to require a single, comprehensive risk determination for each chemical across all COUs. EPA wants to return to evaluating each COU separately, reversing the 2024 rule and returning to the approach established during the first Trump administration.³ The EPA is seeking public comment on whether the procedural framework rule should include regulatory text specifying that the EPA has discretion to exclude COUs, exposure pathways, and routes and to coordinate actions with other EPA-administered laws to ensure that chemical risks “could be eliminated or reduced to a sufficient extent” by other EPA actions, as permitted under TSCA section 9(b). Notably, if the proposed rule is finalized and subsequently challenged, as anticipated, the courts will not defer to either of the EPA’s interpretations. Instead, they will focus on determining the best interpretation of the statute consistent with the Supreme Court’s recent decision in Loper Bright Enterprises v. Raimondo, 603 U.S. 369 (2024).

The proposed rule would allow the EPA to consider occupational exposure controls, such as personal protective equipment (PPE) and industrial engineering controls, in chemical risk evaluations and risk determinations—something previously prohibited under the 2017 rule. This change could reduce findings of unreasonable risk in well-controlled workplace settings. Additionally, the rule would modify the regulatory definitions section in numerous ways, including by eliminating “overburdened communities” from the list of “potentially exposed or susceptible subpopulations” that must be considered in evaluations and by incorporating the definition of “weight of scientific evidence” from Section 2(e) of Executive Order 14303. These changes would influence how the EPA evaluates scientific data in its regulatory decisions.⁴ 

Finally, as proposed, the rule would require manufacturers (including importers) requesting a risk evaluation to submit less information and only that which is relevant to the COU or COUs identified in the risk evaluation request. These procedural changes would apply to all risk evaluations initiated on or after the date of the final rule and, to the extent practicable, to risk evaluations that are in process as of the date of the final rule but not yet finalized.

The deadline for submitting comments on the proposed rule is 7 November 2025.⁵ Those interested in submitting comments or discussing this proposed rule should contact the authors or another member of our Environment, Land, and Natural Resources practice group.

• The Occupational Health and Safety (Psychological Health) Regulations 2025 (the Victorian Regulations); and
• A Compliance Code entitled “Psychological health” (Edition 1, September 2025).

What do Employers Need to Know About the Regulations?

The primary focus of the Victorian Regulations is on psychosocial risk management. We have set out below the key aspects of the Victorian Regulations for all employers with any employees based in Victoria.

Commencement Date

The Victorian Regulations commence on 1 December 2025.

Key Concepts Under the Victorian Regulations

A “psychosocial hazard” is any factor or factors in work design, systems of work, the management of work, the carrying out of the work or personal or work-related interactions that may arise in the working environment and may cause an employee to experience one or more negative psychological responses that create a risk to the employee's health or safety.

A “psychological response” includes cognitive, emotional and behavioural responses and the physiological processes associated with them. 

• The Compliance Code includes various examples of psychological responses, including stress, feeling stressed, distress and feeling burnt out, as well as warning signs of psychological harm.

The term “work design” means the equipment, content and organisation of an employee's work tasks, activities, relationships and responsibilities within a job or role.

What Are the Key Obligations Under the Victorian Regulations?

An employer must, so far as is reasonably practicable:

• Identify psychosocial hazards;
• Eliminate any risk associated with a psychosocial hazard;
• If it is not reasonably practicable to eliminate such a risk – reduce the risk (again, so far as is reasonably practicable);
• Reducing the risk must be done by altering the management of work, plant, systems of work, work design or the workplace environment or through the use of information, instruction or training. However, the provision of information, instruction or training cannot be:
  • Relied on exclusively unless alteration is not reasonably practicable; or
  • The predominant control measure if the employer is also altering the management of work, plant, systems of work, work design or the workplace environment.

The guidance material published by WorkSafe Victoria notes that while this is similar to the traditional hierarchy of controls (in that employers are required to eliminate risks first, then apply more effective higher order controls), the traditional hierarchy is not as well suited to controlling the risks of exposure to psychosocial hazards. The tailored approach prescribed by the Victorian Regulations uses "different terminology applicable to controlling psychosocial risks, so it is easier to apply to psychosocial hazards".

• Review and, if necessary, revise any measures that it has implemented to control risks associated with psychosocial hazards:
  • Before altering anything, process or system of work that is likely to result in changes to the risks;
  • If new or additional information about a psychosocial hazard becomes available to the employer;
  • If any employee (or a person on their behalf) reports a psychological injury or a psychosocial hazard to the employer;
  • After any notifiable incident occurs involving one or more psychosocial hazards; and
  • After receiving a request from a health and safety representative, provided that the Health and Safety Representative believes on reasonable grounds that any of the circumstances referred to above exist or the employer has failed to properly review the risk control measures or take into account any of the circumstances referred to above when reviewing or revising risk control measures.

How Do the Victorian Regulations Differ to the Model Regulations Produced by Safe Work Australia?

The emphasis in the Victorian Regulations on psychosocial hazards causing employees to experience negative psychological responses (such as stress or feeling stressed) that create a risk to safety rather than causing psychosocial harm is notable. It suggests to us that the concept of psychosocial hazard under the Victorian Regulations would be interpreted in a somewhat broader fashion.

Unlike the Model Regulations, the Victorian Regulations do not prescribe a list of matters to which an employer must have regard when determining control measures to implement. For ease of reference, the Model Regulations included the following list:

• The duration, frequency and severity of the exposure of workers and other persons to the psychosocial hazards; 
• How the psychosocial hazards may interact or combine; 
• The design of work, including job demands and tasks; 
• The systems of work, including how work is managed, organised and supported; 
• The design and layout, and environmental conditions, of the workplace, including the provision of safe means of entering and exiting the workplace and facilities for the welfare of workers; 
• The design and layout, and environmental conditions, of workers’ accommodation; 
• The plant, substances and structures at the workplace; 
• Workplace interactions or behaviours; and
• The information, training, instruction and supervision provided to workers.

Despite this omission, consideration of these factors is likely unavoidable if employers are to conduct a robust risk assessment and selection of appropriate controls.

Unlike the Victorian Regulations, the Model Regulations do not prescribe when it is appropriate to use the provision of information, instruction or training as exclusive or predominant control measures.

What Was Not Included in the Victorian Regulations?

The exposure draft regulations released by the Victorian Government in 2022 included obligations to implement prevention plans and to report certain data relating to actual or reported psychosocial hazards.

Those requirements have not been included in the Victorian Regulations.

Guidance material published by WorkSafe Victoria in recent days notes that use of prevention plans is not mandatory, but that employers are nonetheless encouraged to use the prevention plan template that is available from WorkSafe Victoria's website. 

What do Employers Need to Know About the Compliance Code?

The Compliance Code takes effect on 1 December 2025.

A breach of the Compliance Code is not, of itself, a breach of the Occupational Health and Safety Act 2004 (Vic) (Act). However, an employer who complies with the Compliance Code will, to the extent it deals with their duties or obligations under the Act or the Victorian Regulations, be taken to have complied with those duties or obligations.

For that reason alone, employers should quickly familiarise themselves with it and its content. 

In addition, WorkSafe Victoria will regard the contents of the Compliance Code as being information about psychosocial hazards and ways of controlling them of which employers ought reasonably to know, for the purposes of determining what is reasonably practicable to discharge their key duties under the Act.

The Compliance Code is detailed and contains a great deal of guidance in relation to many aspects of identifying and managing psychosocial hazards, including guidance on how to consult with employees about those hazards in small and large organisations.

It also contains:

• Examples of how exposure to a psychosocial hazard can lead to harm;
• Factors and a range of other guidance to consider when identifying hazards;
• A list of examples of psychosocial hazards. This list closely mirrors the list of common psychosocial hazards set out in the Model Code of Practice: Managing psychosocial hazards at work (Code of Practice) published by Safe Work Australia in 2022, save that it specifically calls out gendered violence as a hazard and, in terms of harassment, puts specific focus on sexual harassment but not other types of workplace harassment; and
• Examples of risk controls.

Key Actions for Employers

For many employers with workers based in other Australian states and territories, it will be important to:

• Update your board and executive team about the requirements of the Regulations and the existence and content of the Compliance Code;
• Review your existing system for managing psychosocial hazards against the Regulations and the existence and content of the Compliance Code. 

For example, your system may need to be updated to ensure that existing control measures are reviewed if one of the triggering events identified in the Regulations occurs.