New York’s statewide permitting pause marks a significant escalation from local project opposition to state-level regulation. The same concerns previously visible in county and municipal actions—grid capacity, water use, utility costs, environmental impacts, and community benefits—are now shaping statewide policy and may affect project timing, economics, entitlement strategy, and dispute risk.

This week, New York Governor Kathy Hochul signed an executive order temporarily pausing state environmental permitting for covered data center projects for one year while New York develops statewide standards addressing energy demand, environmental impacts, water use, air quality, utility costs, and community benefits. This action makes New York the first state to impose a statewide moratorium on certain large-scale data center developments, marking a significant escalation in the growing public and regulatory backlash against hyperscale data center projects. 

In May, we wrote that public opposition had become a material project risk for data center development as counties and municipalities nationwide expanded consideration of potential moratoriums or bans on data center development. New York’s action suggests that regulators are increasingly focused not only on the siting of individual projects, but also on the cumulative effects of data center development. The New York action moves the data center opposition trend from the local and county level to the state level.

New York’s Statewide Moratorium

New York’s executive order pauses state discretionary environmental permits for new hyperscale data centers while the state develops a Generic Environmental Impact Statement and related regulatory framework. Generic Environmental Impact Statements are used to evaluate the general effects of a type of project, like data centers, while a supplemental environmental review may tier off the general analysis to evaluate site-specific or project-specific impacts. It is anticipated that the Environmental Impact Statement will be used to establish general standards to address environmental impacts associated with data center development. The order applies to covered projects generally understood to involve facilities requiring 50 megawatts or more of power, although the precise effect on any individual project will depend on the project’s permitting posture and whether necessary state permits had already been deemed complete. The Governor also directed Empire State Development to issue a Community Investment Framework within 60 days to establish guidance for local agencies for the negotiation of community benefits as part of any large-scale data center deal, including local infrastructure improvements and community financial support.

The stated rationale closely tracks the concerns that have driven local opposition across the country. The executive order cites unprecedented growth in data center demand driven by artificial intelligence, cloud computing, streaming services, and other computing operations; it also identifies concerns regarding electric load, water use, water quality, air quality, utility costs, and the risk that infrastructure investments for large loads could be shifted to ordinary ratepayers. Governor Hochul also announced an intention to pursue legislation repealing certain tax exemptions for massive data centers, reinforcing that state-level scrutiny may broadly impact project economics. 

Public Opposition Is No Longer Merely Local

The New York action presents a significant expansion to the multi-jurisdictional ways that data center opposition is evolving. Those various mechanisms include: 

State-Level Moratorium Proposals, Vetoes, and Study Frameworks

Maine’s Legislature passed legislation that would have imposed a temporary moratorium on certain large data centers, but Governor Janet Mills vetoed the bill while stating that a moratorium was appropriate given concerns about environmental and electricity-rate impacts, and that she intended to establish a council to study data center impacts.

Other Texas Counties Continuing to Consider, Reject, or Urge State Action on Moratoria

Hays and Hood Counties considered moratoria or related pauses in response to concerns about water, energy, and local impacts, while Somervell County passed a resolution opposing data center construction until the Texas Legislature addresses the issue.

Electoral Backlash Against Approving Officials

In Festus, Missouri, voters ousted four city council incumbents after approval activity relating to a proposed US$6 billion data center, reflecting that data center approvals can become election-defining local issues.

Ballot Initiatives Restricting Development Incentives or Banning Data Centers

Port Washington, Wisconsin voters approved a measure requiring voter approval before city leaders may grant large tax-increment financing incentives, a measure prompted by concerns over a proposed data center campus; Monterey Park, California voters later approved a measure prohibiting data centers within the city.

Judicial Invalidation of Data Center Approvals Based on Procedural Defects

The Virginia Court of Appeals invalidated Prince William County’s Digital Gateway rezonings after concluding that public notice and advertising requirements were not strictly followed, blocking a major data center development corridor.

Local Abandonment or Rejection of Projects Following Organized Public Opposition

New Brunswick, New Jersey abandoned a proposed 27,000-square-foot data center and restored plans for public park space after public outcry and protest.

Resident Litigation Challenging Rezonings and Approvals

Coweta County, Georgia residents filed suit challenging approval of the proposed Project Sail data center campus, alleging zoning, procedural, due process, and environmental-review defects.

State Legislatures Revisiting Tax Incentives and Cost-Allocation Frameworks

North Carolina lawmakers and Governor Josh Stein have scrutinized data center tax exemptions and ratepayer impacts; the state budget reportedly eliminated an electricity sales-tax exemption for data centers while leaving other incentives in place, and separate legislative proposals would impose requirements intended to prevent large data centers from shifting utility costs to other ratepayers.

Opposition to Energy Infrastructure Needed To Serve Data Centers

In Hilliard, Ohio, residents and city officials have opposed and legally challenged aspects of on-site power infrastructure proposed for a data center campus, including natural gas fuel cells and diesel backup generators.

Large-City Moratoria and Permitting Pauses

Denver approved a one-year moratorium on accepting or processing certain permit and site-development applications for data centers; Seattle unanimously adopted an emergency one year moratorium and policy framework responding to public concern over grid, water, ratepayer, land-use, and public-health impacts; and Oklahoma City adopted a temporary moratorium on new data centers through December 31, 2026, or until zoning-code amendments are approved.

County Pauses in Emerging Data Center Markets

Champaign County, Illinois enacted a one year moratorium on new large-scale data centers while a task force develops zoning and permitting standards.

As these examples illustrate, opposition is no longer confined to one political geography, one level of governmental jurisdiction, one regulatory theory, or one stage of project development. It is appearing as state executive action, county moratoria, municipal permitting freezes, voter initiatives, litigation, tax-policy changes, utility-cost allocation debates, and opposition to supporting energy infrastructure. 

Navigating Risk in a Dynamic Environment

For project participants, the takeaway is clear, diligence should include not only conventional land-use and permitting review, but also a jurisdiction-specific assessment of political sentiment, utility capacity, water availability, environmental-justice issues, tax incentive durability, local procedural requirements, and the likelihood of ballot, legislative, or litigation-driven intervention. Site selection and permitting strategy must be coordinated with a location-specific community engagement strategy. Boilerplate force majeure, change-in-law, material adverse change, termination, outside-date, and government-compensation provisions may be ill-suited to a market facing such dynamic risks. Data center development now routinely implicates land use, environmental review, public utility regulation, grid reliability, water resources, tax policy, public affairs, community engagement, and dispute resolution. These disciplines cannot be addressed sequentially after opposition hardens; they should be coordinated at the earliest stages of site selection, transaction structuring, entitlement strategy, utility interconnection, and public engagement.

Opportunities for New Generation

These project delays may benefit longer lead-time projects, like nuclear generation. As detailed in our recent client alert, in June 2026, the New York Public Service Commission issued an Order Establishing a Nuclear Reliability Backbone Process, which was supported by an Advanced Nuclear Policy Options Paper issued by the New York State Energy Research and Development Authority (NYSERDA) and the New York State Department of Public Service (DPS).¹ The Options Paper represents the start of a comprehensive effort by the State to expand its gigawatt-scale nuclear generation capacity, while the data center construction moratorium creates an opportunity for the State to align new generation resources with the anticipated growth in demand from large-scale data center development.

Fielding a Multidisciplinary Team

The firm is positioned to assist clients in navigating the evolving risk profile for data center development and resolving disputes if those risks materialize. In addition to its capabilities across public policy, regulatory, environmental, energy, land use, real estate, construction, and transactional disciplines, the firm’s US and international Litigation and Dispute Resolution lawyers are adept at evaluating, structuring, and executing strategies aimed at preserving project value, protecting investment-backed expectations, and mitigating regulatory and political risk.

As the New York action shows, the next phase of data center risk may not arise project by project, or county by county. It may arise statewide. Stakeholders that anticipate that shift—and structure, contract, permit, and communicate accordingly—will be better positioned to manage a fast-changing development environment.

For additional insights on the evolving data center landscape, explore the firm's Data Center Deep Dives Webinar Series here and our related Data Center Alerts here.

The Second Circuit Breaks from Ninth Circuit and Upholds New York’s Gas Bans

On 30 June 2026, the Second Circuit held in Mulhern Gas Co., Inc. v. Mosley and Association of Contracting Plumbers of the City of New York, Inc. v. City of New York that EPCA does not expressly preempt two New York measures: (1) the state’s directive to adopt regulations prohibiting fossil-fuel appliances in new buildings; and (2) New York City’s Local Law 154, which prohibits combustion emitting 25 kilograms or more of carbon dioxide per million Btu in new residential buildings.⁵ The court’s analysis turned on EPCA’s definition of “energy use,” which the statute defines as “the quantity of energy directly consumed by a consumer product at point of use, determined in accordance with test procedures.”⁶ That, the court reasoned, is a fixed measure set by controlled testing before a product reaches consumers; nothing a consumer does afterwards changes that appliance’s “energy use.”⁷ As a consequence, a law that bars consumers from using an appliance has “little to do” with that appliance’s “energy use” as EPCA defines the term.⁸

On that reading, the challenged laws govern the type of energy an appliance consumes, not the amount, and so they fall outside of EPCA’s reach. That framing put the Second Circuit in direct conflict with the Ninth Circuit’s CRA decision, which read “energy use” to “fairly encompass[] an ordinance that effectively eliminates the ‘use’ of an energy source.” The court found that CRA “halves the statutory definition”—seizing on the phrase “point of use” while ignoring the EPCA’s requirement that energy use be “determined in accordance with test procedures”—and thereby “render[s] meaningless” part of the statute’s text.

Acknowledging the significance of its departure, the Second Circuit found “the reasons for divergence too compelling” and “reluctantly” concluded it was necessary to “create a split among the Circuits,” expressly adopting Judge Friedland’s CRA dissent as “the better interpretation.”⁹

The Ninth Circuit Narrows its Own Approach to EPCA Preemption, Allowing Some Emissions Regulation

Two days after Mulhern Gas, the Ninth Circuit upheld the South Coast Air Quality Management District Rule 1146.2 in Rinnai America Corporation v. South Coast Air Quality Management District. The rule phases in bans on gas-fired water heaters, boilers, and process heaters emitting more than zero nitrous oxides—an emissions standard adopted under the federal Clean Air Act (CAA) to bring the nation’s smoggiest air basin into ozone attainment.¹⁰

Writing for the majority, Judge Koh held that EPCA does not preempt the rule on two independent grounds: first, EPCA does not reach appliance emissions standards enacted under the CAA, and second, the rule in any event regulates “process heaters,” which EPCA does not cover.¹¹ Critically, Rinnai America cabins CRA rather than repudiating it. The court distinguished CRA—which struck down a building code barring gas piping at the point of delivery, rendering appliances useless—from Rule 1146.2, which erects no barrier to natural gas and dictates only emissions, not the amount or type of energy used.¹² The court reiterated CRA’s description of itself as “very narrow.”¹³ The upshot is that even within the Ninth Circuit, CAA emissions rules now stand on different footing than CRA-style gas bans. 

As a result of these two circuit court decisions, we have a landscape in which outright bans on fossil-fuel appliances survive in the Second Circuit but remain preempted in the Ninth, while CAA-based emissions rules stand apart from both.

Looking Ahead

Both the Mulhern Gas and Rinnai America decisions are subject to further review. Indeed, plaintiffs-appellants in both cases have been granted extensions of time to file petitions for panel or en banc rehearing, and briefing is expected to be filed in both in the coming months. If rehearing is denied (or not sought), the plaintiffs-appellants would have 90 days from the date of the judgment or denial of rehearing to file a petition for a writ of certiorari in the US Supreme Court.¹⁴ Given that the Second Circuit has now expressly acknowledged the circuit split with the Ninth Circuit and the national significance of the EPCA preemption question for building electrification policy, Mulhern Gas presents a strong candidate for Supreme Court review. 

The back-to-back decisions in Mulhern Gas and Rinnai America represent a potential watershed moment in the ongoing debate over state and local natural gas restrictions. In practical terms, enforceability depends on where a new construction project is located and how the applicable rule is written. For now, outright fossil-fuel bans remain enforceable in the Second Circuit but are preempted under CRA in the Ninth, while CAA emissions rules may fare differently than outright bans. Stakeholders across the energy, construction, manufacturing, and real estate sectors—especially those operating across multiple jurisdictions—will need to weigh how this evolving patchwork affects their planning, while closely monitoring these litigation developments, which could set the stage for a definitive national resolution by the Supreme Court on whether EPCA preempts state and local fossil-fuel appliance restrictions.

We will continue to monitor these developments and provide timely updates as the legal landscape evolves.

In a recent judgment in the case of Oheo Bank v Parker [2025] DIFC CA 006, the Dubai International Financial Centre (DIFC) Court of Appeal upheld an appeal against the Court of First Instance’s refusal to set aside a DIFC-seated DIAC arbitral award on the basis that the respondent, Oheo Bank (Bank), was not afforded an opportunity to present its case. In reaching its decision, the Court of Appeal held that it was persuaded, on a very narrow, fact-specific basis, that the high threshold for intervention had been met.

Background

Parker, the claimant in the arbitration, was a customer of the Bank. Parker sought assistance from the Bank to obtain finance to complete the purchase of a ship (Vessel). Parker’s relationship manager advised Parker that the Vessel could be financed through a series of transactions, one of which was a bond (Bond). Parker alleged that it had acted in reliance on the Bank’s advice, but the Bond could not be used to secure finance for the purchase of the Vessel and so was worthless. Parker sought damages in the amount of €1 million, which it had paid for the Bond.

Parker asserted several claims against the Bank, such as deceit, misrepresentation, breach of regulatory duties, and negligence. All of the claims were dismissed by the arbitral tribunal except for a claim founded on alleged breaches of regulatory rules that required the Bank to ensure that its communications with Parker were clear, fair, and not misleading. This claim was upheld by a majority of the tribunal (Successful Claim). 

Although Parker was ultimately successful in its claim for breach of regulatory duty, it did so on a basis that was never pleaded by Parker and that was articulated by Parker for the first time in its post-hearing brief. 

The Bank, in its post-hearing brief, stated that (i) it had not engaged substantively with the unpleaded allegations regarding breaches of regulatory rules raised by the Claimant; and (ii) to the extent that the tribunal considered that the Bank had proper notice of any of the unpleaded points and wished to be addressed on them, the appropriate course would be to direct the Bank to file a supplemental post-hearing brief dealing substantively with any such points. 

The tribunal unanimously accepted that the Successful Claim had not been pleaded prior to Parker’s post-hearing brief. However, the majority of the tribunal took the view that the Respondent had a fair opportunity to address the unpleaded claim. 

The dissenting arbitrator differed from the majority both regarding the decision to permit Parker to advance the Successful Claim and on the merits of the Successful Claim. His concerns were twofold. First, the Bank had not considered that the Successful Claim formed part of Parker’s pleaded claims based on regulatory breaches and had not responded to it. Second, Parker’s claim for regulatory breaches had been recast in its post-hearing brief as a claim advanced on the basis of negligence. Had the Bank appreciated that Parker’s claim was framed in negligence, the Bank would likely have relied on the defences of contributory negligence and voluntary assumption of risk, which he considered would have been “well arguable.”

The Bank challenged the arbitral award under Article 41(2)(a)(ii) of Law No. 1 of 2008, which provides that an arbitral award may be set aside by the DIFC Court if the party making the application furnishes proof that it was “unable to present his case.” The Court of First Instance dismissed the challenge, and the Bank filed an appeal to the Court of Appeal. 

Judgment of the Court of Appeal

In its decision to overturn the ruling of the Court of First Instance, the Court of Appeal noted that the arbitrators unanimously accepted that the Successful Claim had not been pleaded prior to Parker’s post-hearing brief. The Court of Appeal stated that, given the significant number of unpleaded claims contained in Parter’s post-hearing brief, the Bank had clearly conveyed that it was not engaging substantively with them, but, if the tribunal wished to be addressed on them, the appropriate course would be for the tribunal to direct the Bank to file a supplemental post-hearing brief. The Court of Appeal accepted this was a reasonable stance for the Bank to take. The Court of Appeal described the Successful Claim as a “dramatic departure” from the claim previously advanced by Parker and found that its essential elements had not previously been put to the Bank. It was therefore unsurprising that the Bank had not considered or responded to it. 

The Court of Appeal agreed that the practical solution, to achieve fairness to both parties, would have been for the unpleaded claim to be put to the Bank and for the Bank to respond to it by way of a supplemental post-hearing brief (as the Bank had requested). Had the Bank been granted this opportunity, it would likely have raised certain defences that could realistically have made a difference to the outcome of the claim. 

The Court of Appeal therefore decided to set aside parts of the arbitral award containing the majority’s reasoning and decision on the Successful Claim. 

Analysis

This is the first time that the DIFC Courts have intervened and set aside part of an award on the basis that a party was not afforded the opportunity to present its case. This intervention demonstrates that the DIFC Courts will, in appropriate circumstances, intervene where there has been a real failure on the part of the tribunal to ensure procedural fairness between the parties. However, it is important to note that, in reaching its decision, the Court of Appeal drew a distinction between the Bank having not been given an opportunity to present its response to the Successful Claim and the Bank not recognising or taking an opportunity to do so, which would not have justified intervention. 

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 United Arab Emirates and wider Middle East region.

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On 8 July 2026, the United States Court of Federal Claims issued its long-awaited post-trial decision in Alta Wind I Owner Lessor C v. United States (Alta Wind), the latest chapter in a 13-year saga over the calculation of eligible basis for cash grants under Section 1603 of the American Recovery and Reinvestment Act of 2009 (ARRA). The court rejected the taxpayers’ use of a discounted cash flow (DCF) approach under the specific facts of the case and adopted the government’s cost approach to determining the fair market value of the project for purposes of determining eligible basis, holding that, in the case at hand, the fair market value of the grant-eligible tangible assets must be measured by reproduction costs, rather than projected income streams. Because the rules for determining tax basis under the Section 1603 grant program are the same rules that govern the investment tax credit (ITC) under Section 48 and 48E of the Internal Revenue Code (IRC), this decision has direct and significant implications for current renewable energy transactions, particularly those structured as purchases of operating or near-completion projects.

Background

The Alta Wind litigation dates to 2013, when the owners of six California wind farms sued the Treasury Department for underpayment of Section 1603 cash grants. Terra-Gen Power LLC, which developed and constructed the Alta facilities, had sold the completed facilities to grant-eligible buyers between 2010 and 2012. Terra-Gen’s sale prices substantially exceeded its own out-of-pocket construction costs, in part because the prices reflected the anticipated value of the cash grants that the buyers would be entitled to claim. The buyers applied for over US$703 million in Section 1603 grants using the full unallocated purchase price as eligible basis. Treasury awarded approximately US$495 million, allocating a portion of the purchase price to intangible assets ineligible for the grant, and the taxpayers filed suit in 2013 seeking over US$206 million in additional grants, the difference between the grants they received and the grants they believed they were owed.

After the Court of Federal Claims initially ruled for the taxpayers in 2016, the Federal Circuit reversed in 2018, holding that a specific purchase price allocation methodology applied to the determination of eligible basis, requiring the purchase price to be allocated among several categories of assets. The Federal Circuit remanded for a factual determination of how to distinguish eligible tangible assets, such as turbines, transformers, wiring, and other physical project components (including the premium paid for a completed, operational facility, known as turn-key value), from ineligible intangible assets (such as goodwill and going concern value), and the Court of Federal Claims issued its updated ruling on 8 July 2026.

Key Holdings

The Anticipated Value of the Cash Grant Cannot Be Included in Eligible Basis

The court’s most consequential holding is that the anticipated value of Section 1603 cash grants is not allocable to eligible tangible assets and therefore cannot inflate eligible basis. The taxpayers argued that, because the cash grant is a cash flow generated by ownership of the eligible assets, it should increase the fair market value of those assets under a DCF methodology. The court rejected this argument on multiple grounds.

First, the court found that the taxpayers failed to present market evidence that the introduction of the cash grant program actually increased the market price of grant-eligible tangible assets. Second, the court determined that including the anticipated grant in the basis used to calculate that same grant is circular and contrary to the plain meaning of Section 1603. Third, the taxpayers’ own California change-of-ownership filings described the amount paid for the cash grant as “a discrete sum paid for revenue unrelated to the operations” of the wind facilities, which the court viewed as an implicit acknowledgement that the grant did not relate to eligible assets. Fourth, the court noted that a cash grant, as a “right granted by a governmental unit,” constitutes an ineligible intangible asset, not an eligible tangible asset.

The Cost Approach Governs; Although DCF Is Not Inherently Prohibited

The court selected the government’s cost approach over the taxpayers’ DCF methodology to determine the fair market value of eligible property, but it carefully limited its holding, noting that the DCF approach is not categorically prohibited under the applicable purchase price allocation rules. The problem with the use of the DCF approach in this case, the court found, was that the taxpayers’ DCF model was premised on including the cash grant as a revenue stream attributable to the eligible assets, an approach that the court rejected. Without the cash grant in the model, the taxpayers’ own analysis showed their DCF valuations would be significantly lower, undermining the strength of the DCF approach on these facts. The court found the government’s proposed cost approach more reliable in this case, because it directly valued the reproducible tangible assets rather than projecting integrated business cash flows. However, in doing so, the court modified the government’s proposed cost approach to include US$48.1 million of interest during construction and a US$100.5 million development fee incurred in the development and construction of the Alta facilities.

No Independent Turn-Key Premium; Developer Profit Percentages of 15–20%

In addition, the court declined to allow the taxpayers to include in eligible basis an independent turn-key premium above the costs in the cost segregation report, finding that agreements with contractors already reflected turn-key value, because the contractors bore the turn-key risks, not the developer. Specifically, the relevant contracts required the contractors to deliver fully integrated and operational facilities, backed up with performance warranties and liquidated damages provisions that were on the higher end of industry standard. Turn-key risk, therefore, attached to the contractor and not the developer, because the contractors’ contractual assumption of the turn-key risk had economic substance. Practitioners should note this is a highly fact-specific finding: in other cases where a developer economically bears residual turn-key risk, they may still be entitled to an independent turn-key premium.

On developer profit, the court rejected the government’s approach of using the Capital Asset Pricing Model (CAPM), a model that derives the value of an asset by valuing future income streams, as a proxy for developer profit, finding the methodology unsupported by market evidence. The court instead adopted the developer profit percentages from a consultant’s contemporaneous appraisal reports, which were based on seven comparable wind transactions from 2008–2010, directing: (i) 15% developer profit for Alta I; and (ii) 20% developer profit for Alta II through VI. 

Development Rights Excluded for Lack of Evidentiary Support

Finally, the court excluded US$157 million in “development rights” from eligible basis, even though these rights could in principle be capitalized into eligible tangible property under IRC Section 263A. Including these rights in basis requires a rigorous, component-by-component analysis showing that each constituent cost was an indirect cost properly allocable to eligible tangible construction, and the court found that the taxpayers never did a satisfactory analysis, instead offering only vague categorical descriptions (wind data, permitting work, and other development milestone achievements) without identifying or separately valuing each component. This lack of precision made it impossible for the court to conduct the required Section 263A analysis. In other words, not only was the taxpayers’ documentation inadequate, they failed to perform the substantive analytical work that Section 263A demands. 

MARKET IMPACT AND PRACTICAL IMPLICATIONS

This decision will reverberate across the market for purchased renewable energy projects, and market participants should be aware of three practical implications.

First, in ITC project acquisitions with a substantial step-up over developer costs, cost segregation analyses are likely to face heightened scrutiny and the allocation of purchase price between eligible tangible assets and ineligible intangible assets will become a more contentious issue. Tax credit insurers have been scrutinizing these step-ups in a manner that suggests a developer fee or other premium of approximately 20–25% over hard costs is generally defensible, and the court’s ruling indicates that this should be viewed as within an acceptable range. Purchasers of ITC projects and tax credits need to document the components of any step-up with the same rigor the court applied here: general categories are insufficient, and constituent costs must be identified and individually analyzed under the applicable basis capitalization rules.

Second, the DCF approach to valuing ITC eligible property, although not dead, is likely to be significantly constrained going forward. The court was careful to frame its rejection of the taxpayers’ DCF as specific to their model, which increased the value of the project based on anticipated cash grants, and could not survive scrutiny without that input. A well-constructed valuation model that does not take into account cash flows attributable to a cash grant or credit in the basis calculation remains theoretically available, but practitioners should be prepared for IRS pushback where the valuation model produces values materially above reproduction costs. The evidentiary burden to support any such valuation will be high, and the model must be able to withstand scrutiny when cash flows attributable to the credit are removed.

Third, and relatedly, developers who seek to use project-level cash flows to reflect the full fair market value of the eligible assets will likely face more scrutiny in light of Alta Wind. The court indicated that project cash flows attributable to the entire integrated enterprise, including intangibles like PPAs, transmission rights, and regulatory approvals, cannot be cleanly attributed to eligible tangible assets without robust empirical evidence that such cash flows actually increased the market price of those specific tangible assets, rather than the project as a whole. That evidence did not exist in Alta Wind (in fact, turbine prices declined during the relevant period), and it will be difficult to provide this type of robust evidence in most transactions.

LOOKING AHEAD

While Alta Wind represents a major victory for the IRS, a Federal Circuit appeal remains possible, which could once again reframe the rules. In the meantime, taxpayers and their advisors can take the following steps to limit their risk of the type of IRS challenge faced by the taxpayer in Alta Wind:

• Review existing cost segregation analyses for purchased projects to assess how the purchase price step-up has been allocated between eligible tangible assets and ineligible intangible assets, and whether that allocation is supported by adequate documentation.
• For transactions in progress, ensure that the ITC basis analysis does not rely on the ITC itself as a revenue driver supporting a higher eligible basis, and that any DCF approach valuation can be defended independently of the credit.
• Document development cost components with specificity, not just with aggregate categories like “development rights” or “developer fee,” so that each component can be analyzed individually under Section 263A for potential inclusion in eligible basis.
• Be prepared for the IRS to seek to extend the Alta Wind framework to Section 48 and 48E ITC basis disputes through the audit process.

Please contact the authors for more information. 

We acknowledge the contributions to this publication from our special projects lawyer Gale Chan.

The Code’s Section 1 covers providers of generative AI systems; Section 2 covers deployers of AI systems that generate or manipulate deepfakes or text published with the purpose of informing the public on matters of public interest. The Code makes significant structural changes to the first draft published in December 2025, including: (i) several previously mandatory measures are now optional, (ii) marking flexibility is expanded, (iii) a finalized EU icon is introduced, and (iv) a concrete interoperability deadline of 2 February 2027 is set. Adherence to the Code by providers and deployers serves as a guiding (although not conclusive) document for (i) demonstrating compliance with Article 50(2) and (5) EU AI Act obligations, and (ii) reducing administrative burden and giving predictability, legal certainty, and trust across all EU member states. Providers and deployers falling within the scope of Article 50 EU AI Act transparency obligations should assess their position now and are encouraged to become signatories of the Code.

Interaction With EU AI Act Transparency Obligations

The Code operationalizes Article 50 of the EU AI Act, which imposes transparency obligations on two distinct actors.

First, providers of AI systems that generate synthetic audio, image, video, or text output must ensure those outputs are marked in a machine-readable format and detectable as artificially generated or manipulated. 

Second, deployers must disclose to natural persons that they are interacting with an AI system where this is not evident from context. Where deployers use AI to generate deepfake content, they must label it as such. Finally, deployers that generate text published with the purpose of informing the public on matters of public interest must disclose the artificial origin of that text, unless the content has undergone human review and a natural or legal person holds editorial responsibility for the publication. 

Adherence to the Code serves as a guiding reference for compliance with these Article 50(2) and (5) EU AI Act obligations and provides a structured basis for engagement with market surveillance authorities, but it does not in itself constitute conclusive evidence of conformity. Nonsignatories remain bound by the same statutory obligations and must demonstrate compliance through alternative means.

Key Changes From The First Draft: How These Translate Into Obligations for Signatories

Marking Flexibility Expanded

The Code introduces proportionate carve-outs: A single layer of marking suffices for AI systems embedded in physically controlled, closed environments, as well as for free-form text that cannot transport metadata. In the first draft,³ a strict multilayered approach was mandatory across the board. In the future, signatories may also demonstrate compliance through alternative or single marking techniques, provided they can prove equivalent levels of robustness, reliability, effectiveness, and interoperability to market surveillance authorities.

Several Measures Made Optional

Key items demoted from mandatory to optional in the Code include: (i) transparency of provenance information, (ii) functionality for perceptible markings, and (iii) forensic detection mechanisms, which are explicitly acknowledged as not yet mature enough to meet Article 50(2) EU AI Act quality requirements.

EU Icon Finalized

The first draft proposed only interim “AI/KI/IA” acronym solutions. An EU icon following the design specifications for visual disclosure is publicly available for everyone to use freely. The icon will comprise, as the main visual element, the capitalized acronym “AI” in English, unless use of English is incompatible with applicable national laws on the use of languages in commercial or administrative matters, in which case the acronym may be disclosed in the national language.

Concrete Interoperability Deadline

Signatories must implement an interoperability solution for watermark detection mechanisms by 2 February 2027, choosing from four specified pathways, including standardized application programming interface methods, signpost solutions, or shared consortium detection solutions.

New Privacy Protections for Detection

The Code introduces a detailed new sub-measure absent from the first draft: Content submitted for detection must be stored only for the duration of detection and permanently deleted immediately thereafter (known as “zero retention”), with only minimal traffic logs retained.

The above translate into the following obligations for signatories:

• Generative AI providers: They must implement at minimum: (i) digitally signed metadata and imperceptible watermarking (or prove an equivalent single-technique alternative), (ii) a publicly accessible detection solution, and (iii) a compliance process proportionate to their size.
• General-purpose AI model providers: They are encouraged to implement marking at model level to facilitate downstream compliance, though this is not strictly mandatory under the Code.
• Deployers: They must disclose deepfakes and AI-generated published text using the EU icon or an equivalent compliant label, and they must implement internal compliance processes and awareness training.

Impact on Financial Market Participants

Given the uncertainty in the interpretation of “matters of public interest,” financial market participants who, as deployers, use generative AI to produce publicly available communications and reports that may attract public interest (e.g., macroeconomic outlooks; sector reports; commentary on market conditions; environmental, social, and governance reports) will need to (i) determine whether disclosure obligations under Article 50 of the EU AI Act are triggered, and (ii) assess whether such use of generative AI would justify adherence to the Code with a view to enhance regulatory compliance. The Code also permits firms to integrate the EU icon into existing disclosure frameworks under sectoral EU financial legislation rather than building parallel processes, and it encourages industry associations to develop coordinated, sector-specific good practices. To offer a different angle, the European Securities and Markets Authority (ESMA) interestingly considered in its supervisory briefing⁴ that in the context of AI used in algorithmic trading, Article 50 EU AI Act requirements may be triggered for both providers and deployers of AI systems.

With Article 50 obligations applying in full from 2 August 2026, financial market participants that act as deployers are encouraged to act promptly. Our Investment Funds practice group and Finance practice team advises financial market participants on Luxembourg fund law and the EU AI Act regulatory framework.

The Washington Legislature responded to this litigation onslaught with House Bill 2274, which took effect on 11 June 2026. Although lobbying efforts for further amendments are expected in the next legislative session, the enactment represents the state’s first effort to balance exposure to businesses with the actual harm to consumers while preserving protections against genuinely deceptive marketing practices. The new law makes two significant changes. Here’s what you need to know in a minute or less.

What Changed?

First, House Bill 2274 reduces statutory damages from US$500 to US$100 per violation. While businesses still face potential exposure for large-scale email campaigns, the amendment substantially lowers the damages available in many cases.

Second, the Legislature added a knowledge requirement for email subject-line claims. Plaintiffs must now establish that the sender knew—or that such knowledge can be fairly implied from objective circumstances—that the subject line was false or misleading when the email was sent. This change introduces a scienter requirement that was absent under the version of CEMA interpreted in Brown.

For example, if a retailer in good faith intends to end a promotion on a particular date but later extends the sale due to unforeseen circumstances, the amendment confirms that the retailer can assert that good faith belief and change in circumstances in contesting liability. The enactment thus confirms the retailer’s ability to adjust promotions in light of changed circumstances.

Why the Amendments Matter

The reforms address several concerns raised after Brown. Our 2025 alert raised critical questions regarding traditional fraud concepts such as scienter, reliance, and damages. The Washington Legislature has now addressed at least part of that uncertainty by expressly linking liability to what the sender knew or reasonably should have known at the time an email was sent.

The amendments also recognize that routine marketing practices have increasingly become targets of high-stakes class action litigation. Many lawsuits challenge practices they say create “false urgency,” such as limited time promotions that are later extended or discounts that applied only to certain products. The amendments—particularly the scienter requirement—aim to curb the commercially and judicially undesirable trend of opportunistic challenges to these types of marketing practices, which were at issue in the Brown ruling. 

What Has Not Changed

The law still prohibits knowingly false or misleading commercial email subject lines, and violations remain linked to Washington’s Consumer Protection Act. Washington residents also may continue to challenge allegedly deceptive email marketing practices. Companies marketing to Washington consumers should continue to ensure that email subject lines accurately describe sales, discounts, deadlines, and other promotional claims.

Looking Ahead

The 2026 amendments represent an important recalibration of Washington’s anti-spam law. While consumers retain protections against deceptive marketing, businesses now have additional safeguards against liability arising from good-faith marketing communications that change over time or simply cannot fit in a single subject line. 

The legal landscape surrounding CEMA continues to evolve. The Legislature’s action suggests that Washington is seeking a middle ground—preserving consumer protections while reducing the risk of widespread litigation over ordinary advertising language. Whether these reforms achieve that balance will likely be tested in the courts over the coming years. 

We are continuing to work with our clients to help shape amendments to CEMA and counsel litigation avoidance strategies, informed by our litigation experiences defending these claims. We will update with developments as courts address the parameters of the CEMA statute as amended.

The European Union is once again raising the bar for consumer-facing protections in distance and off-premises contracts. Article 11a of the Directive (EU) 2023/2673, effective 19 June 2026 by local implementation acts in all EU member states, amends the Consumer Rights Directive (Directive 2011/83/EU) by closing a long-standing gap: while consumers have long enjoyed a 14-day right of withdrawal, exercising that right has often been buried behind opaque forms and inconsistent processes. The new Consumer Rights Directive requires online merchants to provide a dedicated, prominently displayed “withdrawal button” that consumers can use to withdraw from a contract within the 14-day window. The button supplements any withdrawal methods already offered, giving consumers a clear, standardized path to exit.

Who Is Affected

The withdrawal-button requirement applies to traders that offer goods or services to consumers in the European Union through a website or other distance sales or service provision scheme (e.g., mobile application), provided that a statutory right of withdrawal applies for the goods and services offered. Importantly, the obligation does not turn on where the trader is established. US-based and other non-EU sellers that actively market to, ship to, or otherwise on purpose contract with consumers located in the European Union should expect to fall within scope and should plan compliance accordingly.

Sectors and contract types outside of scope. Precondition for the withdrawal button is always that a consumer withdrawal right already applies under the Consumer Rights Directive. That is not the case for every online transaction. The underlying Consumer Rights Directive excludes certain sectors entirely such as financial services, social services, or passenger transport services as well as certain contract types, among them: goods made to the customer’s specifications or clearly personalized; perishable goods; and sealed hygiene goods unsealed after delivery. Whether a business and its products or services offered fall within scope and whether any of these exclusions apply to part or all of its product or service offerings requires a careful transaction-by-transaction analysis.

Key Compliance Requirements

Placement and Design of the Withdrawal Button

The withdrawal button must be permanently available, prominently placed, and easily accessible to the customer. Implementation in the website footer will generally be sufficient because the button will then appear on every subpage. However, traders must ensure the button is visually distinctive. It must clearly stand out from the surrounding footer text and links. 

The withdrawal button:

• Must be labeled “withdraw from Contract here” or use an unambiguous corresponding formulation. It is highly recommended to use the “withdraw from Contract here” labeling, as it is legally approved and helps to avoid disputes with consumer protection associations or competitors.
• Should use a distinctive color scheme, a larger font size than the surrounding footer text, or an accompanying logo. For example, the use of a separate actual button that clearly stands out from the background and the remaining information in the footer is recommended. 
• Should not be a plain text link that blends in with the other footer links as this will not satisfy the requirement.

No Login or Authentication Barriers

The trader may not require the customer to log into a user account or otherwise authenticate themselves before reaching or using the withdrawal button. No access barriers of any kind may be implemented.

Information to Be Collected From the Customer

After the customer clicks the withdrawal button, the trader must request the following information:

• The customer’s name.
• Details identifying the contract from which the customer wishes to withdraw (e.g., the order number of an online purchase).
• An electronic means of communication through which receipt of the withdrawal can be confirmed. 
  • While the directive only requires that an electronic means of communication be provided, there is a risk that the request of only one means of communication (such as only the email address) may be impermissible, as the customer would be restricted in their choice of communication method. If the trader can provide multiple input options (e.g., email address, phone number for SMS confirmation), these options should be provided to the customer. Should this not be the case, providing the option to enter an email address should be sufficient.
• Product or service identification to allow for partial withdrawal. Where an order comprises multiple individual products or services, the customer must be able to withdraw from the contract in respect of one or more individual products or services only (so-called partial withdrawal). The interface must therefore allow the customer to specify or select the particular product(s) or services to which the withdrawal relates.

The “Confirm Withdrawal” Submission Button

At the end of the information-entry flow, the trader must provide a submission button that allows the customer to send the withdrawal declaration. This button must be labeled “Confirm Withdrawal” or another unambiguous corresponding formulation. Again, it is highly recommended to use the “confirm withdrawal” labeling for the above reasons.

Confirmation of Receipt on a Durable Medium

After the customer submits the withdrawal, the trader must send a confirmation of receipt without undue delay and on a durable medium via the communication channel chosen by the customer (e.g., email). The confirmation must include:

• Receipt of the customer’s withdrawal declaration (care must be taken to confirm only receipt, not the substantive validity of the withdrawal itself).
• The content of the withdrawal declaration (i.e., the information collected under point 3 above).
• The date and time the withdrawal declaration was received.

The following is an example:

“We hereby confirm receipt of your withdrawal declaration.

Your withdrawal declaration had the following content: [insert information from item 3]

Your withdrawal declaration was received by us on [insert date] at [insert time].

This email merely constitutes a confirmation of receipt of your withdrawal declaration.”

Submission Processing: Returns and Refunds

After receipt, the trader should review the withdrawal declaration, confirm that it was made within the statutory 14-day withdrawal period, and then contact the customer in accordance with the trader’s usual processes to arrange the return of the goods and the reimbursement of the purchase price or the price charged for the provision of services (provided these costs for services must be reimbursed under statutory laws).

Updates to Terms & Conditions and the Privacy Notice

Beyond the technical implementation, traders must update consumer-facing documentation:

• The withdrawal-rights instructions (typically included in the general terms and conditions or terms of sale) must be revised to reflect the availability of the new withdrawal button as an additional means of exercising the right of withdrawal.
• The privacy notice must be updated to describe the personal data collected through the withdrawal button (name, order number, email or other contact information, product-selection data), the legal basis for processing, retention, and any onward disclosures.

Recommended Next Steps

Because the requirement reaches any trader actively selling to EU customers, US and other non-EU companies should begin scoping implementation now. Next steps include:

• Audit your EU-facing websites (including localized subdomains, mobile sites, and apps) to identify all consumer-facing flows that fall within scope.
• Engage user-experience and design and development teams to build a visually distinctive withdrawal button in the footer, the prescribed-label submission flow, the partial-withdrawal selector, and the durable-medium confirmation email pipeline.
• Update general terms and conditions, withdrawal instructions, and the privacy notice across all relevant EU language versions.
• Train customer-experience, returns, and legal-operations teams on the new intake flow and the distinction between confirming receipt and confirming the substantive validity of a withdrawal.

Key Takeaways

While certain sectors and contract types fall outside scope, the withdrawal-button obligation will apply to a large portion of businesses selling online to EU customers—and the compliance deadline is already here. Traders that have not yet begun implementation should move immediately. Applicability and the precise scope of each requirement turn on facts specific to a business’s offering, its customer base, and the EU Member States in which it operates, and a careful analysis is warranted before assuming an exclusion applies. The firm is advising clients across industries on these questions and stands ready to help you assess your exposure, confirm scope, and design and execute a compliant rollout.

Inside this issue:

• New Joiners
• Articles of Interest
• Events
• Cases Studies
• Pro Bono Cases

To access the full edition of this newsletter, please click here.

In March 2026, we published a client alert¹ examining the Commission de Surveillance du Secteur Financier’s (CSSF) updated FAQ on crypto assets in investment funds and the key changes since the initial 2022 guidance. That alert highlighted, among other things, the new obligation on investment fund managers (IFMs) to assess their crypto-asset-related activities against article 60(5) of the EU Markets in Crypto-Assets Regulation (Regulation (EU) 2023/1114) (MiCAR), a provision that was set to increase in importance as the MiCAR transitional period drew to a close.

That moment has now arrived. The 18-month transitional period granted under article 143(3) of MiCAR to entities already providing crypto-asset services under applicable national law expired on 1 July 2026.² As of today, any entity providing MiCAR-regulated crypto-asset services in Luxembourg without a valid authorisation is operating outside the law.

This alert sets out the key implications for Luxembourg market participants.

The Transitional Period: A Brief Recap

MiCAR became fully applicable across the European Union on 30 December 2024.³ Article 143(3) allowed entities already providing crypto-asset services in compliance with applicable national law to continue doing so for a period not exceeding 18 months (i.e. until 1 July 2026) without holding a MiCAR crypto-asset service provider (CASP) authorisation. In Luxembourg, the primary beneficiaries of this transitional regime were entities registered as virtual asset service providers (VASPs) under the law of 12 November 2004 on the fight against money laundering and terrorist financing, as amended (the 2004 AML Law). In anticipation of the expiry of that period, the European Securities and Markets Authority (ESMA) issued a public statement on 23 June 2026 setting out its expectations for how unauthorised CASPs should manage the transition.⁴

What Has Now Changed?

Former VASPs

VASP registration under the 2004 AML Law is no longer a sufficient basis on which to provide crypto-asset services within the scope of MiCAR. Entities must either hold a full CASP authorisation under article 62 of MiCAR⁵ or, where they qualify as a regulated financial entity, have completed the notification procedure under article 60 of MiCAR.⁶

Wind-Down Obligations for Unauthorised CASPs

ESMA expects unauthorised CASPs to take immediate steps to wind down their EU activities in an orderly manner whilst safeguarding clients’ interests and mitigating risks to market integrity. In particular, unauthorised CASPs must: (i) immediately stop onboarding new EU clients and cease marketing activities; (ii) limit the provision of services to actions necessary to sell or transfer crypto assets, reallocate assets or close positions; and (iii) communicate clearly, promptly and repeatedly with clients about wind-down plans, including a deadline by which any residual positions would be closed automatically. Wind-down arrangements must be implemented in compliance with all relevant EU or national conduct laws and anti-money laundering/combating the financing of terrorism obligations throughout the process. ESMA further reminds CASPs established outside the European Union that they cannot provide MiCAR services to EU clients, and MiCAR prohibits CASPs from outsourcing or delegating certain services (notably custody) to entities that are not authorised as CASPs.

IFMs and Depositaries

As highlighted in our March 2026 alert, IFMs must analyse the services they perform in connection with crypto assets against the activities listed in article 60(5) of MiCAR,⁷ as this may trigger additional authorisation or notification obligations over and above existing fund management authorisations. In addition, where a fund or IFM has appointed a CASP as custodian under Model 1 of the depositary framework,⁸ it must now verify that the appointed service provider holds a valid MiCAR CASP authorisation. This is not a merely formal requirement: under Model 1, liability for crypto-asset restitution rests directly with the appointed CASP rather than with the depositary, meaning that the regulatory status of the appointed CASP translates immediately into a fund-level risk.

Credit Institutions

Those providing crypto-asset services should confirm whether they have completed the article 60 notification⁹ or hold a stand-alone CASP authorisation, as applicable.

What Should You Do Now?

The expiry of the transitional period warrants a careful review of existing arrangements. In particular, you should do the following:

• Verify that any appointed CASP holds a valid MiCAR authorisation. VASP registration alone is no longer sufficient.
• Verify whether your CASP is authorised under MiCAR using the ESMA Register,¹⁰ and act promptly where this is not the case, including by transferring crypto assets to an authorised CASP or to a self-hosted wallet.
• As an IFM, conduct or revisit your analysis under article 60(5) of MiCAR without delay.
• As a depositary, determine which custody model applies and ensure all required CSSF notifications have been submitted.
• Review service agreements with crypto-asset counterparties and fund documentation for MiCAR compliance.

Why This Matters for You

The expiry of the MiCAR transitional period marks a hard regulatory boundary for the Luxembourg crypto-asset market. Entities that were relying on VASP registration to provide services that fall within the scope of MiCAR are now operating without a valid legal basis, and the consequences—including supervisory action by the CSSF and potential civil liability to clients—are immediate. There is no grace period beyond 1 July 2026.

For investment funds, IFMs and depositaries, the implications are equally direct: the regulatory status of any appointed CASP is now a live fund governance and risk management issue, not a matter that can be deferred to the next periodic review cycle. Acting promptly to verify authorisation status, revisit service agreements and update fund documentation is essential to avoiding both regulatory exposure and reputational risk. It should be noted that although, in the case of indirect investments into crypto-funds (e.g. exchange-traded funds), IFMs are not required to apply for a “Other-Other Fund-Crypto-assets” licence; they have to undertake an assessment of the ability of such crypto funds’ managers to identify and manage the risks pertaining to investments in crypto assets.

Our Investment Funds practice group and Finance practice team advises fund managers, depositaries and institutional investors on Luxembourg fund law and the evolving crypto-asset regulatory framework. 

As one might expect, every item under the Division of Investment Management rulemaking agenda is formally designated as “deregulatory.”³ The SEC 2026 Agenda also maps neatly onto the framework Chairman Atkins has been describing in speeches for the past year, which he calls the “A-C-T” strategy: advance regulatory frameworks into the modern era, clarify jurisdictional lines, and transform the rulebook by returning it to first principles.⁴ For advisers and funds, that translates into three key themes: 

• Reduce burdens from core compliance rules, including updating the adviser recordkeeping and pay-to-play rules.
• Modernize rules written for a paper and telephone era, such as an e-delivery rule and addressing innovations such as crypto and digital assets.
• Continue the sustained push to expand retail access to private markets.

While the SEC 2026 Agenda addresses all the rulemakings under the Commission’s authority, including, for example, important rules related to the definition of a dealer, the regulatory status of finders, and transfer agent rules, this discussion focuses on the agenda items that directly affect investment advisers and funds. 

New for Investment Advisers

Many of the new rulemaking agenda items focus on investment advisers, addressing long-standing pain points, such as Rule 206(4)-5 under the Investment Advisers Act of 1940, as amended (the Advisers Act), commonly known as the “pay-to-play” rule, and the need to modernize some of the regulatory requirements, such as the Advisers Act’s recordkeeping requirements. While many of these items were not formally on the last agenda, it has been clear that the following are matters the current Commission would like to address.

Pay-To-Play Reform

Rule 206(4)-5 under the Advisers Act sets forth requirements relating to political contributions and related solicitation activity by investment advisers who seek to provide advisory services to government entities. Advisers have long raised issues with the strict liability and harsh consequences of the adviser pay-to-play rule, which includes a two-year compensation “time out” when an adviser or its covered associates make political contributions above small de minimis amounts to officials who can influence the award of government advisory business.

The SEC 2026 Agenda includes an item entitled “Pay to Play Reform” and describes the project only as addressing “identified compliance burdens.” Given the long-standing issues investment advisers have raised with Rule 206(4)-5, it is likely that the rulemaking efforts would focus on the very low contribution thresholds, the harshness of a two-year revenue forfeiture for inadvertent foot faults, the breadth of the “covered associate” definition and its lookback, and the limited exceptions for returned contributions. 

Recordkeeping Modernization

Also new is a project to propose amendments to Rule 204-2, the adviser books and records rule. As described in the SEC 2026 Agenda, the project is intended to address the “appropriate scope” and “identified compliance burdens related to electronic communications.”⁵ Brian Daly, the director of the Division of Investment Management, presaged this agenda item at an American Bar Association audience in December, noting that “the language of the [Advisers Act recordkeeping] rule still reflects a paper-based mindset.”⁶  

Given the project description and the fact that this agenda item arises after the off-channel communications enforcement sweep, we expect that the Commission would be seeking to amend the recordkeeping rules to define which electronic communications an adviser must actually retain, rather than policing the question through enforcement. The SEC 2026 Agenda also includes consideration of broker-dealer recordkeeping rules, specifically to clarify the “business as such” requirement under Rule 17a-4 under the Securities Exchange Act of 1934, as amended.⁷ We are hopeful that these proposals will provide some clarity around recordkeeping requirements associated with the use of artificial intelligence, which has been an area of industry focus. 

New for Funds and Products

Much like the agenda for advisers, the items added to the SEC rulemaking agenda for funds reflect the “A-C-T” agenda of Chair Atkins, and many have been previewed through speeches or other venues, including the following:

Retail Access to Private Markets

Potentially the most significant addition is a new agenda item entitled “Enhancing Retail Exposure to Private Markets.” The agenda describes amendments or new rules under both the Advisers Act and the Investment Company Act of 1940, as amended (the 1940 Act), to facilitate retail investor access to private markets through registered funds and, separately, to allow advisers to charge performance fees to an expanded set of clients.⁸

We expect that any proposal resulting from this agenda item to center on enhancing public and retail investor access to privately offered investments through registered vehicles such as closed-end funds like interval and tender offer funds, paired with a potential loosening of the qualified client limits on performance-based compensation. Prior to this item being added to the SEC 2026 Agenda, it was unclear if the Commission would seek to implement this policy priority through staff guidance or other informal incremental steps. Its inclusion on the SEC 2026 Agenda suggests that rulemaking (rather than other avenues) is on the horizon. Notably, this is one of the few agenda items that include a “statement of need” where the Commission explains the reasoning behind the potential rulemaking. Here, the Commission noted that “[f]acilitating retail investor exposure to private markets through registered funds and modernizing the performance fee framework would provide needed investment opportunities for retail investors seeking to diversify their investment allocation in line with their investment time horizon and risk tolerance and open more opportunities for retail investors.”

Affiliated Securities-Lending Agents

Another significant addition addresses a lower profile but nonetheless an important matter. The SEC 2026 Agenda includes an agenda item relating to a potential new exemptive rule that would permit registered funds to use an affiliated securities-lending agent compensated with a share of lending revenue, subject to certain conditions.⁹

Today, such arrangements generally require exemptive relief because of the affiliated transaction prohibitions in Section 17 of the 1940 Act. A rule would level the field between fund complexes that hold legacy orders and those that do not, and it might improve securities-lending economics for funds and their shareholders.

Electronic Delivery at Last

The SEC 2026 Agenda also now includes a cross-divisional project that would modernize the framework for electronic delivery of documents required under the federal securities laws, which still defaults to paper for many fund and adviser communications.¹⁰ The industry has sought an e-delivery default for well over a decade. If proposed and adopted, this would provide the industry with the most immediately tangible cost reductions of any item on the SEC 2026 Agenda.

The SEC 2026 Agenda also includes a number of potential rulemaking items from divisions other than the Division of Investment Management, but items that may still impact funds or advisers. For example, the SEC 2026 Agenda includes new proposed rules related to the proxy process, “including certain filing and procedural requirements relating to proxy solicitations and shareholder meetings, to reduce costs and compliance burdens” that could have significant effects on funds.¹¹ Similarly, a new rule proposal on the regulatory status of “finders” may have significant impacts on the marketing of private funds.¹²  

Still on the List: Cross Trades, Custody, and Reporting

There are a few carryovers from the prior agenda that have not yet been acted upon. The first is Rule 17a-7, which governs the circumstances under which registered investment companies may engage in cross trades. The ability for registered investment companies to engage in cross trades of fixed income securities has been significantly limited by the definition of “readily available market quotations” included in amendments to Rule 2a-5 that were adopted in 2019. Amendments to Rule 17a-7 have been on the SEC agenda since the spring 2025 agenda, and a workable fixed income cross-trading exemption would be a welcome return to past practice and result in immediate cost savings for fund shareholders.¹³ 

A second key item remaining on the SEC 2026 Agenda relates to modernizing the custody rules under both the Advisers Act and the 1940 Act, expressly including crypto assets.¹⁴ This replaces, rather than continues, the 2023 safeguarding proposal, which drew heavy criticism and was formally withdrawn in 2025.¹⁵ The statement of need accompanying this item focuses on the necessity for clarifying how advisers and funds can hold crypto assets in compliance with custody requirements, consistent with the chairman’s broader digital asset agenda.

Rounding out the carryovers, the Commission has already proposed amendments scaling back Form N-PORT portfolio reporting (proposed in February 2026) and a long-overdue update to the “small entity” definitions used in regulatory flexibility analyses, which would raise the adviser threshold for being considered a small entity from US$25 million to US$1 billion in assets under management.¹⁶ While a technical matter, the updates to the “small entity” definitions carry outsized significance from a regulatory process perspective, as the expanded definitions would require the Commission to consider tailored treatment for a far larger population of advisers and funds in every future rulemaking.

What Fell Off the Agenda

Comparing this agenda to the prior edition, the most significant deletion for advisers is the joint SEC and Financial Crimes Enforcement Network (FinCEN) customer identification program rulemaking, which had been listed at the final rule stage. Its removal is consistent with The US Department of the Treasury’s decision to postpone the related investment adviser anti-money laundering program rule to January 2028 and to revisit both rulemakings in the interim.¹⁷  

Timing and Takeaways

Each item on the SEC 2026 Agenda includes a “proposal date” field. Nearly every investment management item shows a proposal date of October 2026. Historically, the published target dates have not been a reliable indicator of when the Commission will actually take action on rules, so these dates are best read as a statement of ambition rather than a schedule. SEC 2026 Agenda dates are nonbinding, and realistically, we expect a steady flow of proposals from late 2026 through 2027, with adoptions stretching beyond. 

As to takeaways, please note the following:

First, Engage Before the Proposal Is Issued

The Commission has invited engagement, and the items on the SEC 2026 Agenda are drafted at a high level of generality. A critical point to keep in mind is that the Commission is limited in what changes they can adopt to a rule after it is proposed, and it can only make changes that are a “logical outgrowth” of what is discussed in the proposal. Advisers and fund sponsors with specific pain points, such as the pay-to-play time out, recordkeeping requirements, or fixed income cross trades, can have outsized impact on any ultimate rule proposals by engaging prior to their publication. 

Second, Do Not Confuse Direction With Relief

This agenda signals deregulation in many core compliance areas, but these changes are still aspirational. Every rule discussed above remains in force as written until amended. Pay-to-play exposure is at its peak in an election year, the recordkeeping rules have not been updated to directly address off-channel communications (despite indications that enforcement has been de-prioritized), and custody obligations for crypto remain unsettled. Compliance programs should always reflect the rules that are currently on the books, not anticipated changes, and deregulation does not mean no regulation. The examination staff will expect advisers and funds to comply with existing rules.

Third, Expect the Deregulatory Posture to Be Tested

As with all rulemaking, rule proposals that are deregulatory in nature, such as proposals that would expand retail access to illiquid assets or relax custody and recordkeeping standards, are subject to comment and further evaluation by the Commission and its staff. Further, the current deregulatory stance could shift dramatically under the next administration.¹⁸ 

If you have questions about any of the items on the agenda or would like assistance engaging with the Commission or the staff on any of these issues, please contact us.

Background: Geofences and Data Collection

The case arose from a 2019 armed robbery investigation where law enforcement obtained a “geofence warrant” directing Google to identify devices that were present within a defined geographic area during a specified period (creating a “digital geographic fence” around the purported crime scene). The warrant initially required Google to search its vast repository of Location History data and produce anonymized records for devices within the designated area before investigators sought identifying information for specific accounts. That process ultimately led investigators to identify and charge their suspect, Chatrie.

The Court held that obtaining this Location History information constituted a Fourth Amendment search. Referencing its 2018 decision in Carpenter, the Court reasoned that Google’s Location History creates a detailed record of an individual’s movements and associations, revealing intimate aspects of daily life. The Court also rejected the government’s argument that users forfeit constitutional protections simply because Google stores the information (third-party doctrine).

The Court did not, however, determine whether the warrant itself satisfied the Fourth Amendment’s probable cause requirements. It remanded the case to the lower courts for further proceedings.

Why This Matters 

Although Chatrie addresses constitutional limits on the government’s access to data, the decision is likely to influence broader privacy rules and regulatory expectations.

First, the Court continued a trend of recognizing that digital data differs fundamentally from traditional business records. Rather than treating location information as transactional data voluntarily shared with a service provider, the Court emphasized the comprehensive and revealing nature of continuous digital location records—including where a person is at or near the time the data is generated. This reasoning may influence future disputes involving other forms of granular digital information, including precise GPS data, connected device data, and potentially artificial intelligence-derived behavioral profiles.

Second, the Court’s analysis further narrows the traditional “third-party doctrine” in circumstances involving pervasive digital technologies. Companies should expect litigants, regulators, and courts to continue questioning whether individuals meaningfully consent to extensive data collection simply because they use modern digital services (as explained by the Court, users are continually prompted to opt in to location services in order to optimize an application’s use).

Third, the opinion reinforces the growing recognition that location information occupies a special place within privacy law because it can reveal sensitive information about an individual’s health, religion, political activities, employment, personal relationships, and daily routines. This principle increasingly appears across federal and state privacy statutes, Federal Trade Commission (FTC) enforcement actions, and international privacy frameworks. Chatrie’s characterization of location data as uniquely revealing may provide additional support for FTC enforcement and state attorney general actions targeting inadequate location data practices. State comprehensive and health-based privacy laws, including those in California, Texas, Virginia, Colorado, Washington, and Connecticut, classify precise geolocation as “sensitive data,” triggering opt-in consent requirements and heightened scrutiny.

Finally, although arising in a different legal context, Chatrie is consistent with a broader regulatory trend recognizing that precise geolocation information presents not only privacy concerns but also national security risks. Recent initiatives—including Executive Order 14117,³ governing bulk transfers of sensitive personal data to countries of concern, and the Bureau of Industry and Security’s Connected Vehicles Rule⁴—reflect an increasingly unified view across regulatory and national security frameworks that comprehensive location data warrants heightened legal protection.

Practical Implications for Businesses

For organizations that collect or process location information, Chatrie serves as another reminder that sensitive data governance has become a strategic legal issue rather than merely a compliance exercise.

Companies should consider the following:

• Reviewing what categories of location and mobility data are collected, how precise that data is, and whether all collection remains necessary for identified business purposes, including whether privacy-enhancing technologies, aggregation, de-identification, or less precise alternatives could satisfy the same business need.
• Reassessing retention periods for historical location information and other highly sensitive datasets.
• Evaluating internal governance surrounding responses to law enforcement requests, subpoenas, warrants, and other legal process involving customer data.
• Confirming that consumer-facing disclosures accurately describe location data collection, retention, sharing, and deletion practices.
• Monitoring how courts interpret Chatrie in future litigation involving geofence warrants and other forms of digital investigative techniques.
• Determining whether Executive Order 14117, the US Department of Justice’s Data Security Program, or the Bureau of Industry and Security’s Connected Vehicles Rule affect the organization’s collection, transfer, or retention of sensitive location or other covered personal data.

Looking Ahead

As data privacy continues evolving, Chatrie is unlikely to be the Court’s last word on digital footprints. Because the Court expressly declined to determine the ultimate constitutionality of the geofence warrant at issue, significant questions remain regarding what degree of geographic scope, temporal scope, and particularity will satisfy the Fourth Amendment. Future cases will likely address those issues directly.

Beyond criminal investigations, however, the broader message is clear. Courts increasingly recognize that comprehensive digital datasets—particularly precise geolocation information—may warrant heightened legal scrutiny because of the insights they reveal about an individual’s life. As legislatures, regulators, and courts continue to reshape privacy laws, organizations that collect sensitive personal information should anticipate greater expectations regarding transparency, necessity, data minimization, and governance.

Key Takeaways

• US Securities and Exchange Commission (SEC or Commission) Shifts Back to Traditional, Less Prescriptive Principles-Based Disclosure: The proposed rescission would eliminate the agency’s 2024 climate disclosure framework, the Enhancement and Standardization of Climate-Related Disclosures for Investors rules, and recenter SEC reporting obligations on traditional, less prescriptive principles, reversing a regime that sought to require detailed climate risk and emissions disclosures.

• Market and Investor Pressure Persists Despite Rollback: Even without a federal mandate, companies will continue to face strong demand from investors for comparable, decision-useful climate disclosures—reflecting the role of investor expectations in shaping sustainability-related risk reporting. 

• The International Sustainability Standards Board (ISSB) Standards for Sustainability-Related Financial Disclosure (ISSB Standards) Offer a Path Forward: The proposal signals a potential way forward for companies seeking a pragmatic approach to meeting investor demands and navigating other regulatory requirements efficiently. The proposal reinforces the potential for dual or hybrid disclosure practices and the importance of market-driven information flows in the total mix of information available. The investor-focused mandate of the ISSB Standards and their growing influence in global capital markets offer a roadmap for providing additional disclosures that are consistent with the traditional principles of the US financial markets.  

On 29 May 2026, the SEC proposed to rescind in full its 2024 climate disclosure rules, marking a significant shift in the Commission’s approach. The comment period closes on 3 August 2026. If adopted, the proposal would eliminate the SEC’s most expansive climate disclosure framework to date and return the agency to a more traditional disclosure regime under federal securities laws.

While the proposal reflects the administration’s broader deregulatory shift, it also underscores the continued role of investor demand and global-market forces in shaping climate-related disclosures—particularly as international frameworks such as the ISSB Standards gain traction. 

Background

The SEC’s climate-disclosure rulemaking has evolved rapidly over the past several years, shaped as much by litigation and political transition as by regulatory policy. In March 2024, the Commission adopted final rules that would have required public companies to provide detailed and standardized disclosures concerning climate-related risks, governance practices, and—depending on the issuer—greenhouse gas (GHG) emissions and related financial-statement impacts. 

Those rules represented a significant departure from the SEC’s longstanding disclosure framework, which historically centered on principles-based requirements and issuer-specific determinations. Rather than relying primarily on a principles-based approach, the 2024 rules introduced a prescriptive and standardized regime requiring broad categories of climate-related disclosures if material, reflecting increasing investor demand for comparability and transparency.

Shortly after adoption, the rules were challenged in multiple federal courts of appeals by a wide range of stakeholders, including states and private litigants. The United States Court of Appeals for the Eighth Circuit (Eighth Circuit) ultimately consolidated the litigation, and the SEC stayed the effectiveness of the rules pending judicial review.

In March 2025, following a change in Commission leadership, the SEC voted to discontinue its defense of the rules. The Eighth Circuit subsequently held the litigation in abeyance while the Commission determined how to proceed.

The current proposal represents the Commission’s formal response to that process and signals its intent to rescind the rules in their entirety through Administrative Procedure Act rulemaking. 

What Is in It

The proposed rescission (Release No. 33-11421) would eliminate all amendments adopted as part of the 2024 climate-disclosure rules, including changes to Regulation S-K and Regulation S-X.

As adopted, the 2024 rules would have required detailed disclosures of material information regarding climate-related risks and their impact on a company’s business strategy, financial performance, and long-term outlook. These requirements extended to governance structures, risk-management processes, and mitigation strategies. The rules also would have required certain issuers to disclose Scope 1 and Scope 2 greenhouse gas emissions, along with related attestation requirements, and to report specified financial-statement impacts associated with climate-related events.

The proposed rescission would unwind these requirements entirely. If adopted, companies would continue their existing disclosure obligations, under which climate-related information is disclosed only to the extent it is considered material under longstanding securities-law principles, given that the 2024 regulations never took effect.

The Commission’s Rationale

The SEC’s proposal is grounded in both legal and policy considerations.

First, the Commission asserts that the 2024 rule exceeded its statutory authority, emphasizing that disclosure requirements must be tied to investor materiality rather than broader policy objectives.

Second, the Commission concludes that the rules imposed significant compliance costs on public companies that were not justified by their benefits. These costs include investments in data-collection systems, internal controls, and third-party verification processes.

Finally, the proposal reflects the Commission’s view that the 2024 rule departed from the SEC’s traditional disclosure philosophy by imposing prescriptive requirements for specific climate-related financial information across a wide range of issuers, regardless of their specific risk profiles.

Implications for Public Companies

If adopted, the rescission would significantly reduce near-term compliance burdens for public companies that had begun preparing implementation of the 2024 rule.

However, the proposal does not eliminate climate-related disclosure obligations entirely. Companies remain subject to existing securities-law requirements, including the obligation to disclose material climate-related risks.

In addition, companies will continue to face disclosure expectations driven by state regulations, international frameworks, and investor demand. As a result, the broader regulatory environment remains complex and increasingly fragmented.

Companies may need to reassess their sustainability-related disclosure strategies to ensure alignment with both legal requirements and market expectations.

Looking Ahead

The SEC’s proposed rulemaking should be understood as part of a broader recalibration of the Commission’s approach to disclosure modernization, with particular significance for how companies might consider the role of international sustainability frameworks. 

While the proposal is embedded in a wider deregulatory and capital formation agenda, its references to market-driven information flows signal a deliberate shift toward recognizing market-driven practices as a means for meeting select investor demand for additional, decision-useful information and acknowledging the role of global standards in that marketplace of information. In particular, the SEC appears to recognize the growing importance of ISSB standards in global capital markets, reflecting a broader shift toward market-driven standardization. In the proposal, the Commission states “disclosures mandated by the Commission are only some of the information registrants provide to the marketplace. Investors and analysts often demand additional information about a wide range of topics depending on their particular investment strategies or non-investment interests.” The SEC emphasizes that this “market-driven flow of information” is expected to continue even without the rule. The proposal also suggests that these flows of information offer a reasonable alternative to meeting investor needs.

From a policy perspective, the proposal reflects an effort to balance domestic regulatory autonomy while acknowledging international market dynamics. Rather than embedding prescriptive climate-related disclosure items into Regulation S-K disclosure framework, the SEC’s overall shift toward a more principles-based posture offers issuers more flexibility to determine how to provide disclosures required by Regulation S-K and how to provide additional information to investors in the evolving global marketplace.

The proposal positions the US framework as compatible—but not coextensive—with global standards, preserving flexibility while enabling participation in global capital markets and investor-driven disclosure ecosystems.

For market participants, this environment is likely to reinforce continued reliance on hybrid or dual-reporting approaches with SEC rules, which are grounded in traditional materiality principles and the existing Regulation S-K framework, defining the minimum US regulatory baseline. The ISSB Standards offer a compatible global baseline for additional sustainability-related financial disclosures.

In recent letter sent to House GOP leadership, Rep. Nick LaLota (R-NY) and a group of House Republicans make a baseline for defending free-market principles and protecting the freedom to invest from increasing political interference in private markets. In the press release, one of the signatories, Rep. Pat Harrigan (R-NC) notes, “When government starts telling investors what risks they can and cannot consider, it does not protect the market, it distorts it. We have already seen how state laws restricting investment decisions cost hundreds of millions in lost economic activity. If Washington continues down this road, the costs fall on American families, workers, and retirees whose savings are caught in the middle.” 

With or without government mandates, we expect many US corporations will continue to make sustainability-related disclosures for investor-relations purposes. The central question, therefore, is not whether such disclosures will be made, but whether they will be recognized and accepted by foreign jurisdictions. In this regard, ISSB-aligned reporting could serve as a “passport” into those jurisdictions, enabling US issuers to satisfy international disclosure expectations through a single, globally accepted framework, while preserving the SEC’s traditional principles-based approach as the foundation of domestic disclosure obligations under the US securities laws.

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:

• Proxy Wars;
• 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.
   

Government Leadership 

The US Coast Guard (USCG), US Maritime Administration (MARAD), and US Nuclear Regulatory Commission (NRC) are collaborating to provide the regulatory foundation for commercial deployment of nuclear maritime technology. As stated by MARAD Administrator Stephen M. Carmel: 

To successfully introduce [small modular reactors]¹ we must view this through a system-transition lens rather than just as a technology demonstration. We are seeking critical insights on how the government can help reduce systemic uncertainty, align regulatory structures, and enable the market conditions necessary for private capital and operators to scale these groundbreaking technologies. 

The American Bureau of Shipping (ABS)² has been leading efforts in the United States to bring industry and government leaders together to identify and build strategies to address barriers to deployment of nuclear propulsion and floating nuclear energy facilities, including through the US Center for Maritime Innovation (USCMI).³ At the most recent USCMI event held on 23 June 2026, the USCG and NRC announced the signing of a new memorandum of understanding (MOU) to “facilitate[] the reliable and efficient licensing and regulation” of civilian maritime nuclear projects.⁴ Under the MOU, the NRC has primary responsibility for nuclear reactor licensing and radiological safety and is the lead federal agency under the National Environmental Policy Act (NEPA), while the USCG is responsible for vessel and maritime facility inspection, maritime safety and security, and related certifications and will serve as a cooperating agency under NEPA. The NRC and USCG agreed to coordinate inspections, reviews, and licensing schedules on a concurrent basis, sharing information and jointly developing milestones from the pre-application stage onward. 

The MOU builds on the NRC’s 14 May 2026 public meeting which outlined the Commission’s plans for a white paper that will describe how its existing licensing frameworks would apply to floating nuclear power plants and nuclear propulsion.⁵ At that meeting, the NRC highlighted items it was considering for inclusion in the white paper, including the following:

• Hazard identification and analysis (e.g., effects of wave-induced motion).
• Classification of structures.
• Systems and components.
• Conditions expected during port entry and operations.
• Security.
• Liability.⁶
• Emergency planning.⁷

Meanwhile, the US Navy is taking the lead in demonstrating the flexible capabilities of nuclear-powered ships by testing the ability to power Norfolk Naval Base, the largest naval base in the world, from the nuclear-powered aircraft carrier USS Gerald R. Ford.⁸ The potential for nuclear vessels to provide power to local ports rather than pulling from local grids could be a key component of the commercial viability of nuclear-powered shipping by providing an additional revenue stream for vessels and reducing the electric power infrastructure and energy needs of ports.⁹

These agencies will be at the inaugural meeting of the International Atomic Energy Agency’s (IAEA) Atomic Technologies Licensed for Applications at Sea (ATLAS) initiative hosted by the United States in Washington, DC, in August 2026. This initiative will provide an international push to “support the maritime industry’s exploration of small modular reactors (SMRs) to power civilian ships and to provide offshore energy, as operators consider alternative fuels and seek to strengthen long-term energy security.”¹⁰

Industry Developments 

On 5 June 2026, ABS announced it had issued an approval in principle for “the integration of a nuclear reactor into a cargo vessel propulsion system developed by the Massachusetts Institute of Technology (MIT), HD Korea Shipbuilding and Offshore Engineering (HD KSOE), and the Capital Maritime Group.”¹¹ An approval in principle is granted during the early conceptual design phase to “assist the client in demonstrating project feasibility to its project partners and regulatory bodies."¹² ABS commented that the approval in principle “highlights the value of collaboration with key stakeholders in advancing promising commercial nuclear technologies.”¹³ Concurrently in Europe, Lloyd’s Register announced its approval in principle for a nuclear car carrier concept powered by a molten salt reactor.¹⁴ 

Preparing the Nuclear Maritime Workforce

On the workforce development side, Maine Maritime Academy (MMA) received a US$1,000,000 grant from the US Department of Energy to establish a Center for Education and Training of the Nuclear Merchant Mariner and is reviving its nuclear engineering technology major in the fall 2027 semester.¹⁵ MMA has a long nuclear maritime history, previously offering the nuclear engineering technology major in 1960 with many of its graduates going on to serve on the NS Savannah, the world’s first nuclear-powered merchant ship.

K&L Gates Is Here to Help

To realize the full potential of commercial nuclear for maritime purposes, companies will need to navigate complex government regulations and technical standards, as well as ensure a robust and ready workforce. As the nuclear and maritime industries coordinate the commercial deployment of these technologies, our experienced nuclear and maritime team, dating back to the birth of the industry with the NS Savannah, holds a deep understanding of these key agencies and the industry and is well positioned to support the deployment of these key technologies. 

The lawsuit comes just three weeks after environmental groups had challenged California’s EPR regulations for being too lenient.³ The two cases approach California’s EPR program from opposite directions. The environmental groups contend that the regulations do not fully align with the statute and are too lenient, while the states and trade association argue the statute itself is unconstitutional.

The Complaint 

The complaint includes 11 counts against the director of the California Department of Resources Recycling and Recovery (CalRecycle) and the Circular Action Alliance (CAA), the producer responsibility organization selected to implement the statute. Among other things, the plaintiffs allege the following constitutional deficiencies:

• The statute violates the Commerce Clause by discriminating against out-of-state manufacturers, imposing fees on out-of-state companies with no presence in California, and restricting the free movement of interstate commerce.
• The environmental mitigation surcharge established under the statute constitutes an impermissible tax on out-of-state companies in violation of the Commerce Clause and the Import-Export Clause.
• The statute constitutes improper delegation of regulatory, legislative, and enforcement authority to CAA.
• The statute violates the First Amendment by prohibiting states and companies from including a “separate item on a receipt or invoice” reflecting the fee charged by the CAA.

What Is Next

The lawsuit adds another layer of uncertainty to California’s EPR program and follows closely on the heels of the environmental groups’ regulatory challenge. Although the cases raise different legal issues, both have the potential to shape the future implementation and administration of California’s EPR framework.

The constitutional arguments advanced in the states’ lawsuit, including the Commerce Clause, nondelegation, and First Amendment claims, may also influence future challenges to EPR programs in other jurisdictions. However, unless a court grants preliminary relief, California’s statutory deadlines and compliance obligations remain in effect. Accordingly, affected companies should continue their compliance planning while closely monitoring litigation developments.

We acknowledge the contributions to this publication from our summer associate Annabel Drayton.

The report identifies both strong practices and persistent weaknesses across the industry. While firms have generally developed relatively mature frameworks for financial sanctions, trade sanctions compliance remains less developed and presents a growing area of risk. The FCA emphasises in its report that firms must maintain robust, end-to-end systems and controls to prevent, detect and respond to sanctions breaches. 

Key Findings

Breach Reporting 

Although reports by FCA-supervised firms of suspected sanction breaches have decreased in recent years, reporting levels remain significantly higher than pre-2022 levels. Most reports concern financial sanctions, while only a small proportion are related to trade sanctions.

The FCA analysed the suspected breach reports it has received since 2024, and it found the following:

• The Majority of Reports Relate to the Russian Sanctions Regime. However, they also saw reports relating to Libya and, increasingly, Iran and North Korea. 
• The Majority of Sanctions Reporting Is From Firms in the Payments, Retail Banking and Wholesale Financial Markets Sectors. However, whilst there is limited reporting from other sectors, such as insurance and digital assets, the FCA expects this to change given sanction evasion attempts by Russia’s shadow fleet and the reported use of cryptocurrencies in circumventing sanctions.
• Identifying and Reporting Suspected Breaches Is Improving but Is Not Always Timely. Of the breaches reported in 2025, 35% related to activity that occurred prior to 2025 (an improvement from 48% in 2024). The average time taken between a potential breach being identified and reported was 116 days in 2025, a small improvement from 120 days in 2024.

Common Breach Causes

The FCA found that most sanctions breaches stem from weaknesses in core control areas. The most frequent root causes include the following:

• Weak Sanctions Screening Systems (Including Name and Transaction Screening). The FCA highlighted that traditional screening is not sufficient, particularly for trade and sectoral sanctions. While most firms had some form of business risk assessment, many were incomplete, outdated or lacked methodological clarity. Common weaknesses included poor articulation of sanctions risk, unsupported conclusions and over-reliance on third-party inputs. 
• Poor Alert Management Processes. Alert management issues were also prominent, including slow response times, inadequate escalation and poor documentation. In some cases, delays in acting on alerts allowed transactions to proceed despite sanctions risks.
• Inadequate Customer Due Diligence (CDD) and Enhanced Due Diligence (EDD). Many firms struggled to identify beneficial ownership or indirect exposure to sanctioned persons, particularly in complex or multilayered structures. The use of EDD tools, such as sanctions questionnaires, was inconsistent, and oversight of third-party CDD providers was often weak. 
• Failures To Properly Implement or Maintain Asset Freezes and Errors in Complying With Licence Conditions. Failures in freezing assets and complying with licence conditions were a major source of breaches. Some firms did not act quickly enough to freeze assets or failed to maintain restrictions once applied, allowing internal transactions to move funds or apply charges to accounts. Others lacked clarity on licence conditions, increasing the risk of noncompliance.

FCA Expectations and Next Steps

The FCA expects firms to adopt a holistic, life-cycle approach to sanctions compliance, covering onboarding, screening, monitoring, escalation and reporting. Systems and controls should be regularly reviewed and updated to reflect evolving risks.

In particular, firms must do the following:

Strengthen Core Control Areas (CDD, Screening, Alert Handling)

The FCA stated that firms should adopt proactive approaches, including transaction monitoring, thematic reviews and intelligence-led investigations.

Improve Governance and Oversight

This includes providing high-quality management information combining both quantitative and qualitative analysis. Firms’ reliance on third-party vendors created additional risk. The FCA identified issues with data quality, such as missing or inaccurate customer information, and delays or errors in updating sanctions lists. Firms with strong controls supplemented external data with internal watchlists and intelligence.

Enhance Capability in Trade Sanctions Compliance

For firms with relevant exposure, trade compliance expertise should be integrated into financial crime frameworks and supply chains and goods/services risk should be mapped.

Incorporate Evasion Typologies Into Risk Assessments and Controls

The FCA identified common methods used to evade sanctions, including (1) use of intermediaries, family members or associates to obscure ownership; (2) complex or opaque corporate structures; (3) movement of funds via crypto assets or e-money platforms; (4) rapid transfer of funds following designation; and (5) misrepresentation of trade transactions (e.g. falsified documentation or mis-declared end use). The FCA stressed that firms must go beyond basic screening and actively detect such patterns.

The FCA is engaging with firms where weaknesses were identified and will continue to monitor industry progress.

Firms should consider the guidance set out in the FCA’s report, and please do not hesitate to contact our team should you wish to discuss these matters further.

From 1 July 2026, the national minimum wage has increased by 6% to AU$26.44 per hour. Award minimum wages have also risen, by 4.75%. 

The Fair Work Commission noted that determination of the review was particularly challenging this year because of the unusual degree of complexity in the economic and business performance in Australia. Ultimately, the Fair Work Commission cited moderate wage growth, increasing inflation, a predicted slowing economy over the next year, and uncertainty in the Middle East as reasons for its decisions. 

Echoing its concerns from the 2025 national wage review, the Fair Work Commission was again fundamentally guided by its view that most Award-reliant employees found the real value of their wages to be lower than prior to the July 2021-post-panedmic inflation spike. The Fair Work Commission noted the resulting 'real wage gap' is particularly affecting the living standards of the low paid and their capacity to meet non-discretionary needs. 

The Fair Work Commission also determined that structural changes to Award wages were necessary, electing to eliminate classifications paid at the lowest wage rates; C13 and C14. 

The C13 rate is the lowest wage rate applicable to ongoing employment in the Award system, while the C14 rate is a transitional wage rate applicable to a limited initial period of employment. The phasing out of the C13 and C14 wage rates will occur in three stages, and C12 will then become the lowest wage rate for ongoing employment. The first of the three stages involves additional, proportional increases to the relevant wage rates. 

The Fair Work Commission otherwise noted it intends to continue its review of particular Award classifications with the objective of eliminating gender-based undervaluation. The Fair Work Commission confirmed review of priority Awards is now complete and will see a phasing in of wage increases accordingly. The Fair Work Commission intends to have completed the entirety of this review by the delivery of the national wage decision next year.  

At 1 July 2026, the Superannuation Guarantee rate will remain unchanged at 12%. An annual maximum contribution base of AU$270,830 for the 2027 income year will apply. 

This means that once an employee's ordinary time earnings exceed AU$270,830 per annum, employers are not required to make further superannuation contributions under the Superannuation guarantee legislation. If separate contractual obligations to pay superannuation apply, these obligations are unaffected.

With the introduction of Payday Super, there will be no per quarter maximum contribution base. 

The changes will apply from 1 July 2026.

The Fair Work Act’s high income threshold will also be indexed from 1 July 2026, and has increased to AU$190,100. Non-award and non-enterprise agreement covered employees who earn in excess of AU$190,100 will be unable to bring an unfair dismissal claim.

The value of penalty units applicable to the Fair Work Act has increased with effect from 1 July 2026 from AU$330 per unit to AU$364 per unit. 

What Should You Be Doing From 1 July?

Employers should:

• Review annualised salary arrangements to ensure that the annualised wage rate is sufficient to meet or exceed the employees’ minimum award or minimum wage entitlements taking into account the 4.75% or 6% increase respectively.
• Update payroll systems and processes to ensure that wages and superannuation contributions take into account 1 July 2026 increases and removal of the per quarter maximum contribution following the introduction of Payday Super.
• Review enterprise agreement pay rates (where applicable) and ensure the pay rates do not fall below the applicable modern award base rate or the national minimum wage (as applicable).
• Ensure all employees who are eligible are being paid the appropriate super guarantee. 
• Be mindful of the new high income threshold of AU$190,100.

How Can We Help?

If you have any questions about the effect of the 1 July 2026 threshold increases on your payment obligations as an employer, please contact our Labour, Employment and Workplace Safety team.

The RFC, which is not itself a proposed rulemaking, seeks public comment on some of these “novel questions,” and it will likely be used by the SEC and its staff to inform future guidance or rulemaking. Several of the questions posed by the SEC in the RFC could have far-reaching implications for sponsors of exchange-traded funds (ETFs) and perhaps even sponsors of other investment products. Specifically, the RFC requests comments on the following:

• Investment company status determinations: Are there certain new ETFs that should not actually be considered an “investment company” under the Investment Company Act of 1940, as amended (the 1940 Act)?
• The ETF rule: Should Rule 6c-11 under the 1940 Act (the rule governing the operation of ETFs) be amended to address concerns arising from novel ETFs (Novel ETFs)?
• Registration statement review process: Should the SEC consider amendments to the rules governing the SEC review of Novel ETF registration statements to permit a heightened level of review?

In raising these issues, the SEC is asking some fundamental questions concerning how Novel ETFs can be structured and brought to market. As such, the RFC is important for ETF sponsors and other industry participants to consider.

Background: Why Is the SEC Seeking Comments?

As noted in the RFC, the ETF industry in the United States has grown rapidly since the first US ETFs were authorized in 1992, and it has seen particularly strong growth after the SEC adopted Rule 6c-11 in 2019. There are now over 4,600 US ETFs with assets of over US$12 trillion, and that growth appears to be accelerating.² So far in 2026, the US ETF industry has seen inflows of over US$1 trillion.³ On a global scale, there is approximately US$23.08 trillion invested in ETFs, with a record US$1.07 trillion year-to-date inflows at end of May 2026.⁴ 

While much of this activity has been fueled by the launch of ETFs following traditional passively managed (i.e., index) or actively managed investment strategies, there has also been tremendous growth in the number of products that seek to provide exposure to innovative asset classes or to use alternative investment strategies, such as single-stock ETFs, leveraged and inverse ETFs, options-based defined income or structured outcome ETFs, crypto-focused or crypto asset-linked ETFs, and ETFs that provide exposure to private assets. Other ETF providers have sought to launch “highly leveraged” ETFs that provide four or even five times leveraged exposure to underlying securities. More recently, several sponsors have sought to register ETFs that provide returns based on “event contracts” offered through prediction markets, such as Kalshi and Polymarket,⁵ while others are seeking to offer blockchain-enabled or “tokenized” ETFs. The influx of these novel strategies appears to have resulted in the questions being raised in the RFC.

The RFC groups these types of ETFs under the term “Novel ETFs,” which is loosely defined in the RFC as ETFs that “have expressed interest in providing exposure to innovative asset classes or using novel investment strategies” and calls out in particular ETFs that seek exposure to “crypto assets; commodity-focused instruments; single stock strategies; heightened leverage; blockchain-enabled opportunities; private assets; event contracts; and/or a combination of any of the above.”

Investment Company Status

The RFC asks why certain products sought to be registered as investment companies, instead of using alternate wrappers such as exchange-traded products (each, an ETP) or exchange-traded notes (each, an ETN). In that vein, the RFC questioned the following:

• If ETFs that have a principal investment strategy of investing in assets that may not be “securities” (e.g., certain real or digital assets determined to not be securities) should be treated as investment companies.
• If the SEC should revisit long-established interpretations of the “subjective test” of what constitutes an investment company under the 1940 Act. 

The RFC also raised questions about the application of the “objective test” under Section 3(a)(1)(C) of the 1940 Act, including whether investments in securities issued by wholly owned subsidiaries, which are commonly used by ETFs to gain exposure to commodities or other nonsecurity assets, should be considered part of a securities investment business. This has potentially significant implications for ETFs that rely on subsidiary structures (such as Cayman Islands subsidiaries) to maintain compliance with Subchapter M of the Internal Revenue Code of 1986, as amended, or to access certain asset classes. Such questions of investment company status have broad and sweeping implications, as many ETFs on the market today (such as commodity or futures-based products) follow investment strategies implicated by these questions. 

Rule 6c-11

The RFC also addressed questions about the operation of Rule 6c-11 and whether it should be amended. The SEC asked about topics such as the following:

• If the assets and strategies of Novel ETFs impact the efficient functioning of the ETF arbitrage mechanism and investor protection.
• If the SEC should take steps to help investors better understand Novel ETFs’ features (such as prescribed ETF/ETP/ETN labeling requirements).
• If Rule 6c-11 and the generic exchange listing rules that rely on an ETF’s ability to comply with Rule 6c-11 should be amended.
• If new ETF portfolio requirements should be added to the rule, such as restrictions on investing in certain strategies or asset classes, minimum holdings in securities, diversification and concentration limits, and more. 

The possibilities raised by the last set of questions on portfolio limitations are particularly significant, given the potential that certain types of ETF strategies could be barred or significantly hampered by such a change. Notably, the RFC also asked whether the interplay between Rule 6c-11 and the generic exchange listing standards should inform any analysis of potential changes to the rule. Because ETFs that satisfy Rule 6c-11’s conditions are eligible for listing under generic listing standards without a product-specific rule filing, any amendments to Rule 6c-11 (such as new portfolio conditions) could have cascading effects on the listing process and could require corresponding changes to exchange rules.⁶ 

Registration and Rule 485

The RFC cites concerns about whether the staff of the Division of Investment Management (IM) has sufficient time to effectively review and address legal issues given the fact that many of the Novel ETFs seek automatic effectiveness within prescribed time frames set forth in applicable registration statement rules under the Securities Act of 1933, as amended (the 1933 Act) (generally 75 days for new ETFs), and whether the IM staff has the tools to address concerns raised by the staff as part of such a review process. 

In light of those concerns, the RFC raises procedural questions around how the SEC could address registration statement review process, specifically, the following: 

• If the 75-day and 60-day automatic effectiveness periods should be extended for Novel ETFs (however defined and thereby removing the ability of ETFs to rely on predictable effectiveness and offering schedules).
• If the rules should be amended to enable the SEC to delay the effectiveness of a Novel ETF’s registration statement.
• If the SEC should develop additional mechanisms to address unresolved staff comments, such as by requiring Novel ETFs to disclose material unresolved comments.
• If Rule 485 should be amended to suspend or delay the effectiveness of a registration statement of a Novel ETF when it makes a material pre-launch change.
• If the SEC should have greater authority to suspend the effectiveness of a post-effective amendment to a Novel ETF’s registration statement. 

The SEC also noted the competitive pressure that incentivizes sponsors to submit Novel ETF filings quickly, and it invited comment on whether the SEC should consider mechanisms for early engagement for Novel ETFs, such as a pre-filing consultation process or confidential treatment for certain novel filings. In connection with competitive pressures, the RFC specifically noted that IM staff has observed Novel ETF filings submitted in rapid succession that are largely identical, and the use of artificial intelligence may be significantly accelerating the speed at which filings can be replicated. This observation may signal the SEC’s interest in developing mechanisms to address what it perceives as imitative filing practices.

While many of these procedural questions may become more acute in the context of Novel ETFs, they raise questions about the investment company registration and review process more generally. Accordingly, every fund sponsor should carefully review and consider the implications of such changes. 

Initial Reaction and Observations

Through the RFC, the SEC seems to be expressing concerns about the potential for certain novel products to undermine the significant progress ETFs have made in becoming the vehicle of choice for many investors. At the same time, the nature of some of these questions, despite being focused on Novel ETFs, may have implications for existing ETFs (and potentially investment companies generally). 

From our perspective, the biggest omission from the RFC appears to be the lack of a precise definition of “Novel ETFs.” At the start, the RFC notes that certain types of existing ETFs, such as those holding digital or private credit assets, might be deemed to have been novel, yet as a threshold matter the RFC does not itself provide a defined framework on how to determine what might be “novel.” As a result, it is unclear whether many future products would fall within the scope of this imprecise definition or, more problematically, whether such a definition might apply retroactively to existing ETFs. The lack of a precise definition is understandable in a request for comment, but nonetheless, it creates significant uncertainty about the scope of the SEC’s concerns (and therefore the scope of any resulting guidance or rule proposals).

The RFC also highlights several additional references to critical terms lacking definition, such as “unresolved staff comments,” as well as IM’s distinction between “failure to respond” to IM staff comments to draft registration statements and the “failure to resolve” them. The concerns of IM reviewing Novel ETFs includes the articulated goal of the RFC “[t]o encourage filing only fully developed” new fund series by fund sponsors. Some of the discussions are reminiscent of the Financial Industry Regulatory Authority (FINRA) complex products discussion in 2022,⁷ and they suggest that these types of Novel ETFs by definition would raise suitability concerns for FINRA members and the investors on their broker-dealer platforms.

The RFC also asked whether Rule 485(a) should be amended to require a fund’s board of directors or authorized signatories to specifically identify each new series included in a filing, drawing a parallel to Rule 483(b)’s requirement that powers of attorney relate to a specific registration statement. If adopted, such a requirement could impose additional governance burdens on fund complexes that register multiple series simultaneously and could slow the pace at which new ETF series that do not implicate the issues raised in the RFC could be brought to market.

What Is Next?

As noted above, the RFC is not a rulemaking; it is an information-gathering exercise for the SEC and its staff. As more industry stakeholders have the opportunity to review the RFC and consider the potential impact and implications of the questions raised, we would encourage market participants in the ETF industry to pay attention to the following points and consider whether providing their input by comment letter is beneficial. Areas that might benefit from industry input include the following:

• Whether any current or planned ETF structuring includes certain sub-trust accommodations to ensure regulated investment company compliance, and whether changes in treatment or industry description might be impactful.
• Whether potential new asset class exposures and novel structures considered for an ETF might be impacted by the questions presented in the RFC.
• Whether new ETF product initiatives have been or may be impacted by the uncertainty of delay and prolonged disclosures to competitors, including ways in which this IM review process could be improved and made more fair and transparent for fund sponsors, especially for smaller and emerging managers.
• Whether a potential new fund naming and disclosure regime for certain ETFs might be adversely impactful to the management and distribution of current or planned funds.

We also note the RFC appears to have been developed by IM’s chief counsel’s office or disclosure review teams and not from IM’s rulemaking staff.⁸ This may signal that rulemaking is not immediately on the horizon, and instead, the SEC may wish to manage the questions raised in the RFC through guidance or a disclosure review process before turning to rule amendments. 

We are continuing to develop our reactions to the RFC and are engaging with industry participants in connection with the questions raised therein. We look forward to developing additional ideas and working with our clients on potential approaches. 

Comments on the RFC are due 60 days after publication in the Federal Register. Assuming the RFC is published within a reasonable time period, the comment deadline will likely be at some point in September 2026.

Presidential Control Becomes the Default and Independent Agencies Are Diminished

The Court’s 1935 decision in Humphrey’s Executor upheld for-cause removal protections for FTC Commissioners.¹ In Slaughter, the Court rejected that protection for modern agencies that exercise executive power. The Court concluded that the FTC’s rulemaking, investigative, adjudicatory, and enforcement authorities fall within the “heartland of executive power.”²  

The majority grounded that rule in Article II accountability and founding-era history, emphasizing that the US Constitution rejected a “committee-style Executive Branch” in favor of a unitary, accountable president. The Court focused on three FTC functions: substantive rulemaking with the force of law; investigations and in-house adjudications; and civil suits on behalf of the United States.³ Although not a formal test, the opinion offers a practical roadmap: courts will ask whether an agency binds private conduct through rules, enforces federal law against private parties through investigations or adjudications, or brings enforcement actions in court. The Court put the point bluntly: “when an agency ‘executes’ a congressional mandate against private parties, it exercises executive power—no ifs, ands, or quasis about it.”⁴ 

The Court left some room for entities performing investigative or informational functions for Congress, but that space appears narrow after the Court’s broad unitary-executive reasoning.⁵ Indeed, the dissent warned that the ruling would shift power over “dozens of independent commissions” to the president, identifying agencies such as the Federal Energy Regulatory Commission, the Consumer Product Safety Commission, the Chemical Safety Board, and the Nuclear Regulatory Commission as potentially affected.⁶

Our earlier Quick Guide to Independent Regulatory Agencies maps agency structure, leadership, and removal protections for potentially affected agencies.⁷ 

The Federal Reserve Remains Different

Cook confirms that Slaughter has limits. The Court treated the Fed as a special historical arrangement rooted in central-bank independence and the First and Second Banks of the United States. It also concluded that Fed Governors may remain protected by a meaningful for-cause standard, that the president’s cause determination is judicially reviewable, and that a Governor is entitled to notice and some opportunity to respond before removal.⁸ 

Key Takeaways

Independent agencies are not gone, but many are now less independent 

For multimember agencies exercising classic regulatory and enforcement powers, for-cause removal protections are now highly vulnerable after Slaughter.

Agency priorities may shift faster with changing administrations 

Clients should expect more direct White House influence over agencies that previously operated with greater insulation from presidential removal, impacting regulatory certainty. Accordingly, clients with regulatory matters pending before impacted agencies will now need to factor in the political election cycle into their strategic planning.

The Federal Reserve is different 

Cook preserves the Fed’s for-cause protection because of its unique history and monetary-policy role, but the Court’s reasoning may invite future challenges over how far that historical exception extends and to which other agencies.⁹  

Future disputes will be about the margins 

Expect litigation over agencies that combine rulemaking, enforcement, and adjudication with claims to special historical, adjudicatory, or quasi-private status.

For regulated businesses, the practical consequence of Slaughter is significant. Agencies may retain the formal structural features of independence, but after Slaughter, the regulators that businesses engage with most often may operate with substantially greater accountability to—and direction from—the White House.

We acknowledge the contributions to this publication from our summer associate Andi Jordan.

The new requirements take effect 1 July 2026 for employers with 15 or more employees and 1 January 2027 for employers with fewer than 15 employees. 

Background: Washington’s Original Fair Chance Act (2018)

In 2018, Washington enacted the original Fair Chance Act, which is commonly known as the “ban the box” law. The Fair Chance Act prohibited employers from inquiring into or conducting criminal background checks on applicants until the employer had determined that the applicant was “otherwise qualified” for the position. The 2018 law also banned job postings that categorically excluded applicants with criminal histories. Those foundational provisions remain in effect and are now supplemented by the 2025 amendments discussed below.

Employers with employees in Seattle have been subject to Seattle’s Fair Chance Employment Ordinance (Seattle Ordinance) since 2013, which already imposed restrictive rules regarding the use of criminal records in employment decisions. The Amended Fair Chance Act aligns Washington’s statewide requirements more closely with the Seattle Ordinance and extends heightened protections to the entire state.

Key Changes Under Washington’s Amended Fair Chance Act

Timing of Background Checks: Conditional Offer Required First

Under the Amended Fair Chance Act, Washington employers are prohibited from inquiring into or receiving information about an applicant’s criminal history or conducting a criminal history background check on an applicant until after the employer has made a conditional offer of employment. It also expressly prohibits:

• Any policy or practice that automatically or categorically excludes individuals with a criminal record from any employment position; and
• Rejecting an applicant for failure to disclose a criminal record prior to receiving a conditional offer of employment.

Arrest Records and Juvenile Conviction Records: Absolute Bar on Adverse Action

Employers are now strictly prohibited from taking any tangible adverse employment action (defined as rejecting an otherwise qualified applicant, or terminating, suspending, disciplining, demoting, or denying a promotion to an employee) based on an applicant’s or employee’s (a) arrest record; or (b) juvenile conviction record.

Exception

The prohibition on considering arrest records does not apply to an adult arrest in which the individual is out on bail or released on their own personal recognizance pending trial.

Adult Conviction Records: “Legitimate Business Reason” Standard

Washington employers may not take a tangible adverse employment action solely based on an applicant’s or employee’s adult conviction record unless the employer can establish a “legitimate business reason” for doing so. 

The term “adult conviction record” is defined broadly to encompass not only criminal convictions themselves, but also any record of or information related to a conviction or other finding adverse to the subject, including citations, arrest records, certain types of dismissals (i.e., on the basis of insanity or incompetency), and probable cause statements associated with the underlying conduct leading to the conviction. As a note, an arrest record alone unrelated to a conviction cannot be the basis of an adverse employment action.

A “legitimate business reason” exists when the employer believes in good faith that the nature of the criminal conduct underlying the adult conviction record will:

• Have a negative impact on the applicant’s or employee’s fitness or ability to perform the position sought or held; or
• Harm or cause injury to people, property, business reputation, or business assets.

To establish a legitimate business reason under prong (b), employers must consider and document the following factors:

1. The seriousness of the conduct underlying the adult conviction record;
2. The number and types of convictions;
3. The time that has elapsed since the conviction, excluding periods of incarceration;
4. Any verifiable information related to the individual’s rehabilitation, good conduct, work experience, education, and training, as provided by the individual;
5. The specific duties and responsibilities of the position sought or held; and
6. The place and manner in which the position will be performed.

This individualized assessment framework is similar in structure to the Equal Employment Opportunity Commission’s guidance under Title VII of the Civil Rights Act of 1964 (Title VII) regarding the use of criminal history in employment decisions, but it is now a statutory mandate under Washington law.

Mandatory Predecision and Postdecision Notice Requirements

Washington employers contemplating an adverse employment action based on an adult conviction record must follow a two-step notice process:

Step 1: Predecision Notice

Before carrying out any adverse action, the employer must:

• Notify the applicant or employee and identify the specific record on which the employer is relying; and
• Hold the position open for a minimum of two business days to provide the individual a reasonable opportunity to correct or explain the record or to provide information regarding their rehabilitation, good conduct, work experience, education, and training (*Please note the federal Fair Credit Reporting Act (FCRA) generally requires a five-business-day pre-adverse action notice).

Step 2: Postdecision Written Notice

If the employer proceeds with the adverse action after the waiting period, it must provide the applicant or employee with a written decision that includes:

• Specific documentation of the employer’s reasoning;
• An assessment of each of the relevant individualized factors described above;
• The impact of the conviction on the position or business operations; and
• The employer’s consideration of any information the individual provided in response to the predecision notice.

(*Please note that FCRA similarly requires a written final adverse action notice after its required five-business-day period.)

New Disclosure Obligation Triggered by Background Check Notification

The Amended Fair Chance Act adds a novel disclosure requirement not widely seen in other jurisdictions. If an employer informs an applicant that the position will be subject to a postoffer background check, the employer must immediately:

• Provide the applicant with a written summary of certain key requirements under RCW 49.94.010; and
• Provide the applicant with a copy of the attorney general’s Washington Fair Chance Act Guide for Employers and Job Applicants, available online at https://www.atg.wa.gov/fair-chance-act.

Importantly, the same disclosures are required if an applicant voluntarily discloses information about their criminal history during a job interview, even if the employer did not solicit that information. Employers who routinely include language in offer letters, applications, or onboarding materials indicating that a background check will be conducted should ensure that the required disclosures are provided simultaneously with any such communication.

Antiretaliation Protection

The Amended Fair Chance Act prohibits employers from taking any tangible adverse employment action against an employee because that employee—or a person acting on the employee’s behalf—makes a good faith report (oral or written) to the employer, the attorney general, a labor organization, or others regarding a violation or suspected violation of the act, or otherwise informs others of the act’s requirements.

Exemptions

The Amended Fair Chance Act does not apply to:

• Employers hiring individuals who will or may have unsupervised access to children under the age of 18, vulnerable adults (as defined in Chapter 74.34 RCW), or vulnerable persons (as defined in RCW 9.96A.060);
• Employers expressly permitted or required under federal or state law to inquire into, consider, or rely on criminal record information for employment purposes (including certain financial institutions);
• Law-enforcement agencies and criminal-justice agencies as defined under Washington law;
• Employers seeking nonemployee volunteers;
• Entities required to comply with the rules or regulations of a self-regulatory organization under Section 3(a)(26) of the Securities Exchange Act of 1934; and
• Employers with respect to positions under a federal contract that specifically prohibits individuals with criminal records from working under that contract.

Enforcement and Penalties

The Washington State Attorney General’s Office is solely responsible for enforcing the Amended Fair Chance Act. There is no private right of action, meaning individuals cannot sue employers directly under the statute. However, the Amended Fair Chance Act substantially increases the monetary penalties that the attorney general may impose, as follows:

In addition to monetary penalties, the attorney general may pursue legal action to obtain unpaid wages, damages, and reasonable lawyers’ fees and costs. The attorney general also has authority to issue civil investigative demands for documents, interrogatory responses, and oral testimony.

Relationship to Other Laws

Employers must navigate the Amended Fair Chance Act in conjunction with other applicable legal frameworks, such as the FCRA, Title VII, the Seattle Ordinance, and the Washington Fair Credit Reporting Act. Because each of these laws impose their own requirements to applicable employers, it is important to consider the overlays and implications of each.

Recommended Steps for Employers

In light of these significant changes, Washington employers should take the following steps before their applicable effective date:

1. Audit Hiring Workflows and Application Materials

Review all job applications, online portals, and interview scripts to ensure that criminal history questions are not presented prior to the issuance of a conditional offer of employment and remove any blanket disqualification language from job postings (unless legally authorized to be included).

2. Revise Conditional Offer Letters

If a background check is warranted, ensure that employment offers clearly condition employment on the results of the background check and are issued before any background check is initiated.

3. Update Background Check Disclosure and Authorization Forms

Revise forms to comply with the Amended Fair Chance Act and the FCRA. If offer letters or onboarding materials disclose that a background check will be conducted, ensure the required attorney general guide and written summary of the law are provided simultaneously.

4. Develop an Individualized Assessment Process

Create a process for evaluating criminal history results that incorporates all six statutory factors, requires written documentation of the assessment, and supports the legitimate business reason determination.

5. Revise Pre-Adverse and Post-Adverse Action Notices

Update pre-adverse action notices to identify the specific record being relied upon, incorporate the two-business-day hold period,¹ and invite the applicant or employee to provide mitigating information where warranted. Update post-decision written notices to include the required reasoning, factor-by-factor assessment, and individualized documentation

6. Train Human Resources Personnel and Hiring Managers

Ensure that all individuals involved in the hiring process understand the new restrictions and the steps required before any adverse action may be taken.

7. Review Agreements with Third-Party Background Check Vendors

Confirm that vendors understand and will comply with the Amended Fair Chance Act’s requirements, and update vendor agreements as necessary.

The 2025 amendments to Washington’s Fair Chance Act represent one of the most significant expansions of criminal background check restrictions in the state’s history. With the 1 July 2026 effective date rapidly approaching, employers with 15 or more employees should begin compliance efforts immediately. 

For more information, please contact a member of our Labor, Employment, and Workplace Safety practice who routinely handle background check matters across the nation.

Taken together, the orders signal an update to the National Quantum Strategy (NQS). Rather than treating quantum technology solely as a long-term research initiative, the Administration is pursuing a whole-of-government effort focused on deployment, commercialization, national-security applications, and cyber resilience.

The first executive order, “Ushering in the Next Frontier of Quantum Innovation,” establishes the Quantum Computer for Application Development and Discovery Science (QC-ADDS) Effort, a coordinated federal initiative intended to develop and deploy a scientifically useful quantum computer. The second executive order, “Securing the Nation Against Advanced Cryptographic Attacks,” directs federal agencies to accelerate the adoption of post-quantum cryptography (PQC) to protect government systems and sensitive information against future quantum-enabled cyber threats. PQC refers to “cryptographic algorithms or methods that are designed to be resistant to attack by both a quantum computer and a classical computer.”

Why This Matters

These executive orders identify quantum technology as a strategic policy priority with implications for cybersecurity, government procurement, critical infrastructure, and emerging technology investment. Quantum technology has arrived, and its implications are significant.

Both domestic and foreign organizations may soon encounter new federal expectations relating to encryption standards, cybersecurity governance, supply-chain security, technology procurement, and participation in federally funded research initiatives. Companies that begin planning now may be better positioned to address future compliance requirements and capitalize on emerging opportunities.

Key Points

• “Harvest Now, Decrypt Later” is real. Adversaries may be collecting encrypted data today with the expectation that future quantum-computing capabilities could permit decryption of that information years later. It is critical that industry and government alike take notice and secure their infrastructure.
• Boards of directors and senior management should consider whether quantum readiness should be incorporated into data-governance programs, cybersecurity governance, enterprise risk management, and technology investment planning.
• Quantum technology is now a strategic national priority comparable to artificial intelligence, advanced semiconductors, and other emerging technologies. Quantum computing has the potential to transform industries including manufacturing, pharmaceuticals, energy, agriculture, logistics, and materials science by enabling solutions to certain computational problems that are difficult or impractical for classical computers.
• Companies that develop, deploy, procure, or rely upon advanced computing infrastructure should begin evaluating their exposure to quantum-related cybersecurity risks. Preparation is key—this process will take time and cannot occur overnight.
• Government contractors and entities participating in federally funded research and development programs may encounter new opportunities, funding streams, reporting obligations, and compliance requirements. The “national PQC migration policy” mandates a government-wide transition to quantum-resistant encryption to protect critical infrastructure and sensitive data.

Federal agencies are expected to accelerate adoption of quantum-resistant cybersecurity measures and to implement the National Institute of Standards and Technology’s (NIST) approved Federal Information Processing Standards (FIPS) for PQC, potentially influencing requirements for contractors, suppliers, and critical infrastructure operators.

Executive Order: Ushering in the Next Frontier of Quantum Innovation

The Administration’s quantum-innovation order creates the QC-ADDS initiative, directing multiple federal agencies to coordinate efforts to develop a quantum computer capable of advancing scientific discovery and solving problems beyond the capabilities of classical computing systems.

The initiative involves various federal stakeholders and will require a coordinated effort. The order also contemplates expanded development of quantum sensing and quantum-networking technologies, areas critical to national security and economic competitiveness.

The executive order further directs agencies to develop technical requirements, coordinate federal investments, and support the establishment of advanced quantum infrastructure. While the timeline for achieving large-scale fault-tolerant quantum computing remains uncertain, the Administration seeks to deploy a quantum computer capable of enabling meaningful scientific breakthroughs by 2028.

For companies operating in the quantum ecosystem—including hardware manufacturers, software developers, cloud-service providers, research institutions, and investors—the order signals continued federal support for commercialization and deployment efforts.

Executive Order: Securing the Nation Against Advanced Cryptographic Attacks

Q-Day—the anticipated date when quantum computers become powerful enough to break public-key encryption—is increasingly predicted to be approaching, although the timing remains uncertain. This reality carries practical significance. PQC is essential to protect our critical infrastructure, financial transactions, and way of life from adversarial cyber-attacks.

The order directs federal agencies to accelerate migration toward cryptographic systems designed to withstand attacks from future quantum computers. The Administration has established aggressive timelines for modernizing federal-encryption practices and reducing vulnerabilities associated with quantum-enabled decryption.

The order reflects growing concern regarding “harvest now, decrypt later” risks. Under this scenario, threat actors collect encrypted information today with the expectation that future quantum-computing capabilities may eventually allow them to decrypt sensitive data that currently appears secure.

Although large-scale quantum computers capable of breaking widely used encryption standards may still be years away, organizations that maintain long-lived sensitive information—including intellectual property, trade secrets, financial data, healthcare information, and classified or export-controlled information—should evaluate whether existing protections will remain adequate over the long term.

The executive order also suggests that federal contractors and critical infrastructure operators may face increased expectations regarding quantum readiness and cybersecurity modernization.

Notably, the order also directs the Cybersecurity and Infrastructure Security Agency (CISA), in coordination with NIST, to release public guidance on minimum elements for a “cryptographic bill of materials”—a disclosure mechanism intended to enable automated assessment of the cryptographic assets utilized by any hardware or software element. If broadly adopted, this requirement could compel technology vendors and government contractors to document and disclose the cryptographic components embedded in their products, analogous to the software bill of materials frameworks that have gained traction in recent years.

Industry Impacts

Government Contractors

Federal contractors should anticipate increased scrutiny regarding cybersecurity modernization, encryption practices, supply-chain security, and technology risk management. Future procurement requirements may incorporate PQC standards or quantum-readiness assessments. 

Critical Infrastructure Operators

Organizations operating in the energy, telecommunications, transportation, financial services, healthcare, and defense sectors may face heightened expectations regarding cyber resilience and adoption of quantum-resistant security measures.

Technology Companies

Cloud providers, cybersecurity companies, networking vendors, semiconductor companies, and software developers may encounter increased demand for products and services that support PQC and quantum-secure communications.

Research Institutions and Emerging Technology Companies

The federal government’s expanded investment in quantum computing, sensing, and networking technologies may create new funding opportunities, public-private partnerships, and commercialization pathways.

Boards and Management Teams

As quantum risk becomes increasingly connected to enterprise cybersecurity and national security concerns, boards of directors and senior management teams should consider incorporating quantum readiness into broader technology governance and enterprise risk-management frameworks.

Legislative Landscape

The executive orders build upon a foundation of bipartisan congressional activity reflecting sustained legislative interest in quantum technology and postquantum cybersecurity. The Quantum Computing Cybersecurity Preparedness Act (Pub. L. 117-260), signed into law in December 2022, required the Office of Management and Budget (OMB) to prioritize the migration of federal information-technology systems to PQC and directed federal agencies to submit inventories of cryptographic systems vulnerable to quantum-enabled attacks. Separately, the National Quantum Initiative Act (Pub. L. 115-368), originally enacted in 2018 and subsequently reauthorized, established a coordinated federal quantum-research program spanning multiple agencies, including NIST, the US National Science Foundation, and the US Department of Energy, and has provided a framework for sustained federal investment in quantum research and workforce development.

Congressional committees have continued to signal interest in additional legislation addressing quantum-workforce development, supply-chain security for quantum technologies, and expanded requirements for critical infrastructure operators to adopt PQC standards. Taken together with the recent executive orders, these legislative efforts underscore that quantum policy is a bipartisan, multibranch priority—and that organizations should anticipate an evolving and increasingly comprehensive federal-regulatory landscape.

Key Deadlines

The two executive orders establish a series of implementation deadlines. Organizations monitoring federal quantum policy should take note of the following milestones:

Recommended Next Steps

Organizations should consider taking proactive steps now, including:

• Conducting inventories of cryptographic assets and dependencies;
• Identifying systems containing long-lived sensitive information;
• Evaluating PQC-migration strategies;
• Assessing vendor and supply-chain readiness;
• Monitoring emerging federal-procurement requirements and technical standards; and
• Incorporating quantum-related risks into cybersecurity governance and enterprise risk-management programs.

How K&L Gates Can Help

The firm is uniquely positioned to assist clients by navigating the legal, regulatory, cybersecurity, procurement, and national-security implications of emerging quantum technologies. Our multidisciplinary team includes lawyers with experience in the White House, the intelligence community, and the US Department of Justice, having worked on government contracts, cybersecurity and privacy, national security, critical infrastructure, emerging technology, artificial intelligence, telecommunications, and public-policy matters.

Our lawyers are actively monitoring developments relating to quantum computing, PQC, federal-procurement requirements, technology regulation, cybersecurity governance, and national-security policy. We assist clients in evaluating emerging compliance obligations, preparing for evolving federal expectations, assessing technology-related risks, and identifying strategic opportunities arising from new government initiatives.

As federal agencies begin implementing these executive orders, organizations should expect additional guidance, technical standards, procurement requirements, funding opportunities, and compliance expectations. Companies that begin planning now may be better positioned to manage both the risks and opportunities presented by the next generation of quantum technologies.

The firm also assists clients with PQC-transition planning, government contracting requirements, technology transactions, supply-chain risk management, incident preparedness, and engagement with evolving federal-regulatory frameworks.

On 12 June 2026, the Federal Financial Supervisory Authority (Bundesanstalt für Finanzdienstleistungsaufsicht, BaFin) issued a draft revision of its circular “Minimum Requirements for Risk Management at Capital Management Companies” (KAMaRisk) for public consultation. 

Against the backdrop of the Fund Risk Limitation Act (Fondsrisikobegrenzungsgesetz, FRiG), which largely entered into force in April 2026, the requirements for lending by alternative investment funds (AIFs) were revised in particular; requirements for electronic data processing were removed to avoid duplication with the Digital Operational Resilience Act (DORA), and the requirements for internal auditing were aligned with international standards. 

Comments on the proposed amendments to KAMaRisk must be submitted to BaFin by 1 July 2026.

BaFin Consultation on the Fund Risk Limitation Act Circular

On 16 June 2026, the Federal Financial Supervisory Authority (Bundesanstalt für Finanzdienstleistungsaufsicht, BaFin) published a consultation on the new German Investment Code (Kapitalanlagegesetzbuch, KAGB) regulations introduced by the Fund Risk Limitation Act (Fondsrisikobegrenzungsgesetz, FRiG), which are intended in particular to address questions from market participants and are directed at capital management companies (Kapitalverwaltungsgesellschaft, KVG). An overview of the key points:

Liquidity Management Instruments (LMTs)—Section 30a of the KAGB

• At least two LMTs must be selected for each open-ended investment fund.
• The decision to activate or deactivate these instruments rests solely with the KVG; investors are not permitted to exercise a choice in this matter.
• KVGs are required to inform investors about the activation and deactivation of LMTs.
• The reporting requirement under Section 35(2)(2) of the KAGB is fulfilled by submitting the investment terms and conditions and the sales prospectus; for special investment funds, it is fulfilled by submitting the information required under Section 307 of the KAGB.
• Individual LMTs, such as redemption restrictions, swing pricing, distributions in kind, and redemption fees, are specified in greater detail, including with regard to thresholds, calculation bases, and disclosure requirements.

Licensing Procedure

• If there are only two managing directors, full-time employment (at least 40 hours per week) is required.
• New managing directors must in the future be resident in the European Union; existing managing directors appointed by 16 April 2026 are grandfathered in—a change in managing directors is subject to the new regulations.

Lending

• Lending activities may be outsourced separately; the outsourcing company does not require a licence for portfolio management for this purpose.
• Existing credit funds are grandfathered in—no new licence is required.

The consultation period ends on 6 July 2026. 

ECON Draft Reports on Capital Market Integration

On 11 June 2026, the European Parliament published the first draft reports from the Committee on Economic and Monetary Affairs (ECON) regarding the market integration and supervision package (MISP).

The MISP package, adopted by the European Commission on 4 December 2025, which consists, among other things, of a Master Amending Directive and a Master Amending Regulation, is intended to further harmonise financial market regulation and the supervisory framework. For example, changes to the passporting rules are intended to simplify pan-European distribution for Undertakings for Collective Investment in Transferable Securities (UCITS) and Alternative Investment Funds (AIFs). Changes are also planned for the Markets in Financial Instruments Directive (MiFID), Markets in Financial Instruments Regulation (MiFIR), and the Regulation on Markets in Crypto-Assets (MiCA).

The report on the Master Amending Directive calls for, among other things, more extensive macroprudential measures by supervisory authorities regarding liquidity management for open-ended funds and leverage limits. Efficient portfolio management techniques are to be disclosed along with certain information, and at least 90% of the resulting returns are to accrue to the fund. Certain fund managers and custodians are to be subject to direct supervision by the European Securities and Markets Authority (ESMA). The report on the Master Amending Regulation proposes, for example, deemed approval after a certain period has elapsed for notices of amendments.

The reports are to be finalized by 16 July 2026 and then discussed in the European Parliament. 

MiCA Consultation 2026

On 20 May 2026, the European Commission launched a consultation on the review of MiCA. The consultation runs until 31 August 2026.
Regulation (EU) 2023/1114 of 31 May 2023 on Markets in Crypto-Assets (MiCA), which has been applicable to asset-referenced tokens (ARTs) and e-money tokens (EMTs) since 30 June 2024, and has been fully applicable since 30 December 2024, harmonises the regulation of crypto-assets as well as the related services and activities.

Following the first few years of implementation, the European Commission is now reviewing whether the existing regulatory framework remains appropriate and sufficient in light of new market developments. In particular, the crypto markets themselves have evolved significantly since the conception and adoption of MiCA and continue to develop dynamically.

With this consultation, the Commission is pursuing the following objectives in particular:

• Identify gaps in MiCA (i.e., issues that have not yet been regulated);
• Evaluate experiences from its application to date;
• Prepare for the statutory review of MiCA (Article 140 in conjunction with Article 142 of MiCA); and
• Assess whether MiCA should be further developed in light of new technologies and global developments.

The results of the consultation are intended to help assess whether and where adjustments are necessary to adapt the regulation to the rapid development of crypto markets and tokenization.

EU Commission Adopts Code of Conduct for Issuer-Sponsored Research

On 21 May 2026, the European Commission adopted a Delegated Regulation establishing an EU code of conduct for issuer-sponsored research studies to improve the availability of high-quality investment research, particularly for small and medium-sized enterprises (SMEs). Issuer-sponsored research refers to investment research that is fully or partially paid for by the issuer and produced in compliance with the new EU standards. Investment firms must obtain enough information from research providers to assess whether labeled research complies with the code before using it or distributing it to clients. If they lack sufficient information, they may not distribute the material to clients or potential clients as issuer-sponsored research. The code requires research providers to maintain effective conflicts-of-interest policies, keep registers of actual and potential conflicts, and review those arrangements at least annually. The annex adds transparency obligations, including disclosure of whether the issuer paid fully or partially, information on conflicts policies, revenue-dependence disclosures, and details of relevant contractual relationships. Contracts between issuers and research providers must generally have an initial term of at least two years, avoid remuneration structures that could compromise independence, and prevent early termination merely because the issuer dislikes the research content or recommendation. Where an issuer fully funds the research, the research must generally be made available to the public free of charge, thereby promoting broader market access to investment information. Overall, the framework seeks to make issuer-sponsored research more credible and useful for investors. The Delegated Regulation will enter into force on the third day following its publication in the Official Journal of the European Union. 

EU Listing Act Fully Applicable

As of 5 June 2026, the EU Listing Act has been fully in force with all its new provisions and must be applied by all affected market participants. It comprises three legal acts and aims to simplify listing requirements for companies seeking admission to trading on public exchanges, while preserving transparency, investor protection, and market integrity. Its key elements include new requirements under the EU Prospectus Regulation (Regulation (EU) No 2017/1129), the Market Abuse Regulation (Regulation (EU) No 596/2014, MAR), the Markets in Financial Instruments Directive (Directive 2014/65/EU, MiFID II) and the Markets in Financial Instruments Regulation (Regulation (EU) No 600/2014, MiFIR).

In particular, the EU Listing Act standardizes, shortens, and simplifies securities prospectuses. It also introduces changes to ad hoc disclosure, managers’ transactions (directors’ dealings), and share buyback programmes; establishes a framework for multiple-vote share structures; and adjusts the regime for disclosing inside information.

However, the Level 2 measures have not yet been fully implemented. In this regard, we refer to our article ″BaFin Publishes Supervisory Notice Regarding the Amended Prospectus Regulation″ in our Investment Management Update Germany (April 2026).

What Is Covered

SB 707 casts a wide net, applying to “covered products” that include most apparel and household textiles—such as clothing, footwear, handbags, towels, bedding, pillows, and curtains. While certain categories are excluded (e.g., personal protective equipment, military clothing, mattresses, carpets, electronics, and some window coverings), the scope is broad enough to capture most consumer-facing textile products sold into California. For many companies, this is not a niche requirement, but rather a core compliance obligation that will reach across product lines, supply chains, and reporting systems.

Who Must Comply

SB 707 applies primarily to “producers,” using a cascading, supply-chain-based definition designed to ensure that someone is always responsible. In general, the producer is the person that manufactures a covered product and owns or licenses the brand or trademark under which the product is sold in California. But if that entity is not in California, responsibility can shift to the brand owner or exclusive licensee, then to the importer, and ultimately to the distributor, retailer, or wholesaler selling the product in California. 

A sale is deemed to occur in California if the product is delivered to a consumer in the state, capturing e-commerce and out-of-state sellers. 

This structure is intentionally broad and difficult to avoid, meaning companies across the value chain, including importers and retailers, may unexpectedly be pulled into compliance. Limited exemptions apply, including for producers with less than US$1 million in annual aggregate global turnover or that only sell secondhand goods. 

What Producers Will Need to Do

SB 707 imposes a staged but aggressive compliance timeline, beginning with a threshold requirement that all covered producers join the approved producer responsibility organization (PRO), Landbell USA, by 1 July 2026. 
 
The program then builds toward full implementation through a series of milestones, including:

• A statewide needs assessment (1 March 2027); 
• CalRecycle’s adoption of implementing regulations (effective no earlier than 1 July 2028);² 
• Submission of a comprehensive stewardship plan (within 12 months of the regulations taking effect); and 
• Plan approval by CalRecycle (by 1 July 2030).

That stewardship plan must establish a statewide system for collecting, transporting, repairing, sorting, recycling, and safely managing covered products, with free and convenient access for consumers. Once approved, implementation moves quickly, requiring rollout within months and full compliance with performance standards over time, including any additional standards imposed by CalRecycle.

The program will be funded through producer fees tied to product characteristics and end-of-life costs, adding a direct financial dimension to compliance. Producers that fail to comply may face penalties of up to US$10,000 per day, or up to US$50,000 per day for knowing violations, once enforcement is triggered.

What About Retailers and Online Marketplaces

Once the program is running, retailers, distributors, importers, and online marketplaces generally may not sell covered products in California unless the producer is listed as compliant by CalRecycle. Online marketplaces must also report certain high-volume third-party sellers and provide those sellers with information about compliance requirements.

What to Do Now

SB 707 introduces significant new compliance obligations and costs for companies selling apparel and textile products into California. Although full implementation will take several years, companies should begin preparing now. That preparation should include confirming which products are covered, identifying the responsible “producer” for each brand, reviewing California sales data, preparing to join the approved PRO, updating contracts with suppliers and retailers, engaging with Landbell USA, and advocating for company interests in future CalRecycle rulemaking.

European Commission Opens Consultation on the Draft of the New Merger Guidelines

On 30 April 2026, the European Commission (Commission) published the draft of the new Merger Guidelines (Draft Guidelines) for public consultation, replacing the 2004 Horizontal and 2008 Non-Horizontal Merger Guidelines with a single consolidated framework. The Draft Guidelines codify two decades of decisional practice and introduce several key innovations, including a positive assessment of scale-enhancing mergers, a new concept of theory of benefit, and an innovation shield for acquisitions of small innovative companies. Interested parties may submit comments until 26 June 2026.

The Commission Carries Out Unannounced Antitrust Inspections in the Chocolate Confectionery Sector

On 13 April 2026, the Commission launched an antitrust investigation in the chocolate confectionery sector, carrying out unannounced inspections over suspected market partitioning and restrictions on cross-border trade. The case highlights the Commission’s continued focus on practices that undermine the EU Single Market and affect consumer prices.

Italian Competition Authority Fines Three Private-Label Snack Producers in First-Ever AGCM Settlement Cartel Case

On 15 April 2026, the Italian Competition Authority (AGCM) imposed a total fine of approximately €23.3 million on three major Italian producers of private-label savory snacks for implementing a market-sharing agreement in relation to the supply of savory snacks manufactured for large-scale retailers in violation of Article 101(1) of the Treaty on the Functioning of the European Union.

FINANCIAL SERVICES 

The Commission is Consulting on Revised Sustainability Reporting Standards

The Commission has launched a consultation on draft revised European Sustainability Reporting Standards aimed at making Corporate Sustainability Reporting Directive sustainability reporting simpler for companies.

The Commission Opens Consultation on Crypto-Asset Framework

The Commission is reviewing how the Markets in Crypto-Assets Regulation are working in practice, giving crypto-asset issuers, crypto-asset service providers, and financial institutions a timely opportunity to flag what needs adjusting.

ANTITRUST AND COMPETITION

European Commission Opens Consultation on the Draft of the New Merger Guidelines

On 30 April 2026, the European Commission (Commission) published the draft of the new Merger Guidelines (Draft Guidelines) for public consultation. The Draft Guidelines are intended to replace the existing 2004 Horizontal Merger Guidelines and 2008 Non-Horizontal Merger Guidelines with a single consolidated framework for the assessment of concentrations under the EU Merger Regulation. The Commission plans to finalize its review in Q4 2026, with formal adoption of the Draft Guidelines anticipated to follow thereafter.

The review is driven by the broader competitiveness policy agenda, including the Draghi Report and the Mission Letter from Commission President Ursula von der Leyen to Competition Commissioner Teresa Ribera, which called for greater consideration of resilience and innovation in merger control.

The Draft Guidelines follow a year-long consultation process that included the May 2025 call for evidence, a general public consultation, and an in-depth technical consultation that closed in September 2025, and two technical stakeholder workshops. The review will continue with a third stakeholder workshop on the draft text on 10 June 2026 and the presentation of an economic study on the dynamic effects of mergers, commissioned by the Commission, in September 2026.

The Draft Guidelines represent a significant overhaul of the Commission’s merger-control guidance, codifying over two decades of the Commission’s decisional practice and EU court case law. The substantive legal test remains unchanged: the Commission will continue to assess whether transactions would significantly impede effective competition (SIEC) in the common market or a substantial part of it, in particular through the creation or strengthening of a dominant position. The core analytical architecture is preserved but embedded within a considerably broader and more flexible analytical framework. 

There are three principal innovations. 

First, the Draft Guidelines introduce a detailed positive assessment of certain scale-enhancing mergers. The Commission expressly takes a favorable view of mergers that enhance the competitiveness of European industry provided that they combine complementary capabilities.  

Second, the Draft Guidelines also introduce the concept of a theory of benefit, describing a broad understanding of eligible efficiencies encompassing improvements in innovation, product choice, quality, and similar benefits in addition to lower prices. The theory of benefit can also include increased resiliency, in what signals a more geopolitical approach to merger review. That being said, the strict test for taking into account efficiencies is maintained: they must be verifiable, merger-specific, and beneficial to consumers. It is still not clear how non-quantified efficiencies would be balanced against a theory of harm, and the Draft Guidelines state that ultimately the Commission will maintain a large margin of discretion to make that balancing exercise.

Third, the Commission also introduces an innovation shield, a safe harbor under which acquisitions of small innovative companies by nondominant acquirers will in principle not give rise to an SIEC, provided that certain conditions are met, including the presence of at least three independent competitors and combined market shares below defined thresholds.

On the theories of harm side, the Draft Guidelines move away from the traditional distinction between coordinated and non-coordinated effects in horizontal, vertical, and conglomerate mergers. The assessment follows the approach taken by the US merger guidelines and is organized around types of anticompetitive effects that may apply across all merger types, including loss of head-to-head competition, loss of innovation competition (including in early pre-development phases), foreclosure, entrenchment of a dominant position, and effects arising from access to commercially sensitive information.

The major novelty here is the return of the old “strengthening of dominance test” and the return of the portfolio effects theory without the requirement to demonstrate anticompetitive foreclosure.

The Commission also notes that the approaches set out in the Draft Guidelines may already be applied in suitable cases before their formal adoption. 

The Commission Carries Out Unannounced Antitrust Inspections in the Chocolate Confectionery Sector

On 13 April 2026, the Commission carried out unannounced antitrust inspections, commonly referred to as “dawn raids,” in two EU Member States (Member States) at the premises of a company active in the chocolate confectionery sector. 

The Commission has indicated concerns that the inspected company may have violated EU competition law under both Article 101 and Article 102 of the Treaty on the Functioning of the European Union (TFEU). Article 101 prohibits agreements and concerted practices that restrict competition, including arrangements between suppliers and distributors that partition national markets. Article 102 prohibits the abuse of a dominant market position. 

The Commission’s investigation focuses on possible market partitioning practices, including restrictions on cross-border trade within the EU Single Market and territorial supply constraints. Such practices typically involve a supplier limiting the ability of distributors or retailers in one Member State to source products from, or sell into, another Member State, artificially partitioning the Single Market.

This case is a stark reminder of the Commission’s focus on conduct that potentially has a direct impact on consumer prices for everyday goods. The chocolate and broader food and consumer goods sectors have historically attracted scrutiny over distribution practices. For instance, in May 2024, the Commission imposed a fine of €337.5 million on a global manufacturer of chocolate and biscuit products for obstructing cross border trade in chocolate, biscuit, and coffee products. In that decision, the Commission found that the manufacturer had infringed both Article 101 TFEU through anticompetitive agreements and Article 102 TFEU through an abusive partitioning of national markets. This new investigation signals continued vigilance in that space. 

Companies operating across multiple Member States should take this opportunity to review their distribution agreements and commercial practices for compliance with EU competition rules. Companies should also ensure that they have robust internal protocols in place to manage dawn raids effectively.

Italian Competition Authority Fines Three Private-Label Snack Producers in First-Ever AGCM Settlement Cartel Case

On 15 April 2026, the Italian Competition Authority (AGCM) imposed a total fine of approximately €23.3 million on three major Italian producers of private-label savory snacks for implementing a market-sharing agreement in relation to the supply of savory snacks manufactured for large-scale retailers in violation of Article 101(1) of the TFEU.

The investigation was triggered by an anonymous whistleblower complaint and led to unannounced inspections in September 2024. The three companies, including the largest suppliers of private-label savory snacks to Italy’s major retail chains, had been colluding since at least 2016, coordinating through informal channels, including bilateral meetings and private messaging applications.

The cartel operated through three mechanisms. First, two of the three companies maintained a nonaggression pact, extended from 2018 to cover all retail clients, under which each agreed not to solicit the other’s accounts. Second, all three companies coordinated their bids when retailers sought competing offers, submitting artificially inflated bids, falsely claiming production constraints, or declining to participate in tenders altogether, thereby ensuring contracts were awarded to the pre-agreed supplier. Third, two of the companies aligned their price increase communications to retailers in 2022, following meetings held in the context of rising raw material costs.

The level of fines was determined on the basis of AGCM’s fining guidelines and reflected the fact that the three companies cooperated actively during the investigation, benefiting from fine reductions. Significantly, all three companies participated in the AGCM’s settlement procedure, which was used for the first time, securing an additional 10% fine reduction in exchange for formally acknowledging their liability and waiving certain procedural rights.

The case is noteworthy as it represents first application of the AGCM’s settlement procedure and illustrates in practical terms the material benefits of cooperating early with the authority—through leniency, compliance programs, and the settlement mechanism—all of which contributed to significant fine reductions for the three companies involved.

FINANCIAL SERVICES 

The Commission is Consulting on Revised Sustainability Reporting Standards

On 6 May 2026, the Commission opened a public feedback period, which closed on 3 June 2026, on draft simplified European Sustainability Reporting Standards (ESRS). The revised standards will apply to financial years beginning on or after 1 January 2027, although companies already in scope could choose to apply them early for financial year 2026.

The objective is to ease the administrative burden on companies without losing the core objective of the Corporate Sustainability Reporting Directive (CSRD). The revision is part of the European Union’s wider drive to simplify sustainability requirements and implements the Omnibus I Directive, which entered into force in March 2026 and notably narrowed the range of companies in scope of CSRD. The draft is based on technical advice from European Financial Reporting Advisory Group submitted in December 2025.

Key changes include: (i) a stronger materiality filter, with companies not required to report immaterial information except in defined cases; (ii) clarification that “fair presentation” applies to the sustainability statement overall rather than every datapoint; (iii) more discretion on aggregation and disaggregation; (iv) new possibilities to omit commercially prejudicial information; (v) more flexibility around anticipated financial effects; (vi) closer alignment with global standards on greenhouse-gas reporting boundaries; and (vii) more targeted changes on transition plans, microplastics, pollutants, substances of very high concern, human-rights and discrimination incidents, and asset-management activities.

Over the past months, there had been speculation that the Commission may use the ESRS revision to move much closer to the International Sustainability Standards Board (ISSB) framework (for example, by creating a formal mechanism allowing companies to claim compliance with the ISSB standards through their ESRS reporting). However, the draft does not contain a formal route to simultaneous compliance, and the Commission’s announcement makes no reference to equivalence, mutual recognition, or deemed compliance. Nevertheless, the revised ESRS improve technical alignment with the ISSB standards in several areas, including greenhouse-gas reporting boundaries, the treatment of anticipated financial effects, the wording of common provisions, and the application of “undue cost or effort” reliefs. 

The Commission Opens Consultation on Crypto-Asset Framework

On 20 May 2026, the Commission launched a public consultation on the Markets in Crypto-Assets Regulation (MiCA), with feedback open until 31 August 2026. 

The exercise runs along two tracks. A public questionnaire is aimed at individuals to gather views on awareness, understanding, and use of digital assets (e.g., cryptocurrencies, stablecoins, tokenized financial assets, and non-fungible tokens) and on the information consumers feel they need to use them with confidence. A separate, more technical targeted consultation is aimed at industry and authorities (i.e., crypto-asset issuers and service providers, financial institutions, technology providers, academics, and national and European supervisors) and covers the detailed legal and operational questions. 

A key area of focus is whether it is always clear which assets fall under MiCA and which should instead be treated as financial instruments under other EU regulatory frameworks, such as the Markets in Financial Instruments Directive. The question is whether assets that qualify as financial instruments should continue to be governed by sectoral legislation, or whether everything issued and traded on distributed ledgers should in principle fall under MiCA. The consultation is therefore particularly relevant for businesses working with tokenized financial instruments, tokenized fund or money-market interests, hybrid tokens, governance tokens, and wrapped assets issued in series.

The Commission is also looking at how MiCA applies to stablecoins, including asset-referenced tokens and e-money tokens, and whether the current rules on reserves, redemption rights, issuance models, and prudential requirements remain appropriate. For crypto-asset service providers, the consultation focuses on: (i) whether the existing list of regulated services properly captures market activity, looking in particular at staking (whether its current treatment as ancillary to custody is sufficient, or whether it needs standalone requirements); (ii) crypto lending and borrowing (whether these should be regulated at all, and if so, how); and (iii) decentralized finance (how MiCA might be complemented to address it).

Because the outcome may shape future amendments to the legislative framework, businesses active in this space should assess whether their current or planned activities could be affected and consider whether to submit evidence before the consultation closes on 31 August 2026.

Background

The NSR program requires preconstruction permits for new major stationary sources and major modifications at existing major sources under both the Prevention of Significant Deterioration (PSD) and Nonattainment New Source Review (NNSR) programs. As currently written, the EPA’s definitions of the terms “begin actual construction” and “begin construction” in the NSR regulations have been interpreted by EPA in the past to prohibit certain on-site construction activities on or related to an emissions unit, which are of a permanent nature. These activities include the installation of building support structures and foundations, laying underground pipework, and the construction of permanent storage structures. 

Key Takeaways

The Proposed Rule would establish a regulatory distinction between construction associated with source-emitting equipment and construction of non-emitting structures or components. Under the proposed framework, construction of non-emitting components or structures would be able to occur before an owner or operator obtains a permit. Some of these potential components consist of building structural components, foundations, and support structures not integral to emissions units, utility service infrastructure for a site, concrete pads, and other non-emitting structures that are not themselves emission units. 

EPA cautions, however, that construction undertaken prior to permit issuance is at the facility’s “own risk” since a permit application can still be denied or an issued permit may require additional controls that may require a change in project design requirements. In addition, state and local permitting authorities will need to evaluate whether corresponding revisions to state-approved NSR programs are necessary, which could result in varying implementation timelines across jurisdictions.

Policy Rationale

EPA’s rationale for the Proposed Rule is that allowing these limited construction activities to occur prior to permit issuance will not affect the substantive air quality review process required under the NSR program, because no pollutant-emitting equipment would be installed or operated before permit issuance. While, historically, EPA guidance treated many permanent on-site construction activities as prohibited prior to permit issuance, EPA has maintained in more recent guidance that portions of that historical interpretation are broader than required by the regulatory text and may unnecessarily delay development projects. The Proposed Rule would now codify that more recent EPA guidance.

Conclusion

EPA is accepting comments on the Proposed Rule through 29 June 2026. Project developers, manufacturers, energy companies, and other regulated entities should closely monitor the rulemaking process and evaluate whether planned projects could benefit from greater flexibility in pre-permit site preparation and construction activities. Our Environment, Land, and Natural Resources practice group is available to work with clients to understand how these regulatory changes may affect their planned capital projects and to develop practical strategies for managing permitting, compliance, and project-development considerations.

As set forth in the EEOC’s press release, the NEP sets out the agency’s priority areas for enforcement activity, including investigations, litigation, and settlements, and continues to focus on a “merit-based” approach to its review of claims of discrimination.² The NEP represents a major policy shift from prior EEOC enforcement approaches, a shift that aligns with executive orders issued by the Trump administration and the EEOC’s (and the Chair’s) public statements over the past 18 months on the agency’s overall mission.³ Consistent with prior EEOC statements, the NEP will now prioritize litigation of disparate treatment claims over disparate impact claims and will seek to minimize the use of disparate impact theories “to the maximum degree possible, consistent with EO 14281” in its investigations.⁴ In support of this shift, and in response to a request by the Chair as to the constitutionality of the EEOC’s disparate impact guidelines, the US Department of Justice Office of Legal Counsel issued a nonbinding legal opinion on 9 June 2026, finding “that [the agency’s] guidelines about disparate-impact liability under Title VII of the Civil Rights Act are unconstitutional.” 

In addition to focusing on intentional discrimination claims, which the agency determined are “inherently are more egregious forms of discrimination than unintentional disparities between groups of employees which arise from an employer’s neutral policies or practices”, the NEP identifies the following enforcement priorities:⁵

• Diversity, equity, and inclusion (DEI) or “similar euphemisms” resulting in facially discriminatory practices or other such policies resulting in intentional discrimination.
• Claims related to the application of recent US Supreme Court decisions, with a focus on DEI practices, voluntary affirmative action programs, religious accommodations pursuant to Groff v. DeJoy,⁶ single-sex spaces in the workplace, and employer obligations under the Pregnant Worker Fairness Act.
• Addressing federal circuit court splits.
• Cases focused on protecting vulnerable or underserved workers, including teenage workers, persons with limited literacy or education, low-wage earners, survivors of sexual assault, and workers with developmental or intellectual disabilities.
• Issues that implicate the integrity and effectiveness of the EEOC’s enforcement processes, including investigations and conciliation efforts.
• Appellate cases that provide an opportunity to clarify the scope of liability under the laws the EEOC enforces, especially in cases involving religious organizations and employers.

The EEOC stated that its enforcement activities are not limited  to the enumerated priority areas and were not presented in any particular order of importance.⁷ Additionally, EEOC Chair Andrea R. Lucas (the Chair) laid out certain “Chair Priorities” that “complement, and are applications of” the NEP’s general priorities, including the following:⁸ 

• Addressing race and sex discrimination deriving from DEI practices and policies.
• The protection of US workers from discrimination relating to US national origin.
• Enforcing women’s rights to single-sex spaces and workers’ rights to “express the binary nature of sex.”
• Protecting employers’ rights to religious accommodation.

Considerations for Employers

The EEOC’s 2025–2029 NEP formalizes the recent shift in the agency’s enforcement priorities. Although the NEP does not modify employer obligations under Title VII of the Civil Rights Act of 1964 and other federal employment anti-discrimination laws, it provides insight into where the EEOC is likely to direct its resources in the coming years. Employers should use this as an opportunity to review hiring, promotion, accommodation, DEI, and workplace conduct policies to confirm that such policies are in compliance with federal, state, and local employment laws, consistently applied, and supported by clear business and compliance rationales. Further, employers should evaluate current employment practices in light of the NEP’s enforcement priorities, especially as various state law requirements may be contrary to the federal directives in the NEP. By proactively evaluating these practices now, employers can better position themselves to respond to the EEOC’s evolving enforcement approach. 

Our Labor, Employment, and Workplace Safety practice is available to assist employers in navigating these developments.

We recognize our summer associates, Ahmed Al-Khawaja and Sara McClure, for their contributions to this client alert. 

The first proposed rule would retain the existing maximum contaminant levels (MCLs) for PFOA and PFOS—set at 4.0 parts per trillion each. This proposed rule will also extend the dates of compliance from 26 April 2029 to 26 April 2031 for eligible systems that submit a request. EPA explained the need for the extension stems from implementation challenges for certain systems, including small, rural, and disadvantaged communities that face financial limitations. In order to be eligible for the extension, a water system must show compelling factors that it is unable to comply and that the extension will not result in an unreasonable risk to health. EPA highlighted that allowing drinking water systems to seek additional time may allow the cost of PFAS removal technologies to come down through technological advancements and production efficiencies.

The second proposed rule would rescind the regulatory determinations, maximum contaminant level goals (MCLGs), and MCLs for four additional PFAS regulated under the 2024 rule—perfluorohexane sulfonic acid (PFHxS), perfluorononanoic acid (PFNA), hexafluoropropylene oxide dimer acid (HFPO-DA, commonly known as GenX), and a hazard index mixture of those three plus perfluorobutane sulfonic acid (PFBS). EPA’s proposed rule explains this action is necessary to correct the unlawful procedure under which these regulations were originally promulgated. If finalized, EPA has committed to re-evaluating these substances using the correct statutory process, including a more robust public comment solicitation. 

Alongside these proposed rules, EPA announced nearly US$1 billion in new grant funding through the Emerging Contaminants in Small or Disadvantaged Communities Grant program to help water systems address PFAS in drinking water. EPA’s announcement also highlights its recently updated PFAS Destruction and Disposal Guidance. This update identifies available and effective methods to remediate, dispose of, and destroy PFAS contamination. The three existing technologies identified by EPA as having lower potential for environmental release of PFAS are thermal destruction, landfills, and underground injection. EPA’s updated guidance also includes a new technology evaluation framework to assess the safety and effectiveness of these emerging tools, including analytical methods, disposal/destruction efficacy, community considerations, and regulatory requirements. The guidance reiterates that PFAS destruction and disposal research is ongoing and new approaches for management will continue to be evaluated.

The EPA will hold a virtual public hearing on 7 July 2026 and comments for both proposed rules must be received on or before 20 July 2026.

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 on a cross-practice basis.

The Order provides an overview of New York’s plans to deploy advanced nuclear capacity, as part of New York’s “all-of-the-above approach” to meeting the state’s future energy needs, including the potential deployment of “one to two new gigawatt [GW]-sized nuclear plants” by 2040.⁴ The Order outlines two new processes, led by the DPS, to facilitate a pathway to add 4 GW of new “advanced nuclear”⁵ These two projects, when combined with New York’s existing nuclear capacity, would result in a total 8.4 GW Nuclear Reliability Backbone to provide a stable foundation of reliable, baseload power for New York’s future economic growth.  

The Options Paper builds on the Order and evaluates the policy mechanisms available to support new grid-scale advanced nuclear projects in New York. It identifies three key challenges confronting the deployment of advanced reactors: (1) pre-final investment decision funding, which can total “hundreds of millions of dollars for a gigawatt-scale project”;⁶ (2) private construction financing, which is a challenge due, at least in part, to cost overrun risk;⁷ and (3) operating revenue sufficiency for commercial viability, which, at the current levels, would likely require “a need for a level of public support.”⁸ While recommendations will be offered in a staff white paper expected to be issued in November 2026, the Options Paper favors pipeline deployment of multiple units of the same mature technology to capture learning-rate cost reductions, with built-in flexibility through opt-in/opt-out provisions.⁹

Interested stakeholders are requested to provide comments and responses to issues raised in the Options Paper and to the questions in the Order by 10 August 2026.¹⁰ A technical stakeholder conference will be convened before 31 October 2026, and a DPS Staff White Paper with recommendations to PSC is due by 13 November 2026. The full Advanced Nuclear Master Plan is expected to be issued by the end of 2026.¹¹

The firm’s Nuclear Energy practice group is monitoring this development and is ready to aid clients in developing comments and navigating the nuclear industry in the Empire State.

Date of Commencement

The WFH Bill is expected to take effect on 1 September 2026. However, small businesses (employers with fewer than 15 employees) will have a deferred commencement date of 1 July 2027.  

Right to Work From Home

The proposed reform moves working from home from a discretionary arrangement to a statutory entitlement. Employees will have a right to work from home where their role can reasonably be performed remotely as follows:

• Up to two days per week for full-time employees; and
• A pro-rata entitlement for part-time employees (with the calculation method to be set by the regulations).

This places the onus on employers to justify any refusal, similar to flexible working arrangements for employees with certain protected attributes under the Fair Work Act 2009 (Cth) (the FW Act). 

Eligible Employees

Many employees will be considered “eligible” to exercise the right, with limited exclusions that include:

• Employees on probation;
• Employees undertaking an apprenticeship, traineeship, internship, graduate program, work experience program or similar program; 
• Certain 'regulated workers' within the meaning of the FW Act (e.g. gig workers); or
• Casual employees not employed on a regular and systematic basis. 

Most significantly, any employees to whom the existing flexible working provisions in the FW Act apply (such as those with parental or caring responsibilities, with a disability, who are pregnant, who are over 55 years, or are experiencing or supporting somebody experiencing family and domestic violence) and who are seeking flexibility because of those circumstances are not eligible under the new WFH Bill. Generally, these individuals would make a request under the federal flexible working arrangements provision.

Practical Operation

The WFH Bill proposes that to exercise the right, an employee must provide written notice specifying their proposed working from home arrangements, including the days on which they propose to work from home and the intended place of work (if not their home). Employers will then be required to respond within 21 days.

If an employer does not agree to the requested arrangement, the response must:

• Confirm whether alternative working from home arrangements can be offered; and
• Set out reasons why the requested arrangement is not considered reasonable.

Grounds for Refusal

An employer may refuse a request only where it is not reasonable for the employee to work from home. While there are some similarities to the FW Act flexible working arrangements, the WFH Bill prescribes a closed set of factors that must be considered, focussing on:

• The inherent requirements of the role;
• The operational impact that working from home would have on the employer; and 
• Any prescribed matters. 

Relevant considerations include productivity, supervision, safety, customer impact, confidentiality, cost, and the practicality of altering working arrangements. Employers must assess these factors on an evidence-based basis.

Additional Employer Obligations

Where an employer is required to allow working from home under the WFH Bill, they will also be required to meet “reasonable costs” associated with the arrangement. This may include essential equipment and secure access to systems.

Pro-Rata Arrangements

For employees not working 38 hours per week, the entitlement is pro-rated. However, the method of calculation is left to the regulations, which have yet to be released.

Dispute Resolution

Notably, this right is to be introduced via an amendment to the Equal Opportunity Act 2010 (Vic) and will sit within its framework. Disputes between employees and employers may be brought to the Victorian Equal Opportunity and Human Rights Commission. Should conciliation between the employer and employee fail, the matter may then proceed to the Victorian Civil and Administrative Tribunal who may order that the employer permit the employee to work from home. 

Takeaways for Employers

The WFH Bill represents a material change to how flexible work arrangements are managed in Victoria. In particular, if it passes:

• Refusals of working from home will be constrained and subject to a structured statutory test;
• Decision-making will need to be clearly documented, reasoned and evidence-based; and
• There is an increased risk of employee claims where requests are not appropriately assessed.

We recommend that employers pay close attention to the WFH Bill's passage and begin reviewing their policies, role design, and decision-making frameworks to ensure they are positioned to respond to requests consistently and in accordance with the proposed legislation. 

The authors would like to thank graduate Tom Denovan for his contributions to this alert.

For decades, the False Claims Act (FCA) has served as the government’s primary tool for combating fraud involving federal funds. FCA enforcement has historically focused on well-established fraud theories such as overbilling, defective pricing, medically unnecessary services, and the submission of false invoices. However, over the last decade, the government and relators have increasingly advanced more novel and expansive theories of FCA liability, reflecting an evolution in enforcement priorities and a willingness to test the statute’s boundaries.

That evolution has been accompanied by significant enhancements in enforcement capabilities. Today, the Department of Justice (DOJ) is increasingly leveraging artificial intelligence (AI), data analytics, interagency information-sharing, and specialized enforcement task forces to identify potential FCA violations. At the same time, DOJ has expanded its focus to a broader range of compliance-related conduct. This heightened enforcement landscape has coincided with record-breaking FCA recoveries. In January 2026, DOJ reported US$6.8 billion in FCA recoveries for Fiscal Year (FY) 2025, marking the largest annual total to date.¹ 

While healthcare-related matters continue to account for a substantial share of recoveries, procurement fraud remains a major enforcement priority. In FY 2025, DOJ secured its second-largest procurement fraud recovery in history, when a federal contractor agreed to pay US$428 million to resolve allegations involving false cost and pricing data and double-billing on a weapons maintenance contract with the US Department of Defense (DOD).² 

More recently, procurement enforcement has extended beyond pricing and billing disputes to alleged failures to comply with contractual and regulatory certifications. DOJ has increasingly pursued FCA theories based on cybersecurity requirements, diversity, equity, and inclusion certifications, domestic sourcing and supply chain obligations, and other regulatory certifications made in connection with government contracts. 

This expansion shows no signs of subsiding. DOJ’s establishment of the National Fraud Enforcement Division on 7 April 2026 underscores a continued institutional focus on fraud detection and coordination.³ Increasingly, DOJ is examining not only what contractors bill, but also what they certify. As a result, representations made in proposals, certifications, compliance reports, questionnaires, and contract performance submissions may carry significant FCA exposure if later alleged to be inaccurate or unsupported—even in the absence of traditional billing misconduct or an underlying loss event.

For federal contractors, these developments reflect a broader risk environment in which compliance obligations once viewed as straightforward operational or administrative requirements have evolved into an enterprise-wide risk that implicates legal, compliance, cybersecurity, human resources, operations, and executive leadership.

The Evolution of FCA Enforcement

The government’s modern FCA enforcement strategy is increasingly centered on certifications, representations, and compliance commitments made in connection with federal funding and contract performance. For example, rather than focusing solely on whether a contractor submitted an inaccurate invoice, DOJ is examining whether contractors knowingly represented compliance with requirements that the government considers material to payment or continued participation in a federal program.

This trend is rooted in the FCA’s “implied certification” theory, which the Supreme Court recognized in Universal Health Services v. United States ex rel. Escobar.⁴ Under that framework, a contractor may face FCA liability where it knowingly misrepresents compliance with requirements that are material to the government’s payment decision or continued participation in a federal program.

As a practical matter, this means contractors may face scrutiny not only for submitting false claims for payment, but also for certifying compliance with contractual, regulatory, or statutory requirements that the government considers significant.

Several recent DOJ initiatives demonstrate how this enforcement theory is being applied in practice.

Cybersecurity Compliance as an FCA Issue

One of the most significant developments has been DOJ’s continued use of its Civil Cyber-Fraud Initiative⁵ to pursue contractors that allegedly misrepresented their cybersecurity practices.

Under this initiative, originally announced in October 2021, DOJ has focused on situations where contractors allegedly:

• Certified compliance with cybersecurity requirements that had not been fully implemented;
• Failed to disclose known cybersecurity deficiencies;
• Submitted inaccurate responses during security assessments or audits;
• Misrepresented the effectiveness of cybersecurity controls; or
• Failed to satisfy contractual obligations relating to safeguarding government information.

Notably, these cases do not necessarily require a data breach or cybersecurity incident. Instead, the government’s theory often centers on whether a contractor knowingly made false or misleading statements regarding its cybersecurity posture. In FY 2025 alone, DOJ recovered over US$52 million in nine settlements under the Civil Cyber-Fraud Initiative, with cybersecurity-related settlements more than tripling in each of the past two years.⁶ 

As cybersecurity obligations continue to expand through frameworks such as National Institute of Standards and Technology (NIST) standards, Cybersecurity Maturity Model Certification requirements, agency-specific security clauses, and contractual certifications, contractors should expect increased scrutiny of cybersecurity representations made throughout both the procurement and performance lifecycle.

Civil Rights Compliance and the FCA

DOJ has also expanded its use of the FCA through its Civil Rights Fraud Initiative, which focuses on situations where recipients of federal funds allegedly make false certifications regarding compliance with applicable civil rights laws and regulations.

Although enforcement in this area remains relatively new, the initiative signals DOJ’s willingness to test the FCA as a vehicle for enforcing civil rights compliance certifications that historically may have been addressed through administrative or regulatory mechanisms. To that end, DOJ entered into its first FCA resolution under the Civil Rights Fraud Initiative with a government contractor in April 2026, wherein the contractor agreed to pay US$17 million to resolve allegations of failure to comply with anti-discrimination requirements in its federal contracts.⁷ 

For contractors, the significance extends beyond any particular substantive requirement, and the broader lesson is that certifications concerning compliance programs, policies, and operational practices are increasingly becoming focal points of FCA scrutiny.

Procurement Integrity and Performance-Based FCA Theories

Traditional procurement fraud remains a major enforcement priority, but DOJ has increasingly expanded its focus beyond post-award billing disputes to encompass representations made throughout the procurement lifecycle, including during solicitation, award, and performance.

Recent enforcement activity has addressed a widening range of alleged misrepresentations and compliance failures, including:

• Defective pricing and cost or commercial item disclosures;
• Small business and socioeconomic program eligibility certifications;
• Buy American and domestic sourcing requirements;
• Labor and wage compliance certifications;
• Quality control, testing, and product specification representations; and
• Contract performance metrics reported to government customers.

Taken together, these developments are illustrated in recent DOJ resolutions involving alleged misstatements in cost and pricing data, as well as cybersecurity and program-compliance matters, in which the government has advanced the theory that ongoing compliance obligations are material to the government’s decision to pay for, or continue performance under, a contract. While courts continue to apply the materiality standard articulated in Escobar, these cases reflect DOJ’s increasingly aggressive use of certification-based theories in the procurement context.

As noted above, recent cybersecurity-related FCA settlements brought under the Civil Cyber-Fraud Initiative have alleged that misrepresentations regarding required security controls go directly to the government’s decision to pay for or continue performance under a contract. These cases illustrate DOJ’s view that compliance representations made during performance may be evaluated as material to payment decisions, particularly where they are expressly incorporated into contract terms or certification regimes.

Materiality Remains the Key Limiting Principle

Despite the expansion of FCA theories, not every regulatory or contractual violation creates FCA liability.

The Supreme Court’s decision in Escobar emphasized that materiality is a demanding standard. To establish liability, the government generally must show that the alleged noncompliance was material to the government’s decision to pay claims or continue participation in a federal program. In the wake of Escobar, numerous federal circuit courts now apply a holistic analysis to determine whether an alleged noncompliance was truly material, considering factors such as whether compliance is expressly designated as a condition of payment, whether the requirement goes to the essence of the bargain, and whether the government continues to pay claims despite knowledge of noncompliance. No single factor is dispositive, and materiality is ultimately a context-specific inquiry.⁸ 

Nevertheless, recent enforcement activity suggests that the government increasingly advances theories of materiality grounded in the centrality of compliance obligations to payment decisions, particularly in areas such as cybersecurity, data protection, procurement certifications, and program integrity controls. For example, a university paid US$1.25 million to resolve FCA allegations arising from alleged failures to comply with cybersecurity requirements under DOD contracts in October 2024,⁹ and since then at least eight additional settlements have involved alleged failures to implement NIST-based controls, maintain system security plans, or address identified cybersecurity vulnerabilities, even in the absence of a breach or confirmed access by a threat actor.

Contractors therefore should focus not only on whether they are compliant, but also on whether compliance representations accurately reflect operational realities.

Whistleblower Activity Continues to Drive Enforcement

Many of the DOJ’s most significant FCA matters originate from whistleblower complaints filed by current or former employees, subcontractors, consultants, or competitors. In FY 2025, whistleblowers filed nearly 1,300 FCA lawsuits, the highest number in a single year.¹⁰ These complaints will likely remain the primary source of FCA investigations.

At the same time, FCA enforcement is becoming increasingly data-driven. Whistleblowers and the government are increasingly using data analytics and AI-enabled tools to identify alleged billing anomalies, pricing discrepancies, utilization patterns, contract performance issues, and other indicators of potential noncompliance. 

As a result, organizations should expect whistleblower allegations to be supported by increasingly detailed analyses of internal and publicly available data, making it easier for whistleblowers to identify potential FCA theories. For more detail, please see our recent alert regarding DOJ’s new Fraud Oversight through Careful Use of Statistics Initiative for data miners filing FCA lawsuits. 

As FCA enforcement theories continue to expand beyond traditional billing disputes, organizations should expect whistleblowers to focus on:

• Internal audit findings;
• Compliance assessments;
• Cybersecurity reviews;
• Quality assurance reports;
• Regulatory deficiencies;
• Contract performance metrics;
• Internal investigations; and
• Management communications concerning known compliance issues.

Organizations should assume that internal compliance documentation, operational data, and performance metrics may become central evidence in future FCA investigations or litigation. Companies should also recognize that data that may appear routine when viewed in isolation can be leveraged by whistleblowers and enforcement authorities to identify patterns that support broader allegations of fraud or noncompliance.

Practical Considerations for Federal Contractors and Next Steps

The expanding scope of FCA enforcement creates several practical risks for contractors that should be addressed proactively.

First, legal and compliance teams should recognize that representations made in proposals, certifications, questionnaires, compliance reports, and contract deliverables may receive the same scrutiny historically reserved for invoices and payment requests.

Second, organizations should ensure that compliance functions are adequately integrated into contract performance and governance processes.

Third, contractors should assess whether internal controls can identify situations in which contractual commitments differ from actual practices.

Finally, leadership should recognize that FCA risk increasingly extends beyond finance and billing functions and now encompasses cybersecurity, privacy, human resources, regulatory compliance, quality assurance, and operational performance.

Accordingly, contractors should consider the following next steps:

• Inventory significant certifications and compliance representations made to government customers;
• Validate that contractual obligations are mapped onto operational controls and business processes;
• Establish governance procedures for reviewing compliance certifications before submission;
• Ensure that identified compliance gaps are documented, escalated, and remediated appropriately;
• Evaluate whether cybersecurity, quality assurance, human resources, and operational compliance functions are integrated into enterprise risk management processes; and
• Review whistleblower reporting and investigation procedures to ensure concerns are addressed promptly and consistently.

Conclusion

Recent DOJ initiatives demonstrate that FCA enforcement increasingly extends beyond traditional billing and pricing fraud to encompass certification and other compliance-related obligations. As DOJ continues to expand its use of data analytics, AI, and specialized enforcement initiatives, contractors should expect heightened scrutiny of representations relating to cybersecurity, civil rights compliance, supply chain requirements, quality assurance, and contract performance.

In this evolving enforcement environment, organizations should carefully evaluate whether their compliance programs, internal controls, and government-facing representations accurately reflect operational realities.

On 12 June 2026, the European Commission (Commission) launched a public consultation on guidelines for the implementation of the Corporate Sustainability Due Diligence Directive (CS3D).

The consultation is a significant opportunity for businesses to influence how CS3D’s requirements will operate in practice. The consultation is relevant not only to companies falling directly within the scope of CS3D but also to suppliers, customers, joint-venture partners, industry associations, financial institutions, professional advisers, and other stakeholders that may be affected by the due-diligence processes of in-scope companies. 

CS3D Scope Following Omnibus I Amendments

The CS3D originally entered into force on 25 July 2024. It has since been amended twice under the Omnibus I simplification package. The first amendment—the so-called “stop-the-clock” measure—entered into force on 17 April 2025 and postponed certain CS3D implementation and application deadlines without altering any substantive obligations. The second set of amendments brought forward more far-reaching changes, most notably a significant reduction in the number of companies falling within the CS3D’s scope, the removal of the requirement for companies to adopt a climate-change mitigation transition plan, a maximum cap for pecuniary penalties of 3% of a company’s net worldwide turnover, and an introduction of a more targeted risk-based approach to value-chain due diligence, including safeguards intended to limit disproportionate information requests to smaller business partners. This second set of changes entered into force on 18 March 2026. 

Following these amendments, the CS3D will apply directly to the following:

• EU companies with at least 5,000 employees and net worldwide turnover of at least €1.5 billion, including relevant ultimate parent companies on a consolidated basis.
• Non-EU companies with net turnover of at least €1.5 billion in the European Union, including relevant ultimate parent companies on a consolidated basis.
• Certain companies operating under franchising or licensing models where the applicable thresholds are met.

In-scope companies will need to assess actual and potential adverse human rights and environmental impacts in their own operations, those of their subsidiaries, and their chains of activities. This will affect commercial relationships with companies that are not directly subject to CS3D, including smaller suppliers and other value-chain partners.

Member states must adopt and publish the relevant national transposition measures by 26 July 2028. The amended CS3D requirements will apply to all companies from 26 July 2029, except for the reporting measures under Article 16, which will apply for financial years starting on or after 1 January 2030.

We previously reported on the Omnibus I amendments in this client alert. 

Key Elements of the Consultation

The consultation covers a broad range of issues affecting the practical implementation of CS3D. In particular, the Commission is seeking input on the following:

• Risk-Based Due Diligence: How companies should integrate due diligence into their policies and risk-management systems, identify and prioritize adverse impacts, access relevant data, and use digital tools and external service providers.

• Value-Chain Relationships: How companies should engage with direct and indirect business partners, manage information requests, adapt purchasing practices, and provide proportionate support to small and medium enterprises.

• Contractual Arrangements: How voluntary model contractual clauses should allocate responsibilities, costs, audit rights, corrective-action measures, and termination rights without shifting disproportionate burdens to business partners.

• Higher-Risk Operating Environments: How companies should address due diligence challenges in conflict-affected and high-risk areas, including limited data availability, safety concerns, legal constraints, and opaque supply chains.

• Collaboration and Verification: How companies may share information, use industry initiatives and third-party verification mechanisms, and address trade-secret, competition-law, and audit concerns.

• Stakeholder Engagement: How companies should engage with workers, affected communities, and vulnerable stakeholders, including through complaint mechanisms and safeguards against retaliation.

• Supervision and Enforcement: How national authorities should coordinate their oversight activities and approach penalties.

The consultation is particularly relevant for companies that expect CS3D to affect their supply-chain management, contractual practices, data systems, and relationships with business partners. Businesses may wish to use the consultation to highlight sector-specific concerns, propose proportionate compliance solutions, and identify areas where further guidance could reduce duplication, legal uncertainty, and unnecessary burdens across value chains.

Next Steps

The consultation runs until 24 July 2026. 

Legally, the guidelines will not create independently enforceable obligations. The binding requirements will arise from the legal text of CS3D as implemented through national law. Nevertheless, the Commission’s guidance is expected to become an important practical tool for companies, supervisory authorities, and other stakeholders when interpreting and applying CS3D requirements.

The present consultation is intended to inform a broad package of Commission guidance to be published in the following stages:

• By 26 July 2027, the Commission is expected to publish:
  • Guidance on voluntary model contractual clauses, intended to support companies when seeking contractual assurances from business partners while avoiding an inappropriate transfer of CS3D obligations or compliance burdens to those partners.
  • A first package of general guidelines covering the following:
    • Practical guidance and best practices on the due-diligence obligations set out in Articles 5 to 16 CS3D, including risk identification, prioritization, purchasing practices, responsible disengagement, remediation, and stakeholder engagement.
    • The assessment of company-level, operational, geographical, contextual, product, service, and sectoral risk factors, including risks associated with conflict-affected and high-risk areas.
    • References to relevant data and information sources, digital tools, and technologies that may facilitate compliance.
• By 26 July 2028, the Commission is expected to publish additional guidelines covering the following:
  • The sharing of resources and information among companies and other legal entities, including the protection of trade secrets and safeguards against retaliation.
  • Information for stakeholders and their representatives on how to engage throughout the due-diligence process.
• Sector-specific guidelines are also contemplated by Article 19 CS3D, although CS3D does not set a fixed publication deadline.

We are available to assist clients in understanding the CS3D obligations, assessing the potential impact of the future guidelines, identifying the most relevant consultation areas, coordinating internal input, and preparing tailored submissions to the consultation.

One particular focus of the petition is how the regulations treat advanced recycling technologies.² SB 54 defines “recycling” in a way that excludes combustion, incineration, energy generation, fuel production, and other disposal, and requires covered material to be sent to a responsible end market.³ The final regulations have been interpreted by some stakeholders as allowing certain advanced recycling pathways to properly qualify under SB 54 pursuant to specified conditions. The petition challenges whether that approach is consistent with the statute’s requirements. Determination of this issue will affect whether such processes can be viewed as potentially compliant with SB 54’s recyclability mandates.

Litigation Adds to Existing Legal Challenges to California’s Recycling Regulations

This litigation comes amid broader scrutiny of California’s recycling-related laws, including a constitutional challenge to SB 343 brought in federal court by trade associations representing retailers, restaurants, packaging suppliers, and cosmetic, food, paper product and pet food manufacturers,⁴ where plaintiffs are seeking to enjoin portions of California’s “Truth in Recycling” law on First Amendment and due process grounds. SB 343 restricts use of the chasing-arrows symbol and other recyclability claims unless products or packaging meet California’s statutory criteria for being “recyclable in the state.” Industry challengers have objected that the framework sets rigid statewide thresholds for recyclability claims, potentially barring “recyclable” labels, even where some recycling pathways may exist in practice. Together, these developments underscore continued uncertainty over how these criteria will be implemented, enforced, and applied to particular materials as these legal challenges continue to play out in court.

What This Means for Now

For now, absent a court order staying or invalidating the regulations, there is no immediate change to compliance obligations; however, the litigation adds another layer of complexity to an already evolving program and increases uncertainty around how key requirements adopted in CalRecycle’s regulations will be applied. Core definitions, such as what qualifies as “recycling,” and adopted exemption categories and procedures will be subject to legal scrutiny. How these issues are ultimately resolved could directly affect compliance strategies, reporting obligations, and program costs.

More broadly, these developments are a reminder that California’s recycling regulatory program, one of the most stringent in the country, continues to evolve. Companies should continue moving forward with compliance while remaining flexible as key issues are tested in court, recognizing that the outcome of these challenges could shape how the rules are interpreted and applied going forward.

Background

For many years, contractual arrangements giving a party future rights over land have largely remained outside the public domain. Whilst notices or restrictions may appear on the register, the nature and extent of the underlying arrangements have often been difficult to ascertain.

The Government considers that this lack of transparency can make it more difficult for local authorities, communities and market participants to understand who controls land that may be available for future development.

The new regime seeks to address this by requiring prescribed information relating to certain contractual control arrangements to be supplied to HM Land Registry.

What Is a Contractual Control Arrangement?

The regulations apply to a broad range of arrangements that confer rights over future dealings with land, including the following:

• Option agreements.
• Pre-emption rights and rights of first refusal.
• Conditional contracts.
• Promotion agreements.
• Contracts contingent on planning or other future events.
• Other arrangements that give a party a significant degree of control over the future disposal or development of land.

The scope is intentionally broad and parties should review arrangements carefully rather than assuming that only traditional options are affected. The regime generally applies where the owner holds a qualifying estate, namely the following:

• A registered freehold title.
• A leasehold title with at least 15 years remaining.

What Information Must Be Provided?

Although the exact requirements depend on the nature of the arrangement, parties will be required to provide information, including the following:

• Details of the affected land.
• The identity of the beneficiary of the arrangement.
• The nature of the rights granted.
• Relevant dates and duration.
• Prescribed information relating to the contractual control itself.

Some of this information will become publicly available through HM Land Registry records and will be protected on the register by the entry of a notice or a restriction. The information does not include financial/price information, and information is not required for overage or restrictive covenants. Also, if a contractual control right is varied in writing after information has been provided, the grantee must provide information about the variation to HM Land Registry within 60 days of the variation being made. This also includes any assignments of control, which any new grantee must update within 60 days of the assignment period.

When Do the Changes Take Effect?

The regulations will come into force on 6 April 2027. A transitional period applies to existing arrangements entered into after the regulations are made but before 6 April 2027, when the regime becomes fully operational.

Parties should be aware that notification obligations can arise before that date and may be triggered by specified events during the transitional period. Current guidance indicates that transitional information must be submitted by 6 October 2027.

Practical Implications for the Market

The regulations are likely to have several practical consequences.

Increased Visibility of Strategic Land Positions

Developers, promoters and investors may find that competitors, local authorities and other stakeholders have greater visibility of their land interests and strategic positions.

Due Diligence Considerations

Buyers, funders and joint venture partners will have access to additional information regarding land control arrangements, which may assist with transaction due diligence and risk assessment.

Confidentiality Concerns

Many option and promotion agreements contain commercially sensitive provisions. Whilst the regulations do not require full disclosure of every contractual term, parties should review existing confidentiality provisions and consider whether amendments are appropriate.

Portfolio Reviews

Businesses with significant strategic land holdings may decide to undertake an audit of existing arrangements to identify the following:

• Agreements that fall within the regime.
• Upcoming trigger events.
• Reporting responsibilities.
• Internal compliance processes.

What Should Landowners and Developers Do Now?

Parties involved in strategic land transactions should do the following:

1. Review existing option, promotion and conditional agreements.
2. Identify arrangements likely to fall within the new regime.
3. Consider responsibility for compliance and reporting.
4. Review confidentiality provisions and data-sharing implications.
5. Ensure future transaction documents address the new requirements appropriately. 

Commentary

The new regime represents one of the most significant changes to the transparency of strategic land arrangements in recent years. While the stated objective is to improve understanding of land availability and support housing delivery, the practical effect will be to bring a level of public visibility to arrangements that have traditionally remained largely private. The obligation to register falls on the grantee/beneficiary of the contractual right, and whilst certain agreements are excluded (such as restrictive covenants, security arrangements for loans or overage security, certain section 106 rights, and matters related to national security and defence), a failure to register can have both criminal and practical consequences.

For landowners, developers and promoters, early preparation will be important. Although the full implementation date is some way off, businesses should use the transitional period to understand the impact on existing portfolios and establish procedures for future compliance. 

In the past several months, both states have adopted pro-nuclear policies that bode well for the future of nuclear power in this part of the Northeast United States. In April 2026, New Jersey lifted its de facto moratorium on new nuclear facilities, which for 50 years has stalled new nuclear power plant development in the state.¹ Also, in January 2026, New York Governor Kathy Hochul directed state agencies to establish a pathway towards a “Nuclear Reliability Backbone” of 8.4 gigawatts (GW) of nuclear generation.²

Longtime observers of nuclear politics in New York and New Jersey may recall that these states previously opposed the license renewals for Indian Point in New York and Oyster Creek in New Jersey.³ Notably, both states were petitioners in State of New York v. NRC, which challenged the Nuclear Regulatory Commission’s (NRC) long-standing Waste Confidence Decision and resulted in a two-year pause in NRC licensing decisions.⁴ Today, however, both New York and New Jersey are leading the way for the adoption of new, advanced nuclear technologies in the Northeast. 

New York

Since assuming office in 2021, Governor Hochul has consistently supported the development of New York’s nuclear capabilities. In June 2025, Governor Hochul directed the New York Power Authority (NYPA) to develop and construct a 1 GW advanced nuclear power plant in upstate New York, calling the directive a “critical energy initiative” and identifying nuclear power as a key component in addressing growing power needs and fossil fuel plant retirements.⁵ In December 2025, NYPA and Ontario Power Generation entered into a memorandum of understanding (MOU) to support collaboration on the development of advanced nuclear energy technology.⁶ The MOU identified both large-scale reactors and small modular reactors (each, an SMR) as a priority, and it committed New York and Ontario to expertise sharing, workforce development, and cross-border business ventures to enhance electricity trade and deploy nuclear generation.⁷

In her annual “State of the State” address in January 2026, Governor Hochul announced an expansion of the state’s nuclear ambitions, raising the target of 1 GW to 5 GW of new nuclear power generation to meet the state’s 100% zero emissions goal by 2040.⁸ If successful, the new generation would add to New York’s existing nuclear generation to create an “8.4 gigawatt ‘backbone’ of reliable energy.”⁹ To this end, on 29 May 2026, the NYPA posted two solicitations to support nuclear advancement: one focused on nuclear workforce training funding¹⁰ and one directed at firms interested in building 1 GW of new nuclear power.¹¹ Governor Hochul stated the solicitations “will help ensure New York is poised to lead the nation in new nuclear development[.]”¹²

Today, New York is home to four operating nuclear reactors, all operated by Constellation Energy Generation, LLC (Constellation) and advanced reactor developer NANO Nuclear Energy (NANO). 

Nine Mile Point Clean Energy Center

Constellation operates two boiling water reactors (each, a BWR) in Scriba, New York, on the shores of Lake Ontario at its Nine Mile Point Clean Energy Center (Nine Mile Point).¹³ Nine Mile Point Nuclear Station Unit 1 came online in December 1969 and is the oldest operating commercial reactor in the United States;¹⁴ Unit 2 came online in 1988. Originally commissioned by the Niagara Mohawk Power Corporation, the facility is now owned and operated by Constellation.¹⁵ Nine Mile Point has a generating capacity up to 1,907 megawatts (MW) of electricity (MWe)¹⁶ annually across both reactors.¹⁷ Following NRC grants of initial license renewal in 2006, Unit 1 is licensed to operate until 2029 and Unit 2 is licensed to operate until 2046.¹⁸ In March 2026, Constellation applied for subsequent license renewal for Unit 1, which is currently under NRC review and, if approved, would authorize an additional 20 years of operation.¹⁹

James A. FitzPatrick Clean Energy Center

The James A. FitzPatrick Clean Energy Center (FitzPatrick), a BWR located in Scriba, New York, was constructed alongside Nine Mile Point by the Niagara Mohawk Power Corporation.²⁰ FitzPatrick, now operated by Constellation, commenced operation in 1974 and generates up to 842 MWe.²¹ After receiving its renewed license in 2008, Fitzpatrick is licensed to operate until 2034.²²

R.E. Ginna Clean Energy Center

R.E. Ginna Clean Energy Center, a single pressurized water reactor (PWR) in Ontario, New York, was constructed by Rochester Gas and Electric and commenced operation in 1970, making it the second-oldest operating reactor in the United States after Nine Mile Point Unit 1.²³ Named after Robert Ginna, an early nuclear advocate who worked to modify the Atomic Energy Act to allow for research into nuclear generation of electricity, the facility, which is operated by Constellation, produces up to 576 MWe and is licensed to operate until 2029.²⁴

NANO Nuclear Energy

NANO is a New York-based advanced nuclear energy company that develops microreactor technologies and space nuclear technology; fabricates and transports nuclear fuel; and consults across the nuclear industry.²⁵ Founded in 2022, NANO was the first portable microreactor company to be listed publicly in the United States.²⁶ In April 2026, NANO submitted a construction permit application for a research reactor at the University of Illinois Urbana-Champaign.²⁷ In May 2026, the NRC accepted the application, beginning its detailed technical review.²⁸ NANO is also developing the ZEUS, ODIN, and LOKI microreactors, portable solid-core “battery” reactors that could offer between 1–1.5 MWt of clean, on-demand, and space-capable power.²⁹

New Jersey

Governor Mikie Sherrill was sworn in as the 57th governor of New Jersey in January 2026. Following a hotly contested gubernatorial campaign that centered on rising electricity costs as a top issue for New Jersey voters, Governor Sherrill issued two inaugural executive orders targeting this issue and promoting energy infrastructure development designed to “deliver relief to consumers” and “expand New Jersey power generation.”³⁰ The first order identifies combatting rising energy costs as a top priority and directs the state Board of Public Utilities (BPU) to issue bill credits to consumers, explore options for electricity cost freezes, and conduct a study on modernizing electric utility generation.³¹ The second order established the Nuclear Power Task Force to “position the state to lead on building new nuclear power generation” and directed state energy regulators to solicit clean energy projects, develop a “virtual power plant program,” and identify state reforms to accelerate permitting for new energy projects.³² As a near-term solution, the BPU has awarded incentives to 355 MW of utility-scale energy storage projects in Tranche 1 of its Garden State Energy Storage Program,³³ and it is seeking to award another 645 MW in Tranche 2.³⁴ The BPU has also established a capacity allocation of 3 GW for community solar projects in the 2026 energy year. However, given the limitations on available land and high population density of New Jersey that constrain development of large-scale energy generating facilities, as well as stymied offshore wind projects off New Jersey’s coast, nuclear energy has emerged as a key resource to support the state’s long-term energy-generating portfolio strategy.

Building on the momentum from her executive orders, on 8 April 2026, Governor Sherrill signed S3870 into law, effectively lifting a long-standing moratorium on new nuclear energy facilities in the state.³⁵ Governor Sherrill stated that lifting the moratorium positions New Jersey to “be a leader in next-generation nuclear energy.”³⁶ Passage of the bill will allow the newly-formed Nuclear Power Task Force to begin advancing nuclear development in the state.

New Jersey is home to three operating nuclear reactors and nuclear technology company Holtec International (Holtec). 

Salem Nuclear Power Plant and Hope Creek Nuclear Generating Station

The Salem Nuclear Power Plant (Salem), owned by PSEG and Constellation, and Hope Creek Nuclear Generating Station (Hope Creek), owned by PSEG, are both operated by PSEG and represent the entirety of New Jersey’s nuclear power infrastructure, operating three reactors side by side on an artificial island in Lower Alloways Creek Township in Salem, New Jersey. The reactors produce over 40% of the state’s total electricity and more than 80% of zero-emissions generation in New Jersey, and combined, they are the fourth-largest nuclear power site in the United States.³⁷

The two Salem reactors are PWRs that commenced operation in 1977 and 1981 and generate up to 2,280 MWe.³⁸ The license for unit 1 expires in 2036; the license for unit 2 expires in 2040.³⁹ PSEG has informed the NRC that it plans to request subsequent license renewal for both units in the second quarter of 2027.⁴⁰

PSEG also operates Hope Creek, a BWR with total generating capacity of 1,172 MWe. Hope Creek is licensed to operate until 2046;⁴¹ PSEG plans to submit a subsequent license renewal application in the second quarter of 2027.⁴²

Holtec International

Holtec is a US-based energy technology company that specializes in nuclear power-related equipment, systems, and services. Founded in Mount Laurel, New Jersey, in 1986, the company is a major supplier in the global nuclear energy supply chain, including nuclear fuel storage, transport systems, heat transfer equipment, and other technologies that support the full nuclear life cycle. Holtec maintains a significant industrial presence in the state, primarily at the large-scale manufacturing facility in Camden, New Jersey. Holtec is currently decommissioning the Oyster Creek Nuclear Generating Station in Lacey Township, New Jersey.⁴³ Holtec has also expanded its role as a nuclear energy project developer, advancing SMR designs, such as the SMR 160 and SMR 300.⁴⁴

Notably, Holtec has been at the leading edge of efforts to restart shutdown reactors in the United States. After acquiring the shutdown Palisades reactor in 2022, Holtec has been working with the NRC to bring the reactor back online.⁴⁵ Holtec provided notice to the NRC that it intends to pursue subsequent renewal for Palisades in 2028.⁴⁶ In December 2025, SMR, LLC, a subsidiary of Holtec, submitted a limited work authorization application for two Holtec SMR-300 units that would be located at the Palisades site.⁴⁷

New York and New Jersey Teams

The firm has a team of Nuclear Energy practitioners, spanning offices throughout the United States, that draw on deep experience at the state, federal, and international levels. In New York and New Jersey, our New York City and Newark offices bring together lawyers with legal, technical, and regulatory backgrounds—paired with local market knowledge—to ensure that any nuclear investment in this part of the country is well positioned for success.

Navigating Nuclear Series

We are pleased 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 practice group 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.

The Commission’s proposed rule will face substantial cross-currents. At a fundamental level, the Commission is seeking broad administrative authority to determine whether certain event contracts are in the public interest or readily susceptible to manipulation. The Commission takes this broad approach despite a number of public challenges to its authority, which in effect will take the position that the Proposal: (i) seeks to apply additional public interest factors beyond the legislatively mandated findings and purpose provisions of Section 3 of the Commodity Exchange Act (the CEA),¹ (ii) takes an expansive reading of the Commission’s “exclusive” jurisdiction to regulate prediction markets without expressly taking into account recent US Supreme Court rulings on the major questions doctrine or balancing the long history of gambling regulation being largely left to state legislatures,² and (iii) minimizes risks of manipulation posed by binary option products that have been previously recognized by the Commission.³ Moreover, administrative review of the Proposal will play out as US courts across the country continue to a weigh the threshold structural question of whether the Commission has the authority to regulate certain prediction markets under its Dodd-Frank Act swaps-related authority, a question likely to be taken up by the US Supreme Court in due course.

Background

Enacted in 2010 as part of the Dodd-Frank Act derivative market reforms, Section 5c(c) of the CEA was amended to include a new provision under which the Commission is authorized to prohibit registered platforms from listing for trading particular types of event contracts, if the Commission determines that such contracts are contrary to the public interest. 

Specifically, clause (i) of this new provision provides that:

In connection with the listing of agreements, contracts, transactions, or swaps in excluded commodities that are based upon the occurrence, extent of an occurrence, or contingency (other than a change in the price, rate, value, or levels of a commodity described in [CEA] section 1a(2)(i)), by a [DCM] or [SEF], the Commission may determine that such agreements, contracts, or transactions are contrary to the public interest if the agreements, contracts, or transactions involve—(I) activity that is unlawful under any Federal or State law; (II) terrorism; (III) assassination; (IV) war; (V) gaming; or (VI) other similar activity determined by the Commission, by rule or regulation, to be contrary to the public interest.⁴ 

In regulatory parlance, the specific activities identified in Section 5c(c)—terrorism, war, assassination, gaming, and activities that are unlawful under federal or state law—are referred to as “Enumerated Activities.”

The Commission has undertaken various efforts to clarify when certain event contracts—now widely referred to as “prediction markets”—are “contrary to the public interest.” In particular, the CFTC withdrew a prior 2024 event contracts proposal several months ago,⁵ and it subsequently issued an Advance Notice of Proposed Rulemaking (ANPR) on prediction markets.⁶ The ANPR was extensive, asking questions about whether amendments to CFTC regulations were needed to address how the CEA’s core principles should apply to prediction markets, including questions about how prediction markets resolve the outcomes of event contracts, whether event contracts have unique characteristics that make the prohibition on listing contracts that are readily susceptible to manipulation different from other listed contracts, whether event contracts traded on margin would present regulatory implications, and the factors the CFTC should consider when making a public interest determination under Section 5c(c)(5)(C) of the CEA, among many other topics. This proposed rulemaking follows this complex history for establishing a structured framework for evaluating whether certain event contracts are contrary to the public interest, as originally expressed in the CEA.

Factors Considered When Evaluating Whether a Contract Is Contrary to the Public Interest

Under the Proposal, the CFTC would consider factors applicable to all event contracts, as well as other factors only applicable to Enumerated Activities, when evaluating whether a contract is contrary to the public interest. In making a public interest determination, the CFTC would apply a multifactor approach, with no single factor dispositive to the determination. The CFTC would consider the public interest purposes articulated in Section 3 of the CEA (i.e., hedging and price discovery), but it would also consider specific, potential harms of a contract as opposed to a broad inquiry into the public good of a contract.

Factors applicable to all event contracts would include the following:

• Price discovery and information aggregation utility—including whether the information can be used when making economic decisions—while promoting innovation and fair competition.
• Potential threats to market integrity, which would encompass considerations related to settlement integrity and information leakage and the misuse or misappropriation of confidential information.
• Compliance and self-regulatory challenges that arise from a prediction market’s ability to administer the contracts, including the prediction market’s dispute resolution process and adoption of guardrails against the misuse of nonpublic information (e.g., prohibition on certain categories of traders who are likely to have access to insider information from trading).

Factors considered only with respect to specific activities would be divided into categories based on the Enumerated Activity. The CFTC identifies when an event contract involving an Enumerated Activity would be contrary to the public interest in the following manner:

• An activity that is unlawful under federal or state law would raise public interest concerns because the very fact that the activity is illegal means that it has been recognized as causing (or posing) public harm.
• An activity involving terrorism, assassination, or war would present national security risks that raise public interest concerns. These contracts could distract law enforcement and be manipulated by individuals seeking to divert attention from planned harmful events. In addition, these contracts could create misleading market signals, could be susceptible to information leakage by individuals with access to this sensitive information who may be incentivized to trade on that information in violation of a duty of confidentiality, and could be vulnerable to settlement ambiguity. Based on those stated concerns, the Commission preliminarily declared that “all event contracts involving. terrorism, assassination, and war are highly likely to be against the public interest.”⁷
• Only certain games would be contrary to the public interest under the Proposal. 
  • According to the CFTC, games of random chance would probably be contrary to the public interest. In contrast, sport event contracts would not be contrary to the public interest when they settle based on final scores, win-loss results, and other metrics because these contracts may provide useful information and price discovery. Critically, the Commission preliminarily determined that “political elections are not gaming” and thus presumably fall outside of the specific framework to be established by the Proposal.⁸
  • Factors indicating that the CFTC would find a sports event contract to be contrary to the public interest include whether the contracts are based on player injury, an officiants’ decision (including video replay decisions and player ejections), a discrete action (such as the outcome of a specific pitch thrown by a specific pitcher), an altercation (such as fights between players), and pre-collegiate sporting events. 
  • Factors indicating that the CFTC would find a sports event contract not to be contrary to the public interest include the following:
    • When an event contract includes objective and verifiable settlement data. 
    • Whether the sport is subject to an established integrity infrastructure, such as a recognized governing body, published rules, and disciplinary procedures.
    • Whether an exchange has a formal information sharing agreement with the relevant sports league or governing body.

Determination That a Contract “Involves” an Enumerated Activity

Pursuant to Section 5c(c)(5)(C) of the CEA (the Special Rule), the CFTC may determine that event contracts are contrary to the public interest if the contracts “involve” the Enumerated Activities. Thus, whether something “involves” an Enumerated Activity is critical to whether the Special Rule applies to an event contract. According to the Proposal, an event contract “involves” an Enumerated Activity if its settlement is “determined by an occurrence, extent of an occurrence, or contingency in the activity.” 

As described in what would be a new Appendix F to Part 40, the CFTC will apply the following factors when considering whether an event contract involves an Enumerated Activity. Given the Commission’s preliminary analysis of unlawful activities and activities involving terrorism, assassination, or war, we focus on the analysis of gaming activities.

The CFTC describes gaming as “the game itself, the activity that occurs.”⁹ Defining this term too broadly would make the category “limitless.” Pursuant to Proposed CFTC Regulation 40.11(b)(1), the term “gaming” would mean “any activity that: (i) One or more participants typically engage in for purposes of recreation or to entertain others; (ii) Is governed by rules; and (iii) Includes measurable occurrences or outcomes that depend on the participants’ luck, skill, or athletic ability during the activity.”¹⁰ A game must have a measurable occurrence or outcome and depend on skill, luck, or athletic ability. According to the CFTC, gaming would include: games of chance (the example the CFTC uses is roulette), games that require skill (such as chess), and games of mixed skill and chance (such as poker). 

The CFTC explains that a figure skating competition would be gaming because the skaters participate for recreation and entertainment of others, with judges evaluating their skill and athletic ability, whereas a “figure skater of the year” award would not be gaming, as its purpose is to honor the skater. The CFTC goes on to articulate the types of activities that would not be considered gaming if the Proposal is adopted, including the following:

• Contests, such as political elections (whose outcomes rely on voters’ judgment) and awards like the Nobel Prize or the Academy Awards, which are determined based on judgments rather than measurable occurrences that depend on a person’s skill or athletic ability.
• Other gambling activities, such as gambling on who will win an Academy Award, because the gambling does not change the fact that the award is not gaming.
• Events occurring in connection with games or happening within games, such as whether a football player will score a certain number of touchdowns in a game.

Exercising Authority to Make Public Interest Determinations

Procedural Framework for CFTC Review

The CFTC may decide to initiate a review of an event contract only when there is a basis to believe that the contract involves an Enumerated Activity and may be contrary to the public interest. The CFTC explains that it may only initiate a review when an exchange files a contract submission pursuant to Regulations 40.2 or 40.3, acknowledging that a contract may trade after being self-certified even if the CFTC subsequently initiates a review. The CFTC may request an exchange to suspend the trading of a contract that is under review.

Under the Proposal, the CFTC would need to initiate a review within 10 days after an exchange lists the contract. The determination to initiate a review would be posted on the CFTC’s website, and the contract would be subject to a 90-day review that may only be extended upon the exchange’s request. The determination timing triggers other deadlines, including the following:

• Within 15 days: The Director of the Division of Market Oversight would be required to provide the exchange a written statement supporting the review. 
• Within 30 days: The exchange would be permitted to submit a written response, which may include modifications to the contract terms and conditions.
• Within 60 days: The Director of the Division of Market Oversight, with the concurrence of the CFTC’s general counsel, would be permitted to submit to the CFTC a written recommendation on the CFTC’s determination, which would be provided to the exchange concurrently. This recommendation would be required to address the exchange’s response and any proposed modifications. 
• Within 70 days: The exchange may provide the CFTC a written response to the recommendation. 
• Within 90 days: The CFTC may issue an order finding that the contract (or consolidated group of contracts) is contrary to the public interest. 
• Within 100 days: If the CFTC has not issued an order, the exchange may list the event contract subject to the review. 

CFTC Consolidated Review of Multiple Contracts

When a contract involves the same or substantially similar underlying event, the CFTC may consolidate the public interest review of these contracts. This is the case even where more than one exchange lists the contracts subject to review. 

Delegation to the Director of the Division of Market Oversight

Under the Proposal, the CFTC would delegate authority for ministerial and record-development responsibilities to the Director of the Division of Market Oversight or the Director’s designee. However, this delegation would not extend to the responsibilities included in proposed CFTC Regulation 40.11(f), such as determining whether to initiate a public interest review, the submission of a recommendation to the CFTC (which must be done by the director), and the issuance of a public interest determination.

What is next?

Comments are due on 27 July 2026 (45 days after the Proposal was published in the Federal Register). Given the speed at which the CFTC is moving forward with rulemakings, those interested in commenting should begin drafting comment letters and scheduling meetings with staff as soon as possible. 

The Hill County Moratorium and the Larger Trend of Public Opposition 

In early May, by a 3–2 margin, Hill County officials enacted a one year moratorium on new data center construction in unincorporated areas. The measure followed significant public opposition to the rapid influx of proposed data center projects. Residents expressed concern about the potential impacts on water use, electricity demand, infrastructure, and quality of life. The Hill County moratorium is part of a broader pattern of organized and official resistance to data center development. In our prior coverage, we identified several ways that public opposition is manifesting itself, in Texas and nationally, as a major risk factor for data center development. 

The Industry Pushes Back

The Hill County moratorium predictably faced legal challenges. The first significant challenge arrived in the form of a federal lawsuit by a company claiming its once valuable purchase rights to acquire 800 acres in Hill County were rendered valueless by the moratorium. The plaintiff is challenging the county’s authority to enact the measure and seeking compensation for an alleged taking in violation of the US Constitution, among other claims. 

The suit is captioned RCM Hill LLC v. Hill County.¹ The complaint asserts a multipronged constitutional and state-law challenge to the moratorium, combining (i) federal and state declaratory judgment claims that the moratorium is ultra vires and void, including parallel claims for prospective injunctive relief against the county and its officials; (ii) federal regulatory takings and inverse condemnation claims under the Fifth Amendment and Fourteenth Amendment (via 42 U.S.C.§ 1983), alleging that the moratorium effects both a per se taking and, alternatively, a Penn Central taking by eliminating economically viable use and destroying investment-backed expectations; (iii) a § 1983 due process claim (procedural and substantive) premised on arbitrary, unauthorized government action that allegedly alters property and entitlement rights without lawful authority or adequate process; and (iv) parallel Texas constitutional claims including inverse condemnation under Article I, § 17, denial of due course of law and arbitrary and capricious government conduct under Article I, § 19, and impairment of contracts/retroactivity under Article I, § 16, all tied to the alleged retroactive imposition of a new approval regime that frustrates pre-existing contractual and development rights.

The takings claims may garner the most attention for their potential national application as a compensation mechanism for categorical data center prohibitions. However, in Texas specifically, whether a Texas county has the authority to impose such sweeping regulations is a central question. The complaint against Hill County alleges that Texas counties are creatures of statute with no inherent police power, and therefore, they may act only when authority is expressly granted or necessarily implied by statute or the state constitution—and no such authority exists for a data center (or any) development moratorium. 

The County Alters Its Approach

In response to the lawsuit, Hill County has pivoted from an outright moratorium on data center development to a process-driven regulatory regime, rescinding the ban and replacing it with a formal development checklist and major industrial development review framework that compels developers to submit detailed, project-specific disclosures regarding infrastructure, traffic, and resource impacts before proceeding. Rather than prohibiting projects, the county’s new approach functions as a front-end screening and information-forcing mechanism,  that subjects large-scale industrial developments to heightened scrutiny, transparency requirements, and compliance obligations—effectively shifting from categorical restriction to a structured review process that can influence project feasibility, timing, and cost without formally blocking development. Questions persist regarding whether the county has the authority to implement this new process and whether plaintiffs will continue their lawsuit in some amended form. 

Practical Takeaways

Project participants, including developers, purchasers, investors, equipment suppliers, and contractors, need to anticipate prolonged risks from community opposition. Project participants should understand the benefits and risks of using litigation as a means of challenging local and state action that unduly restricts development and for potentially recouping investments. 

Hill County’s shift illustrates that categorical prohibitions invite ultra vires and takings challenges, causing local governments to possibly pivot to process-driven regulatory layering—leveraging disclosure requirements, infrastructure reviews, and public transparency mandates to influence (and potentially slow or deter) development without formally banning it.

For project participants, the takeaway is straightforward: risk allocation must now account not only for outright regulatory bars, but also for incremental, information-based approval regimes that can alter project economics and timelines just as materially.  

Spotlight on Foreign Equity Investors 

Federal and state regimes now treat data centers—and the land they occupy—as critical infrastructure tied to sensitive data, energy grids, and strategic assets. Laws like Texas SB 17 illustrate this shift by regulating not just how land is used but who is allowed to own or finance it, aligning with federal frameworks like the Committee on Foreign Investment in the United States, which scrutinize foreign investment in infrastructure for national security risks. Modern data center restrictions are as much about capital origin and geopolitical risk as traditional zoning or environmental concerns. As data center opposition evolves, expect more focus on the extent to which foreign participants could face restrictions. 

Foreign stakeholders should also take care to investigate whether their investments qualify for investment treaty protections. Where applicable, investment treaties may offer stronger protection than domestic law for compensation for government interference in data center projects. Companies that operate in jurisdictions that have investment treaties with the United States should examine their deal structures to maximize treaty protections. Critically, once the dispute arises, it will be difficult to restructure an investment for the purpose of obtaining treaty protections. The key period for structuring investments for treaty protections is ideally prior to the investment being made but, in any case, before a dispute becomes reasonably foreseeable. 

The firm is positioned to assist clients in navigating the evolving risk profile for data center development. In addition to its capabilities across the public policy, regulatory, environmental, and transactional sectors, our US and international dispute resolution attorneys are adept at evaluating, structuring, and executing dispute strategies aimed at preserving project value and mitigating risk. 

To this end, it introduces several measures amending the legal framework applicable to commercial leases, as set out in the French Commercial Code, in particular with respect to rent payment frequency, the regulation of guarantees, indexation clauses and the statutory right of first refusal.

Key Measures Affecting Commercial Leases

Below is a summary of the main changes to be noted.

Monthly Rent Payments and Regulation of Security Amounts

Note: These measures apply only to premises used for retail or wholesale trade or commercial or artisanal services.

• Monthly payment of rent at the tenant’s request (new Article L.145 32 1 of the French Commercial Code).
  • Condition: no outstanding undisputed rent or service charge arrears.
  • Effective date: from the next payment date provided for in the lease. 
    • Is it a mandatory rule? Yes (pursuant to Article L.145 15 of the French Commercial Code, as amended by the Simplification Act).
    • Which leases are affected? Leases into force as of the date of enactment of the Simplification Act, i.e. 26 May 2026.
• Cap on the amount of guarantees (Article L.145 40 of the French Commercial Code): Amounts paid as a security may not exceed one quarter’s rent. Likewise, the value of any assets, securities, undertakings or guarantees of any kind received by the landlord may not exceed one quarter’s rent.

Note: The Simplification Act would therefore appear to permit the inclusion of both a security deposit equal to three months’ rent and an additional security (such as a joint guarantee or a first-demand guarantee) of the same amount.

• Is it a mandatory rule? Yes (pursuant to Article L.145 15 of the French Commercial Code).
• Which leases are affected? Leases entered into or renewed as from the date of enactment of the Simplification Act, i.e. 26 May 2026.

Rental Guarantees: Two Clarifications Applicable to All Commercial Leases

• In the event of a transfer of ownership of the leased premises (Article L.145 40 of the French Commercial Code), the obligation to return the sums paid as security is transferred to the new landlord. 

Where applicable, such transfer results in the automatic lapse of any other guarantee (assets, securities, undertakings or guarantees of any kind referred to in the statute).

• Is it a mandatory rule? Yes (pursuant to Article L.145 15 of the French Commercial Code).
• Which leases are affected? Leases relating to premises transferred as from three months after the date of enactment of the Simplification Act, i.e. 26 August 2026.
• At the end of the lease—return of guarantees (Article L.145 40 of the French Commercial Code): any sums paid by way of security must be refunded within a reasonable period not exceeding three months from the handover of the keys. 

Any other security held by the landlord (e.g. a joint guarantee or a first-demand guarantee) must be returned or released within six months of the handover of the keys.

• Is it a mandatory rule? Yes (pursuant to Article L.145 15 of the French Commercial Code).
• Which leases are affected? Leases into force as of the date of enactment of the Simplification Act, where the handover of the keys takes place no earlier than three months after that date, i.e. 26 August 2026.

Indexation Clauses: Symmetrical Cap (So Called “Tunnel Clause”)—New Article L.145 38 1 of the French Commercial Code

• The lease may provide for a mechanism symmetrically capping, both upwards and downwards, the annual variation of the Commercial Rent Index (Indice des loyers commerciaux) (ILC) as provided for in the indexation clause.

This does not apply to indexation clauses based on any other index, in particular the ILAT (Indice des loyers des activités tertiaires) index.

Note: While the new legislation appears to now permit so-called “tunnel clauses,” such clauses could nonetheless be held unenforceable where they have the effect of preventing a rent adjustment exceeding more than one quarter, which triggers the (public policy) right to seek judicial revision of the rent.

• Which leases are affected? Leases into force as of the date of enactment of the Simplification Act, i.e. 26 May 2026.

Tenant’s Right of First Refusal (Article L.145‑46‑1 of the French Commercial Code)

• The Simplification Act now excludes premises used exclusively as offices and warehouses from the scope of the tenant’s statutory right of first refusal.
  • Which leases are affected? Leases into force relating to premises that are the subject of sales completed after the date of enactment, i.e. 26 May 2026.

Property Tax Rechargeable to the Tenant: Legislative Rollback

The bill initially provided for a prohibition on landlords recharging property tax to their tenants.

However, this provision was deleted during the joint committee proceedings (commission mixte paritaire). 

Accordingly, no change has, for the time being, been made on this point, meaning that commercial leases may still validly provide for the recharging of this tax to the commercial tenants.

Note: this provision was removed while another bill, submitted before the French National Assembly on 13 January 2026, provides that, for leases entered into or renewed after its enactment, property tax could only be passed on to the tenant up to 50% of its amount, without this limitation being offset by a rent increase.

Forfeiture Clause: Strengthened Framework in Favour of Landlords

• With respect to forfeiture clauses, the court may grant payment deadlines and suspend the effects of the forfeiture clause in the event of unpaid rent only if the following two strict cumulative conditions are satisfied:
  • The tenant is able to clear its rental arrears; and
  • The tenant resumes full payment of the current rent before the first hearing.
    • Is this a mandatory rule? Yes (pursuant to Article L.145 15 of the French Commercial Code).
    • Which leases are affected? Leases into force and subject to applications for suspension of the effects of the forfeiture clause filed from the date of entry into force of the Simplification Act, i.e. 27 May 2026.

Practical Impacts and Recommendations

• For tenants: consider requesting monthly rent payments where cash flow is a concern, ensuring that there are no outstanding, undisputed arrears.
• For landlords: review the “security deposit” and “guarantees” provisions in lease templates to ensure compliance with the cap introduced by Article L.145 40 of the French Commercial Code.
• In the event of a transfer or sale of the building: address in the transaction documentation the transfer of the obligation to return security amounts and the treatment (lapse or renewal) of existing guarantees.
• At the end of the lease: anticipate the timetable for the return of security deposits (three months) and for the release or return of guarantees (six months); organise the documentation supporting any deductions.
• Indexation: review existing ILC indexation clauses and consider whether a symmetric “tunnel” mechanism would be appropriate upon renegotiation.

Entry into Force—Summary

Do You Need Further Guidance?

We remain at your disposal to analyse the impact of these measures on your leases (current leases, renewals, transfers and returns of guarantees) and to assist in adapting your contract templates.

The Act focuses on accelerating development through the following two major pathways: 

• Facilitating specific “Priority Projects.”
• Coordinating the development of entire precincts for “State Development Areas.” 

To support achievement of the above, the Act establishes a new office of the coordinator general (Coordinator General) to identify and oversee priority projects and state development areas, as well as to provide advice and make recommendations to the Minister of State Development (the Minister) in relation to them.

Priority Projects 

As stated in the Act’s second reading speech, the government seeks to increase the competitiveness of Western Australian industry by prioritising projects in the following: 

• Critical minerals processing facilities.
• Naval shipbuilding.
• Large-scale renewable energy projects.
• Net-zero hubs for green metals. 

Though the scope of priority projects in the Act is not confined to specific industries, and requires only that the project has strategic or economic significance to the state, the state’s industrial focus is reinforced through the Act’s prohibition on designating purely residential developments as priority projects. Projects designated by the Minister as a priority project will receive fast-tracked approvals, strategic recognition and coordinated engagement and support across government.

The naval and industrial focus of the Act aligns with Australia’s participation in the AUKUS security partnership with the United Kingdom and the United States, particularly Australia’s acquisition of conventionally armed, nuclear-powered submarines (each, an SSN) and the development of the infrastructure, technical capabilities, industry and workforce necessary to operate a sovereign SSN fleet. This accelerated development trajectory is further bolstered by the Cook Labor Government’s entry in October 2025 into a landmark Australia-US agreement supporting critical minerals and rare earths, enhancing cooperation and investment to diversify Western Australia’s mineral supply chains and manufacturing sectors.¹  Modification orders may be issued to modify how certain provisions of a designated Act apply to a priority project, streamlining approvals. Priority projects may also gain access to several coordination mechanisms that may be exercised by the Coordinator General to ensure efficient delivery: due regard notices, time frame notices and joint decision notices.

Modification Orders

The Minister may, with the approval of the Premier, make a modification order providing that specified provisions of a designated Act do not apply, or apply with specified modifications, in relation to the making of a decision for a priority project. 

There are around 40 designated Acts that these modification orders may impact, including the Planning and Development Act 2005, the Biodiversity Conservation Act 2016 and the Heritage Act 2018, with some exclusions. 

In making a modification order, the Minister must consider it appropriate to do so because, in the Minister’s opinion: 

• The making of an order will prevent or reduce duplication of statutory or administrative processes or requirements that apply to the priority project or to a part of the priority project.
• Having regard to the purpose of the affected designated Act and the object of this Act, the making of the order will not prevent the priority project or part of the priority project from being effectively regulated under law. 

Noncompliance by a proponent for the priority project with any conditions set out in a modification order is an offence, punishable by a AU$100,000 fine and a daily penalty of AU$5,000 for each day during which the offence continues. 

To rein in the potentially broad and controversial effects of a modification order, the following checks and balances apply: 

• Consultation with each affected public authority and the proponent for the priority project prior to the making of an order.
• A modification order cannot have the effect that a key regulatory authorisation that would otherwise be required in relation to a priority project is not required.
• A modification order cannot exclude or modify the application of a provision of a designated Act, to the extent that it relates to an assessment under a bilateral agreement or a process that the Commonwealth minister administering the Environment Protection and Biodiversity Conservation Act 1999 (Cth) has decided to use under section 87(1).
• All orders are to be tabled in Parliament and subject to disallowance processes. 

Due Regard Notices

The Minister may give due regard notices to a public authority responsible for making a decision regarding the implementation of a priority project. A due regard notice requires the relevant responsible authority in making that decision to have due regard to a set of considerations specified by the Minister.

A due regard notice therefore allows for ministerial elevation of the importance of particular matters within a public authority’s decision-making process. Despite this, the notice cannot itself permit an authority to consider matters outside the scope of matters it may have regard to under the designated Act. 

Due regard notices may not be given to the Environmental Protection Authority or Heritage Council of Western Australia, nor to another minister without consent. 

Time Frame Notices

The Minister may also accelerate decision-making by issuing time-frame notices to a relevant public authority making decisions under a designated Act or the Aboriginal Heritage Act 1972. A time-frame notice requires that the responsible authority perform the designated function within a certain time period, which must not be less than 20 business days after the day on which the notice is given. 

As there are around 40 designated Acts under the Act, the scope of decision-making public authorities that may potentially be issued a time-frame notice is broad. An extension on the designated time frame may be granted by the Minister on application by the responsible authority. 

A time-frame notice may not be given to another minister without consent. 

Joint Decision Notices

The Minister may issue joint decision notices, requiring decisions to be made jointly between the public authority under a designated Act and the Minister or the Coordinator General. Upon the issuing of such a notice, the responsible authority must consult, and if possible agree with, the relevant coordination authority on the designated decision to be made. If agreement cannot be reached, the matter may be referred to the Minister and the responsible minister for the responsible authority or otherwise to the Premier for final determination.

A decision made under this process will be valid as if it were made by the responsible authority under the ordinary procedure applying under the designated Act. Revocation or variation of the joint decision is prohibited without consultation with the relevant coordination authority. 

A joint decision notice cannot be given to the Environmental Protection Authority, Heritage Council of Western Australia, Western Australian Planning Commission or another minister without consent. 

State Development Areas

State Development Areas (SDAs) are designated precincts identified to support Western Australia’s economic and industrial growth. These may include renewable energy precincts, industrial circular economy hubs and project hubs supporting industry clusters. An accompanying State Development Area Plan (SDA Plan) will outline the strategic direction for the nominated area, including setting out the following:

• Economic, environmental and social considerations.
• Intended precincts, developments and subdivisions in the plan area.
• Infrastructure and services required to support the plan area. 

Projects undertaken in an SDA will be assessed by a public authority with regard to the SDA Plan. In doing so, the government hopes to create investment-ready areas, giving clearer signals to industry and investors. 

Despite this, the Minister may give a public authority written notice exempting the public authority from the requirement to have due regard to an SDA Plan in making decisions under a designated Act. 

A newly operational SDA does not affect the application of any improvement scheme or planning scheme applying to that area under the Planning and Development Act 2005 or another written law at the time of operation. 

Next Steps

The Act came into operation on 18 February 2026 following the publication of the State Development Act 2025 Commencement Proclamation 2026 in the Government Gazette, save for sections 115–117 amending the Petroleum Legislation Amendment Act 2024, which are to be commenced at a later date.

As of the date of this article, no priority projects or SDAs have been designated. 
 

The Order builds on Governor Newsom’s responsible AI adoption and use policies and adds to California’s existing safeguards for child safety, self-harm prevention, restrictions on sexually explicit deepfakes, AI watermarking requirements, protections for performers’ digital likenesses, and measures against AI-generated robocall scams.

KEY DIRECTIVES OF EXECUTIVE ORDER N-6-26

Research and Early Warning Systems

Within 90 days of the Order’s issuance, the Labor and Workforce Development Agency (LWDA), Governor’s Office for Business and Economic Development (GO-Biz), and the Department of Finance, in consultation with academic, industry, and state agency partners, shall provide to the governor a review of the emerging body of academic research identifying the potential workforce impacts of technological shifts, including AI’s impact on California’s labor market and potential disproportionate impacts on demographic groups, including best practices on early economic warning signals of future labor disruptions.²

Within 90 days of the Order, the Employment Development Department (EDD) shall launch a dashboard showing AI’s impact on employment across various sectors using unemployment insurance data, and EDD may consult with leading AI labs that have published related data to build out its dashboard. The EDD also shall include, as part of the California Labor Market Review, a summary of feedback from businesses about the role of technological adoption in determining hiring or workforce decisions, with reporting to occur twice per year through the end of 2027.

California WARN Act Review

Within 180 days of the issuance of the Order, LWDA shall review and provide to the governor recommendations on revisions and updates to the WARN Act in a manner that is responsive to, and effectively provides early warning data on, emerging industry trends. 

Displaced Worker Safety Net Policies

Within 180 days of the Order, LWDA is required to submit to the governor a review of policies and practices that provide displaced workers with a safety net, including severance and other compensation, such as stock or equity, and any recommendations for incorporating such policies or strengthening existing programs. The review shall include, to the extent practicable, a comparative analysis of policies or common practices in other countries. Further, the Order directs LWDA to submit a workplan for expanding awareness of and enrollment in employment insurance programs, such as employment stability payments through the Work Sharing program.

Collective Bargaining Review

No later than 15 October 2026, the LWDA, in consultation with labor organizations, employer groups, and relevant experts, must review how the collective bargaining process is incorporating and addressing new technologies, such as AI, in ways tailored to the specific needs of workers and employers, including how worker voice is incorporated in adoption of emerging technologies, to identify what can be learned from unionized workplaces. 

Workforce Training and AI Playbook

Further, the LWDA is directed to review existing workforce training programs to ensure programs are fit for their purpose and targeted toward growing industries and professions, and the EDD, in partnership with local workforce development boards, shall develop an AI playbook to expand dislocated worker strategies for occupations exposed to AI and provide local boards with technical assistance on the utilization of Workforce Innovation and Opportunity Act resources for AI literacy-related programs. This review must be collected prior to 15 October 2026. 

Worker Ownership Models and Small Business Support

Additionally, the Order directs GO-Biz and the California Office of the Small Business Advocate (CalOSBA) to evaluate and, where appropriate, support opportunities to expand and enhance worker ownership models to encourage broad-based capital growth and build wealth from productivity gains among workers, including exploring any existing regulatory barriers to employee-owned company structures and best practices leveraged in other states. GO-Biz is also required to engage in educational and other initiatives to support business adoption of “opportunity AI,” including direct engagement through CalOSBA to support small business technology adoption and education on best practices for using emerging technology to encourage competition and broad-based economic growth while supporting workforce training and retention. 

Public Good and Incentive Structures

Finally, by 15 October 2026, the Government Operations Agency is directed to provide the governor with options and recommendations for actions that could alter incentive structures and increase the likelihood of AI development and deployments that advance the public good. Recommendations may include public-private partnerships, voluntary or mandatory programs that direct a portion of revenue generated by AI companies to support beneficial AI deployments, and securing dedicated access to computing power for research and development of AI that advances the public good. 

What this means for employers

While the Order imposes no immediate compliance obligations on private employers, it signals a clear trajectory: California is building the policy and regulatory architecture to address AI-driven workforce disruption, and action could follow swiftly. Employers should be aware of the following near-term developments:

WARN Act Exposure

Potential expansion of WARN Act obligations to cover AI-related workforce changes is now squarely on the state’s agenda.

Severance and Equity Policies

State review of severance standards and equity-based compensation for displaced workers may inform future legislative or regulatory proposals.

Collective Bargaining

Employers with unionized workforces may see increased pressure to negotiate over AI adoption, with the state actively studying how AI decisions are being handled at the bargaining table.

Workforce Training Obligations

New frameworks and playbooks for AI-displaced workers may eventually be tied to employer obligations or incentives.

Public-Good Mandates

Potential future requirements directing AI companies to contribute a portion of revenue to workforce programs could reshape AI-related business models in California.

Growing State-Law Patchwork

The Order adds to an already complex and expanding patchwork of state-level AI employment laws, reinforcing the need for employers operating across multiple jurisdictions to monitor and adapt to diverging compliance obligations.³

The Flowers Foods court held that a transportation worker who stays entirely intrastate but transports goods for the last mile of an interstate journey can qualify for the “transportation worker” exemption, rejecting a proposed bright-line rule that would have required a worker to cross state lines or interact with a vehicle that does.³ As a result of this seminal ruling, employers who rely on arbitration agreements with last-mile delivery drivers, independent contractors, franchisees, or gig-economy workers should reassess those arrangements now.

Background

On 28 May 2026, the Court issued its decision in Flowers Foods, addressing whether workers who deliver goods entirely intrastate—but whose goods traveled interstate—qualify for the Section 1 Exemption. The Section 1 Exemption prevents courts from compelling arbitration of disputes involving “contracts of employment” for transportation workers engaged in interstate commerce.

Angelo Brock, a franchisee of Flowers Foods, picked up the company’s products from a warehouse in Colorado and delivered them to local stores.⁴ All of Brock’s pickups and deliveries occurred within the state of Colorado.⁵ In 2022, Brock sued Flowers Foods in federal district court, alleging the company had underpaid him and other distributors in violation of various federal and state laws. Flowers Foods filed a motion asking the court to send the case to arbitration, arguing that Brock had signed a distribution agreement promising to arbitrate any disagreement between himself and the company.⁶ 

The district court denied Flowers Foods’ motion, and the Tenth Circuit Court of Appeals (Tenth Circuit) affirmed. The Tenth Circuit reasoned that Brock “belonged to a class of workers engaged in interstate commerce,” meaning the court lacked authority to compel arbitration.⁷ The critical fact was that Brock’s “intrastate route formed a constituent part of the... interstate journey” of the goods.⁸ Flowers Foods petitioned the Court, asking the justices to instead adopt a bright-line rule that a transportation worker must transport goods across state lines or interact with a vehicle that does in order to qualify for the Section 1 Exemption to the FAA.

The Court’s Decision

The Court affirmed. Writing for a unanimous Court, Justice Neil Gorsuch rejected the proposed bright-line rule requiring a transportation worker to cross state lines or interact with a vehicle that does to fall within the Section 1 Exemption. Notably, this is the fourth time in recent years that the Court has addressed the scope of the Section 1 Exemption—and in each case, the Court has rejected efforts to limit its reach. For example, in New Prime Inc. v. Oliveira,⁹ the Court held that the Section 1 Exemption’s “contracts of employment” extend to independent contractors, not just employees. In another case, the Court held that an airline worker who loaded and unloaded cargo solely within a single state was engaged in interstate commerce and fit within the Section 1 Exemption. And in Bissonnette v. LePage Bakeries Park St., LLC, the Court again affirmed that a worker can fall within the Section 1 Exemption whether he or she is employed in the “transportation industry” or some other industry, so long as his or her work plays a “direct and necessary role” in the free flow of goods across borders.¹⁰ The consistent direction of this line of authority has significant implications for companies who have relied on arbitration as a dispute resolution mechanism for delivery workers.

The Court centered its analysis on the definition of the terms “engage” and “interstate commerce.” It reasoned that neither term requires the bright-line crossing-or-contact rule Flowers Foods proposed.¹¹ The Court offered a hypothetical with two scenarios to illustrate the point—one where a single driver takes goods directly across state lines, and another where three drivers split the same delivery, with only one crossing state lines. The Court stated it “cannot be right” that only the driver who crossed the state line actively engaged in interstate commerce, as each driver played a direct, active, and necessary part in the interstate journey.¹² 

The Court further referenced several commerce clause cases, including The Daniel Ball,¹³ which involved a steamer that operated entirely within the limits of Michigan and did not connect with any line of vessels or railway leading to other states, but was nonetheless held to be engaged in interstate commerce because it transported goods destined for other states.¹⁴ The Court rejected Flowers Foods’ argument that these cases applied only to the commerce clause and acknowledged that while Section 1 of the FAA is not coterminous with the commerce clause, cases using the same language as Section 1, or formulations very close to it, offer probative evidence of what an ordinary person at the time of the FAA’s enactment would have understood its terms to mean.¹⁵ 

The Court reaffirmed the standard established in its prior precedent that a worker must play a “direct,” “necessary,” and “active” role in moving goods across borders—confirming that the Section 1 Exemption has limits, even if the crossing-or-contact rule is not one of them.¹⁶ 

Questions Remain 

Flowers Foods resolves one question regarding the scope of the Section 1 Exemption while leaving several others open. While the decision establishes that last-mile delivery workers may qualify for the Section 1 Exemption without ever crossing state lines, it does not mean they always will. Notably, the Court declined to rule on whether operating through an independently owned company mattered for the Section 1 Exemption, or whether the worker’s ordering, purchasing, and taking title to the goods prior to resale changed the analysis.¹⁷ It noted that lower courts have found these facts relevant when considering the Section 1 Exemption’s scope. However, because Flowers Foods did not ask the Court to decide the legal significance of those facts—choosing instead to stake its entire argument on the bright-line crossing-or-contact rule—the Court declined to analyze their implications on Section 1 Exemption eligibility.¹⁸ 

While the definition of “contract of employment” was not at issue, the Court discussed Fli-Lo Falcon, LLC v. Amazon.com, Inc.¹⁹ and Silva v. Schmidt Baking Distribution, LLC ²⁰ as examples of cases in which the structure of a contract of employment affected Section 1 Exemption eligibility. The Court also cited the First Circuit Court of Appeals’ decision in Immediato v. Postmates, Inc.,²¹ which held that intrastate delivery drivers fulfilling takeout food orders are not engaged in interstate commerce. However, the Court did not disturb these decisions, holding only that the crossing-or-contact rule is not a prerequisite for a Section 1 Exemption.

Practical Considerations

Companies who use arbitration to resolve disputes with last-mile delivery workers should not assume those agreements will be enforceable. Flowers Foods confirms that crossing state lines is not required to fall within the Section 1 Exemption. Further, the questions the Court left open—including how entity structure, title transfer, the structure of the contractual relationship, and operation through an independently owned company affect the analysis—create real exposure in circuits that have already split on these issues. Notably, the circuit courts remain divided on whether the Section 1 Exemption’s “contract of employment” requirement is satisfied when the agreement is between two business entities rather than with an individual worker, meaning outcomes may vary significantly by jurisdiction. Employers should consider auditing existing arbitration agreements with delivery workers, franchisees, and gig workers and consult counsel to evaluate their arbitration programs in light of this decision and the open questions it leaves for the lower courts.

We acknowledge the contributions to this publication from our summer associate, Ryan Johnston.

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.

On 2 June 2026, President Donald Trump signed an Executive Order entitled Promoting Advanced Artificial Intelligence Innovation and Security (the EO). The EO represents a significant development as the first action by the Trump Administration to directly confront the national security implications of advanced artificial intelligence (AI) models, while maintaining the Administration’s firmly pro-innovation posture. The EO is notable for four key reasons: (1) an explicit prohibition on mandatory AI licensing, preclearance, or permitting requirements for AI model development or distribution; (2) the creation of a new classified “covered frontier model” designation controlled by the Director of the National Security Agency (NSA), (3) a directive to the Attorney General to prioritize criminal enforcement against actors who weaponize AI to illegally access or damage computer systems; and (4) aggressive whole-of-government cybersecurity timelines, with most provisions requiring action within just 30 days. After internal disagreements over the timing of certain provisions, the White House appears to have struck a balance on high-risk AI standards, notably including an amended voluntary framework and benchmark standards against which future AI models will be evaluated.

With the release of recent high-risk generative AI models, the threats posed by AI have become increasingly prominent, as have the threats posed to AI systems. Although the White House has released its AI Policy Framework and Executive Orders to halt state AI regulation, it had not yet addressed the national security implications of high-risk frontier models—until now. This EO balances the Administration’s pro-innovation and deregulatory posture with a collaborative framework for private companies to work with the federal government on cybersecurity infrastructure for high-risk AI models.

Cybersecurity

The EO prioritizes cyber defense and security through the Committee on National Security Systems, the Department of War, and the Department of Homeland Security—all of which are subject to an aggressive 30-day action timeline. The Cybersecurity and Infrastructure Security Agency (CISA) is tasked with creating “Binding Operational Directives and other guidance” related to national security across the federal government. CISA is also tasked with facilitating access to cybersecurity resources for agencies, state and local authorities, and operators of critical infrastructure. The EO directs the Secretary of Treasury to form an AI cybersecurity clearinghouse, in voluntary collaboration with the AI industry and operators of critical infrastructure, to coordinate vulnerability scanning, discovery, and remediation. The cybersecurity provisions within the EO aim to create a more consolidated effort to address AI risks across the federal government.

Frontier Models

The focal point of the Administration’s risk-mitigation efforts lies in the third section of the EO, related to Secure Frontier Model Deployment. “Frontier model” refers to the most advanced, cutting-edge AI models—those whose cyber capabilities, such as automated hacking and sophisticated system-control tactics, meet a threshold to be determined through a classified benchmarking process. Given the threats these models could present to networks and internet infrastructure, if left unregulated, the White House issued the EO as a regulatory middle ground—a voluntary framework that promotes engagement with and access to such models.

The EO mandates the development of a classified benchmarking process to assess the cyber capabilities of AI models, including the creation of a “covered frontier model” designation. This process will include a voluntary framework that allows AI developers to engage and collaborate with the federal government through protected agreements.

Critically, the EO expressly prohibits construing any of its provisions as authorizing mandatory governmental licensing, preclearance, or permitting requirements for the development, publication, release, or distribution of AI models. This provision explicitly frames the order as a rejection of the prior administration’s regulatory approach, positioning deregulation as a national security and economic competitiveness strategy. Consistent with the “America First” posture throughout the EO, the Administration resolves the ongoing tension in AI governance—innovation against security—decidedly in favor of voluntary frameworks and industry collaboration, reserving enforcement authority for bad actors rather than imposing compliance burdens on developers.

Through this collaboration, the federal government plans to strengthen critical infrastructure cybersecurity, while companies designated as “trusted partners” will receive early access to covered frontier models to promote secure innovation.

Building Upon the Current Framework

Currently, the Center for AI Standards and Innovation within the National Institute of Standards and Technology (NIST) facilitates collaboration between the government and the private sector through voluntary guidelines and best practices. While not stated explicitly in the EO, the order appears to provide a similar voluntary standards framework through NIST oversight—only now with a primary focus on more sophisticated frontier models.

Notably, while NIST has traditionally been the home of AI related benchmarks and standards, the EO primarily designates the Secretaries of Treasury, War, and Homeland Security through the Directors of NSA and CISA to take the lead with the Secretary of Commerce, through the Director of NIST, serving in a consultative role. These Secretaries are all jointly tasked with the rollout and enforcement of the benchmark and standards provisions of the EO. The Director of NSA is specifically designated as the authority to determine whether a model meets the “covered frontier model” threshold. The benchmarks themselves will be classified, so many questions around this order will remain publicly unanswered even after the 60-day development period.

Takeaway

Although the EO’s provisions are voluntary and the benchmark framework will be classified, this order signals the direction the Administration plans to take on future AI action: monitor high-risk AI systems while encouraging innovation. The explicit prohibition on mandatory AI licensing regimes reinforces the Administration’s commitment to federal preemption and regulation. At the same time, the EO’s criminal enforcement provisions direct the Attorney General to prioritize prosecution under 18 U.S.C. §§ 1028, 1030, and 1343, among other applicable statutes, against anyone who utilizes AI to illegally access or damage a computer without authorization, including through the deployment of AI agents. This signals that the Administration views AI-related threats as both a national security and law enforcement priority. 

As the framework and benchmarks are developed over the next 30 to 60 days, the respective agencies will likely look to the private sector for guidance and collaboration. If your company is developing frontier models or working within the cybersecurity space, now is the time to engage in the process. While voluntary, these benchmarks will serve as the basis for categorizing future AI models and establishing national security standards. Just as NIST’s AI Risk Management Framework was foundational to federal AI standards, this high-risk framework will be foundational to future cybersecurity standards for AI models.

Our team is tracking these developments in real time—from frontier AI oversight and federal preemption to state compliance obligations and emerging cybersecurity frameworks—and translating them into practical guidance. We are happy to discuss how these shifts may affect your AI model decisions, cyber practices, and federal partnerships, and what steps you can take now to prepare. Please feel free to reach out for a targeted readiness assessment, a legislative strategy briefing, or further analysis.

Background and Statutory Origin

The proposed rule implements Section 847 of the FY2020 National Defense Authorization Act (NDAA) and Section 819 of the FY2021 NDAA, together with elements of DoW Instruction 5205.87 (May 2024). In other words, this is not starting from scratch; DoW began moving in this direction some years ago, signaling the intent to broaden the FOCI review. Historically, FOCI scrutiny—administered by the Defense Counterintelligence and Security Agency (DCSA) under the National Industrial Security Program—has been reserved for contractors requiring access to classified information. The new framework reflects DoW’s view that FOCI risk is a function of ownership and supply-chain exposure, not classification status, and is designed to provide what DoW describes as an “unprecedented level of visibility” into the ownership structures of its industrial base. Crucially, the proposed rule reaches to both prime contractors and subcontractors, which will significantly enlarge the affected population of companies and will make flowdown compliance a key concern for prime contractors.

What the Proposed Rule Requires

The rule would create a new Defense Federal Acquisition Regulation Supplement (DFARS) Part 240, Information Security and Supply Chain Security, along with a new solicitation provision (DFARS 252.240-70XX) and contract clause (DFARS 252.240-70YY). Key obligations include:

Pre-Award Disclosure via NISS

Before contract award, offerors must submit a completed Standard Form (SF) 328, Certificate Pertaining to Foreign Interests, along with supporting documentation and contact information for each beneficial owner, through DCSA’s National Industrial Security System (NISS). Submission of an offer constitutes a representation that the information is current, accurate, and complete.

“Eligible” NISS Status as a Gate

Contracting officers may not award, modify, or exercise an option on a covered contract unless the contractor (or subcontractor) holds an “eligible” status in NISS. NISS eligibility thus operates as a gating requirement at every subsequent contract action, not just at initial award.

90-Day Mitigation Clock

If DCSA determines that FOCI or beneficial ownership poses a mitigable risk, the contractor must agree at award to implement a DCSA-approved mitigation strategy within 90 calendar days. The clock resets after each triggering contract action, including post-award identification of risk. The proposed rule does not specify what mitigation tools (e.g., board resolutions, proxy agreements, or structural changes) will apply to uncleared contractors—an open question of substantial concern.

Ongoing Reporting Duties

Contractors must update the SF-328 in NISS before any modification or renewal and whenever underlying ownership information changes. If a change may place the contractor under FOCI, the contractor must report owner details to DCSA within three business days, and the contractor must confirm a plan of action within 10 business days of receiving DCSA’s recommendations.

Subcontractor Flowdown

Prime contractors must flow the substance of the FOCI clause down to subcontractors at any tier whose subcontracts exceed US$5 million, and they must confirm and maintain subcontractor NISS eligibility before award and throughout performance.

The Commercial Item Exemption—Narrower Than It Appears

The rule generally excludes contracts for commercial products and services, including commercially available off-the-shelf items. However, this exemption is qualified in ways that compliance teams should not overlook. A “designated senior DoW official” (not yet identified) may direct that the new terms apply to any commercial acquisition involving “sensitive data, systems, or processes.” Notably, the proposed rule itself indicates that DoW views FOCI risk as driven by ownership rather than by what is being procured, suggesting the exemption may be invoked more frequently than its plain text implies—particularly for software, information technology, and other technology-heavy acquisitions. The rule does not yet specify the criteria, timing, notice, or appeal process governing such determinations.

Scope and Impact

DoW’s own estimates underscore the scale of the expansion:

• Approximately 3,774 unique awardees per year would have been captured under the rule based on FY2022–FY2024 data.
• Approximately 37,740 total entities (including offerors and subcontractors) could be subject to submission requirements.
• Approximately 21,511 of those entities are small businesses, many of which have no prior interaction with DCSA or NISS.
• Approximately 9,435 contractors are projected to need disclosure updates during performance; an additional approximately 1,887 would be affected by the refresh requirement before option exercise or modification.

Expected Implementation Timeline

• 7 May 2026: Proposed rule published in the Federal Register.
• 6 July 2026: Public comment period closes.
• Post-comment period: DoW will review comments and issue a final rule. No effective date has been set. Given the breadth of the rule and the open questions identified above, a final rule is unlikely before late 2026 or 2027, and DoW may issue interim or implementing guidance to address NISS onboarding for uncleared contractors.

Recommended Actions for Legal and Compliance Teams

The proposed rule represents a structural shift from a classified-information paradigm to an ownership-and-access paradigm that reaches deep into the defense industrial base, including companies with no prior DCSA exposure. Affected companies should begin internal preparation now, rather than waiting for a final rule. Recommended steps include the following:

Map Your Contract Portfolio Against the US$5 Million Threshold

Identify prime contracts, subcontracts, and pipeline opportunities that would be covered, including indefinite delivery, indefinite quantity task orders and option years that could trigger the eligibility gate.

Conduct an SF-328 Readiness Review

Walk through each question in SF-328 against current ownership records. Identify foreign parents, foreign limited partners, foreign minority investors, foreign-citizen officers or directors, foreign indebtedness, and foreign revenue concentrations that could trigger FOCI disclosure.

Build a Beneficial Ownership Inventory

Maintain a current, defensible record of all beneficial owners with contact information ready for NISS submission. Coordinate with corporate, mergers and acquisitions, and treasury functions to flag changes in real time.

Initiate NISS Registration Planning

For uncleared contractors with no prior DCSA interaction, identify a NISS account administrator, confirm commercial and government entity code alignment, and review available DCSA guidance on the registration process.

Assess Mitigation Exposure

For contractors with known foreign ownership or control elements, evaluate the realistic universe of mitigation outcomes—from attestations to board resolutions to structural arrangements—and how a 90-day clock would interact with the governance processes.

Update Subcontractor and Supplier Management Processes

Build NISS eligibility verification into supplier onboarding, prime/sub-flowdown templates, and ongoing supplier monitoring for subcontracts above US$5 million.

Engage With Private Equity Sponsors and Foreign Investors

Portfolio companies, joint ventures, and minority-investment structures may now require FOCI analysis, even where no classified work is involved—investors should be brought in early.

Consider Submitting Comments by 6 July 2026

Open questions on the commercial item exemption, the “senior DoW official” process, the mitigation toolbox for uncleared contractors, NISS onboarding, and legacy contracts are squarely teed up for industry input.

The firm’s International Trade, Investment Controls, and National Security practice group and Government Contracts and Procurement Policy practice group are closely monitoring these developments and can assist companies contemplating activity subject to these new requirements.

The SDGT and FTO designations expand upon prior Trump administration and Department of Justice (DOJ) actions increasing the focus on cartels and gangs, particularly in Latin America.³

These new designations, coupled with the criminal organizations’ expansion into legitimate business and infiltration of the ordinary economy, increase risks for international companies operating in Latin America. As these organizations become more deeply embedded in routine commercial activity, companies doing business in the region must exercise heightened caution in assessing counterparties, transactions, and operational relationships. This is particularly true in Brazil and other Latin American countries (e.g., Mexico) where FTOs are intertwined with legitimate businesses.

Criminal Organization’s Infiltration of Legitimate Business Operations

The FTO designations of CV and PCC come as organized crime groups, particularly in Latin America, are increasingly infiltrating legitimate business operations, including global supply chains, agriculture, energy and fuel, mining, real estate, and banking and investment.⁴ 

CV and PCC present two prominent examples of this infiltration. In August 2025, Brazilian officials seized US$220 million from PCC money-laundering activities across 40 investment funds (with investments in Brazilian port terminals, ethanol plants, and gas stations) and Brazilian fuel distributors, transport companies, and gas stations.⁵ The Brazilian Federal Revenue Service alleged that a fintech company served as a “shadow bank” for PCC to move more than US$8.5 billion in illicit profits and that the people and companies involved evaded more than US$1.6 billion in fuel sales taxes.⁶ Additionally, the National Treasury of Brazil requested that courts freeze US$1 billion in assets allegedly tied to PCC’s activities. Subsequently, in October 2025, Brazilian state police conducted the largest raid against CV to limit the organization’s expansion into other parts of the country.⁷

The expansion of illicit activities, and infiltration of legitimate business operations, have resulted in an all-of-government approach, including increased coordination between the United States and the Latin American countries these organizations call home. 

Impact on International Companies Operating in Latin America

These designations significantly increase compliance, sanctions, and enforcement risks for companies operating in Latin America, particularly as criminal organizations become increasingly embedded in legitimate commerce, supply chains, and financial networks. The risk is especially acute in countries like Brazil, Mexico, Colombia, Ecuador, and Venezuela, where designated FTOs and affiliated networks may intersect with otherwise lawful businesses. Companies must therefore enhance due diligence, third-party risk management, and ongoing monitoring.

While there have always been potential civil and criminal consequences for companies working with, supporting, or associating with transnational criminal organizations (TCOs), the DOJ’s stated priority of seeking the highest possible penalties under the sentencing guidelines for cases involving cartels⁸—combined with the recent FTO designations—has increased these potential consequences significantly.

Under the United States terrorism statutes, 18 U.S.C. § 2339A and § 2339B, DOJ may pursue companies both criminally and civilly for providing “material support” to an FTO. Section 2339A provides criminal liability for providing material support or resources in support of an act of terrorism. Section 2339B provides criminal liability for providing material support or resources to an FTO. Material support is broadly defined as providing an FTO with any property (tangible or intangible) or services, including currency, financial services, lodging, personnel, or transportation.

Companies and their personnel may face civil or criminal liability for even inadvertent dealings that provide support to a cartel or TCO, including transactions with FTO-linked counterparties, entities with concealed beneficial ownership, or businesses that pay cartels to operate safely. The penalties can be severe. Under 18 U.S.C. § 2339A, material support may trigger substantial fines and prison terms of up to 15 years—or life if death results. Under section 2339B, defendants may face criminal fines and prison terms of up to 20 years—or life if death results.⁹ Although DOJ has not yet used these provisions against international companies in this context, precedent exists.¹⁰

DOJ has also used civil forfeiture to seize assets tied to TCOs and FTOs. Recent examples include a multimillion-dollar Iranian fuel shipment in 2020,¹¹ US$2 million in digital currency linked to Hamas in 2025,¹² and 300,000 kilos of methamphetamine precursor chemicals tied to the Sinaloa Cartel later that year.¹³ Although DOJ has applied this authority selectively, it provides a basis to pursue products or funds connected to an FTO.

The impact on legitimate business does not end with DOJ. The US Department of the Treasury’s Office of Foreign Assets Control (OFAC) can issue sanctions against FTOs like CV and PCC.¹⁴ These sanctions may result in the blocking or freezing of property, assets, and interests associated with TCOs or FTOs; trade and financial transaction prohibitions; and targeted restrictions on certain industries or sectors. In practice, this means an international company engaged in a business sector that has been infiltrated by a TCO or FTO—such as energy or fuel—could face sanctions, have its assets or property frozen, face trade and financial restrictions, or have its entire business in that sector paused.

Moreover, the US Department of the Treasury’s Financial Crimes Enforcement Network (FinCEN) can restrict financial institutions, such as foreign banks, from transmitting funds associated with TCOs and FTOs. For example, in June 2025, FinCEN issued orders identifying three Mexico-based financial institutions as engaging in money laundering in connection with Mexican cartels and limiting all US dollar (USD) transactions with those banks.¹⁵ International companies associated with financial institutions that have ties to TCOs or FTOs may have their business operations paused, funds frozen, or access to the USD market restricted.

The resulting criminal and civil penalties from inadvertent support of FTOs is not limited to US-based companies. Any company or financial institution with connections to the United States—including USD-denominated transactions, US correspondent banking relationships, US email or cloud accounts, or US-based personnel—could be subject to US jurisdiction and may be affected by these US enforcement actions. 

These designations are also likely to channel additional US enforcement and administrative resources toward Latin America, increasing scrutiny of conduct that may implicate not only material-support theories but also adjacent enforcement regimes such as the Foreign Corrupt Practices Act, export controls, and anti-money laundering laws. For companies operating in the region, the practical effect is a heightened likelihood that issues once viewed in isolation will now be examined through a broader, coordinated enforcement lens.

Proactive and Tangible Actions International Companies Can Take

Given the significant potential criminal and civil penalties—and business disruptions—associated with supporting or associating with TCOs or FTOs, international companies and their senior leadership should prioritize assessing and proactively updating policies and procedures and engaging counsel to identify potential risks. These proactive actions can include:

Conducting Cartel and TCO-Focused Due Diligence on Third Parties and Merger Targets

Any business operating in Latin America must scrutinize employees, vendors, agents, customers, and even local governments where TCOs or FTOs may be so embedded that licensing payments are effectively bribes to the regional cell. When entering into a new business relationship, companies should: (1) conduct background checks and review government-maintained lists from US regulators (OFAC, the US Department of the Treasury, and the Bureau of Industry and Security), as well as any lists published by national or local governments; (2) conduct planned and unplanned site visits to meet with personnel and observe day-to-day business operations; and (3) seek corporate and leadership references from trusted industry participants and regulators.

Assess and Revise Third-Party Agreements in Known Cartel or TCO Territories

Beyond the standard anti-bribery and anti-corruption clauses, these agreements should include: (1) clear descriptions of services to be provided; (2) requirements to investigate potential cartel, TCO, and FTO associations uncovered in background checks; (3) robust audit clauses to aid in potential future investigations; (4) notification requirements for any changes to beneficial ownership and structure, and the ability to revise or terminate agreements if these changes are problematic; and (5) notification requirements if third parties are solicited or otherwise approached by a cartel, TCO, or FTO.

Implement Robust Internal Policies, Procedures, and Training to Prevent, Detect, and Respond

Companies should: (1) codify the due diligence policies and procedures described above; (2) train employees to act upon these policies and procedures, with a particular focus on identifying red flags, and identify and train key personnel to assess internal reports of potential encounters with a cartel or TCO and determine whether external reporting is necessary; (3) expand awareness of direct and indirect conduct constituting “material support” (e.g., hiring associated individuals, payments to local charitable organizations, or providing information); (4) implement physical and technological safeguards to protect employees and business operations, including financial controls requiring purpose-of-payment documentation; and (5) proactively prepare for increased investigative inquiries by stress-testing policies, procedures, and crisis-management systems.

Proactively Engage Independent Counsel to Assess Potential Concerns

Companies should proactively engage independent, third-party counsel to assess any potential financial and operational connections to cartels, TCOs, or FTOs and evaluate self-reporting of any findings. Doing so quickly and thoroughly may limit the extent of the company’s exposure and potential liabilities. For example, in November 2025, Kodiak Gas Services engaged counsel to conduct an internal investigation into concerns that payments were made to individuals associated with a Mexican criminal organization designated as an FTO to protect employees of the Mexican business from threats of harm or harassment and to ensure access to worksites. Although these payments occurred prior to the company’s 2024 acquisition of the Mexican affiliate, the company voluntarily self-reported to US authorities and has since sold all its operations in Mexico.¹⁶

• On 22 April 2026, Japan blocked the acquisition of the Japanese company Makino Milling Machine Co., Ltd. by a South Korea-based private equity fund, MBK Partners, under the Foreign Exchange and Foreign Trade Act (FEFTA) based on perceived national security risks.
• This is only the second time ever that Japan has blocked a transaction under FEFTA, which is expected to be amended in July 2026 to bring Japan’s review process closer to that employed by the United States under the Committee on Foreign Investment in the United States (CFIUS).¹
• Japan’s actions are the latest sign of its increasing scrutiny of foreign investment, especially transactions involving semiconductors, AI, defense, advanced manufacturing, cybersecurity, and critical infrastructure. 
• Private equity investors will likely face increased review of consortium structures, indirect investments, and ultimate ownership arrangements.

Japan Blocks Acquisition Of Makino Milling Machine Co., LTD.

On 30 April 2026, the South Korea-based private equity firm MBK Partners (MBK) announced it had ended its effort to acquire the Japanese machine tool manufacturer Makino Milling Machine Co., Ltd. (Makino) after the Japanese government issued a rare recommendation against the transaction based on national security concerns.²

Founded in 1937, Makino is a leading global manufacturer of high-precision machine-tools and machining systems. Its principal business lines include the manufacturing of machining centers, electrical discharge machining systems, mill machines, automation systems, and computer-aided design/computer-aided manufacturing solutions.³ One of its main products is the five-axis machining center,⁴ which can be used to produce missile guidance fins and nose cones, automobile molds and dies, home appliances, semiconductors, rocket components, and medical devices.⁵ 

Under the proposed transaction, Makino was to become a wholly owned subsidiary under one of MBK’s funds, constituting an inward direct investment that triggered the prior notification filing requirements under FEFTA, Japan’s foreign investment control statute.⁶ Under FEFTA, certain foreign investments, such as those deemed related to national security or involving target companies engaged in a “core business sector,”⁷ trigger a prior notification filing requirement with the Ministry of Finance and the relevant ministries with responsibility for the specific sectors(s).⁸ This is followed by a 30-day review period by the Ministry of Finance. If the Ministry of Finance and any applicable ministry issues a recommendation at the end of the review period, the investor has 10 days to comply with the recommendation. If the investor fails to respond or to comply with the recommendation within such period, a formal order is issued requiring modification or suspension of the transaction.⁹

Following its review of MBK’s proposed acquisition of Makino, on 22 April 2026, the Japanese government (in this case, the Ministry of Finance and the Ministry of Economy, Trade, and Industry) issued a recommendation against approving the transaction.  According to the Minister of Finance Katayama, MBK’s proposed acquisition posed “potential risks to national security,” as Makino operates in a “dual-use technology” sector by manufacturing high-precision machine tools and machining systems.¹⁰ Under FEFTA, “dual-use technology” refers to technology with both civilian and various military applications and purposes.¹¹ Machine tools falling within certain categories are commonly regarded as strategically sensitive technologies under FEFTA and as an integral part of Japan’s defense supply chain and national security system. MBK subsequently announced the fund was pulling out of the transaction.

This is only the second time that the Japanese government has blocked a foreign acquisition, after it previously blocked a UK investment fund from increasing its investment in J-POWER, a Japanese power company holding key infrastructure assets, in 2008.¹² Notably, MBK’s proposed acquisition of Makino had already obtained CFIUS approval, which was necessitated by Makino operating a manufacturing facility in Ohio.¹³  

Japan's Increasing Regulatory Scrutiny Of Foreign Investments And Proposed Amendments To FEFTA

The Japanese government’s decision to block the acquisition of Makino is the latest example of its efforts to increase scrutiny of foreign investment in Japan.

Under FEFTA, a foreign investor is generally required to submit a prior notification to the Japanese government and obtain approval if the target company is engaged in business sectors relating to national security, public order or safety, or critical infrastructure, such as defense, aerospace, cybersecurity, telecommunications, energy, semiconductors, dual-use technologies, and other industries deemed sensitive by the Japanese government.¹⁴ The factors which the government considers are largely set out in administrative guidance and policy materials published by the Ministry of Finance and are not codified in law, granting the government considerable discretion in carrying out its review.  

Recent legislation has expanded the scope of FEFTA. In 2019, the share acquisition/ownership threshold for triggering the prior notification requirement was lowered from 10% to 1%, and new types of activities were added that trigger the prior notification requirement such as the appointment of a foreign investor or its “close associate”¹⁵ as a director or statutory auditor of a Japanese company.¹⁶ 

Additional legislation is set to further strengthen FEFTA. On 17 March 2026, the Japanese Cabinet approved and submitted to the Diet (the Japanese legislative body) a bill to overhaul and expand the scope of FEFTA by:¹⁷ 

• Introducing a formal inter-agency screening committee reportedly to be co-chaired by the Ministry of Finance and the National Security Secretariat;¹⁸ 
• Covering certain indirect acquisitions, including offshore-to-offshore transactions involving Japanese subsidiaries and changes in ultimate ownership or control;
• Codifying “risk mitigation measures” that are currently implemented largely through administrative guidance (such measure to include governance restrictions, information barriers, limitations on access to sensitive technology, and other post-closing compliance obligations);
• Introducing post-closing “call-in” powers to allow Japanese authorities to review and impose remedies on transactions even after completion, including transactions not initially subject to prior notification requirements; and
• Strengthening anti-circumvention measures through a broader interpretation of “deemed foreign investors,” and increased focus on effective control and beneficial ownership.

The Bill was passed by the Diet on 29 May 2026. The current Diet session will run until 17 July 2026. Regulations implementing the FEFTA reforms will likely be promulgated around mid-July or August 2026 and come into force around mid 2027. 

Practical Applications For Foreign Investment Into Japan

Japan’s opposition to the Makino acquisition and the proposed FEFTA amendments reflect a policy shift toward a more robust security-oriented foreign investment screening process similar to the US CFIUS framework, heightening risks for foreign investment in Japanese companies involved in sensitive manufacturing capabilities and dual-use technologies with potential national security implications. 

The expected FEFTA reform would further broaden the scope of transactions requiring FEFTA analysis, and reviews are expected to become increasingly subject to economic security and geopolitical considerations. The Makino decision demonstrates that approval under traditionally more rigorous regimes in other jurisdictions, such as CFIUS in the US, does not necessarily signal a likely approval under FEFTA.

In general, foreign parties investing in Japan should expect heightened scrutiny, longer review timelines, and increased regulatory uncertainty, as well as greater reliance on mitigation measures such as governance restrictions, information barriers, and ongoing compliance obligations. For private equity investors, FEFTA reform places greater emphasis on scrutiny of indirect acquisitions, transparency in relation to ultimate beneficial ownership, and effective control, thereby increasing scrutiny over consortium structures, layered holding companies, and beneficial ownership arrangements.¹⁹ 

In this environment, a thorough risk assessment before moving forward with an investment likely to attract attention under FEFTA will become more essential than ever. 

This edition of the K&L Gates Competition & Consumer Law Round-Up provides a summary of recent and significant updates from the Australian Competition and Consumer Commission (ACCC), as well as other noteworthy developments in the competition and consumer law space. If you wish to have any more detail about the issues outlined in this newsletter or discuss them further, please reach out to any member of the K&L Gates Competition and Consumer Law team.

Enforcement

• Australian Government Grants an Additional AU$67.7 Million to the ACCC Over a Four-Year Period to Strengthen Competition and Consumer Law Enforcement Capabilities
• Coles Found by the Federal Court to Have Misled Consumers in its "Down Down" Promotions
• AU$15 Million Penalty Ordered Against Emma Sleep for Misleading Statements About Sale Prices

Mergers and Acquisitions

• ACCC Requires Two More Merger Notifications to Proceed to Phase 2 Review (MicroStar - Konvoy and Insurance Australia Group - RAC Insurance)

Notifications and Authorisations

• ACCC Proposes Not to Authorise Screen Producers Australia to Negotiate With Broadcasters and Streaming Platforms
• ACCC Proposes to Grant Authorisation for Australian Hotels Association Members to Engage in Collective Bargaining

Noteworthy Developments

• Heightened ACCC Attention on Compliance With Consumer Guarantee Rights in the Electronics and Whitegoods Sector
• ACCC Granted Leave by the Federal Court to Intervene in the Epic Games, Inc v Apple Inc Proceedings
• Streamlined Competition Exemption Powers for Emergencies and Exceptional Circumstances, Alongside Increased Penalties in the Petroleum Marketing Industry

Click here to view the Round-Up.

The model tariff is intended to provide broad guidance, leaving specific terms to be vetted in EDC tariff filings or rate proceedings (as discussed below). Since large-load interconnections will be governed by the tariff of the EDC serving the territory where the load is located, the PUC will make case-by-case determinations on key elements of the interconnection procedures based on the administrative record in the EDC’s docket. The deferral of these decisions is deliberate, preserving flexibility, but the model tariff is significant in that it reflects the PUC’s policies and governing principles that EDCs will need to consider in their interconnection reform proposals.

Key Components of the Model Tariff

Applicability and MW Thresholds

The model tariff applies to new large-load interconnections—both new customers and new incremental load from existing customers—after its effective date.² Existing Large Load Customers would be grandfathered under current tariff terms, though they may opt in on a case-by-case basis.³ The model tariff is applicable to customers “at or over 50 MW individually or 100 MW in the aggregate,” with EDCs retaining discretion to apply the tariff to customers below 50 MW.⁴ The definition is based on gross load; behind-the-meter generation is excluded from the threshold calculation.⁵

Contract Terms and Load Ramp

The model tariff sets a minimum initial contract term of five years, beginning after the conclusion of a three-to-five-year load-ramp period.⁶ EDCs must ensure that the contract term is adequate to recover the full cost of the EDC’s investment to serve the Large Load Customer and may therefore require a longer term.⁷ Further, the customer is financially responsible to pay minimum charges, even if it chooses to curtail, reduce, suspend, or terminate service.⁸  

Cost Allocation

The Large Load Customer will be responsible for network upgrade costs under a “but for” cost-causation test: if a network improvement would not have been needed but for the Large Load Customer’s interconnection, the costs are allocated to that customer regardless of whether others may benefit, and will be assessed as a contribution in aid of construction (CIAC).⁹ The sole exception is for upgrades already planned under a PUC-approved Long-Term Infrastructure Improvement Plan (LTIIP).¹⁰

Monthly Billing Demand and Minimum Demand Charge

The Large Load Customer’s monthly billing demand—highest 15-minute integrated peak measured in kilowatts during the month¹¹—is at least equal to 80% of contracted capacity.¹² The Large Load Customer is subject to a minimum monthly demand charge at least equal to 80% of contracted demand.¹³  

Collateral

Financial security supplied by the Large Load Customer (or the customer’s financial sponsor) must fully cover Network Improvement and Interconnection Facility costs. As construction and load-ramp milestones are achieved, financial security may be reduced.¹⁴ 

Exit Fees

The Large Load Customer may reduce contract capacity by up to 20% after the initial term (or five years, whichever is greater) without an exit fee, provided 48 months’ notice is given.¹⁵ Reductions beyond 20% or early terminations are permitted, but will be subject to an exit fee calculated as the greater of unrecovered Network Improvement and Interconnection Facility costs or the nominal value of remaining minimum charges.¹⁶

Costs, Timing, and Completion of Interconnection Studies

A biannual (twice per year) Network Open Season allows Large Load Customers to apply for cluster studies, with study costs allocated on a pro-rata load-share basis to each customer.¹⁷ EDCs must complete interconnection studies within six months of receiving a complete application or refund 50% of the study fee for each 90-day period of delay.¹⁸  

Interruptible Service

Interruptible service will be available based on the terms of each EDC’s existing tariff provisions or by bilateral contract.¹⁹ A customer’s interruptibility will be subject to testing and verification by the EDC. A customer that fails to curtail when directed by the EDC will face penalties, equal to the difference between interruptible and firm rates for the full contract term, and removal from interruptible service.²⁰ 

Universal Service Contributions

The Large Load Customer must make annual contributions to the EDC’s universal service programs on a tiered schedule based on peak demand, ranging from US$250,000 (25–75 MW) to US$1,000,000 (500+ MW).²¹ 

Self-Construction

Large Load Customers have the option to self-construct network upgrades, subject to compliance with Federal Energy Regulatory Commission and North American Electric Reliability Corporation rules and the EDC’s engineering standards. The customer must also meet inspection, maintenance, and repair standards in the Public Utility Code.²² 

PJM Emergency Procedures

The EDC will provide the Large Load Customer with protocols for emergency response, including actions necessary in response to a load-shed event called by grid operator, PJM Interconnection, L.L.C. (PJM).²³ This coordination requirement is consistent with the US Department of Energy’s Section 202(c) orders authorizing PJM to direct the deployment of data centers’ back-up generation during a system emergency.²⁴  

Issues Deferred to Rate Cases and Future Proceedings

The PUC reserved a number of issues for resolution in future EDC tariff filings or rate proceedings: 

1. The specific criteria for determining the aggregation of closely located customers;²⁵  
2. The methodology for determining the “majority beneficiary” of network upgrades for collateral purposes.²⁶ The PUC declined to finalize how to determine whether a large load is the major beneficiary of network upgrades, finding the concept to be “uncertain, difficult to quantify and in need of greater stakeholder vetting”;²⁷ 
3. While the PUC adopted the “but for” cost-allocation standard, it does not prescribe detailed benefit-quantification methodologies, allocation formulas for partially shared upgrades, or dispute procedures for contested allocations;
4. The specific components of exit fee calculations;²⁸ and 
5. Universal service-program cost-allocation structures—including total funding levels, eligibility, and enrollment procedure—that are to be addressed in EDC rate cases and universal service-plan proceedings.²⁹ 

Implications

The model tariff proposes a structured and risk protective framework intended to align EDCs and Large Load Customers on cost causation, long term commitments, and financial protections, while leaving critical implementation details to utility specific proceedings that will shape how these requirements are applied in practice. Utilities, data center developers, large industrial customers, and others may want to evaluate how the model tariff’s requirements could affect their operations, contractual arrangements, and cost exposure.

Ready to Help

The firm’s Data Centers and Energy Intensive Infrastructure 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. 

Federal Preemption Was the Strategy, but Execution Is Still Incomplete

In December 2025, the Trump Administration issued Executive Order 14365 to halt state-by-state AI regulation and lay the groundwork for federal preemption. The order directed Department of Commerce, within 90 days, to identify and effectively triage “onerous” state AI laws, flagging those that distort “truthful outputs,” burden interstate commerce, or raise constitutional concerns for referral to a newly created AI Litigation Task Force (Task Force). The Department of Justice (DOJ) stood up that Task Force in January 2026, but key pressure points remain stalled, including Commerce’s evaluation, the Federal Trade Commission’s (FTC) policy statement on AI and “truthful outputs,” and the Federal Communication Commission’s (FCC) disclosure-standard proceeding.

The result is familiar: clear federal intent, but incomplete execution. In the meantime, states continue to legislate, including Colorado’s high-risk system deployer obligations, Utah’s AI disclosure requirements, and Illinois’s biometric and employment-related AI laws. For companies, that means ongoing state compliance pressure alongside shifting federal expectations.

The National AI Policy Framework Signals Direction, Not Relief

The March 2026 National AI Policy Framework (Framework) is a four-page coordination document, not a compliance reset. It does not impose obligations, preempt state law, or resolve the hardest liability questions. Instead, it organizes legislative recommendations across seven themes and reinforces a consistent federal posture: preference for national uniformity, reliance on existing agencies rather than a new AI regulator, and skepticism of prescriptive rules that add compliance burden without clear payoff.

Two signals matter for business planning. First, on intellectual property, the Framework reflects the Administration’s view that training AI models on copyrighted material does not violate copyright law and favors litigation, not mandatory licensing, to resolve fair-use disputes. Second, it previews the direction of travel for enforcement and legislation: a focus on demonstrable harms, clearer allocation of responsibility between developers and deployers, resistance to state laws viewed as regulating model development, and treatment of AI as economic and physical infrastructure.

Frontier AI and Pre-Market Oversight

In early May 2026, after previews of Anthropic’s Mythos model raised concerns around the speed at which cybersecurity vulnerabilities might be leveraged, reporting indicated that the Administration has been considering executive actions addressing broad cyber security risks from advanced AI, including a pre-deployment vetting regime that would require government clearance before releasing certain frontier models. National Economic Council Director Kevin Hassett publicly compared the concept to an Food and Drug Administration-style review process. At the same time, the National Institute of Standards and Technology’s (NIST) Center for AI Standards and Innovation has begun entering voluntary agreements with developers to conduct unclassified evaluations focused on national security risks such as cybersecurity, critical infrastructure, biosecurity, and chemical weapons.

The contemplated executive order could also restrict private-sector efforts to block government use of AI models and tighten contracting and termination standards for federal vendors. If adopted, a clearance-style regime would mark a meaningful shift toward pre-market oversight for certain systems and is a development companies should plan around now, not after the rules are final. But pre-market oversight for frontier models is only one dimension of a broader shift already underway.

Four Channels Driving AI Governance Now

Even while Congress deliberates, governance expectations are solidifying through four channels:

1. FTC enforcement: Consumer protection law is already being applied to AI claims, including representations about accuracy, business growth, and safety, making substantiation a present-tense issue.
2. Civil rights enforcement: DOJ and Equal Employment Opportunity Commission enforcement turns on outcomes, not intent, and vendor sourcing does not shift responsibility away from deployers.
3. Standards: Frameworks like the NIST AI Risk Management Framework remain voluntary, but increasingly function as a baseline in procurement, diligence, and contracting.
4. Procurement: Federal contracting continues to convert policy into enforceable obligations, which often migrate into broader market expectations.

The through-line is straightforward: operational governance is becoming the price of entry, regardless of whether or when Congress acts.

Near Term Legislative Vehicles

Comprehensive AI legislation remains unlikely in the near term. Instead, Congress appears more inclined toward narrowly targeted bills addressing discrete risks. The TAKE IT DOWN Act (Pub. L. 119-12), which criminalizes the nonconsensual distribution of AI-generated intimate images, was signed into law in May 2025 with strong bipartisan support, underscoring congressional appetite for focused measures. Other pending proposals follow a similar pattern: the bipartisan CHATBOT Act (H.R. 7985 / S. 4407) and the GUARD Act (S. 3062) target protections for minors, with the GUARD Act advancing out of the Judiciary Committee in May. Taken together, these efforts suggest that near-term legislative movement is more likely to concentrate in specific areas like child safety, transparency, fraud prevention, and government use of AI than to coalesce into a comprehensive regulatory framework.

But targeted bills are not the only legislative strategy taking shape. In April 2026, Reps. Jay Obernolte (R-CA) and Ted Lieu (D-CA) introduced the American Leadership in AI Act (H.R. 8516), a bipartisan legislative package that consolidates more than 20 prior proposals and recommendations from the bipartisan House Task Force on Artificial Intelligence–a separate congressional body chartered by Speaker Johnson and Leader Jeffries to develop guiding principles and policy proposals on AI–into a single framework. The package spans standards and evaluation, research infrastructure, federal adoption and procurement, workforce development, and safeguards against AI enabled harms. Unlike the issue-specific measures described above, the bill represents an attempt to organize fragmented congressional efforts into a more coherent legislative architecture.

Importantly, the proposal does not yet resolve core structural questions, including federal preemption, liability allocation, or the scope of mandatory requirements. Instead, it reflects an emerging congressional strategy: aggregating areas of bipartisan consensus into modular legislation that could serve as a foundation for more comprehensive action over time. While the package is not a near-term compliance driver, it is a meaningful indicator of how Congress may begin to organize a broader AI policy framework.

The incremental approach is also evident in parallel efforts to build a national data-privacy framework. Congress continues to negotiate baseline questions about data rights, profiling, and automated decision-making. The House Republican SECURE Data Act (H.R. 8413) would create opt-out rights for profiling, treat children’s data as sensitive, establish a data broker registration regime, and preempt much of state privacy law. It does not include explicit AI provisions, impact assessments, or a private right of action, limiting its immediate utility as an AI governance vehicle even as it reshapes the data-rights landscape. The companion GUARD Financial Data Act (H.R. 8398) would add tailored requirements for financial institutions’ use of automated decision-making.

Practical Takeaways for Stakeholders

This is a moment to engage deliberately:

• Expect governance to continue forming outside Congress. FTC enforcement, civil rights liability, NIST standards, and federal procurement are already converting policy into operational obligations. If a pre-market clearance regime for frontier models moves forward, it will add a new and significant compliance layer—companies developing or deploying advanced systems should begin scenario-planning now.
• Plan for continued state-law compliance pressure. Executive Order 14365 signaled clear preemption intent, but Commerce’s evaluation of state AI laws, the FTC’s policy statement, and the FCC’s disclosure proceeding remain incomplete. Until federal preemption is operational, obligations under laws like Colorado’s deployer requirements, Utah’s disclosure rules, and Illinois’s biometric and employment-related AI statutes remain in effect.
• Assume privacy and AI governance will keep converging. The SECURE Data Act’s profiling opt-out rights, sensitive-data classifications, and data broker registration requirements would reshape the data-rights landscape even without explicit AI provisions. Companies should assess how emerging data-privacy frameworks interact with their AI systems, automated decision-making processes, and vendor relationships.
• Engage early to shape outcomes. Congressional strategy is shifting from one-off bills to modular frameworks like the American Leadership in AI Act, and agency guidance, contract terms, and enforcement positions are hardening quickly. The window to influence standards, preemption scope, and liability allocation is now—not after the rules are final.

Bottom Line

AI governance is not waiting for Congress. Federal preemption remains the stated objective, but execution has lagged—Commerce’s evaluation, the FTC’s policy statement, and the FCC’s disclosure proceeding are all incomplete. In the interim, operational obligations are forming through enforcement, procurement, standards, and state law simultaneously. A pre-market clearance regime for frontier models, if adopted, would add a significant new compliance layer. The American Leadership in AI Act signals that Congress is beginning to organize fragmented efforts into modular frameworks, and the SECURE Data Act could reshape the data-rights landscape in ways that intersect directly with AI governance. Companies should plan for a period in which compliance expectations continue to harden across multiple channels, national security considerations may override pro-innovation defaults, and the window to influence outcomes is narrowing.

Our team is tracking these developments in real time—from frontier AI oversight and federal preemption to state compliance obligations and emerging data privacy frameworks—and translating them into practical guidance. We are happy to discuss how these shifts may affect your AI governance program, data practices, vendor relationships, and regulatory exposure, and what steps you can take now to prepare. Please feel free to reach out for a targeted readiness assessment, a legislative strategy briefing, or a gap analysis.

The table below outlines the key features of break fees generally and naked break fees (sometimes also referred to as a "bare break fees" or "naked no-vote break fees"):

The firm recently acted for Ausmincon Holdings Limited on a merger by way of a court approved scheme of arrangement with AFRY AB in the Federal Court of Australia, under which AFRY AB acquired 100% of the issued share capital in Ausmincon Holdings Limited. This deal featured a naked break fee which was expressly considered by Justice Jonathan Beach in Re Ausmincon Holdings Limited [2026] FCA 280.

Justice Beach found that the naked break fee did not constitute unacceptable circumstances, but rather "the price of buying the opportunity” to put the AFRY AB offer to the Ausmincon Holdings Limited shareholders. In coming to this decision, Justice Beach considered the following:

• Circumstances where the bidder's preference was a traditional M&A transaction which would involve customary warranties and other deal protection arrangements;
• The market soundings leading up to the negotiation of the scheme implementation agreement;
• The quantum of the naked break fee being approximately 1% of the scheme consideration;
• The naked break fee being a reasonable estimate of the actual costs to be incurred by the bidder;
• The target's financial position which could facilitate payment of the naked break fee;
• The premium of the bid compared to the independent fairness report; and
• The likelihood of support from the target's shareholders.

This decision highlights that despite being unusual, naked break fees are not automatically unacceptable. However, as naked break fees carry a much higher regulatory risk than conventional break fees, they should be approached with caution and carefully considered before being implemented.

On 14 May 2026, the Federal Court of Australia (the Court), in a prosecution commenced by the Australian Competition and Consumer Commission (ACCC), found that Coles Supermarkets Australia Pty Ltd (Coles) had engaged in misleading conduct and made misleading representations about the price of products in trade or commerce between February 2022 and May 2023.

The proceedings, centred on Coles’ long-running “Down Down” promotional campaign which advertised lower prices on frequently bought grocery items, such as milk, bread and laundry liquid. 

The Court found that, for a discount on a product to be a “genuine discount,” it required the following:

• A pre-promotional price that was commercially justifiable and not artificially inflated.

• Commercial volumes of the product sold at that pre-promotional price.

• Importantly, a reasonable period during which the product was ordinarily offered at that price.

The Court held that a price that was only ever held for a short time (in these instances, about four weeks), notwithstanding that these prices were commercially grounded (the prices followed supplier price increases, were based on suppliers’ recommended retail prices (RRPs) and, hence, were “genuine prices”), was, in the context of Coles’ long-standing pricing behaviour and policies/“guardrails,” too short to constitute a genuine reference price, rendering the represented discounts illusory and misleading.

The Court stated that had the prices been held at the higher prices for a period of 12 weeks immediately prior to the “Down Down” promotion, the conduct would not have been misleading. However, while it was not explicitly stated, it is clear that the reference to the 12-week period related directly to Coles’ own policies/guardrails which were in place prior to the period in which the conduct took place—further detail below.

According to ACCC Chair Gina Cass-Gottlieb, the ACCC brought these proceedings as it considered that “Coles’ pricing practices within its ‘Down Down’ program made it harder for consumers to identify genuine value for money while shopping for household essentials.” ¹

This decision by the Court has important implications for businesses and their promotional strategies and activities. We set out a number of key considerations for businesses in light of the Court’s decision in more detail below.

Background

The ACCC commenced proceedings against Coles in September 2024 over alleged false or misleading representations made to consumers.

Specifically, Coles was alleged to have briefly raised prices (for periods of about four weeks or less) on 245 items (the Affected Products) by at least 15% before putting them on “Down Down” promotions. The Affected Products included Arnotts’ Shapes biscuits, Bega cheese, Band-Aids, Danone Yoghurt and more.

The Affected Products were marked with “Down Down” pricing tickets which noted both a promotional price and a “was” price for each product (being the temporarily increased price). Even though the promotional price was lower than the “was” price, it remained higher than the regular price before that temporary increase.

The ACCC’s allegations were that the “Down Down” pricing tickets constituted false or misleading representations that the Affected Products’ promotional price was a genuine discount, even though the “was” price displayed on the pricing tickets was the temporarily increased price and not the product’s regular price. Therefore, the discounts did not actually exist.

Coles denied the alleged representation, asserting that supplier cost increases and related negotiations resulted in the price increases from which the discounting occurred. Coles argued that the “was” price reflected the immediately preceding regular price and that the promotional price therefore represented a genuine discount.

For completeness, in parallel with the ACCC prosecution, a class action proceeding was commenced making similar allegations, and the initial trial involved all issues of liability in both the ACCC proceeding and the class action proceeding (the Joint Liability Trial).

The Joint Liability Trial was conducted using 12 out of the 245 Affected Products (Sample Products), all of which were manufactured and packaged grocery products instead of fresh products.

Is the Discount Genuine or Illusory?

The Court approached the issue of what separates a genuine discount from an illusory one, ultimately finding that the duration that the “was” price had been offered, particularly in the context of Coles’ own policies and guardrails that were in place in the three years prior to the conduct taking place (and which were amended at the conduct’s commencement), was the decisive issue in this case.

The Court accepted that most ordinary consumers, when grocery shopping, would not have formed a conscious belief about the period for which the “was” price was offered. 

As such, consumers would only have an intuitive sense that the discount being offered was genuine. In addition, incorporated into the notion of a genuine discount is the idea that the previous price was an ordinary price that had been offered by Coles for a reasonable period. 

Therefore, the Court’s view was that the “Down Down” pricing tickets conveyed a representation about Coles offering a genuine discount.

Was the Discount Genuine?

To determine whether the discount was genuine, the Court had to consider all relevant factors, including whether the “was” price shown on the “Down Down” pricing ticket truly reflected the product’s usual sale price over a reasonable time frame.

These relevant factors included the following:

• The commercial circumstances under which the price of the product had been determined.

• The level at which the price was set.

• The period over which the product was sold at that price.

• The volume of product sales at that price.

Based on its assessment of the circumstances under which Coles increased the Sample Products’ retail prices before placing them on “Down Down” pricing tickets, the Court concluded that the price increases were due to an increase in supplier cost prices and that Coles’ decision to increase retail prices (based in part on the price increases and suppliers’ RRPs) was commercially justifiable. The Sample Products were both offered for sale at the “was” price in Coles’ ordinary course of business and were also sold in commercial volumes.

Nevertheless, the determining consideration was the duration for which the Sample Products were sold at the “was” price. 

The Court considered in detail Coles’ own policies and in particular the “guardrails” that had been in place since September 2019, particularly the following:

• The requirement that the product which was the subject of the “Down Down” promotion must not have been offered at lower than the “was”/regular price at any time in the preceding 12 weeks.

• The requirement that the product must have been sold at the “was”/regular price for the four weeks immediately prior to the launch of the promotion (or for four out of the previous six weeks).

The Court also did the following:

• Considered that the above guardrails “provided contemporaneous evidence of Coles’ efforts to ensure that the Down Down price represented a genuine discount from the previous price”²—noting that the Court discounted the fact that the guardrails were amended immediately prior to the conduct commencing as being similarly probative.

• Proceeded to state that “…In that regard, the guardrails demonstrate that Coles was aware of the potential for the Down Down promotional strategy to mislead consumers….”³

• Therefore concluded that 13 of the 14 “Down Down” pricing tickets were misleading, as they had not been sold at the “was” price stated on the ticket for a reasonable period prior to the “Down Down” promotion. The only exception was the Nature’s Gift Dog Food “Down Down” pricing ticket, which was not misleading as it did not include a “was” price.

As such, the discounts represented on the “Down Down” pricing tickets were not genuine. In offering the Sample Products on the “Down Down” pricing tickets, Coles had done the following:

• Engaged in misleading conduct in trade or commerce.

• Made a misleading representation with respect to the price of the Sample Products in connection with the promotion of the supply of the Sample Products in trade or commerce.

Penalties

The question of penalties has yet to be determined by the Court. However, Ms. Cass-Gottlieb has stated that the ACCC will be seeking a substantial penalty to reflect “the importance of accurate pricing for consumers.”⁴

What Does This Mean for Your Business?

The Court determined that the concept of a genuine discount inherently includes the assumption that the referenced prior price reflects the ordinary sale price over a reasonable period. 

While there has been significant “publicity” about the “requirement” to make available the products at the “was” price for a period of 12 weeks, as is set out clearly above, this requirement was clearly contextual to Coles’ factual circumstances and is not, in our view, a “hard and fast rule.”

The Court determined that the concept of a genuine discount inherently includes the assumption that the referenced prior price reflects the ordinary sale price over a reasonable period. Having said that, businesses should exercise care when using “was/is” or “strike through” pricing strategies in promotions, as they are implicitly making a factual representation about the product’s pricing history.

To manage risks in relation to misleading conduct and representations, businesses should “take stock” of their promotional strategies, activities and mechanisms to ensure they are not at risk of contravening the Australian Consumer Law (ACL).

When assessing their promotional strategies, activities and mechanisms, businesses should consider the following:

• What is a reasonable period for the product to be offered at the pre-promotional price/“was” price?
  • Are the prices of the product relatively stable, or do they change frequently?
• What internal guardrails can be established (e.g. minimum price sale periods) to manage the risk of offering an illusory discount?
  • According to the promoter’s rules, how long must product prices remain stable/the products be sold at (or at least offered at) before the product is offered on promotion?
• What is the volume of sales for each product at the pre-promotional price?
  • Businesses should keep records of pre-promotion sales volume (or at least the period of time that the product was offered at the “was” price), promotion sales volume and other relevant data points. 
• What is the commercial basis behind pre-promotional prices?
  • If challenged, can the business provide sufficient evidence on why each specific price point is commercially justifiable? For example, by providing supplier cost data or internal documentation outlining the methodology used in price determination.

If your business cannot confidently establish that a pre-promotional reference price meets the factors for being a “genuine discount,” the most prudent approach may be to avoid “was/is” or “strike through” pricing and identify other ways to communicate the product’s value.

If you require any assistance in conducting an assessment on whether your business’s promotional activities and strategies pose a risk under the ACL, please contact us and we can assist you further.

On 28 April 2026, the European Parliament’s Committee on Economic and Monetary Affairs (ECON Committee) published the draft of its report on the revision of the Sustainable Finance Disclosure Regulation (SFDR 2.0).

Among other things, the report proposes that SFDR 2.0 should also apply to packaged investment products within the meaning of the PRIIPs Regulation. This would, for example, also include structured securities.

Stricter requirements are also proposed with regard to the principal adverse impacts of investment decisions on sustainability factors (PAIs). One proposal provides that products under Article 8 of SFDR 2.0, “ESG Basics,” should also be required to disclose mandatory PAIs. These mandatory PAIs would apply to all product categories.

For the categories under Article 7, “Transition,” and Article 9, “Sustainable,” an increase in the minimum share of taxonomy-aligned investments from 15% to 20% is proposed.

While an extended transitional period of 24 months is generally proposed, the relief measures planned under SFDR 2.0—for example, the removal of entity-level PAIs—are intended to enter into force immediately.

The report is still at an early stage and, after being adopted by the ECON Committee, must also be adopted by the European Parliament.

BaFin Consults Second Draft of WpI MaRisk

On 6 May 2026, the German Federal Financial Supervisory Authority (Bundesanstalt für Finanzdienstleistungsaufsicht,BaFin) published the second draft of a new circular entitled “Minimum Requirements for the Risk Management of Investment Firms” (Mindestanforderungen an das Risikomanagement von Wertpapierinstituten, WpI MaRisk) and opened it for consultation. Compared to the first draft from August 2025, this version is less extensive and now focuses on the statutory minimum requirements for small and medium-sized investment firms (Wertpapierinstitute). It is designed to offer a flexible and tailored framework for shaping business organization and risk management within these firms. Additionally, the circular aims to address deficiencies in the investment sector that could put the security of entrusted assets at risk; undermine the proper execution of investment services, ancillary investment services, or related transactions; or cause significant disadvantages for the wider economy. It is also intended to help reduce the risk of disorderly resolution of investment firms. The guiding principle of the WpI MaRisk is prudential supervision to protect clients, which requires proper business organization and effective risk management by the investment firms.

Large investment firms remain excluded from the scope of the WpI MaRisk, as the MaRisk for banks in its current version shall continue to apply to them.

Comments on the draft can be submitted to BaFin until 17 June 2026. The final coordinated circular is scheduled to come into effect from 1 January 2027.

BaFin to Apply ESMA Guidelines on LMTs

On 5 May 2026, BaFin announced that it will apply the guidelines of the European Securities and Markets Authority (ESMA) on liquidity management tools (LMTs) for open-ended funds.

The ESMA guidelines were published on 12 March 2026 and contain the supervisory framework relating to the selection and calibration of LMTs for Undertakings for Collective Investment in Transferable Securities (UCITS) and open-ended alternative investment funds (AIFs). The guidelines will therefore be incorporated into BaFin’s supervisory practice.

ESMA Advances Simplification of EU Reporting Obligations for Funds and Transactions

On 4 May 2026, ESMA published two key reports on simplifying regulatory reporting obligations in fund and transaction reporting. The aim is to reduce the increasing complexity and operational burden of European reporting regimes for fund managers and other market participants.

At the center of ESMA’s approach is the “report once” principle: In the future, market participants should, as far as possible, only have to report data once, while supervisory authorities should be able to exchange information more efficiently across the European Union. This is intended to reduce duplicate reporting, inconsistent data requirements, and parallel reporting processes.

For the funds sector, ESMA proposes a harmonized EU-wide reporting framework with a single reporting template. The currently fragmented national reporting systems are to be gradually replaced by a common European system. A hybrid model is envisaged, under which data collection would continue to take place at national level, while data validation and analysis would be consolidated more strongly at the EU level. Initially, the reporting obligations under the Alternative Investment Fund Managers Directive (AIFMD) and Undertakings for Collective Investment in Transferable Securities (UCITS) are to be merged in particular.

In addition, ESMA published an interim report on simplifying transaction reporting under the European Market Infrastructure Regulation (EMIR), the Markets in Financial Instruments Regulation (MiFIR), and the Securities Financing Transactions Regulation (SFTR). The authority identifies overlapping requirements, inconsistent data standards, and frequent regulatory changes in particular as major cost drivers for the industry. In the long term, ESMA is also examining the introduction of an integrated “report once” model in this area. Specific regulatory recommendations are expected to follow by mid-2026 after further market consultation.

For fund initiators, management companies, and other regulated market participants, the proposals could have significant medium- to long-term implications for reporting processes, data management, and IT interfaces. At the same time, there are indications of greater standardization of European supervisory data, which is likely to entail higher requirements for data quality and governance in the future.

Consultation Paper ESMA—Guidelines on the Endorsement Regime Under Article 11 of the ESG Ratings Regulation

The Regulation (EU) 2024/3005 of the European Parliament and of the Council of 27 November 2024 on the transparency and integrity of Environmental, Social and Governance (ESG) rating activities (ESG Ratings Regulation) will apply from 2 July 2026. From that date, in-scope entities will have one month to notify ESMA of their intention to apply for authorization, registration, or recognition under the ESG Ratings Regulation. 

Entities that apply for authorization may also request to endorse ESG ratings issued by legal entities established outside the European Union. The purpose of the ESMA guidelines is to provide additional guidance on the requirements and documentation expected for such applications and on how the endorsement process should be implemented in practice.

ESMA has opened a consultation on draft guidelines outlining its proposed framework for endorsing ESG ratings issued outside the European Union under Article 11 of the ESG Ratings Regulation. The draft guidelines are intended to clarify the information and documentation that firms must provide when seeking approval to endorse third-country ESG ratings. The endorsement regime aims to ensure continued access to global ESG data while maintaining market integrity and protecting investors.

According to ESMA’s proposed framework, ESG ratings endorsed under the regime would be expected to comply with standards broadly comparable to those applicable to EU-authorized rating providers, including requirements relating to governance, methodologies, and transparency disclosures.

The consultation paper provides a detailed table outlining the documentation ESMA expects applicants to submit when seeking endorsement of ESG ratings, mapped against each requirement set out in Article 11. It also explains how rating providers may demonstrate ongoing compliance with the specific obligations under Article 11.

ESMA is inviting feedback on both the proposed application information requirements and the continuous supervisory obligations. 

The consultation closes on 29 May 2026. ESMA will publish further information on the outcome of the consultation and the adoption of the guidelines no later than the end of July 2026.

Understanding Your GenAI ESI

Organizations and their counsel must understand which GenAI tools employees use (approved and informal) and for what purposes, what data each tool retains, where that data resides, and how long it remains available, including any applicable vendor retention practices.

GenAI ESI (including prompts, outputs, uploaded documents, and usage logs) may not be retained by default. Some tools auto-delete data quickly, overwrite information as users iterate, or preserve it only in audit logs that require affirmative configuration. As a result, potentially relevant information may be lost before counsel realizes GenAI ESI is implicated.

As GenAI adoption grows, these issues will impact information governance, litigation, and compliance readiness. Organizations will need enterprise-level retention settings for approved tools, clear internal rules for business and legal use, and legal hold processes that can quickly identify and preserve relevant GenAI ESI.

Updating Your Retention Policies

In some cases, GenAI ESI may qualify as a business record with retention requirements, e.g., where employees rely on GenAI outputs in decision-making or where such data supports audit or compliance functions. In regulated industries, GenAI outputs that inform client communications, marketing, or operational decisions may trigger the same documentation and supervision requirements as other ESI. Organizations should review retention policies to ensure relevant ESI is addressed, with retention periods determined by content of a record rather than format.

At the same time, overly broad retention creates burden and risk. Data minimization remains a core principle of effective information governance, particularly given the volume of ESI GenAI tools can generate. Retention policies should define what constitutes a business record and incorporate GenAI ESI into existing categories based on content and business purpose, rather than creating entirely new classifications. Exploratory prompts and draft outputs that do not inform business decisions may not warrant retention and may be subject to defensible disposition practices. Because technical capabilities vary across platforms, policy requirements should align with what organizations can realistically implement.

Because GenAI tools continue to rapidly evolve, retention policies should be reviewed periodically but drafted flexibly enough to remain effective without constant revision.

Preserving GenAI ESI in Anticipation of Litigation

Under the Federal Rules of Civil Procedure and in most states, parties must preserve relevant ESI once litigation is reasonably anticipated. Recent case law confirms this can include GenAI ESI. When litigation is anticipated, organizations should promptly identify custodians using relevant GenAI tools, assess retention settings, and work with IT and information-governance teams to suspend auto-deletion, preserve existing data, or enable logging where necessary. Coordination with third-party providers may also be required.

Failure to preserve relevant GenAI ESI, carries the same risks as other lost ESI. If the information cannot be restored or replaced through additional discovery and the loss prejudices another party, courts may order curative measures or sanctions. Because GenAI ESI may reflect decision-making not apparent from final documents, courts may be more likely to find prejudice from its loss. If a court finds intent to deprive another party of the information, harsher sanctions may follow.

Re-Considering Traditional Legal Holds

Traditional, custodian-focused preservation instructions may not be sufficient for GenAI ESI, particularly where relevant information is stored within the tool rather than by employees. Instructing employees not to delete information may be ineffective if vendor or enterprise settings continue overwriting or deleting interaction histories or audit logs.

Organizations should consider updating legal hold notices to expressly address approved GenAI tools, specify what must be preserved (such as prompts, outputs, and metadata), and clarify preservation steps. IT and information-governance teams should confirm whether to pause deletion or enable logging.

Practical Considerations for Preserving GenAI ESI

Information Governance and Litigation Readiness

Plan Ahead

Address GenAI during vendor diligence, onboarding, and contracting.

Investigate GenAI Usage

Identify what tools employees use and what information each retains. 

Publish GenAI Policies

Establish clear rules for acceptable use, including restrictions on sensitive data. 

Review Document Retention Policies

Confirm existing policies appropriately address GenAI ESI. 

Train Employees

Ensure employees understand GenAI ESI may be discoverable or business records. 

Monitor and Audit Use

Periodically assess compliance and identify whether sensitive or regulated data is being retained.

Preservation and Legal Holds

Update Legal Hold Procedures

Revise policies and templates to expressly cover GenAI ESI. 

Implement Deletion-Suspension Processes

Establish technical or administrative processes to preserve relevant GenAI ESI when obligations arise. 

e-Discovery Planning for Once Litigation Has Begun

Update e-Discovery Workflows

Update e-discovery protocols and outside counsel guidelines to address GenAI ESI, including data held by third-party vendors.

Incorporate GenAI into Case Strategy

Factor GenAI ESI into scope, proportionality, and burden decisions for collection, review, and production.

Protect Sensitive Information

Assess privacy, personal data, and cross-border transfer implications. 

Looking Ahead

As GenAI becomes increasingly embedded in business and legal workflows, preservation questions will arise more often in litigation and regulatory matters. Courts will likely apply existing discovery and information-governance principles to GenAI ESI as they have to other technologies. Organizations that understand how GenAI ESI is created, retained, and deleted—and align those practices with records management and legal hold processes—will be better positioned to meet preservation obligations and reduce spoliation risk. 

Hill County Moratorium 

With an estimated 400 data center projects either in development or operating statewide, Texas has been seen as an ideal location for developers. Texas aligns well with core siting criteria for hyperscale data centers—power, land, cost, and a friendly regulatory environment. Given the state’s preeminence in data center development, a recent decision in Hill County, Texas, is garnering particular attention. There, by a 3–2 margin, county officials enacted a one-year moratorium on new data center construction in unincorporated areas. The measure followed substantial public opposition to the rapid influx of proposed projects. 

Residents in Hill County expressed concern about the potential impacts on water use, electricity demand, infrastructure, and quality of life. County leadership has characterized the moratorium as a temporary pause intended to provide time to study the effects of large-scale data center development and to assess how best to regulate the industry within the county’s limited authority. Even if temporary, the moratorium may materially affect early-stage projects that are not yet under active construction and therefore are subject to the moratorium. Significant questions concerning the authority of Texas counties to enact such moratoria remain, and legal challenges are likely to follow.

Public Opposition Is National

Hill County’s moratorium is part of a broader emerging pattern. Several other Texas counties—including Hays and Hood counties—have considered similar pauses on data center development, while others, such as Somervell and Ellis counties, have formally requested state-level intervention. On Monday, 18 May Texas Agriculture Commissioner Sid Miller called for a moratorium on new hyperscale data center development in the state, pointing to costs to farmers and strains to the power grid. Although most of these efforts have not resulted in adopted moratoria—often because of legal uncertainty regarding county authority—the volume of proposals and public opposition demonstrates a growing trend in Texas of jurisdictions seeking to slow or condition data center buildout.

The trend is not confined to Texas, however. Projects across the United States are facing pronounced challenges because of public opposition. Public backlash has manifested in several consequential ways across jurisdictions, including the following:

• Voters have removed elected officials who supported data center projects, reflecting direct electoral backlash against approving authorities (Festus, Missouri).
• Voters have adopted ballot initiatives requiring approval of tax incentives for data centers, effectively restricting development support (Port Washington, Wisconsin).
• Courts have invalidated project approvals for failure to comply with statutory notice and procedural requirements, halting development (Prince William County, Virginia).
• Local governments and developers have abandoned projects in response to organized community opposition and sustained public protest (New Brunswick, New Jersey).
• Residents have filed lawsuits challenging rezonings and approvals on environmental and procedural grounds, seeking to block projects (Coweta County, Georgia).
• State legislatures have reconsidered and proposed changes to tax incentives and cost-allocation frameworks, affecting project economics (North Carolina—statewide).
• Communities have opposed the energy infrastructure needed to support data center campuses, including dedicated or co-located generation facilities (Hilliard, Ohio).

Navigating Risk in a Dynamic Environment

Developers, purchasers, investors, and other project participants must anticipate that community opposition to data center development will persist. To manage project impacts and mitigate investment risk, heightened diligence, early local engagement, and bespoke legal assessments are necessary. Boilerplate force majeure and material adverse change clauses may be ill-suited to this dynamic risk environment, and a lack of familiarity with state and local laws and stakeholders could prove costly.

For project execution, transparent communication regarding project impacts, meaningful participation in public processes, and early retention of counsel familiar with local zoning, land use, and administrative procedures are recommended. Equally important is ensuring strict compliance with procedural requirements governing notice, hearings, and approvals, as technical defects can provide a basis for unwinding even fully approved projects.

In addition, the convergence of land use, environmental, energy, and political considerations requires a multidisciplinary legal strategy from the outset. Data center projects now routinely implicate overlapping regulatory regimes, including zoning and permitting, environmental review, energy infrastructure siting, and public utility regulation. Successfully navigating these issues requires coordinated engagement across these disciplines rather than a sequential or siloed approach, particularly in jurisdictions where public opposition is actively shaping the regulatory landscape.

Fielding a Multidisciplinary Team

The firm is positioned to assist clients in navigating data center development risks and resolving disputes if those risks materialize. The firm is also deeply engaged in key jurisdictions for data center development. In Texas, for example, our multidisciplinary legal team works seamlessly with our Texas-based state lobby team, which is presently engaged with the committees of jurisdiction holding public hearings regarding data center land use, water and energy consumption and efficiency standards, and tax abatement eligibility requirements.

Our Texas capabilities are illustrative of our broad geographic and subject-matter reach. In an environment where public opposition increasingly shapes project feasibility, an integrated legal and policy strategy—grounded in local knowledge and national experience—is essential to advancing data center development successfully.

Consumer class actions are beginning to target brands and retailers that raised prices due to tariffs. Following the US Supreme Court’s February 2026 decision striking down certain tariff measures,¹ and the resulting push toward refunds, plaintiffs are now going directly to companies to recover alleged overcharges rather than waiting for any government process. For additional background on the Supreme Court’s decision and the broader tariff landscape, see our prior alert, “Unpacking the US Supreme Court’s IEEPA Tariff Decision: The Outlook for Future Disputes.”² 

The premise is simple: brands and retailers passed on the cost of tariffs and were made whole by imposing higher prices on consumers. Any tariff refunds going to these brands and retailers are accordingly alleged to be a windfall to the brands and retailers. The reality, however, is more complex. Many brands absorbed a significant portion of tariff costs, passing through only limited price increases.

These lawsuits are already increasing and are expected to continue, particularly as US Customs and Border Protection moves forward with its tariff refund process. Early cases have already been filed against large retailers, including entities that serve as importers of record.³

In the event of a lawsuit, brands do have defenses. They may be able to argue that customers agreed to arbitration or waived the right to bring class actions, which may limit these claims. They can also point to the fact that most of the tariff costs were not passed on and that price increases were lawful and justified at the time, and therefore not unfair.

The strength of these claims will be highly fact-specific, depending on the nuances of each company’s practices, contracts, terms, and tariff strategy.

Our firm is closely tracking these developments and can help assess risk and advise on next steps.

SB 5 arrives amid a fast-developing state-by-state AI regulatory landscape. As reflected in our recent employment-focused AI alert,¹ employers must comply with numerous state and local laws requiring transparency, risk assessment, vendor oversight, and anti-discrimination controls when automated systems are used in employment decisions. Connecticut’s framework follows this trend directly addressing automated tools in recruiting and personnel decisions. 

What Tools Are Covered?

SB 5 regulates “automated employment-related decision processes (AERDP).” AERDP is broadly defined as “a computational process that generates any output, including, but not limited to, any constraint, rank, score, recommendation or classification, that (i) affects the outcome of an employment-related decision, and (ii) is not a de minimis factor that is relied upon in making, or in determining the material terms of, an employment-related decision.” Specifically, an AERDP includes technology and outputs such as:

• Scores, such as candidate-fit scores or performance-risk scores;
• Ranks, such as ranked applicant lists or internal promotion shortlists;
• Constraints, such as automated filters that exclude candidates from consideration;
• Recommendations, such as suggested candidates, interview decisions, or retention actions; and
• Classifications, such as “high potential,” “low risk,” “preferred candidate,” or similar labels.

Given the broad definition of AERDP, the law may apply to a wide range of systems, including:

• Resume-screening and applicant-tracking tools;
• Chatbots that collect applicant information or screen candidates;
• Video-interview analytics or structured interview scoring tools;
• Skills assessments, personality assessments, and cognitive assessments using automated scoring;
• Background-screening workflows that incorporate automated flags or rankings;
• Internal mobility, succession-planning, or promotion engines;
• Performance-management tools that generate automated ratings or recommendations;
• Scheduling, productivity, or workforce-management tools used for discipline or termination decisions; and
• Reduction-in-force tools or models that identify employees for selection, retention, or redeployment.

Key Compliance Requirements for Employers

A central feature of SB 5 is transparency. Similar to requirements in California and Illinois,² employers using an AERDP to generate any output for the purpose of making or as a substantial factor in making an employment-related decision will need to provide disclosures prior to using the tool. These notices should explain in plain language that an automated tool may be used, the nature and purpose of the tool, the personal data it processes, the outputs it generates, how those outputs may be used, and whether additional information or human review may be requested. In the event that an AERDP is used for an adverse employment-related decision, employers must also disclose to employees or applicants a “high-level statement disclosing the principal reason or reasons for such adverse employment-related decision, including, but not limited to, (A) the degree to which, and manner in which, the output generated by such automated employment-related decision process contributed to such adverse employment-related decision, (B) the type of data that were processed by such automated employment-related decision process in generating such output, and (C) the source of the data.”

SB 5 also makes anti-bias review a practical necessity. Specifically, SB 5 amends the Connecticut Fair Employment Practices Act to cover the use of an AERDP that has a discriminatory effect. The law directs the relevant state body or court to “consider any evidence, or lack of evidence, of anti-bias testing or similar proactive efforts to avoid such discriminatory practice, including, but not limited to, the quality, efficacy, recency and scope of such testing or efforts, the results of such testing or efforts and the response thereto.” SB 5’s “AI is not a defense” principle reinforces that employers remain responsible for discriminatory outcomes even when a vendor or automated tool contributed to the decision.

Employers using an AERDP should evaluate whether automated tools produce statistically significant disparities on the basis of protected characteristics. Where disparities are identified, employers should assess whether the decision is job-related and consistent with business necessity, whether less discriminatory alternatives are available, and whether mitigation measures are required.

Employers also should ensure that automated outputs do not become unreviewed final decisions. Human oversight is most effective when decision-makers understand the tool’s purpose and limitations and retain authority to question or override automated outputs, all of which should be documented.

Enforcement and Implementation Timeline

The employment-related provisions will be enforceable exclusively by the Connecticut attorney general under the Connecticut Unfair Trade Practices Act. SB 5 includes staggered effective dates beginning 1 October 2026, and because different provisions may become operative at different times, employers should develop a phased compliance plan rather than waiting for all obligations to take effect. For example, employers should: 

• Now–Q3 2026: Inventory automated tools, identify covered use cases, review vendor agreements, and assign internal owners.                       
• Q3–Q4 2026: Draft plain-language disclosures and pre-decision notices; create internal escalation and human-review workflows; begin bias testing for high-impact tools.
• Q4 2026–2027: Implement training for human resources and managers; update applicant and employee-facing materials; refresh procurement standards; monitor regulatory guidance and enforcement developments.
• Ongoing: Repeat audits, update notices after tool changes, document mitigation, and reassess tools when business practices or job criteria change.

Employers should also monitor further guidance from Connecticut regulators and the attorney general, as well as any amendments, interpretive guidance, or enforcement announcements affecting the law’s workplace provisions.

Our Labor, Employment, and Workplace Safety practice 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.

When considering the sale of your company, a number of questions may arise. This guidebook addresses these questions, providing an overview of the private company sale process and key steps required for business owners, as well as for officers, directors, employees, buyers, advisors, and other parties involved in a sale.

To access the Ready to Sell Guidebook, click here.

The Dubai Conflicts of Jurisdiction Tribunal (CJT), an independent judicial authority established in Dubai by Decree No. 29 of 2024 to resolve conflicts between the Dubai International Financial Centre Courts (DIFC Courts) and onshore Dubai judicial bodies, has recently issued a decision in Application No. 01/2026 Judicial Authority. That decision confirms that the DIFC Courts have jurisdiction to recognise and ratify foreign arbitral awards regardless of the seat of arbitration, while the enforcement of a foreign arbitral award in Dubai, but outside of the Dubai International Financial Centre (DIFC), is subject to the jurisdiction of the onshore Dubai Courts. 

Background

The matter concerned an arbitral award issued by the Singapore Chamber of Maritime Arbitration in a Singapore-seated arbitration. The award creditor sought ratification and enforcement of the award in the DIFC Courts, and the award debtor sought annulment of the award in the onshore Dubai Courts. Given the conflict of jurisdiction, the award debtor filed an application to the CJT for a ruling that the onshore Dubai Courts were the competent judicial authority, together with a stay of the DIFC Courts’ enforcement proceedings. 

Decision

In its decision, the CJT confirmed the conceptual and legal distinction between the recognition and ratification of an arbitral award and the enforcement stage. It held that, under the applicable legal framework, the DIFC Courts have jurisdiction to recognise and ratify arbitral awards regardless of their seat, even in the absence of a nexus to the DIFC, provided that the request is properly brought under the applicable legal framework. This is consistent with Article III of the 1958 Convention on the Recognition and Enforcement of Foreign Arbitral Awards (commonly known as the New York Convention)—which requires each contracting state to recognise arbitral awards in accordance with the local rules of procedure, without imposing substantially more onerous conditions than those imposed on domestic awards. 

However, the CJT also confirmed that the DIFC Courts’ execution jurisdiction is limited to cases where a sufficient enforcement link exists within the DIFC (namely, where execution is directed against assets or entities located therein), whereas enforcement in Dubai, but outside the DIFC, is subject to the jurisdiction of the onshore Dubai Courts. 

Analysis

The decision is significant because it confirms that award creditors can seek recognition and ratification of a foreign arbitral award in the DIFC Courts, even where there is no nexus to the DIFC. However, the practical utility of doing so may be limited where enforcement of the arbitral award is ultimately sought against assets located onshore in Dubai. In such circumstances, it may be more efficient and cost-effective to apply directly to the onshore Dubai Courts for enforcement. UAE Federal Law No. 42 of 2022 Issuing the Civil Procedures Law provides a streamlined process whereby an award creditor can apply directly to the execution judge for enforcement of a foreign arbitral award without the need to initiate separate proceedings to recognise or ratify the award. 

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 United Arab Emirates and the wider Middle East region.

• File a single semiannual report and one annual report each year.
• Choose to continue filing three quarterly reports and one annual report.

The SEC is also proposing amendments to Regulation S-X to facilitate semiannual reporting and simplify the “age of financial statements” rules. 

The SEC’s current proposal reflects its view that the regulatory landscape has evolved sufficiently to support greater flexibility. The SEC’s proposal states that optional semiannual reporting could reduce the regulatory burden of being a reporting company and could influence decisions to become or remain public, particularly for emerging growth companies and smaller reporting companies. The SEC notes that other potential benefits of semiannual reporting include: less distraction from running the day-to-day business, reallocation of attention from interim reporting to company strategy, additional time spent on new product development, and ability to engage in transactions that might not be possible when management is focused on preparing interim reports. Comments are due 60 days after publication of the proposed rule in the Federal Register.

Rule and Form Amendments 

Under the amendments proposed by the SEC, public companies would be permitted to choose between the new semiannual reporting regime and the current quarterly reporting regime. The SEC’s proposal would allow a public company that elects semiannual reporting to check a box on the cover page of its Form 10-K indicating such choice, or, if a public company elects quarterly reporting, it would simply leave the box unchecked. The election would be made annually and would continue until the filing of the company’s next Form 10-K. 

Companies that elect semiannual reporting would be required to file semiannual reports on new Form 10-S. Form 10-S would require the same disclosures and financial statements as the current Form 10-Q, including management discussion and analysis, legal proceedings, material risk factor updates, and unregistered sales of securities. Form 10-S would also require the same exhibits, officer certification requirements for disclosure controls and Inline XBRL tagging as Form 10-Q. The Form 10-S filing deadline would be 40 or 45 days after the end of the first semiannual period (depending on filer status), matching current Form 10-Q deadlines, which would not change.

The SEC is also proposing amendments to Regulation S-X to facilitate semiannual reporting and to simplify and modernize the “age of financial statements” rules. Specifically, the SEC proposes to consolidate the Rule 3-12 of Regulation S-X “age of financial statements” framework into Rule 3-01 of Regulation S-X. In addition, rather than a day-counting approach to determine whether interim financial statements are required in a registration or proxy statement, the SEC proposes a simplified approach that would require interim financial statements as of the end of the most recently completed fiscal quarter (for quarterly filers) or semiannual period (for semiannual filers) that has been filed, or is required to have been filed, on or before the filing date of the registration or proxy statement.

Impact on Public Companies

The proposed optional semiannual reporting regime could present meaningful opportunities for cost reduction and improved allocation of resources for public companies, including management’s time and attention, but it also carries potential tradeoffs that they will need to evaluate carefully.

Potential Benefits

• The SEC’s estimates suggest that, on average, annual direct public company compliance costs associated with three Form 10-Qs are approximately US$330,000, compared to approximately US$132,000 for one Form 10-S, for a net reduction of approximately US$198,000 per fiscal year.
• These potential savings span a range of cost categories, including internal time, external professional fees, auditor review and data tagging costs, and investor engagement obligations during the earnings cycle, such as quarterly conference calls.
• Additionally, public companies that choose semiannual reporting may realize indirect benefits, such as reduced managerial distraction and reductions or delays in disclosure of competitively sensitive information.

Considerations and Risks

• The SEC’s proposal identifies potential investor-facing costs associated with semiannual reporting, including longer intervals between standardized disclosures, delays in the dissemination of material information, an overall reduction in information available to the public, and diminished comparability across issuers and over time.
• Longer gaps between disclosures may also extend periods of higher information asymmetry between insiders and investors, increasing the risk of insider trading on undisclosed material information.
• The SEC’s proposal notes concerns that less frequent interim auditor reviews could negatively impact corporate accountability and financial reporting, as quarterly auditor reviews can facilitate the early detection of accounting issues and internal control deficiencies.
• Actual cost savings may be reduced for companies with contractual or other obligations that still require quarterly financial information, such as debt agreements, lender monitoring covenants, or capital-raising expectations, meaning some issuers may essentially be required to produce quarterly information even if they stop filing Form 10-Q.
• Existing market practices around comfort letters and applicable Public Company Accounting Oversight Board standards and underwriter and investor demands could create practical pressure to maintain quarterly reviewed financial information to support offerings, depending on the timing of any capital-raising activity.

Conclusion

Should the SEC adopt the proposed rule and form changes, companies considering adopting the new semiannual reporting regime will need to weigh the benefits of a reduced compliance burden against the impact of the change in reporting frequency on investor relations. Companies will need to assess the expectations of their investor base, analyst coverage, market practices of peer companies, exchange listing requirements, and contractual obligations before determining whether electing semiannual reporting would be advantageous. In addition, even if a public company were to elect semiannual reporting, it will need to evaluate whether it would continue releasing material financial information on a quarterly basis as a matter of investor relations, in order to address stockholder and analyst expectations, to facilitate the opening of trading windows, and to ensure timely access to the capital markets.

Our Capital Markets practice group lawyers will be pleased to discuss how the proposed rules could impact our clients as they consider next steps.

Prior to the ADVANCE Act, the NRC was prohibited from issuing a reactor license to an entity that “the [NRC] knows or has reason to believe…is owned, controlled, or dominated by an alien, a foreign corporation, or a foreign government.”² This prohibition ultimately resulted in the cancellation of plans to construct additional reactors at Calvert Cliffs Nuclear Power Plant in Maryland, when the US partner in the Unistar consortium pulled out, leaving only the French company EDF as an applicant.³

Under section 301 of the ADVANCE Act and the NRC’s implementing direct final rule, entities from 37 countries, subject to certain sanctions-based exclusions, will now be exempt from the Atomic Energy Act’s foreign ownership, control, or domination provision for utilization facilities. The list of countries includes India and all members of the Organisation for Economic Co-operation and Development (OECD) except for Türkiye.⁴ Issuance of a license to a foreign entity will still require the NRC to determine that the issuance “to that entity is not inimical to the common defense and security or public health and safety.”⁵ 

The rule does not otherwise impact or change any of the NRC’s licensing requirements or procedures, and review from the Committee on Foreign Investment in the United States (CFIUS) may still be required depending on the type of investment. The firm’s Nuclear Energy team is constantly monitoring new and emerging development and ready and able to assist clients in discussing these emerging issues. 

Annual Reporting Requirements 

Currently, Australian companies listed on the ASX are required to:

• Provide the ASX with its audited accounts for the full financial year when lodging with the Australian Securities and Investments Commission (ASIC), in any case no later than three months from the end of its financial year; and
• Prepare and send an annual report to its shareholders within four months from the end of its financial year.

Moving forward, ASX-listed companies may now be captured by the new mandatory requirements which require the preparation of a sustainability report (Sustainability Reporting Requirements).¹

Which ASX-Listed Companies Are Required to Prepare Sustainability Reports? 

ASX-listed companies are required to prepare and lodge financial reports under Chapter 2M (being the financial reporting provisions) of the Corporations Act 2001 (Cth). Accordingly, the Sustainability Reporting Requirements will apply if an ASX-listed company falls within one of the following groups ² :

Group 1:

• Companies meeting at least two of the following criteria for the relevant financial year:
  • consolidated revenue of more than AU$500 million;
  • consolidated gross assets of more than AU$1 billion; or
  • 500 or more employees, or
• Companies above the threshold in section 13(1)(a) of the National Greenhouse and Energy Reporting Act 2007.

Group 2:

• Companies meeting at least two of the following criteria for the relevant financial year:
  • consolidated revenue of more than AU$200 million;
  • consolidated gross assets of more than AU$500 million; or
  • 250 or more employees, or
• Companies subject to other National Greenhouse and Energy Reporting Act 2007 reporting obligations.

Group 3:

• Companies meeting at least two of the following criteria for the relevant financial year:
  • consolidated revenue of more than AU$50 million;
  • consolidated gross assets of more than AU$25 million; or
  • 100 or more employees.

Deadlines

The first financial year in which Group 1, 2 and 3 companies must comply with the Sustainability Reporting Requirements is set out in the timeline below:

_{Source: K&L Gates}
 
Accordingly, the first phase of climate-related disclosures for Group 1 companies is due this financial year ending 30 June 2026.

What Must Be Reported?

The Sustainability Reporting Requirements include preparing:

• Climate statements for the year;
• Any notes to the climate statements; and
• The directors’ declaration regarding the statements and notes,

which must include:

• Material financial risks and material financial opportunities relating to climate;
• Metrics and targets relating to climate, including those relating to Scope 1, Scope 2 and Scope 3 greenhouse gas emissions; and
• Information relating to the governance or strategy of, or risk management by the company in relation to, the above.

If a Group 3 company determines that it has no material climate-related risks or opportunities for that financial year, its climate statement must state this and an explanation as to how it came to this conclusion.

ASX Lodgement

The timing for providing ASX with a sustainability report for an ASX-listed company coincides with lodgement of its annual reporting documents as required by Listing Rule 4.5 (being no later than three months after the end of the financial year).

However, late lodgement of a sustainability report will not automatically result in mandatory suspension from trading on the ASX (as a result of amendments made by the ASX to Listing Rule 17.5).

Next Steps

As the Sustainability Reporting Requirements are being phased in over three years, ASX-listed companies should begin preparing to ensure compliance ahead of each relevant deadline. 

We will continue to monitor developments and provide updates as required.

Further information can also be found in our ESG and the Sustainable Economy Handbook, and our Australian ESG Policy Updates (click here).

-----------------------

¹ As introduced by the Treasury Laws Amendment (Financial Market Infrastructure and Other Measures) Act 2024 (Cth).
² Separate thresholds apply for superannuation funds and managed investment scheme entities.
 

The author would like to thank graduate Cleo Taliadoros for her contributions to this alert.

Your compliance team is already toggling between 20+ state privacy laws—one spreadsheet for California, another for Texas, a third for Colorado. Meanwhile, every smartphone app is quietly sharing location data, health metrics, and browsing history with dozens of third parties. For businesses, it is an operational nightmare. For consumers, it is an invisible free-for-all. That may be about to change.

On 21 April 2026, House Republicans released the SECURE Data Act (H.R. 8413) (the Act), the most comprehensive attempt yet to create a national data privacy standard. Paired with the GUARD Financial Data Act (H.R. 8398), which covers financial institutions under the Gramm-Leach-Bliley Act, the two bills aim to eliminate gaps and overlaps in consumer data protection across the entire economy.

What Rights Would Consumers Get?

The Act would codify enforceable privacy rights against data controllers—persons that determine the purpose and means of processing personal data (financial institutions subject to the Gramm-Leach-Bliley Act are separately exempt). Consumers would gain the right to access, correct, delete, and port their data, and to opt out of targeted advertising, data sales, and profiling decisions with significant effects.

Controllers would need to respond to verified requests within 45 days. Consumers may submit two free requests per right per year. Controllers would also need to establish an appeals process for denied requests. These are not aspirational principles, they would be enforceable, uniform, nationwide rights.

Data Minimization: No More “Collect Everything, Figure It Out Later”

Perhaps the most operationally significant provision is data minimization. The Act would limit collection to what is “adequate, relevant, and reasonably necessary in relation to each purpose for which the data is processed as disclosed to the consumer,” curbing excessive collection and unanticipated secondary uses.

The Act would also require affirmative opt-in consent before processing sensitive data—a category that includes data disclosing racial or ethnic origin, religious belief, health diagnosis, sexual orientation, or immigration status; genetic or biometric identifiers; data collected from children or teens; and precise geolocation data. For companies accustomed to opt-out defaults, this would require rethinking consent architecture from the ground up.

Consider a fitness app that collects geolocation and health data: under the Act, it would need opt-in consent before processing, and could not quietly repurpose that data to train an AI model or sell it to a data broker (defined as a controller that derives 50% or more of its revenue from selling data about noncustomers, excluding persons acting solely as processors).

Automated Decision-Making: When Algorithms Make Life-Altering Decisions

One of the most significant provisions targets automated decision-making. Where a controller relies on profiling to make a decision with a legal or similarly significant effect on a consumer—and that decision is made with no human review, involvement, oversight, or intervention—the Act would require disclosure and give consumers the right to opt out.

The covered categories include decisions to deny a consumer a healthcare service, a rental or lease of housing, or an employment opportunity. An employer using AI to screen out applicants, a landlord using algorithmic tenant scoring to deny a lease, or a health insurer using automated claims adjudication to refuse coverage could all be caught. For companies that have quietly integrated AI into high-stakes decisions, this provision may demand the most immediate attention.

One Standard to Rule Them All

For many businesses, the most appealing aspect of the bill is federal preemption. The Act would bar any state or political subdivision from prescribing or enforcing any law that “relates to the provisions of” the Act—replacing the current patchwork with a single national standard. A broad coalition of industry groups, including the US Chamber of Commerce and more than 50 other business associations, have endorsed the bill on the basis that a consistent nationwide standard would strengthen trust, give consumers meaningful control over their information, and provide businesses with the certainty needed to innovate and protect data. State attorneys general would retain authority to enforce the federal standard, preserving existing enforcement infrastructure while eliminating the need for 50 separate compliance programs.

The political fault lines are familiar. Industry groups support preemption but resist broad opt-in consent. Consumer advocates resist preemption that would lower existing state protections. Enforcement would rely on the Federal Trade Commission and state attorneys general—no private right of action—a design choice that may draw criticism from consumer advocates while offering comfort to industry. The American Data Privacy and Protection Act (H.R. 8152) stalled over these same disputes in the 117th Congress. Whether the Act can break through remains the central question.

What Should Companies Do Now?

The legislative landscape is moving quickly. Our team is tracking the SECURE Data Act and the broader wave of AI and technology legislation in real time—translating developments into practical guidance for clients navigating data practices, compliance programs, and regulatory exposure. Whether you need to assess how the bill’s provisions apply to your business, shape your organization’s position in the legislative process, or get ahead of compliance requirements before enactment, now is the time to act. Reach out to our team for a targeted compliance readiness assessment, legislative strategy briefing, or gap analysis. Waiting until the ink is dry is a strategy with real costs.

The first critical deadlines arrive almost immediately. Producers must register by the end of May 2026; registration requirements will vary depending on whether they are reporting through the approved Producer Responsibility Organization or PRO (designated as Circular Action Alliance in California), complying individually, or claiming a small producer exemption. Both the Annual Supply Report and Annual Source Reduction Report are due by 31 May and will directly drive future fee calculations. A second major milestone follows on 1 August when producers must submit source reduction plans outlining how statutory reduction targets will be met. The PRO will also be releasing a PRO Plan later this year, which will provide details regarding management of the PRO and additional specifications and guidance regarding reporting.

These deadlines raise urgent, practical, high stakes questions. Determining whether products or components are covered, assessing potential exclusions, aligning internal data systems, establishing an internal methodology to quantify the amount of covered products utilized or distributed, and coordinating reporting across affiliates or brands are all front burner issues. Early missteps can carry lasting cost, reporting, and enforcement consequences as the program ramps up toward 2027.

SB 54 also does not exist in isolation. California now joins a growing list of states with packaging EPR laws, including Colorado, Oregon, Minnesota, Washington, Maryland, and Maine—each with different scopes, reporting mechanics, and timing. Companies that take a fragmented or reactive approach risk duplicative work, misaligned data systems, lost opportunities for efficient reporting, and avoidable compliance exposure.

The firm is actively helping companies navigate EPR compliance, including applicability and exclusions analysis; registration and reporting preparation; source reduction planning; PRO coordination; contract review; representation in EPR legislative and regulatory rulemaking; and alignment with other state EPR programs. Our approach is practical and business-focused: we identify what is covered, determine what must be filed, build a defensible data record, and help companies make packaging and compliance decisions that work across their operations. Those seeking assistance should contact the authors of this alert or a member of Environment, Land, and Natural Resources practice group.

The decision has important implications that extend well beyond the parties in the dispute at issue, as many municipalities and municipal authorities across the Commonwealth have adopted relevantly similar stormwater charge programs. Pennsylvania businesses and landowners should be cognizant of whether they are subject to such stormwater charges, and consider how those programs, and their payment obligations, may be impacted by the Court’s decision.  

The Majority’s Two-Step Test for Distinguishing Taxes From Service Fees

Four of the Court’s seven Justices (Brobson, Todd, Dougherty and Mundy) joined in the Court’s majority opinion, which sets forth a two-part test for distinguishing a municipal service fee from a local tax. First, a court must determine whether the municipality is performing the service in its public or quasiprivate capacity. If the municipality is acting in its public capacity, then the associated charge is a tax and the inquiry ends. On the other hand, if the municipality is acting in its quasiprivate capacity, then the court must proceed to the second step, under which it must determine whether the charge is reasonably proportional to the service rendered. If so, it is a fee; if not, it is a tax.

Applying this test, the Court determined that the Borough’s stormwater charges are taxes, not fees, under the first step of the inquiry. The Court found that the Borough provides stormwater management services in its public capacity, for the benefit the public generally and not particular landowners. This conclusion was supported by the lack of any voluntary contractual relationship between the Borough and the property owners who are subject to the charge (as may exist when a municipality provides water or sewer services). Because the Borough’s stormwater charge qualified as a tax, the Court found that PSSHE and West Chester University, as instrumentalities of the Commonwealth, were immune from any payment obligations.

Under the majority’s mode of analysis, many (if not all) municipal stormwater charge programs across the Commonwealth could very well be construed to impose taxes, not fees. 

The Concurring and Dissenting Opinions

Justice Mundy issued a separate concurring opinion, and Justices McCaffery and Wecht each issued opinions dissenting from the key holding in the case. Justice Mundy indicated that she was joining the majority opinion “in the present circumstances” but reserved judgment “as to stormwater charges in other municipalities where the proceeds are directed solely to stormwater remediation” or “where the amount of the charge is calculated in substantial part according to the benefit accruing to each property based on the amount of runoff from nearby properties.” Justice McCaffery (joined by Justice Donahue) would have reversed and remanded the case to Commonwealth Court to determine whether the amount of the charge billed to the university was proportional to the benefits it receives from the Borough’s stormwater management system. Justice Wecht, meanwhile, believed that the stormwater charge qualified as a fee that the university was required to pay.

Ramifications

This decision has several important implications for local governments and landowners across the Commonwealth. 

First, barring some rationale for distinguishing other municipal stormwater charge programs from the Borough’s stormwater charge, other tax-exempt entities may similarly be able to claim immunity from any payment obligations. This could ultimately have the effect of imposing a greater share of costs for stormwater management on nonexempt landowners as municipalities restructure their existing stormwater charge programs.

Second, many local stormwater charge programs currently in place have been adopted by municipal authorities created under the Municipality Authorities Act. Municipal authorities, whose governing bodies are appointed rather than elected, lack any power under the Pennsylvania Constitution to impose taxes. For this reason, the Court’s decision calls into question the legality of certain stormwater charge programs adopted by municipal authorities, despite their statutory authorization to impose stormwater management fees.²

Third, while municipalities have the authority to impose taxes, they must do so in compliance with the procedural requirements of the Local Tax Enabling Act and be consistent with the Uniformity Clause of the Pennsylvania Constitution. The Pennsylvania Constitution requires taxes to be levied uniformly on the same class of subjects, and it only permits exemptions for places of religious worship, burial grounds, public property used for public purposes, institutions of purely public charity, and for persons in need of exemptions or special provisions due to age, disability, or infirmity.³ Accordingly, ordinances that use progressive or regressive rate schedules based on factors such as water utilization, treat business versus residential property differently, or provide unauthorized types of exemptions may be subject to constitutional challenges. Questions may arise as to the compliance of stormwater charge programs with these requirements.

Finally, for tax-exempt entities, the Court’s decision may generate rights to seek refunds of taxes paid for the last three years, plus interest.⁴ The same remedies may also be available to other entities if ordinances are held to violate provisions regarding the permissible scope of tax exemptions or special provisions.

Businesses and property owners located in municipalities with stormwater management programs should consider how their payment obligations may be impacted by the Court’s decision. The firm's lawyers will continue to monitor judicial and policy developments relating to stormwater charges in the wake of the Court’s decision and are well positioned to assist. 

Disrupt

The Strategy prioritises early intervention to disrupt the tools, systems and vulnerabilities used to commit fraud. A £31 million Online Crime Centre is expected to launch in April 2026, initially focusing on fraud and high-volume cybercrime. It will support public and private-sector data sharing to analyse trends, generate intelligence, and coordinate large-scale law enforcement action. The UK government is also pursuing international cooperation, including joint action plans with Nigeria and Vietnam to share intelligence and disrupt cross-border fraud networks, with further agreements planned with other priority jurisdictions.

Telecommunications vulnerabilities are also addressed, particularly the ease of obtaining UK phone numbers and distributing fraudulent texts. In 2026, the Home Office plans to issue a “Call for Evidence on the National Telecommunications Traceback Scheme,” alongside exploring a centralised digital tool for managing UK telephone numbers to improve traceability, block fraudulent calls more quickly, and support enforcement action.

Safeguard

The Strategy aims to strengthen the ability of individuals and businesses to detect and prevent fraud before harm occurs. Public awareness initiatives will be expanded, including the “Stop! Think Fraud” campaign and further education programmes targeting consumers, schools, students and small organisations. A victim-centred approach remains a priority. The UK government will continue operating the “Report Fraud” service, consider additional civil penalties for fraud and plans to introduce a “Fraud Victims Charter” by mid-2027.

To address financial exploitation, the Home Office will work with the National Crime Agency, the Financial Conduct Authority (FCA), the Children’s Society and the City of London Police to overcome barriers to tackling exploitative money laundering, improve victim referral pathways, and strengthen coordination across agencies.

Respond

The Strategy seeks to improve fraud prosecution outcomes, acknowledging long-standing concerns around low prosecution rates and evidential complexity. To speed up proceedings in the most complex cases, the UK government plans to introduce judge-only trials for serious fraud by the end of the current Parliament. The Home Office is also considering additional civil penalties for fraud and for facilitating money laundering, providing alternatives to criminal prosecution for businesses affected by fraud.

Key Points for Businesses  

• The Strategy recognises that businesses themselves can commit fraud. Under the “failure to prevent fraud” offence in the Economic Crime and Corporate Transparency Act 2023, large organisations must implement procedures to prevent fraud by associated persons.
• From 2026, the Insolvency Service will intensify enforcement against “phoenixism,” where individuals repeatedly use companies to evade debts. Businesses should expect greater scrutiny of directors and entities with repeated insolvency histories.
• Online fraud will be a key enforcement focus following the Online Safety Act 2023. From 2027, services designated by the Office of Communications (Ofcom) as Category 1 or 2A will be required to take proportionate steps to prevent users encountering paid-for fraudulent advertisements. Ofcom is expected to consult in summer 2026 on further measures, including fines and business disruption powers for serious noncompliance.
• The Home Office and the Department for Culture, Media and Sport have also launched an industry partnership with the Internet Advertising Bureau UK under the Online Advertising Taskforce, with recommendations expected in early 2027. Businesses reliant on online reviews should note that the Online Safety Act 2023 and the Digital Markets, Competition and Consumers Act 2024 will ban fake reviews and strengthen the Competition and Markets Authority’s enforcement powers.
• From October 2027, cryptoasset firms will be brought within a full financial services regulatory regime and required to be authorised by, and comply with, FCA rules.
• From April 2029, electronic invoicing will be mandatory for all value-added tax invoices, requiring suppliers to issue invoices through secure digital systems to reduce interception and fraud risk.

Conclusion

The Strategy underscores the UK government’s renewed focus on fraud as a strategic economic and societal risk, with clear implications for businesses across multiple sectors. As enforcement activity, regulatory oversight and cross‑border cooperation increase, organisations should expect greater scrutiny of their fraud risk management frameworks and operational controls. Taking early steps to review governance arrangements, update fraud prevention procedures and monitor forthcoming consultations and guidance will help businesses not only manage compliance risk, but also protect customers, assets, and reputation as the Strategy is rolled out. 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.

This alert provides a summary of a recent US Department of Justice (DOJ) anti-fraud initiative that highlights the growth of data-driven False Claims Act (FCA) actions. Entities that face potential FCA liability, including healthcare providers and government contractors, should look to this alert for insights on the new initiative.

On 30 April 2026, DOJ announced a new anti-fraud initiative: the Fraud Oversight through Careful Use of Statistics (FOCUS) initiative. The FOCUS initiative is intended to strengthen DOJ’s working relationship with whistleblowers seeking to bring FCA actions.

Over the past several years, there has been an explosion of qui tam FCA lawsuits initiated by whistleblowers. As the firm noted in a prior alert, there was a record-high 980 qui tam lawsuits filed in Fiscal Year (FY) 2024, and that number was quickly dwarfed by a new record-high 1,297 qui tam lawsuits filed in FY 2025. That trend does not appear to be slowing down. DOJ’s announcement of the FOCUS initiative indicates that DOJ has already received more than 780 qui tam complaints midway through FY 2026. 

“Much of this recent increase [in qui tam activity] has been driven by companies or individuals who analyze publicly available government data for potential signals of fraud (data miners).” According to DOJ, data miners have filed over 45% of all qui tam complaints since FY 2024. 

This increase in qui tam activity has placed workload pressures on DOJ, given that DOJ is required to investigate any new qui tam complaint. To help alleviate some of that pressure, DOJ’s FOCUS initiative is aimed at identifying and prioritizing those data miners who have developed effective tools for detecting fraud against the government. 

As part of the FOCUS initiative, DOJ will invite data miners to meet with DOJ’s Civil Fraud Section to discuss the data miners’ capabilities and explain “why and how their data signals reliably correlate to fraud.” In conjunction with these specific meetings, DOJ issued the following reminders to prospective whistleblowers:

• Data miners should provide DOJ with valuable leads on potential fraud through high-quality, reliable, and predictive data analyses, which requires a thorough understanding of applicable legal obligations.
• The heightened pleading standards of Federal Rule of Civil Procedure 9(b) apply to any FCA action, including data-driven FCA lawsuits.
• Data miners should assess potential alternative explanations for any observed conduct and should be prepared to articulate how the data and any other evidence suggest falsity and knowledge on the part of any defendant-entity.
• Data miners should partner with others who can “aid their understanding of program eligibility requirements and regulatory frameworks” to support any data-driven FCA action.

DOJ explained that these meetings with the Civil Fraud Section are not a pre-filing requirement for a qui tam lawsuit, but DOJ “will prioritize working with data miners who have demonstrated an investment in pre-filing diligence and commitment to analytical rigor, familiarity with program rules, and legally sufficient allegations.” To that end, DOJ has instructed data miners to be “prepared to explain what differentiates their approach, how they validate their findings, and why their methodology provides a reliable basis for identifying” actionable FCA matters. 

The announcement of DOJ’s FOCUS initiative comes on the heels of other DOJ statements regarding the rise of data-driven FCA actions. For example, at the American Conference Institute’s 13th Annual Advanced Forum on False Claims and Qui Tam Enforcement in January 2026, Deputy Assistant Attorney General (DAAG) Brenna Jenny discussed the increased importance of data analytics in bringing FCA actions. As DAAG Jenny noted, “your next whistleblower could be your data.”

It remains to be seen what effect this new FOCUS initiative will have on data-driven FCA actions. Given DOJ’s apparent quality-over-quantity approach, it may be that DOJ exercises its authority to dismiss qui tam lawsuits by data miners that cannot point to a reliable methodology to support their qui tam allegations. In any event, data-driven FCA actions appear to be here to stay. Healthcare providers, life sciences companies, and other government contractors should consider evaluating any publicly available data regarding their government program-related operations to identify concerns that may become the focus of a civil enforcement action.

The firm’s Federal, State, and Local False Claims Act practice group practitioners will continue to closely monitor developments regarding the FOCUS initiative and data-driven civil fraud enforcement more broadly; and we are able to assist entities that are dealing with FCA actions.

The bill containing a ban on upwards-only rent reviews in commercial leases received Royal Assent on 29 April 2026 and is now the English Devolution and Community Empowerment Act 2026 (the Act). 

The ban will not take effect immediately, and a commencement date will be set by future regulations. Market expectation is that this will not be before 2027 or possibly 2028. 

The Act includes a ban on upwards-only rent review clauses in new and renewal commercial leases in England and Wales, which are occupied by the tenant for business purposes or which could be occupied for business purposes. These include high street, office, and manufacturing leases, with limited exemptions, such as certain agricultural/mining leases. Please see our previous alert here.

Are Existing Leases Affected?

Existing leases containing upwards-only rent review provisions should generally remain unaffected. Similarly, leases granted pursuant to “an arrangement” in place before the ban comes into force will not be affected. “An arrangement” is not a defined term, so it will likely be interpreted as being wider than a contract and will include options as well as agreements for lease. 

However, following a late amendment, certain renewal arrangements entered into on or after 17 March 2026 could be affected. The ban on upwards-only rent reviews would apply not only to rent reviews within a lease, but also to the rent payable at the start of a new lease granted pursuant to what are described as “tenancy renewal arrangements"—essentially put or call renewal options contained in an existing lease. This late amendment means that the ban would apply to the rent payable at the start of a new lease (and rent reviews contained in that new lease) if the relevant renewal option was contained in a lease granted on or after 17 March 2026.

Rent Reviews Which Would Be Subject to the Ban

The ban would apply to traditional open-market rent reviews, rent reviews linked to inflation or other index or multiplier, and rents linked to turnover, if the rent payable after the review date is unknown and cannot be ascertained when the lease is entered into. A stepped rent and a rent subject to a fixed increase will be unaffected, as both are ascertainable when the lease is granted.

As inflation rarely falls, commentary suggests that landlords may switch to index-linked reviews, so rent will be linked to the increase in the value of money rather than the value of property, which would not be what the Act envisaged. There is currently no guidance on the Consumer Price Index (CPI) as an alternative to the Retail Price Index and whether, for example, an increase based on CPI with a cap and collar would be compliant. The Government has promised to consult on cap-and-collar rent reviews, so we will need to wait for the outcome of this consultation. Whilst in principle there should be no objection to caps, it is difficult to see how any form of collar would be consistent with the aims of the Act.

Practical Implications for Landlords and Tenants

Revisit Current Deals and Template Drafting

Landlords and tenants should review any live transaction or standard form lease that includes a contractual renewal right. Where that right is granted on or after 17 March 2026, the renewed lease may be caught by the new regime. The parties should therefore address at the outset how rent is to be set on renewal, rather than assuming that an upwards-only market review will remain available.

Think Carefully About Term Length and Rental Structure

The ban may influence how parties approach lease length. Some landlords may prefer shorter terms, giving them a further opportunity to reset the rent on re-letting, rather than relying on an upwards-only review during the term. For longer leases, alternatives such as fixed stepped increases or genuinely upwards/downwards index-linked reviews may become more common, although these may not suit every asset or financing structure.

Reassess Valuation, Funding and Investment Assumptions

Where valuations, lending assumptions or investment appraisals rely on a rent floor at review, those assumptions should be revisited. This will be particularly important for assets where renewal options form part of the expected income profile. Investors, valuers and lenders will also need to consider the emerging distinction between leases protected by existing arrangements and newer leases subject to the ban.

If you would like advice on how to adapt your leasing strategy or a review of your current documentation, please contact our Real Estate practice team.

From 25 October 2027, in-scope cryptoasset businesses must obtain prior authorisation from the UK Financial Conduct Authority (FCA) in order to do business in the United Kingdom or provide services to certain customers in the United Kingdom. Obtaining “FCA authorisation” means those businesses will need to be licenced by the FCA, and they will be subject to regulation and supervision by the FCA in respect of their UK activities. The legislation setting out the overall framework has been finalised, but the FCA’s detailed firm-facing rules are not yet finalised. The main FCA consultation papers on these rules can be found at “Key publications” on a dedicated FCA webpage HERE.

The new UK cryptoasset regime will have a significant impact on existing cryptoasset businesses, including those that have customers in the United Kingdom, even if the business operates outside the United Kingdom and has no other UK connection or presence. 

Key Takeaways

What Cryptoasset Activities Will Be Regulated?

The following cryptoasset activities will become “regulated activities” in the United Kingdom, meaning that a person carrying on such activities will generally (i.e. subject to exclusions/exemptions) need to be licensed and regulated by the FCA:

• Issuing stablecoin
• Safeguarding (i.e. custody) of cryptoassets 
• Operating a cryptoasset trading platform
• Cryptoasset staking
• Dealing in cryptoassets as principal
• Dealing in cryptoassets as agent
• Arranging deals in cryptoassets

The FCA refers to the last three regulated activities collectively as “cryptoasset intermediation,” and firms undertaking one or more of these activities as “cryptoasset intermediaries.”

Note: Whilst there is no separate regulated activity in relation to advising on cryptoassets or managing cryptoassets, this does not necessarily mean that these activities are outside the UK regulatory perimeter. Instead, advising on or managing cryptoassets will be within the existing UK regulatory perimeter where the cryptoasset in question meets the definition of a type of “specified investment” in the legislation, e.g. a tokenised equity or debt security. In addition, a business that is not required to be FCA authorised may be subject to FCA requirements in certain circumstances under the “designated activities regime.”

Who Will Be Affected?

The territorial scope of the new regulated cryptoasset activities is prescribed in legislation, and this is different in some respects to the territorial scope of other regulated activities. In summary, the position is as follows: 

• Firms based in the United Kingdom that undertake regulated cryptoasset activities are potentially in-scope regardless of where their customers are located.
• Non-UK overseas firms with no physical presence in the United Kingdom but providing the relevant services to consumers located in the United Kingdom are potentially in-scope. There is no specific “reverse solicitation” exemption.  

Note: Overseas cryptoasset firms whose operations have UK elements will need to assess if they could fall within scope, particularly where they service consumers in the United Kingdom. There may also be some impact for traditional businesses whose activities involve cryptoassets (e.g. firms providing custody services for tokenised securities that are within scope of the new cryptoassets regime) given the different rules on territoriality for cryptoassets. 

What Is the Timing?

The new regime will come into force on 25 October 2027. This means cryptoasset businesses must be authorised by the FCA by this date in order to carry on the regulated cryptoasset activities in the United Kingdom or with relevant UK customers unless the firm is able to rely on an exclusion/exemption or is within the transitional arrangements. 

Note: Preparing an FCA authorisation application is a significant undertaking that for most businesses will require considerable time and resources; it will also take the FCA time to process such applications. In-scope businesses are therefore advised to start this process as soon as possible. Transitional arrangements may be available for existing cryptoasset firms that have submitted an authorisation application to the FCA before 25 October 2027 that is yet to be processed/determined. If a firm does nothing before this date, then it will have to stop operating in the United Kingdom or with relevant UK customers no later than 25 October 2027.

Consistency With the EU Regulatory Regime?

The European Union’s Markets in Crypto-Assets Regulation (MiCAR) introduced a comprehensive regulatory framework for cryptoassets in the European Union, which has been fully effective since 30 December 2024. However, the United Kingdom is not simply replicating MiCAR; the work of international bodies such as the Financial Stability Board and International Organisation of Securities Commissions has helped establish some key principles for the regulation of cryptoassets that have been adopted by both the European Union in MiCAR and the forthcoming UK regime. That said, there are differences in scope, and there are expected to be differences in the detailed regulatory requirements. It will be critically important to understand the position in each jurisdiction where a cryptoasset business operates or has customers.

Note: If your business complies with MiCAR, do not assume that what is in place will be sufficient to comply with the UK regulatory regime.

Main Aspects of the New Cryptoassets Regime 

Territorial Scope

The new UK cryptoasset regime will apply to regulated cryptoasset activities carried on in the United Kingdom or provided to persons in the United Kingdom. Consequently, non-UK businesses that operate on a cross-border basis into the United Kingdom will be caught in certain circumstances even if they do not have any physical presence in the United Kingdom.

The UK Financial Services and Markets Act 2000 prescribes certain circumstances where a person is deemed to be carrying on a regulated activity in the United Kingdom even if they are not physically present in the United Kingdom. That legislation has been amended to include the following additional “deemed in the UK” circumstances for regulated cryptoasset activities: 

• Where a person is involved in the sale or subscription of a cryptoasset to or by a consumer in the United Kingdom and that person is carrying on a regulated cryptoasset activity in circumstances that do not involve an FCA-authorised cryptoasset intermediary in relation to the sale or subscription.
• Where a person is carrying on the regulated activity of safeguarding cryptoassets on behalf of a consumer in the United Kingdom and is not acting at the direction of an FCA-authorised firm to carry on that regulated activity.
• Where a person is carrying on the regulated activity of cryptoassets staking on behalf of a consumer in the United Kingdom and is not acting at the direction of an FCA-authorised firm to carry on that regulated activity.

A “consumer” in this context means an individual in the United Kingdom who is acting for a purpose other than for any trade, business or profession carried on by that individual.

The chart below indicates how an overseas cryptoasset firm may be caught. Note that the chart is a simplified summary of complex requirements and is for illustration only. The specific analysis will depend on the particular facts and circumstances.

Cryptoassets That Are Within Scope

The UK regime defines a cryptoasset as “any cryptographically secured digital representation of value or contractual rights that (a) can be transferred, stored or traded electronically and (b) uses technology supporting the recording storage of data (which may include distributed ledger technology).” 

Whether a particular cryptoasset is subject to the UK regulatory regime depends on whether it falls within any of the following categories:

The following chart indicates the overlapping nature of the regulatory cryptoasset definitions discussed above.

FCA Authorisation

Who Needs to Be FCA Authorised?

If a firm is carrying on any of the new regulated cryptoasset activities (listed above and discussed further below) by way of business in the United Kingdom or with relevant UK customers, and no exclusion/exemption is available, the firm must obtain prior authorisation from the FCA for the specific activities it wishes to carry on, whether or not they are already authorised by or registered with the FCA for other activities. Being FCA authorised means the firm will be licensed and subject to regulation and supervision by the FCA. 

This is expected to impact existing businesses as follows:

• For existing cryptoasset firms that are currently required to be registered with the FCA under the UK anti-money laundering (AML) requirements, they will need to consider whether they are within the scope of the new regime and accordingly whether they need to apply to be authorised and regulated by the FCA. 
• For existing FCA-authorised traditional financial services (e.g. investment firms), they will need to consider whether they are brought within scope of the new regime. This might be the case if, for example: (i) they are carrying on or begin to carry on one or more of the regulated cryptoasset activities, or (ii) they undertake safeguarding (custody) activities for tokenised traditional asset classes.

Businesses based outside the United Kingdom that need to be authorised by the FCA will need to establish a UK presence. That might involve establishing a UK subsidiary or a UK branch (for overseas cryptoasset platforms that fall within scope, that might involve establishing both a UK subsidiary and a UK branch). The FCA is consulting on these options. 

Carrying on a regulated activity in the United Kingdom without the requisite authorisation is a criminal offence which may result in imprisonment and/or unlimited fines. In addition, certain of the exemptions from the new prohibition on public offers of cryptoassets in the United Kingdom are dependent on the involvement of an appropriately FCA-authorised cryptoasset firm (discussed further below). 

What Do the Regulated Cryptoasset Activities Entail?

Further details of the new regulated cryptoasset activities and associated requirements are set out below. Note that there are exclusions/exemptions from the regulated activities (not discussed in this article) which may be available depending on the facts and circumstances.

What Requirements Must Be Complied With Once Authorised?

An FCA-authorised cryptoasset firm must comply with various requirements, including maintaining financial and nonfinancial resources, as well as conduct of business requirements. We set out below some of the main requirements as currently understood. As mentioned, the FCA is still to finalise the rules.

Additional Requirements Relevant to Cryptoasset Businesses: Designated Activities Regime 

The United Kingdom’s recently introduced “designated activities regime” empowers the FCA to impose requirements on firms that are not authorised by the FCA if they are carrying on a “designated activity” in the United Kingdom. This regime is being used to impose the following requirements in relation to cryptoassets: 

Transitional Arrangements

There are two transitional arrangements for existing cryptoasset firms that would come within the new regime. These are called the “saving provisions” and the “transitional provisions.” In summary:

Saving Provisions

If the firm applies for authorisation within the period from 30 September 2026 to 28 February 2027 (application period) and, by 25 October 2027 (the go-live date), the application is still open (e.g. the FCA has not decided whether to grant authorisation), then the firm enters into the “saving provisions.” This means that the firm may continue operating its business as usual until the application is determined. 

Transitional Provisions

If the firm applies for authorisation and the application has been refused within the above application period, or if the firm applies for authorisation after the application period but before 25 October 2027 (the go-live date) and the application is still open by 25 October 2027, then the firm enters into the “transitional provisions.” This means that the firm may only operate its business in relation to pre-existing contracts (e.g. contracts entered into before the FCA refusal) and it may not take on new customers.

There is a long stop date for both arrangements, which is 25 October 2029. If a firm applies for authorisation after 25 October 2027, it must stop the UK business while waiting for the outcome of the application.

Not to Be Forgotten

Certain aspects of current UK law applicable to cryptoasset businesses will continue to be relevant under the new cryptoasset regulatory regime, but with some changes. We note in particular the following:

How Might the Regulated Activities Regime Apply to Different Cryptoassets?

The FCA previously issued guidance on cryptoassets (PS19/22) in July 2019, which described different types of cryptoassets and the expected application of the existing UK regulatory regime at that time (i.e. 2019) to them. We set out below some thoughts on how the UK regulatory regimes might apply to the different types of cryptoassets identified by the FCA in light of the forthcoming UK cryptoasset regime. 

Revised Case Assessment Framework

Chapter 5 of the Guidance introduces a revised case assessment framework based on a four‑level seriousness matrix. This framework is used to assess breaches and determine appropriate outcomes, ranging from private warnings to monetary penalties or criminal investigation. It incorporates mitigating and aggravating factors, with some factors (including professional facilitation and failure to apply for a licence) removed or revised.

The Guidance also clarifies baseline penalty calculations and replaces the previous self‑disclosure discount with new voluntary disclosure and co‑operation discounts of up to 30%, which may apply cumulatively. The revised approach places greater emphasis on early identification, escalation and engagement with OFSI, with weaker compliance frameworks likely to limit access to discounts.

New Settlement Scheme

Chapter 6 introduces a settlement scheme allowing eligible firms to resolve cases with a 20% reduction to the baseline penalty. Settlements are subject to a 30‑business‑day negotiation window (subject to limited extensions). In settling, firms must waive rights to ministerial review and judicial challenge, although they may comment on any public penalty notice. Settlement does not require an admission of breach and is not available for other enforcement outcomes, such as disclosure notices.

Early Account Scheme

Chapter 4 introduces an Early Account Scheme (EAS), which allows firms, in certain cases, to submit an early and comprehensive factual account of a suspected breach. OFSI will then decide whether to close the matter or proceed with enforcement. Participation may, where applicable, result in a penalty discount of up to 20%.

Eligibility depends on factors such as the firm’s ability to provide a complete and reliable account, and OFSI may require an independent third‑party review. The EAS is unlikely to be available where breaches were knowingly unreported or where OFSI has already taken significant investigative steps.

Streamlined Enforcement Process, Increased Statutory Maximum Penalties and New Financial Hardship Policy

The Guidance introduces a more streamlined approach to penalising both reporting and licensing breaches, including fixed penalties of £5,000 or £10,000 depending on severity of the breach. Minor or first‑time breaches may be addressed privately, while repeat or more serious breaches are more likely to result in monetary penalties.

The maximum civil monetary penalty is expected to increase, subject to future legislation, to the greater of £2 million or 100% of the breach value. A new financial hardship policy also allows OFSI to reduce penalties where payment would cause genuine hardship, unless this would be contrary to the public interest. Overall, the updated framework is expected to result in more efficient enforcement, greater consistency and higher penalties.

Enforcement Framework in Action

The updated framework has already been applied in OFSI’s first sanctions‑related settlement involving Apple Distribution International. The company agreed to pay £390,000 after breaching United Kingdom financial sanctions by instructing a UK bank to transfer funds to a sanctioned Russian‑owned company in 2022, with the settlement concluded on 19 March 2026.

Key Lessons for Clients

Stricter and Faster Enforcement

OFSI’s updated Guidance is designed to accelerate investigations and increase transparency, with a greater likelihood of public outcomes and monetary penalties in serious cases.

Greater Focus on Early Engagement 

Early detection, escalation and meaningful engagement with OFSI are now critical. Firms with weaker compliance frameworks may face reduced access to penalty discounts.

Expanded Discount Mchanisms 

The new voluntary disclosure and co operation discounts (up to 30%), EAS discounts (up to 20%) and settlement discounts (20%) can apply cumulatively, offering meaningful mitigation where issues are identified and addressed promptly.

New Settlement and Early Account Options

Eligible firms now have additional routes to resolve matters efficiently, although these involve strict time frames and, in the case of settlements, waivers of review and challenge rights.

Higher Financial Exposure

Subject to legislation, maximum civil penalties are expected to increase significantly, reinforcing the importance of robust sanctions compliance controls and timely incident management.

Conclusion

The updated enforcement framework signals a more proactive and outcome‑driven approach to UK sanctions enforcement, with faster processes, greater transparency and increased financial exposure for firms. Against this backdrop, early identification of potential issues, effective internal escalation and prompt engagement with OFSI will be critical to mitigating regulatory risk. Firms should take this opportunity to review and strengthen their sanctions compliance arrangements to ensure they are well‑placed to respond swiftly and credibly where issues arise. 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.
 

This Proposed Rule is significant for businesses that operate through franchise systems, staffing agencies, contractor relationships, and other business models involving shared oversight or control of workers because these work arrangements often involve the highest risk of being classified as joint employers who share the legal obligations owed to workers.

Relevant Background

The Proposed Rule follows the rescission of President Donald Trump administration’s 2020 joint employer rule (2020 Rule) by the US District Court for the Southern District of New York. Following recission, and in the absence of a final rule, businesses encountered various tests for joint employer status that varied greatly across jurisdictions. Thus, the Proposed Rule serves as the DOL’s first attempt to establish a workable joint employer framework since July 2021. As background, the 2020 Rule required actual control over another entity’s workers before joint employer liability would attach under the FLSA, a business friendly approach that made it more difficult to establish joint employer liability. The Proposed Rule would return to an “economic realities” framework that considers both direct and indirect control, with a hiring entity’s right to control serving as a relevant factor for determining joint employer status. 

The Proposed Rule

In its press release, the DOL stated that the Proposed Rule is designed to address what it describes as a “dearth of departmental regulatory guidance” and to create greater consistency by drawing from commonalities in federal court precedent across the Applicable Statutes. The DOL’s stated goal is to provide a clear standard to simplify compliance for American businesses and make their investigations more efficient, particularly in light of the DOL’s rescission of the 2020 Rule. 

Importantly, the Proposed Rule distinguishes between “vertical joint employment” and “horizontal joint employment.” Vertical joint employment occurs “where an employee is employed by an employer for work, and another person—or entity—simultaneously benefits from that work as, or in the manner of, an employer,” whereas horizontal joint employment occurs when an individual works for two or more separate but associated employers who are sufficiently associated with each other with respect to the employment of the employee.

Vertical Joint Employment: Four-Factor Test

The Proposed Rule proposed a four-factor test to determine the existence of a vertical joint employment relationship focused on the economic reality of a potential joint employer’s control over the employee, whether direct or indirect.

The factors include whether the potential joint employer:

• Hires or fires the employee;
• Supervises and controls the employee’s work schedule or conditions of employment to a substantial degree;
• Determines the employee’s rate and method of payment; and
• Maintains the employee’s employment records.

None of the four factors outlined in the Proposed Rule are intended to be dispositive. While the Proposed Rule highlights additional factors that may be considered, including a worker’s continued and related relationship with a potential joint employer or a worker’s economic dependence on a potential joint employer, such factors are generally less relevant to the primary four factors set forth above. Further, while the potential joint employer’s ability to exert control over workers is taken into consideration, the Proposed Rule notes that the actual exercise of control is more relevant for the analysis. Finally, the Proposed Rule identified certain factors that are irrelevant to the determination and are more generally associated with the determination of a worker as an independent contractor,¹ including whether: (i) the worker’s role requires special skill, initiative, judgment, or foresight; (ii) the worker has an opportunity for profit or loss; and (iii) the worker invests in equipment or materials necessary for their role.

Horizontal Joint Employment: “Sufficiently Associated”

The Proposed Rule largely retains the analysis from pre-2020 regulations for horizontal joint employment, which focuses on the relationship between employers based on all the facts and circumstances to determine if the “employers are sufficiently associated with respect to the employment of the employee.” Under the Proposed Rule, two employers would be considered “sufficiently associated” if:

• There is an arrangement between them to share a worker’s services;
• One employer is acting directly or indirectly in the interest of the other employer in relation to the employee; or
• They share control of the employee, directly or indirectly, by reason of the fact that one employer controls, is controlled by, or is under common control with the other employer.

The Proposed Rule provides that “certain business relationships” such as engaging with the same vendor or being a franchisee of the same franchisor are inadequate on their own to establish two entities as “sufficiently associated.” However, where there is horizontal joint employment, employees’ total hours worked in a week for each employer must be aggregated, and each employer would be “jointly and severally liable” for wages due under the Applicable Statutes.

General Joint Employer Considerations

Importantly, the Proposed Rule provides that common business arrangements, such as requirements to comply with general legal obligations or health and safety regulations, or even providing a sample handbook, would not establish joint employer status alone. The DOL indicated that contractual obligations between two entities, including those related to quality control standards, deadlines, or deliverables do not make joint employer status more or less likely. However, if a potential joint employer were to exercise control over workers with regard to certain standards or policies, those actions could indicate joint employer status. Under the Proposed Rule, joint employer status turns on “the circumstances of the whole activity” with a focus on factors that are pertinent to the wages and working conditions of the relevant workers. 

Comment Period

Pursuant to the DOL’s required rule-making processes, the Proposed Rule is subject to a 60-day comment period, which closes on 22 June 2026.

Businesses may wish to use this comment period to review existing contractual relationships and compliance practices, particularly where more than one entity has authority over hiring, scheduling, pay practices, workplace conditions, or employment records for its workers. They may also wish to consider whether to submit comments addressing the proposal’s operational, compliance, and litigation implications.

Potential Impact on Businesses

If adopted, the Proposed Rule would affect a broad range of business arrangements where more than one entity is involved in workers’ terms and conditions of employment. Among many others, the Proposed Rule is most likely to have a significant impact on the following business relationships:

• Franchise relationships;
• Staffing agency arrangements;
• Subcontracting structures;
• Outsourcing models; and
• Other partnership or business arrangements involving shared authority over hiring, scheduling, compensation, or employment records.

The DOL’s Proposed Rule represents a potentially important development in the federal joint employer doctrine as it applies to the Applicable Statutes. Companies with business models involving shared control over workers should consider evaluating their arrangements in light of the proposed framework and the approaching public comment deadline. However, businesses should be mindful that the Proposed Rule would only apply with respect to the Applicable Statutes, with a different framework applying under other federal laws, including the recently finalized National Labor Relations Board rule addressing joint employer liability under the National Labor Relations Act, as well as under applicable state laws. Companies need to refresh themselves on those requirements and how the Proposed Rule may differ. 

Consult Employment Counsel

The lawyers of our Labor, Employment, and Workplace Safety practice regularly counsel clients on a wide variety of issues related to joint employer status and are well positioned to provide guidance and assistance to clients on this potentially significant development. We will continue to monitor developments as additional information becomes available.

On 1 April 2026, the German Federal Financial Supervisory Authority (Bundesanstalt für Finanzdienstleistungsaufsicht, BaFin) submitted a draft of a 9th amendment to the “Minimum Requirements for Risk Management (MaRisk)” for consultation. As part of the amendment, the circular was fundamentally revised and its complexity was significantly reduced, in particular in order to expand the scope for a proportional application of the requirements. In the future, the proportional requirements will be based on the clearly defined size classes of the supervised institutions, with a distinction being made between very small institutions, small institutions, and less-significant institutions. Institutions that are subject to direct supervision by the European Central Bank (ECB) shall be excluded from the scope of the MaRisk. In addition, BaFin is implementing the new guidelines of the European Banking Authority (EBA) on environmental scenario analysis and internal governance.

BaFin and the German Federal Bank (Deutsche Bundesbank) are accepting comments until 8 May 2026.

Delegated Regulations to MAR Adopted and Amended

On 8 April 2026, the European Commission adopted a Delegated Regulation to the EU Market Abuse Regulation (Regulation (EU) No 596/2014, MAR) and amended another Delegated Regulation. MAR aims to ensure market integrity and protect investors by prohibiting insider dealing, the unlawful disclosure of inside information and market manipulation on European financial markets.

The newly adopted Delegated Regulation concerns the disclosure of inside information in protracted processes and the delay of disclosure. Its annexes contain a nonexhaustive list of final events or final circumstances in protracted processes that must be disclosed, as well as the point in time at which such disclosure must take place. In addition, it lists circumstances in which the inside information whose disclosure an issuer (or an emission allowance market participant) intends to delay would contradict the most recent public announcement or communication by that issuer (or emission allowance market participant) on the same matter to which the inside information relates.

The Amending Regulation concerns the Delegated Regulation to MAR (Delegated Regulation (EU) 2016/522). Among other things, the exceptions for transactions by persons with managerial responsibilities (directors’ dealings) during a so called “closed period” are expanded.

The newly adopted Delegated Regulation will enter into force on the third day following its publication in the Official Journal of the European Union, while the Amending Regulation will enter into force on the 20th day following its publication.

BaFin Sanctions Breaches of Position Reporting Requirements

Recent supervisory sanctioning measures by the German Federal Financial Supervisory Authority (Bundesanstalt für Finanzdienstleistungsaufsicht, BaFin) highlight the importance of adequate organizational measures to ensure the complete and timely submission of voting rights notifications in accordance with §§ 33 et seq. of the German Securities Trading Act (Wertpapierhandelsgesetz, WpHG). This applies to reaching, exceeding, and falling below certain thresholds through the acquisition, disposal, or any other means in relation to shares of an issuer for which the Federal Republic of Germany is the home member state, as well as to instruments related thereto.

In two recently published cases, BaFin imposed substantial administrative fines on financial market participants. In one case, the fine was imposed directly for an infringement of §§ 33 et seq. of WpHG. In the other case, fines were imposed due to breaches of supervisory duties pursuant to § 130(1) of the German Administrative Offences Act (Ordnungswidrigkeitengesetz, OWiG) as a result of repeatedly late voting rights notifications. In BaFin’s view, the market participants had not put in place sufficient organizational measures to prevent, or at least significantly impede, the underlying infringements.

In the event of repeated breaches of transparency obligations (namely, the timely and complete notification to the issuer and the notification to BaFin) there is, in addition to the direct sanctioning of the individual infringement, a risk that BaFin will also assume at least negligent organizational fault at the management level and impose sanctions accordingly. In addition to substantial administrative fines, this may also result in a publication on BaFin’s website (a process known as “name and shame”).

AMLA Consults on Delegated Acts Under the EU Anti-Money Laundering Regulation

On 16 April 2026, the European Authority for Anti-Money Laundering and Countering the Financing of Terrorism (AMLA) published two new consultation papers under the new Anti-Money Laundering Regulation (Regulation (EU) 2024/1624, AMLR). The first one relates to draft guidelines on Business-Wide Risk Assessment (the BWRA) under Art. 10 (4) AMLR, and the second one relates to draft Regulatory Technical Standards (RTS) on group-wide requirements under Art. 16 (4) AMLR and on additional measures on branches and subsidiaries in third countries under Art. 17 (3) AMLR. 

Art. 10 (1) AMLR requires obliged entities to take appropriate measures, proportionate to the nature of their business (including their risks and complexity) and their size, to identify and assess the risks of money laundering and terrorist financing to which they are exposed, as well as the risks of nonimplementation and evasion of targeted financial sanctions. In this context, Art. 10 (4) AMLR requires AMLA to issue guidelines specifying (i) the minimum requirements for the content of the BWRA drawn up by the obliged entity pursuant to Art. 10 (1) AMLR, and (ii) additional sources of information to be taken into account when carrying out the BWRA. This consultation will be open until 15 July 2026, and AMLA will consider the feedback received when preparing the final guidelines, which will be issued in the fourth quarter of this year.

Art. 16 and Art. 17 AMLR cover the regulatory provisions regarding the design and implementation of group-wide anti-money laundering and countering the financing of terrorism (AML/CFT) frameworks, including their application across cross-border group structures and in situations where branches or subsidiaries operate in third countries. The purpose of the mandates under Art. 16 (4) and Art. 17 (3) AMLR is to further clarify these provisions in RTS. 

This consultation will be open until 15 June 2026, and AMLA will consider the feedback received when preparing the submission to the European Commission by 30 September 2026.

Abolition of the Licensing Requirement for the Commercial Intermediation of Corporate Loans

On 17 April 2026, the German Parliament (Bundestag) adopted a draft act implementing Directive (EU) 2023/2225 on Consumer Credit Agreements and regulating the promotion of climate‑neutral mobility. In addition to provisions implementing the above‑mentioned Directive, the draft act also contains amendments to the German Trade Regulation (Gewerbeordnung, GewO), with the result that commercial loan intermediation will, in the future, only require a trade license if it is aimed at the conclusion of general consumer loan agreements within the meaning of § 491 (2) of the German Civil Code (Bürgerliches Gesetzbuch, BGB) or financing assistance within the meaning of § 506 (1) BGB.

Persons who provide intermediation, brokerage, or advisory services in relation to such forms of financing (known as loan intermediaries) will, in the future, require a license pursuant to the new § 34k GewO. If they already hold a license under § 34c GewO before 20 November 2026, they will have until 31 May 2027 to apply for the new license; in these cases, a simplified licensing procedure is generally intended to apply.

The licensing requirement previously applicable under § 34c (1) no. 2 GewO for the commercial intermediation of corporate loan agreements will cease to apply upon the entry into force of the new act, which is scheduled for 20 November 2026.

BaFin Publishes Supervisory Notice Regarding the Amended Prospectus Regulation

On 23 April 2026, the German Federal Financial Supervisory Authority (Bundesanstalt für Finanzdienstleistungsaufsicht, BaFin) published a supervisory notice (03/2026 (WA)) on the Level I compliant interpretation of Commission Delegated Regulation (EU) 2019/980 (Level II Regulation) regarding the preparation, review, and approval of securities prospectuses. The background is that, when the Prospectus Regulation (Regulation (EU) 2017/1129) as amended under the so-called EU Listing Act enters into force on 5 June 2026, the Amending Regulation to the Level II Regulation is expected to not yet have entered into force. This will result in substantive divergences between Level I and Level II that securities issuers seeking, during this period, a public offer or admission of securities to trading on a regulated market will need to address. In its supervisory notice, BaFin sets out the substantive requirements it will apply when reviewing and approving securities prospectuses until the amended Level II Regulation enters into force.

In this context, BaFin clarifies in particular that the currently applicable Level II Regulation is to continue to serve as the legal basis for the preparation, review, and approval of prospectuses until it is aligned with the new Level I Regulation. Until then, the existing delegated regulation must be interpreted in a Level I-compliant manner; as a general rule, the directly applicable requirements of the Level I Regulation and its Annexes I to III are to be adopted. BaFin will not yet take into account changes envisaged by the recast Level II Regulation in its current draft where these are not sufficiently reflected with the necessary specificity in the Level I Regulation. However, prospectus drafters may already voluntarily follow the further changes envisaged (e.g., regarding the standardized structure of prospectuses) and, once the amended Level II Regulation has entered into force, retain information that is no longer required as voluntary disclosures.

In This Issue

Industry Focus

• US Healthcare and Cybersecurity

Featured Articles

• US Children's Privacy and Age Assurance: Insight From the FTC's Workshop and State Legislation
• Australia: Age Assurance Technology Reaches Maturity

From the Floor

• IAPP UK Intensive 2026 Update

Enforcement and Regulatory Updates

• Australia
• China
• European Union
• United Kingdom

US National Security Feature

• The DOJ Data Security Program: A National Security Rule, Not a Privacy Rule

Litigation Corner

• South Carolina's Age-Appropriate Code Design Act: A New Frontier for Private Rights of Action in Data Privacy

View Global Data Protection Insights Here

European Commission Opens In-Depth Foreign Subsidies Investigation in the EU Wind Sector

On 3 February 2026, the European Commission launched an in-depth Foreign Subsidies Regulation investigation into a Chinese wind turbine manufacturer, due to concerns over possible grants and preferential treatment affecting EU competition. This is the second in-depth ex officio (i.e., on its own initiative) FSR investigation against Chinese manufacturers.

European Union and United Kingdom Sign Competition Cooperation Agreement Establishing Post-Brexit Enforcement Framework

On 25 February 2026, the European Commission and the United Kingdom signed the EU-UK Competition Cooperation Agreement, establishing a formal framework for cooperation on antitrust enforcement and merger control between the Commission, the EU member states national competition authorities, and the United Kingdom’s Competition and Markets Authority. The agreement is the first supplementing agreement to the EU-UK Trade and Cooperation Agreement and is expected to enhance a more structured approach between the authorities in antitrust investigations and merger reviews. 

EU policy

The Italian Competition Authority has fined an Italian manufacturer and distributor of mid-range jewelry and watches approximately €25.9 million for infringing Article 101 of the Treaty on the Functioning of the European Union through two related vertical restraints: (i) resale price maintenance applied to online sales channels, and (ii) a discriminatory contractual ban on the use of third-party online marketplaces. The infringement took place from 20 July 2018 to 23 December 2025.

EU POLICY

Europe Sets Sail: The European Union’s New Maritime Strategy Reshapes Opportunities and Risks for Global Industry

On 4 March 2026, the European Commission adopted two complementary and far-reaching policy initiatives: the EU Industrial Maritime Strategy and the EU Ports Strategy. Together, these initiatives set out the European Union’s policy road map for strengthening the competitiveness, sustainability, and resilience of Europe’s maritime ecosystem—covering shipbuilding, shipping, port infrastructure, and maritime technologies.

The European Commission Proposes the Industrial Accelerator Act

The European Commission proposed the Industrial Accelerator Act, a new regulatory framework, to accelerate industrial permitting, create lead markets for strategic products, and condition foreign direct investment in emerging sectors.

ANTITRUST AND COMPETITION

European Commission Opens In-Depth Foreign Subsidies Investigation in the EU Wind Sector

On 3 February 2026, the European Commission (Commission) decided to initiate an in-depth investigation under the Foreign Subsidies Regulation (FSR) to assess the activities of a company (Company) headquartered in the People’s Republic of China (PRC). The Commission raised preliminary concerns that the Company has been granted foreign subsidies that could distort the internal market of the European Union.

The Commission started this investigation on its own initiative (ex officio) in April 2024 in the EU wind sector, where the Company is predominantly active in wind turbine manufacturing, research and development, and sales and servicing. Based on its preliminary investigation, the Commission found sufficient indications that the Company may have been granted by the PRC: (i) direct financial contributions, including grants, capital injections, and debt write-off grants; (ii) preferential tax measures in the form of a reduction of corporate income tax and value-added-tax refunds; and (iii) preferential financing in the form of loans. The Commission considers that these foreign subsidies may improve the Company’s competitive position in the EU internal market, thereby negatively affecting competition for the supply of wind turbines and related services in the European Union. In particular, the Commission indicated that the foreign subsidies may have enabled the Company to offer lower prices than its competitors, thereby winning more wind project tenders than it would have done in the absence of those foreign subsidies.

In its in-depth investigation, the Commission will assess whether the preliminary findings are confirmed. The Commission has also invited third parties to submit their comments within one month following the date of the publication of the summary notice in the Official Journal of the European Union. The summary notice was published on 18 February 2026.

This investigation follows a similar trajectory to the Commission’s investigation into another Chinese manufacturer of threat detection systems, against which the Commission opened an in-depth investigation on 11 December 2025. Both investigations were initiated by the Commission ex officio in April 2024 and involve Chinese-owned companies. These cases illustrate that the Commission is intensifying its use of the FSR’s ex officio procedure to tackle perceived distortions caused by foreign subsidies.

European Union and United Kingdom Sign Competition Cooperation Agreement Establishing Post-Brexit Enforcement Framework

On 25 February 2026, the Commission and the United Kingdom signed the EU-UK Competition Cooperation Agreement (Agreement), which establishes a post-Brexit framework for cooperation on competition matters between the Commission and all 27 national competition authorities of the EU member states, on the one hand, and the UK Competition and Markets Authority (CMA), on the other hand. It is the first supplementing agreement to the EU-UK Trade and Cooperation Agreement of December 2020, which had broadly provided for competition cooperation but expressly contemplated the subsequent conclusion of a dedicated instrument.

The Agreement contains four principal cooperation mechanisms: 

• Reciprocal notification obligations of enforcement activities that may affect the “important interests” of the other party, promptly after the first publication of an investigative step (Article 3).
• Coordination of enforcement activities where authorities pursue or intend to pursue the same or related enforcement activities (Article 4).
• Negative comity obligation requiring authorities to make reasonable efforts to reach an “appropriate accommodation” where enforcement activity risks adversely affect the other party’s important interests (Article 5).
• Information sharing to the extent lawful under applicable domestic law, including rules on confidentiality and data protection (Articles 6 and 7). Written consent from the company that provided confidential information will generally remain necessary unless domestic law permits disclosure without consent. The information shared may only be used for the purpose of enforcing competition laws.

The Agreement will ensure that a more structured coordination between the CMA and EU authorities with respect to parallel enforcement in antitrust investigations and merger reviews. Companies should expect closer dialogue between the authorities and an increased number of requests by them to grant confidentiality waivers in cross-border cases. 

The Agreement will enter into force as soon as the ratification by both the European Union and the United Kingdom is completed. The Agreement contemplates a joint review within two years of entry into force, potentially paving the way for enhanced cooperation among the authorities.

Italian Competition Authority Fines Jewelry Manufacturer Over Online Resale Price Maintenance and Discriminatory Marketplace Ban

The Italian Competition Authority (AGCM) has fined an Italian manufacturer and distributor of mid-range jewelry and watches approximately €25.9 million for infringing Article 101 of the Treaty on the Functioning of the European Union (TFEU) through two related vertical restraints: (i) resale price maintenance (RPM) applied to online sales channels, and (ii) a discriminatory contractual ban on the use of third-party online marketplaces. The infringement took place from 20 July 2018 to 23 December 2025.

The AGCM’s investigation was triggered by an anonymous whistleblower complaint and revealed that the company had imposed maximum online discount policies on its authorized distributors through its selective distribution agreements, monitored compliance using a dedicated price-tracking software, and systematically applied retaliatory measures, including automatic order blocks and the removal of distributor accounts from third-party platforms, against those who failed to comply. Internal correspondence showed that the company’s own legal department had expressly acknowledged the unlawfulness of the pricing conduct as early as 2019, yet the practice continued for an additional six years.

This case is particularly significant with respect to the AGCM’s findings on the discriminatory implementation of the marketplace restriction. While authorized distributors were contractually barred from using the marketplace channel, the company sold through the same platforms, both as a direct seller and through vendor arrangements. The AGCM found this discrimination to be incompatible with the adequacy and proportionality requirements under the EU Vertical Block Exemption Regulation and the Commission’s Vertical Guidelines, and it concluded that the restriction could not benefit from the Article 101(3) TFEU exemption.

The AGCM described this decision as among the first in Europe to establish the restrictive nature of a marketplace ban under Article 101 TFEU. Given the novelty of the AGCM’s findings on the marketplace violation, the fine was calculated by reference to the RPM infringement only. The AGCM decision sends a stark reminder to companies of the increased risk of scrutiny from authorities in Europe regarding compliance of their distribution models with the antitrust best practices and decisional practice.

EU POLICY

Europe Sets Sail: The European Union’s New Maritime Strategy Reshapes Opportunities and Risks for Global Industry

On 4 March 2026, the Commission adopted two complementary and far-reaching policy initiatives: the EU Industrial Maritime Strategy and the EU Ports Strategy. Together, these initiatives set out the European Union’s policy road map for strengthening the competitiveness, sustainability, and resilience of Europe’s maritime ecosystem—covering shipbuilding, shipping, port infrastructure, and maritime technologies. The package combines industrial policy, climate regulation, trade policy, and infrastructure investment, reflecting the European Union’s intensifying 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 and increasing regulatory exposure.

Maritime Infrastructure as a Geopolitical Asset

The European Union 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, while ports handle roughly 74% of all goods entering or leaving the European Union. Against a backdrop of geopolitical tensions, supply chain disruptions, and intensifying global competition—particularly from heavily subsidized Asian shipbuilders—the Commission has framed the strategies around four core objectives: (i) reinforcing Europe’s leadership in high-technology maritime manufacturing, (ii) accelerating fleet modernization and decarbonization, (iii) modernizing and securing EU port infrastructure, (iv) and reducing strategic dependencies on third countries. The initiatives therefore constitute not a sectoral plan, but an expression of the European Union’s broader industrial and geopolitical ambitions.

Key Opportunities for Industry Participants

The strategies signal a strong policy push toward commercializing maritime decarbonization and infrastructure modernization, creating several areas of opportunity. On the funding side, the European Union intends to mobilize a range of instruments—including the Connecting Europe Facility, Innovation Fund, and Horizon Europe—to support port electrification, vessel decarbonization, and digital maritime technologies. Energy security considerations are also expected to accelerate alternative fuel development, including hydrogen, ammonia, methanol, and synthetic fuels, with EU ports positioned to serve as multifuel energy and import hubs. The establishment of an EU Industrial Maritime Value Chains Alliance will further coordinate investment in priority segments such as offshore wind vessels, underwater technologies, and advanced port equipment. As EU member states implement such policies nationally, companies across the maritime ecosystem—from technology providers to infrastructure developers—may find meaningful scope to engage directly with governments, port authorities, and public procurement pipelines.

Regulatory Exposure: Climate, Investment Screening, and Mergers and Acquisitions Diligence

Alongside the commercial opportunities, the initiatives signal a markedly more interventionist regulatory environment. Three areas warrant particular attention. First, the European Union continues to expand its maritime decarbonization framework through the EU Emissions Trading System and FuelEU, which impose emissions-related obligations on vessels calling at EU ports regardless of the operator’s nationality, meaning that non-EU shipping companies are directly affected when operating within EU maritime networks. Second, foreign investment in port infrastructure faces heightened scrutiny: The Commission intends to provide guidance to EU member states on screening acquisitions and reviewing foreign ownership or operational control of strategic port assets, which may result in longer approval timelines and greater uncertainty for non-EU investors. Third, companies acquiring vessels with a prior EU operational history may be exposed to legacy climate compliance liabilities, requiring enhanced regulatory due diligence and careful contractual risk allocation as part of transaction structuring.

Outlook and Next Steps

The EU Industrial Maritime Strategy and the EU Ports Strategy represent a significant shift in how the European Union positions its maritime sector: less as a commercial domain and more as a pillar of strategic industrial policy. For maritime, energy, and infrastructure companies, the initiatives open substantial opportunities in green shipping technologies, port modernization, and alternative fuels, while simultaneously raising the regulatory bar for operators, investors, and mergers and acquisitions participants active in EU waters or infrastructure. 

Looking ahead, businesses should assess their exposure across all three regulatory vectors and evaluate how the new funding instruments and procurement pipelines align with their commercial strategies.

The European Commission Proposes the Industrial Accelerator Act

On 4 March 2026, the Commission published a proposal for the Industrial Accelerator Act (IAA), a new regulation aimed at restoring manufacturing as a central pillar of EU economic output. 

The proposal responds to growing concerns over the erosion of European industrial competitiveness and the slow pace of industrial decarbonization. It amends three existing instruments (the Single Digital Gateway Regulation, the Net-Zero Industry Act, and the Construction Products Regulation) and is organized around four main areas of intervention.

The first two pillars focus on enabling conditions for industrial production. On permitting, the proposal would require EU member states to establish a single access point and designate a competent authority to coordinate permit granting for all manufacturing projects, with streamlined timelines and full digitalization. On lead markets, the IAA would introduce EU origin and low-carbon requirements in public procurement, renewable energy auctions, and public support schemes across a broad range of strategic products, including steel, aluminum, batteries, solar panels, heat pumps, wind technologies, and vehicles. 

The remaining two pillars address investment and industrial clustering. On foreign direct investment, the proposal would introduce mandatory conditions applicable to large investments from third countries holding a dominant share of global manufacturing capacity in four emerging strategic sectors: (i) battery technologies, (ii) electric vehicles, (iii) solar photovoltaics, and (iv) critical raw materials. Investors must satisfy at least four out of six defined criteria (including workforce localization, technology transfer, and supply chain integration) before their investment can take effect. On industrial clustering, EU member states would be required to designate at least one industrial manufacturing acceleration area, where projects benefit from pre-cleared permits, fast-track environmental assessments, and priority treatment in energy grid planning.

The IAA will now be examined by both the European Parliament and the Council of the European Union in order to adopt their respective positions before interinstitutional negotiations can begin. The legislative process is likely to generate substantive debate, particularly on the foreign investment conditions and the scope of the lead market requirements.

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

A local government (LG) in Western Australia will frequently procure goods and services by way of an expression of interest (EOI) or a request for tender (RFT). 

An EOI or RFT may also form part of an LG's processes to dispose of land, an interest in land (e.g. a lease), or to develop land.

RFTs and EOIs invariably contain evaluation criteria against which submissions are to be assessed. Proper application of the assessment criteria is very important but can be time consuming, require careful analysis, be technically complicated, and involve making an informed judgment.

There is no single source that codifies the legal obligations that apply to LGs when managing EOIs and RFTs. But when undertaking procurement processes, LGs do have obligations, including:

• To adhere to procedural fairness;
• To ensure the process is free of bias and unfair advantage;
• To avoid and manage conflicts of interest;
• Confidentiality obligations;
• To not engage in misleading and deceptive conduct;
• To make legal, rational, and fair decisions;
• To comply with their own terms and conditions (as applicable to the LG);
• To comply with express legislative requirements, e.g. the LG (Functions and General) Regulations 1996 and privacy laws relating to automated decision-making (where applicable).

Artificial intelligence (AI) can assist with the EOI and RFT assessment process. But it cannot replace the need for human decision making.

How AI Can Assist

AI refers to technologies that enable computer systems to simulate aspects of human learning, comprehension, problem solving, decision making, and creativity. Generative AI tools do this by making use of a large language model to process natural language (as distinct from structured data, such as spreadsheets or financial statements).

Generative AI tools can assist by sorting and summarising large volumes of information, generating tables, or undertaking the preliminary assessment of EOIs and RFTs. AI can be utilised to identify gaps or inconsistencies and to highlight issues that may require further clarification with a bidder. 

Used appropriately, AI can be a valuable tool.

Practical and Legal Risks

AI use carries risks. 

These include:

• Incorrect assessments;
• Assessment by reference to unstated evaluation criteria;
• An advertent disclosure of confidential information;
• Abrogation of responsibility; and
• The risk that AI-generated material is given undue weight. 

AI outputs may be inaccurate, biased, outdated, or entirely fabricated. 

Bidders may "curate" their responses to be assessed favourably by an AI, e.g., to make their financial capacity or relevant experience appear greater than it is.

Reliance on AI generated outputs, particularly without adequate human oversight, can undermine the integrity of the assessment process and lead to difficulty in explaining or defending the final decision.

These issues may give rise to claims by unsuccessful bidders, including:

• Claims for injunctive relief;
• Allegations of misleading or deceptive conduct;
• Judicial review of decisions on the basis that a decision is one that no reasonable government decision maker could have made;
• A perceived lack of procedural fairness; and
• Breach of express legislative requirements, contractual terms and conditions, or terms implied by law into the tender process.

What Needs to Be Done

If AI is used to assist with EOI and RFT assessments, LGs must be able to demonstrate that:

• The assessment was undertaken strictly by reference to the stated evaluation criteria; and
• Suitably qualified humans were entirely responsible for the assessment outcome.

Decision makers must understand the extent to which AI has been used by their LG in the assessment process. In choosing a suitable AI tool for this task, consideration should be given to the tool's ability to explain its reasoning and the factors that led to a particular outcome or outputs.

If a decision is challenged the reasoning must be capable of explanation, independently of the output of any AI tools and supported by records showing how the AI outputs informed, but did not determine, the outcome.

EOI and RFT Documents Should Address AI Use

Clear disclosure of AI use is critical to transparency, procedural fairness, and defensibility.

Your EOI and RFT terms and conditions should expressly address AI use. 

This should include:

• Disclosure that AI tools may be used in the assessment process;
• Disclosure of the associated risks;
• A reservation of rights to disregard AI-generated outputs;
• The bidder's consent to the use of AI notwithstanding its risks and deficiencies;
• Appropriate waver of the right to bring claims arising from the use of AI; and
• Confirmation that responsibility for the assessment remains with human decision makers.

When choosing a suitable AI tool, LGs may also wish to consider how the information they provide to the tool will be used and whether the provider of the AI tool acquires some rights in that information and any prompts (including whether they are permitted to use your data to train their models). This is more common in publicly available Generative AI tools. As with any software tool, consideration should be given to the terms of use and whether they are acceptable given the nature of the information that will be input into the system.

Where confidential information is involved, bidders should be required to acknowledge that the LG may not be able to verify how that information is handled once it is input into AI systems, including what is retained, reused, or used to train models. Put another way, the LG should not be giving assurances how the information inputted into AI will or will not be used (unless the LG is certain of the answer).

How can K&L Gates help you?

K&L Gates is a Western Australian Local Government Association panel law firm.

We are focused locally and connected globally.

At K&L Gates, we advise LGs and public sector bodies on procurement risk, probity, and governance issues, including those arising from the use of AI.

We can assist with drafting tailored AI clauses for EOI and RFT documentation and with developing practical governance tools and checklists to mitigate the risks associated with AI assisted assessments. We can also assist as you select AI tools and negotiate terms of use for those tools.

More broadly we can assist with advice and documentation for EOIs and RFTs for the procurement of goods and services.

Our team has 20 years' experience supporting LG's undertaking or facilitating major land transactions and large-scale urban renewal projects.

The author would like to thank graduate Emilia Cottino for her contributions to this alert.

On 17 March 2026, the US Securities and Exchange Commission (SEC) and Commodity Futures Trading Commission issued a joint interpretive release establishing a securities taxonomy for crypto-assets the (Taxonomy).¹ The Taxonomy is the most significant step yet in fulfilling SEC Chair Paul Atkins’ promise to establish a clear securities law framework as applied to crypto and digital assets. The Taxonomy now serves to help market participants to discern what characteristics the SEC would attribute to a crypto-asset to consider it a security.

Since the widespread adoption of digital assets more than a decade ago, questions have often arisen as to whether certain tokens, cryptocurrencies, non-fungible tokens (NFTs), and other innovative blockchain-based assets are securities. With the exception of Bitcoin (and ambiguously Ether), the SEC has steadfastly refused to answer the question, “Is this token a security?” Instead, it has often been accused of using a strategy of ad hoc “regulation by enforcement” of crypto-assets or suggesting that token issuers “come on in and register.”

The Taxonomy flips the script and seeks to offer the crypto industry clarity. First, the Taxonomy classifies crypto-assets into five categories and analyzes each category under the Howey test.² Most notably, it “names names” and unambiguously identifies a dozen crypto-assets, including Solana, Bitcoin, Ether, and Cardano, as “digital commodities” rather than “securities.” Second, the Taxonomy provides some guidance regarding when a crypto-asset is a “security” because it takes the form of an “investment contract” and, critically, how it can lose that status. Third, the Taxonomy provides guidance with respect to certain crypto transactions, such as airdrops, protocol mining, protocol staking, and “wrapping” a nonsecurity crypto-asset in a crypto-asset.

History

The first crypto-asset, Bitcoin, was created in 2009 and introduced the concept of a decentralized, blockchain-based alternative to traditional financial systems. These assets immediately raised questions because they challenged and crossed the boundaries of traditional definitions found in the securities laws: they had features, characteristics, and iterations that fit the definitions of “security,” “commodity,” and even “currency,” sometimes all at the same time. A crypto-asset’s classification carried significant implications for which regulatory regime applied to its issuance and trading.

The SEC first addressed crypto-assets in The DAO Report, in which it applied the Howey test to offers and sales of crypto-assets by an unincorporated virtual organization known as (The DAO). The Howey test is used to determine whether an asset constitutes an “investment contract” and therefore a “security” under the federal securities laws.³ Under the Howey test, an “investment contract” is a transaction that involves (i) an investment of money (or other value), (ii) a common enterprise, and (iii) with a reasonable expectation of profits derived from the managerial efforts of others.⁴

In The DAO Report, the SEC outlined its determination that the offers and sales of crypto-assets by The DAO constituted investment contracts and, therefore, securities under the federal securities laws.⁵ Specifically, the SEC noted that The DAO was a common enterprise in which people invested money with a reasonable expectation of profits from the efforts of the creators of The DAO.⁶ The DAO Report set the stage for the SEC’s analysis of future crypto-assets under the federal securities laws.

In the years that followed, the SEC brought enforcement cases involving a variety of crypto-assets being allegedly offered as unregistered securities. Sometimes, in cases where dealers were accused of dealing dozens of crypto-assets, the SEC would not identify which specific crypto-assets it claimed were securities.⁷ Sometimes, the SEC’s analysis of why a crypto-asset is a security was ambiguous.⁸ In critical responses to such orders, SEC Commissioners Hester Peirce, Elad Roisman, and Mark Uyeda argued that applying specific “clues” from some enforcement actions did not yield clear answers in others,⁹ and echoed industry participants’ calls for clarity in discerning which crypto-assets are securities.¹⁰ 

The SEC’s approach left crypto-assets in a regulatory morass. Crypto-industry participants were encouraged to register with the SEC as intermediaries dealing in securities and to register crypto-assets as securities;¹¹ however, the framework of federal securities regulation was not designed for decentralized entities such as those involved in dealing in crypto-asset activities.¹² For example, the federal securities laws assume that a securities issuer is a discrete entity, whereas many crypto-assets are associated with open-source protocols featuring diffuse governance structures, raising questions about who would be required to register as the issuer.

The SEC’s New Guidance

The new Taxonomy signals a retreat from the SEC’s ambiguous “regulation-by-enforcement” approach and seeks to provide greater clarity for participants in crypto-asset markets.

Crypto-Asset Classifications, Defined

The most significant change introduced by the Taxonomy is the SEC’s specific classification of crypto-assets. Recognizing that crypto-assets can be used to represent securities, goods, services, rights, or other interests in a digital format, the SEC has classified crypto-assets into five categories based on their characteristics, uses, and functions: (i) digital commodities; (ii) digital collectibles; (iii) digital tools; (iv) stablecoins; and (v) digital securities.¹³

Digital Commodities

A digital commodity is a crypto-asset that derives its value from (i) the programmatic operation of a “functional” crypto-system and (ii) supply-and-demand dynamics, rather than from a reasonable expectation of profits from the essential managerial efforts of others, as is required under the Howey test.¹⁴ A digital commodity lacks economic properties or rights and does not generate a passive yield or convey rights to future income, profits, or assets.¹⁵

As explained in the Taxonomy, digital commodities are not securities because their value is linked to the programmatic functioning of the associated functional crypto system, rather than another party’s essential managerial efforts.¹⁶

The value of a digital commodity, like that of a physical commodity, derives from the value of the goods and services produced using the commodity, as well as supply-and-demand dynamics.¹⁷ Users of a digital commodity are encouraged to participate in its functional crypto system, and developers are incentivized to build applications for functional crypto systems that attract users.¹⁸ Because a functional crypto system does not have a central party that oversees participation or distributes rewards, the value of a digital commodity is linked to the programmatic functioning of a crypto system. Accordingly, a purchaser of a digital commodity would not reasonably expect to profit based on the essential managerial efforts of others, and a digital commodity therefore cannot pass the Howey test.¹⁹

The Taxonomy specifies that the following crypto-assets are digital commodities: Aptos (APT), Avalanche (AVAX), Bitcoin (BTC), Bitcoin Cash (BCH), Cardano (ADA), Chainlink (LINK), Dogecoin (DOGE), Ether (ETH), Hedera (HBAR), Litecoin (LTC), Polkadot (DOT), Shiba Inu (SHIB), Solana (SOL), Stellar (XLM), Tezos (XTZ), and XRP (XRP).²⁰ However, this is not an exclusive list, and it is expected that many other crypto-assets would also be digital commodities.

Digital Collectibles

Digital collectibles, such as NFTs and meme coins, are digital assets designed to be collected.²¹ They typically represent or convey rights to art, trading cards, in-game items, or digital representations or references to internet memes.²² Digital collectibles generally have limited or no functionality and do not provide holders with legal rights or an ownership interest in any business or entity associated with the creator of the digital enterprise.²³

EtherRock provides a useful example. EtherRock is a collection of 100 NFTs that serve no functional purpose and are commonly described as “Pet Rocks on the Blockchain.”²⁴ Nevertheless, one of these digital collectibles sold for approximately US$1.3 million in 2021.²⁵

The Taxonomy, however, notes that a crypto-asset may begin as a digital collectible—such as a meme coin—with no functionality within an associated functional crypto system, and later become a digital commodity, if it becomes functional within that system.²⁶ Although a digital collectible may have artistic value or utility, it is not an investment; its value is based on the supply and demand of the digital collectible, rather than on an expectation of profits derived from the essential managerial efforts of its creator.²⁷

A though a digital collectible is not itself a security, the offer and sale of a digital collectible—if fractionalized or otherwise structured to involve reliance on essential managerial efforts from which a purchaser would reasonably expect to derive profits—can give rise to an investment contract.²⁸

Digital Tools

A digital tool is a crypto-asset that performs a practical function in a crypto system.²⁹ For example, digital tools can take the form of a membership, ticket, or identity badge.³⁰ A digital tool derives its value from its practical function, and users acquire it for its utility.³¹ A digital tool does not confer rights or interests in a business enterprise; instead its price is determined by supply-and-demand dynamics associated with its, rather than by an expectation of profits derived from the managerial efforts of its developer.³²

Digital tools may be paired with digital commodities in a single digital asset.³³ For example, the “Bored Ape Yacht Club” (Bored Ape) consists of a series of 10,000 NFTs that entitle holders not only to ownership of a digital image—as would be typical of a digital collectible—but also to access to exclusive Bored Ape gatherings, merchandise, and online forums.³⁴ At their peak. Bored Apes sold for hundreds of thousands of dollars, reflecting the value placed on membership in this exclusive club.³⁵

Similarly, CoinDesk, Inc.’s (CoinDesk) “Microcosm” (Microcosm) is a digital asset that provides holders access to CoinDesk’s “Consensus” conference (Consensus) for three years, in addition to ownership of one of 1,000 unique works of digital art.³⁶

The activities of the maker of a digital tool may affect the value of the digital tool, but the maker typically does not make representations or promises that would cause a purchaser to reasonably expect to derive profits from the digital tool.³⁷ The founders of the Bored Ape, Yuga Labs LLC (Yuga Labs), granted buyers full ownership of their Bored Apes, allowing holders to license, market, or otherwise sell their Bored Apes however they saw fit.³⁸ The value of a Bored Ape was not attributable to Yuga Labs’ managerial efforts, but rather the desire to participate in an exclusive club.³⁹ Similarly, the value of a Microcosm is based on the desire to access the Consensus conference, not the ongoing managerial efforts of CoinDesk in operating the digital asset.⁴⁰ Accordingly, a digital tool would not constitute a security under the Howey test.

Stablecoins

A stablecoin is a crypto-asset that is designed to maintain a stable value relative to a reference asset, such as the US dollar. The Taxonomy notes that, under the Guiding and Establishing National Innovation for US Stablecoins Act (GENIUS Act), enacted in 2025, “payment stablecoins” issued by a permitted payment stablecoin issuer are statutorily excluded from the definition of a “security”.

However, the Taxonomy notes that, because the GENIUS Act is not yet effective, its interpretation of whether a stablecoin constitutes a “security” is based on the SEC’s Staff Statement on Stablecoins.⁴¹ Under that statement “covered stablecoins”—that is, crypto-assets “designed and marketed for use as a means of making payments, transmitting money, or storing value,”⁴²—would not be considered securities.

The Taxonomy did not specifically address stablecoins other than “covered stablecoins,” such as algorithmic stablecoins, leaving a potential source of ambiguity going forward.

Digital Securities

A digital security (or “tokenized” security) is a financial instrument enumerated in the definition of a “security” that is formatted or represented as a crypto-asset and where the record of ownership is maintained, in whole or in part, on or through one or more crypto networks.⁴³ The Taxonomy is clear: “A security is a security regardless of whether it is issued, or otherwise represented, off-chain or on-chain. All devices and instruments that have the economic characteristics of a security are securities regardless of format or label.”⁴⁴

This guidance closely follows a recent statement issued by SEC staff regarding tokenized securities.⁴⁵ In that statement, the staff explained that a single class of securities may be issued in multiple formats, including as a token on an issuer’s distributed ledger technology, and neither the format in which a security is issued nor the method by which ownership interests are recorded affect the application of the federal securities laws.⁴⁶ Likewise, if a tokenized security represents a class of securities that is also offered in a traditional format and has substantially similar characteristics—conferring comparable rights and privileges—it may be considered the same class of security as the traditionally issued security.

Digital securities may include additional nonfinancial benefits that appear resemble those of a digital commodity, digital collectible, or digital tool. The provision of such nonfinancial benefits, however, does not remove a digital security from the definition of a “security.”⁴⁷

Getting Specific: Applying the Howey Analysis to Crypto-Assets

When an Investment Contract Analysis Applies

The Taxonomy not only marks a significant shift in the SEC’s stance on digital assets, but also gives a modern flavor to jurisprudence that is over eight decades old.⁴⁸ When Congress enacted the Securities Act to define the term security, it “enacted a definition of ‘security’ sufficiently broad to encompass virtually any instrument that might be sold as an investment.”⁴⁹ Accordingly, in addition to conventional financial instruments such as notes, stocks, bonds, debentures—as well as instruments not traditionally viewed as securities, such as fractional undivided interests in oil, gas, or other mineral rights—Congress included the term “investment contract” to capture novel, uncommon, or irregular devices that are widely offered or dealt in under terms establishing “their character as investment contracts or as any interest or instrument commonly known as a security.”⁵⁰  

Against this backdrop, that the Supreme Court (Court) articulated the criteria for an investment contract in the seminal case of SEC v. W.J. Howey Co.⁵¹ The Court defined an investment contract as involving three elements: (i) an investment of money (or other value); (ii) in a common enterprise; and (iii) with a reasonable expectation of profits derived from the managerial efforts of others.⁵²

A crypto-asset that meets the definition of “investment contract” under the Howey test would be considered a “security.” The Taxonomy specifies how the elements of the Howey test apply in determining whether an investment contract is offered or sold in connection with crypto-assets.⁵³ While these elements historically have been applied to crypto-assets with limited specificity,⁵⁴ the Taxonomy seeks to provide a more defined framework for analyzing whether an investor can reasonably expect to realize profits derived from the managerial efforts of a digital asset’s issuer.⁵⁵ In particular, the Taxonomy states that a purchaser’s reasonable expectation of profits is contingent on the issuer’s representations or promises to engage in such essential managerial efforts.⁵⁶ Although the Taxonomy recognizes that the reasonableness of a purchaser’s expectation of profits depends on facts and circumstances, it specifies that relevant factors include the timing and manner in which the representations or promises are made.⁵⁷ 

Timing

The Taxonomy states that expectation-creating promises must be conveyed to a purchaser prior to, or contemporaneously with, the issuer’s offer or sale. Importantly, post-sale representations or promises will not retroactively convert a prior sale into an offer or sale of an investment contract because such post-sale statements cannot form the basis of a purchaser’s expectations at the time of purchase.⁵⁸

Manner of Speaking

With respect to the manner in which representations or promises are made, the Taxonomy states that it is reasonable for a purchaser to expect profits based on representations or promises conveyed to purchasers in written or oral agreements. In addition, public communications through which the issuer has established a regular pattern of communicating—such as the issuer’s website or social media accounts—direct private communications between the issuer and purchasers, and regulatory filings or other documents, such as a whitepaper, would be clearly attributable to the issuer.⁵⁹ Other channels of communication may also suffice to support the reasonableness of a purchaser’s expectations of profits; however, that determination depends on whether the representations or promises are widely disseminated, the specific means by which they are conveyed, and the issuer’s established communication practices.

Types of Representations

The Taxonomy also provides criteria and examples of representations or promises that are likely to create reasonable expectations of profit. The primary criteria noted in the Taxonomy are representations or promises that:

• Are explicit and unambiguous with respect to the essential managerial efforts to be undertaken by the issuer;
• Contain sufficient details to demonstrate the issuer’s ability to implement the proposed project; and
• Explain how the issuer’s efforts are expected to produce the profits that purchasers reasonably anticipate.⁶⁰

Examples of representations or promises that are likely to create reasonable expectations of profit include a business plan containing detailed milestones, timelines, information about personnel, sources of funding and other resources needed to meet such milestones, as well as an explanation of how holders of the crypto-asset are expected to profit from efforts of the crypto network.⁶¹ The Taxonomy distinguishes these representations from those that are vague or contain “no semblance of an actionable business plan,” that such representations would not give rise to a reasonable expectation of profits.⁶² Moreover, the Taxonomy explains that it would not be reasonable for a purchaser to expect profits based on representations or promises made by third parties, or based on secondary-market transactions in which a purchaser would not reasonably expect to profit from the issuer’s managerial efforts.⁶³

Loss of Investment Contract Status

The Taxonomy also reinforces and clarifies that an asset’s status as an investment contract is not always permanent. This guidance may have significant ramifications beyond the digital-asset context, as it is not limited to digital assets, and reflects the reasoning adopted by lower courts decisions in SEC v. Ripple Labs, Inc. and SEC v. Binance Holdings Limited.⁶⁴

In the Ripple opinion, Judge Analisa Torres held that even if a virtual currency was originally offered and sold by a crypto enterprise as part of a securities transaction, it does not necessarily remain a security in downstream transactions.⁶⁵ Judge Torres therefore concluded that Ripple Labs, Inc.’s (Ripple) native crypto-token XRP, when sold to purchasers on exchanges through “bid/ask” transactions—among other factors—did not constitute the offer and sale of investment contracts. Unlike institutional purchasers, buyers who acquired XRP on an exchange did not purchase the token directly from Ripple pursuant to a contract.⁶⁶ Similarly, in the Binance litigation, Judge Amy Berman Jackson applied comparable reasoning, holding that secondary-market sales of the token BNB did not constitute the offer and sale of a security.⁶⁷

Accordingly, the Taxonomy explains that a nonsecurity crypto-asset offered and sold subject pursuant to an investment contract does not necessarily remain subject to that investment contract in perpetuity.⁶⁸ Once a purchaser can no longer reasonably expect the issuer to engage in essential managerial efforts originally represented or promised, the nonsecurity crypto-asset is no longer subject to an investment contract.⁶⁹ The Taxonomy refers to this process as a “decoupling,” which occurs when one or more of the following nonexclusive indicia indicating a separation of a nonsecurity crypto-asset from an investment contract is present:

Fulfillment of the Issuer’s Representations or Promises

If, the issuer has fulfilled its representations or promises to engage in essential managerial efforts, the investment contract may be considered “complete” and therefore no longer applicable to the asset.⁷⁰ This remains true even if the issuer continues to provide efforts that are not essential managerial efforts with respect to the nonsecurity crypto-asset or an associated crypto system or other software project.⁷¹

Failure to Satisfy the Issuer’s Representations or Promise

If a purchaser would no longer reasonably expect the issuer to be able to fulfill—or to continue engaging in—the essential managerial efforts it previously represented or promised to undertake, the investment contract may likewise cease to apply.⁷² This may occur where a sufficiently long period of time has passed since the issuer’s offer and sale of the investment contract and it has become clear to the investors that the issuer failed to perform the promised managerial efforts, or it has become clear to investors that the issuer failed to perform the promised essential managerial efforts, or where the issuer has publicly announced that it will no longer perform those efforts.⁷³ Such abandonment demonstrates that the investment contract is functionally void, although it may raise separate questions regarding whether purchasers have other legal remedies available to enforce, or seek recovery under, the no-longer operative investment contract.

Defining Mining, Staking, Wrapping, and Airdrops

While the classification of assets and investment contract status issues discussed above represent the most significant aspects of the Taxonomy, it also discusses a variety of other digital-asset issues. Many of these topics have been addressed in prior staff statements, however the Taxonomy both expands on those discussions and elevates the guidance from the staff level to Commission-level guidance. In particular, the Taxonomy provides guidance on how activities frequently undertaken by crypto networks will be analyzed under the Howey test, including “mining,” “staking,” and “wrapping.” In addition, the Taxonomy provides insight into the SEC’s views on crypto platforms’ use of “airdrops” to disseminate tokens.

Mining

“Mining” is the process used by certain crypto networks and platforms to generate new coins and validate new transactions.⁷⁴ “Miners” facilitate transaction validation in a cryptographic network by operating a crypto protocol’s “consensus mechanism”—that is, a method that enables a distributed network of unrelated computers called “nodes,” to reach agreement.⁷⁵ These nodes maintain a peer-to-peer network to agrees on the authoritative record of account balances, transactions, smart contracts, and other network data (collectively referred to as the network’s “state”).⁷⁶ Proof-of-work (PoW) is a type of consensus mechanism that rewards miners for operating network nodes and contributing computational resources to the PoW network.⁷⁷

Typical mining arrangements involve self (or solo) mining and mining pools.⁷⁸ Self-mining involves mining digital commodities using the miner’s own computational resources.⁷⁹ The miner may work along or together with others to operate a node and mine digital commodities.⁸⁰ A mining pool involves mines combining their computational resources with other miners to increase their chances of successfully validating transactions and mining new blocks on the PoW network.⁸¹

Prior to the release of the Taxonomy, the SEC’s Division of Corporation Finance staff issued a statement in 2025 explaining that activities like self-mining and mining pools do not involve the offer and sale of securities.⁸² The staff reasoned that mining is not undertaken with a reasonable expectation of profits to be derived from the entrepreneurial or managerial efforts of others.⁸³ Instead, a miner contributes its own computational resources and thus engages in an administrative or ministerial activity.⁸⁴

The Taxonomy mirrored the staff’s statement by only addressing self-mining and mining pools and positing that these specific mining activities are not considered the offer and sale of a security within the meaning of section 2(a)(1) of the Securities Act and section 3(a)(10) of the Exchange Act.⁸⁵ This is because mining is not undertaken with a reasonable expectation of profits derived from the managerial efforts of others.⁸⁶ Rather, a miner contributes its own computational resources to secure the PoW network and enable the miner to earn rewards issued by the PoW network in accordance with its software protocol.⁸⁷ Simply put, a miner engages in an administrative or managerial activity to secure the PoW network, validate transactions by adding new blocks, and receive rewards.⁸⁸ Thus, a miner’s expectation to receive rewards is not derived from any third-party’s essential managerial efforts.⁸⁹ Similarly, a mining pool has no expectation of profits because a mining pool also engages in the same administrative or ministerial activities as self-mining actors.⁹⁰

Staking

Overview of Staking and the SEC Staff’s Initial Stance on Staking

Proof of stake (PoS) is a consensus mechanism used to prove that Node Operators participating in a PoS Network have contributed to the PoS Network.⁹¹ Node Operators must stake the PoS Network’s digital asset to be selected by the PoS Network’s software protocol to validate new blocks of data to the PoS Network.⁹² This effectively updates the state of the network, in that the Node Operator checks and confirms transactions effected on the crypto-network.⁹³ Therefore, when a Node Operator is selected by the network, it serves as a “Validator.”⁹⁴ Validators earn rewards in exchange for providing validation services.⁹⁵ These rewards are usually either generated digital assets distributed to the Validator by the PoS Network in accordance with its software protocol, or a percentage of the transaction fees paid in digital assets by parties seeking to add their transactions to the PoS Network.⁹⁶ Node Operators must commit or “stake” digital assets to be eligible to validate and earn rewards.⁹⁷ While staked, the digital assets are locked up and cannot be transferred.⁹⁸ This therefore provides an incentive for participants to use their digital assets to secure the PoS Network.⁹⁹

There are four main types of staking:¹⁰⁰

1. Self (or Solo) Staking: When self-staking, the digital asset owner maintains ownership and control of its digital assets and cryptographic private “keys” to unlock the staked assets if the owner so chooses.¹⁰¹
2. Self-Custodial Staking With a Third Party: In this staking method, owners grant their validation rights to a third-party Node Operator. While the owner retains ownership and control of the staked digital assets, the owner and Node Operator split a portion of the rewards for the validating services.¹⁰² 
3. Custodial Staking: A third party or “Custodian” takes custody of an owner’s digital assets and facilitates staking them on behalf of the owner.¹⁰³ To effectuate this, the owner deposits the assets in a cryptographic wallet controlled by the Custodian.¹⁰⁴ Although the Custodian may seem akin to a type of bank, the Custodian is not permitted to use the assets for operational or general business purposes. The Custodian also may not lend, pledge, or rehypothecate the assets for any reason, and the assets are held in a manner designed to not subject them to claims by third parties.¹⁰⁵ Moreover, the Custodian also may not use the assets to engage in leverage, trading, speculation, or discretionary activities.¹⁰⁶
4. Liquid Staking: In this arrangement, depositors receive newly generated crypto-assets (or “staking receipt tokens”) evidencing the depositors’ ownership of the deposited digital assets.¹⁰⁷ The staking receipt tokens are issued to depositors on a 1:1 basis to the amount of the deposited digital assets. This arrangement therefore allows holders to maintain liquidity without being obliged to withdraw deposited digital assets from staking. Depositors can redeem the staking receipt tokens for the deposited digital assets and any rewards that accrue during the period that the commodities were deposited.¹⁰⁸ It is possible to participate in liquid staking using a third-party service provider or (Liquid Staking Provider), in which the Liquid Staking Provider holds the deposited digital commodities either in a cryptographic wallet controlled by the Liquid Staking Provider, or in a smart contract. The Liquid Staking Provider stakes the deposited digital assets on behalf of the depositor for an agreed-upon fee that reduces the amount of rewards that would otherwise accrue to the deposited assets.¹⁰⁹

In 2025, the SEC’s Division of Corporation Finance staff released two statements addressing protocol staking and liquid staking respectively.¹¹⁰ The staff’s statements were clear that protocol staking and liquid staking do not involve the offer and sale of a security because they are administrative or ministerial activities and therefore do not meet the Howey standard of the managerial and entrepreneurial efforts of others.¹¹¹

Protocol Staking Activities Covered by the Taxonomy

The Taxonomy differs from the staff’s statements on staking activities in that while the Taxonomy makes clear that protocol staking activities do not involve the offer and sale of a security under the Securities Act or the Exchange Act, this classification is only in relation to digital commodities.¹¹² Accordingly, participants in protocol staking activities in connection with digital commodities are neither required to register such transactions with the SEC, nor fall within an exemption from registration.¹¹³ Generally, this is because a digital commodity does not constitute any of the financial instruments enumerated in the definition of a security.¹¹⁴ As such, the Taxonomy considers staking services to be administrative or ministerial to a crypto-network because the staking services are validating activities, which improve the operative and security capabilities of the network.¹¹⁵ Therefore, such activities do not suggest a reasonable expectation of profits to be derived from the essential managerial efforts of others under Howey.¹¹⁶

The Taxonomy is, however, less straightforward with regard to custodial arrangements. While the Taxonomy states that a custodian does not provide essential managerial efforts to depositors for whom custodians provide custodial services, the Taxonomy does note that a custodian acts as an agent in connection with staking the deposited digital commodities on behalf of the depositor.¹¹⁷ This is because the depositor decides whether, when, and how much of the depositor’s digital commodities to stake.¹¹⁸ While the Taxonomy states that such an arrangement does not constitute essential managerial efforts, the Taxonomy notes that a custodian who does select whether, when, or how much of a depositor’s digital commodities to stake is outside the scope of the Taxonomy.¹¹⁹ Therefore, it could be inferred that an arrangement in which the custodian has a more active role may be considered managerial efforts of others in the context of an investment contract analysis.

Additionally, the Taxonomy clarifies that a staking receipt token that is a receipt for a nonsecurity crypto-asset not subject to an investment contract does not fall within the definition of a security, because it does not have the economic characteristics of a security.¹²⁰ This is because the staking receipt token evidences the deposited digital commodity held with the staking provider to which the depositor is the owner.¹²¹ Furthermore, a staking receipt token is not offered and sold subject to an investment contract because the parties involved in the process of generating, issuing, and redeeming the receipt token do not provide essential managerial efforts to holders of the receipt token, and any economic benefits realized by the holders of the receipt token are not derived from any such efforts.¹²² In other words, the receipt token is not a security because the receipt token’s value is derived from the value of the deposited digital commodity and not from the managerial efforts of the staking provider or any other third party.¹²³ Nonetheless, the Taxonomy stresses that a staking receipt token for a digital security or nonsecurity crypto-asset subject to an investment contract is a security.¹²⁴

Wrapping

“Wrapping” crypto-assets is a process in which a crypto-asset is deposited with a custodian or a cross-chain bridge (a self-executing code that programmatically generates and redeems wrapped tokens without the use of a custodian),¹²⁵ and in return, the custodian or cross-chain bridge (in this capacity, both act as a “wrapped token provider”) generates an equivalent amount of redeemable wrapped tokens on a 1:1 basis.¹²⁶ A redeemable wrapped token is a crypto-asset issued on a crypto-network representing either a crypto-asset native to a different crypto-network or a crypto-asset based on a different token standard and that is both backed by the deposited crypto-asset and can be redeemed on a 1:1 basis for the deposited crypto-asset.¹²⁷ In the latter case, the redeemable wrapped token is “burned” (i.e., destroyed) and permanently removed from circulation.¹²⁸ The wrapped token provider holds the deposited crypto-asset in a manner intended to ensure that there is an equivalent amount of the deposited crypto-asset being held.¹²⁹ When the token holder wishes to redeem the redeemable wrapped token, the holder sends the tokens back to the wrapped token provider who burns the redeemable wrapped tokens, thereby releasing the equivalent amount of the deposited crypto-asset back to the holder on a 1:1 basis.¹³⁰

The Taxonomy specifies that the offer or sale of a redeemable wrapped token that is a receipt for a nonsecurity crypto-asset not subject to an investment contract does not involve an offer or sale of a security under the Securities Act or the Exchange Act.¹³¹ This is because a redeemable wrapped token evidences the deposited crypto-asset held with the wrapped token provider.¹³² Furthermore, holders of a redeemable wrapped token are not making an investment in an enterprise because their funds are not pooled together to be deployed by promoters or other third parties, and their fortunes are therefore not tied to the efforts of a promoter.¹³³ Additionally, any economic benefits realized by holders of such redeemable wrapped tokens are not derived from the essential managerial efforts of others because the value of the wrapped token is derived from the value of the deposited crypto-asset, rather than from the efforts of a third party. Therefore, there is no financial incentive derived from the wrapping process because a wrapped token is redeemable for the deposited crypto-asset on a fixed 1:1 basis without any additional financial incentive or benefit.¹³⁴ However, an offer or sale of a redeemable wrapped token that is a receipt for a digital security or nonsecurity crypto-asset subject to an investment contract is an offer or sale of a security.¹³⁵

Airdrops

The Taxonomy provides clarity on the SEC’s stance regarding a dissemination activity known as “airdrops.” An airdrop is a means for crypto-asset issuers to disseminate their crypto-assets in exchange for no or nominal consideration.¹³⁶ An airdrop occurs when an issuer transfers the crypto-asset to specific cryptographic wallets or other addresses. This method is generally used to generate interest in use of crypto-assets and to expand the use and ownership of crypto-assets. Usually, airdrops are used to reward early or loyal users of a crypto-network. Issuers choose the recipients and all other terms of their airdrops, such as the timing and frequency of the airdrop, or the criteria for which recipients are eligible for an airdrop.

The Taxonomy specifies that it pertains only to airdrops of nonsecurity crypto-assets to recipients who did not provide the issuer with consideration in exchange for the airdropped nonsecurity crypto-asset.¹³⁷ As such, the Taxonomy states that an airdrop of a nonsecurity crypto-asset does not become subject to an investment contract because an airdrop of a nonsecurity crypto-asset is not an investment of money under Howey.¹³⁸ An airdrop does not constitute an investment of money under Howey because the recipients do not provide consideration in exchange for the airdropped nonsecurity crypto-asset.¹³⁹

The Taxonomy also outlines types of scenarios in which it would be interpreted that the airdrop recipient does not provide consideration to the issuer in exchange for the airdropped nonsecurity crypto-asset. These scenarios include: (i) when an issuer airdrops a nonsecurity crypto-asset to persons who hold another specified crypto-asset in their digital wallets, and the issuer does not announce the airdrop before the asset is disseminated; (ii) when an issuer creates a new crypto-system and announces and issues an airdrop of nonsecurity crypto-assets to users who volunteered to use a test system of the new crypto-system (unless the issuer announced the airdrop during the testing phase to incentivize engagement); and (iii) when an issuer airdrops a nonsecurity crypto-asset free of charge to users satisfying a certain eligibility criteria based on usage of the application and the issuer does not announce the airdrop before dissemination.¹⁴⁰

While the Taxonomy does not consider airdrops of nonsecurity digital assets to be subject to an investment contract, the Taxonomy states that airdrops of digital securities would constitute a “sale” under section 2(a)(3) of the Securities Act or section 3(a)(14) of the Exchange Act.¹⁴¹

Takeaways

While the Taxonomy is a useful step forward in providing clarity on the application of securities laws to crypto-assets, analysis of crypto-assets remains fact-specific. The clarity on specific digital assets as digital commodities and thus outside the securities laws may lead to a focus on these investment products going forward, given their unambiguous status. It may also lead to new digital assets seeking to resemble the essential characteristics of such named tokens to ensure that their status is not questioned. We will also likely see players in the crypto-industry realigning their operations and restructuring any token offerings in a way to avoid registering the tokens as digital securities and tailor their token offerings to offer nonsecurity crypto-assets.¹⁴²

Chair Atkins recently noted in remarks that the Taxonomy is “a beginning, not an end” and that more action from the SEC is certain to come in the near term.¹⁴³ To this end, Chair Atkins and Commissioner Peirce have alluded to a forthcoming “Crypto Innovation Exemption” that would allow crypto-firms to pilot onchain trading of tokenized securities and other blockchain-based products under defined limits and without prior SEC registration.¹⁴⁴ This innovation exemption is expected imminently, along with other formal rulemaking procedures to follow.¹⁴⁵

It is, however, important to note that the Taxonomy is purely guidance from the SEC and is neither statutory law nor binding jurisprudence. Indeed, following the Court’s consequential decision in Loper Bright Enterprises v. Raimondo,¹⁴⁶ courts may exercise independent judgment and are no longer obligated to defer to an agency’s interpretation of the law simply because a statute is ambiguous.¹⁴⁷ Therefore, a court would likely view the Taxonomy as at most persuasive evidence and perhaps give it Skidmore deference.¹⁴⁸ That lesser deference still leaves the court in the position of having the final say, and courts will likely apply the Howey test according to the court’s best interpretation of the statute and precedent. Nonetheless, the Taxonomy is a significant step by the SEC and will help clarify the nebulous regulatory environment in which crypto exists. We expect that the Taxonomy will form the foundation of the assessment of the security status of digital assets unless and until there is further action from Congress or the Courts.

We acknowledge the contributions to this publication from our Washington, DC law clerk Stewart Atkins.

The CC&NH SEPP, which aims to consolidate and strengthen climate change controls within the one instrument, follows the insertion of a new climate change object into the Environmental Planning and Assessment Act 1979 (EPA Act) through the enactment of the Environmental Planning and Assessment Amendment (Planning Systems Reforms) Act 2025 (EPA Amendment) in November last year. 

Although no legal drafting for the CC&NH SEPP has been published yet, the Government has exhibited an Explanation of Intended Effect (EIE), draft Climate Change Scenario Guidelines, and draft NSW Urban Heat Policy for Land Use Planning. The recent EPA Amendment represents the most comprehensive reform of the NSW planning system in decades. 

Towards Consolidated and Systematic Climate Assessment

The current legislative approach to hazards operates on a case-by-case basis, identifying land affected by specific hazards—such as bush fires, floods, and coastal risks—and applying controls respectively. These controls are dispersed across the Resilience and Hazards SEPP, the EPA Act, the Standard Instrument LEP (Standard Instrument), and the Rural Fires Act 1997 (Rural Fires Act), among others. The proposed CC&NH SEPP seeks to consolidate those provisions within one instrument, citing anecdotal uncertainty about how those frameworks relate.

The CC&NH SEPP is intended to adopt a proactive rather than reactive approach to future climate risk by embedding the following overarching principles: 

• Planning decisions consider future climate risk and relevant natural hazards;
• Planning decisions reduce future exposure and vulnerability to natural hazards and climate risk;
• Planning decisions appropriately balance and manage future costs and risk to life from natural hazards and climate risk; and
• Planning decisions improve the health of Country (and therefore Aboriginal communities) in a changing climate.

The EIE also provides an overview of how major areas of climate risk are proposed to be addressed under the new SEPP. 

Climate Change

Climate Change Mandatory Considerations 

The proposed CC&NH SEPP will codify several matters that consent authorities must consider when determining a development application: 

• Consider climate risk and natural hazards, taking into account projected changes as a result of climate change;
• Minimise risk to development from climate risk and changing natural hazard exposure as a result of climate change;
• Consider if the development is appropriately designed, constructed and operated to be resilient to the future impacts of climate change; and 
• Use the appropriate prescribed climate scenarios for the relevant development assessment decision, as directed by the Climate Change Scenario Guidelines.

Climate Scenario Assessments

Climate scenario assessments are a new proposed requirement in development assessment. The Sixth Assessment Report of the Intergovernmental Panel on Climate Change identified five Shared Socioeconomic Pathways (SSPs). Each SSP represents a different emissions scenario that can inform how future climate risk impacts the life of the proposed development. 

To help consent authorities make informed decisions on climate risk, particular SSP modelling scenarios are proposed to be applied to future developments. The type of modelling scenario is proposed to vary with the scale, context, and lifetime of a proposed project to ensure proportionality. 

The following table is adapted from the exhibited Climate Change Scenario Guidelines, showcasing the minimum requirements for considering climate change scenarios in planning decisions. 

Fig 1–SSP emissions scenarios for planning decisions

Urban Heat–A New Hazard

Urban heat is not currently addressed on a statewide planning level. The exhibited EIE stresses the importance of heat planning, noting that some parts of the state such as Dubbo and Penrith are projected to experience an additional 56.7 and 25.9 hot days per year by 2090, being days where maximum temperatures are 35 degrees and above, while the cost of cooling Western Sydney homes may increase 370% by 2079. 

The draft Urban Heat Policy aims to install urban heat as a consideration in development projects within urban land use zones across NSW, especially in heat-vulnerable communities. The policy points to the proliferation of large areas of dark, hard, heat-absorbing surfaces that permeate daily commutes to urban centres and the corresponding lack of heat-reducing elements such as greenery, water bodies, and heat-reflective surfaces. Three principles for consideration are proposed: 

1. Consider the urban heat context of the land use planning decision or proposed development; 
2. Incorporate planning and design measures in development to support community adaptation to increased heat; and 
3. Design buildings and public spaces to support wellbeing during heatwaves and hot days. 

The Government is currently seeking feedback on how and where such provisions should apply, including potential triggers by development type (such as schools, hospitals, and aged care facilities) and the appropriate role of heat risk assessments and heat data. 

Approach to Existing Hazards

Bush Fires 

Although bush fire risk will continue to be substantively managed under the EPA Act and Rural Fires Act, the CC&NH SEPP will include new objectives requiring consent authorities to avoid inappropriate development in high-risk bush fire locations and ensure development includes adequate evacuation capability, among others. Existing bush fire provisions in section 272 and 274 of the Environmental Planning and Assessment Regulation 2021 and clause 5.11 of the Standard Instrument are also proposed to be consolidated into the CC&NH SEPP. 

A new planning pathway to facilitate cultural burning as an approved method of hazard reduction is also proposed. 

Coastal Hazards

The CC&NH SEPP would redistribute coastal protection clauses around various instruments to prevent duplication. For example, the four current coastal management areas under the Resilience and Hazards SEPP are suggested to be divided across the State Environmental Planning Policy (Biodiversity and Conservation) 2021 and the CC&NH SEPP. 

Concern has been expressed regarding the duplication of coastal risk planning clauses spread across local environmental plans (LEPs). These may be consolidated into a coastal vulnerability area clause in the CC&NH SEPP, although guidance on this transition is currently unclear. 

Flooding

Noting that flood planning is one of NSW’s most mature natural hazard frameworks, the CC&NH SEPP primarily consolidates clauses from several other instruments into its own ambit, including clause 5.21 (flood planning requirements) and clause 5.22 (special flood considerations) currently in the Standard Instrument.

A clause giving effect to local council flood maps is also suggested to be drafted. 

Connection with EPA Act Amendment

The proposal for the CC&NH SEPP follows on the heels of the new EPA Act climate objective and the powers conferred on the Department of Planning, Housing and Infrastructure to make environmental planning instruments for the purposes of administering the EPA Act. 

The recent EPA Amendment itself reflects a broader policy approach towards consolidation and streamlining. It rearranges the fabric of the planning landscape and underpins several mechanisms contemplated by the CC&NH SEPP. The essential elements of the EPA Amendment are summarised below.

The DCA–A Single Front Door for Referrals 

The Development Coordination Authority (DCA) is being established as a single front door for referrals, concurrences and issuing General Terms of Approval across all development types. It will act as the final decision-maker on these inputs, replacing the current system under which up to 22 separate agencies—including those responsible for bush fire and flooding—may need to be consulted, sometimes producing inconsistent requirements. 

The DCA will also function as a contactable agency for council and applicant enquiries, supporting an in-house technical advisory team. Consistent with the CC&NH SEPP’s aim to amalgamate fragmented climate risk legislation into a single instrument, the current 800+ triggers for concurrences with government agencies are also proposed to be consolidated into a schedule under the State Environmental Planning Policy (Planning Systems) 2021. 

The DCA is projected to commence full operation on 1 July 2026. 

Simplifying Development Approval Streams 

“Complying developments in New South Wales,” said Minister for Planning Paul Scully in the EPA Act’s second reading speech, “are too rigid, and in some cases, just ludicrous”. 

To simplify the development approval process, the Government has rearranged assessments into three pathways: 

1. Expanded scope of deemed approvals 
   
   Development that would be complying development but for some minor variations now will no longer need assessment under a full DA. These applications will generally be deemed approved if the consent authority does not make a decision within 10 days. 
2. Targeted assessment (new pathway)
   
   Targeted assessment sits as an intermediary pathway between complying and full development assessment. It ‘switches off’ the public interest, site suitability, and likely impacts from the section 4.15 application evaluation criteria by replacing them with a set of rules in a SEPP. This reduces the need for expert reporting on matters that have already been strategically assessed.
3. Full development assessment
   
   For developments continue to be assessed as a traditional full DA, section 4.15 of the EPA Act has been amended to require assessment of only ‘significant likely impacts’ (rather than just ‘likely impacts’). This is intended to prevent unduly extensive assessment of all matters touching upon a project. 

Standardised Development Conditions 

The EPA Act now enables an SEPP to specify model conditions for development consent. It will be mandatory for consent authorities to use these model conditions where directed. Applicants will also be given the chance to consider and comment on development conditions prior to their imposition by the consent authority. 

Variation of Definition of ‘Development Standards’ 

Alongside these changes, the definition of ‘development standards’ has been redrafted more restrictively. As a result, requirements in environmental planning instruments not specifically identified as a development standard may fall outside the definition and be characterised as a prohibition. They may therefore not be amendable to variation via section 4.6 of the Standard Instrument.

This may have implications for how the CC&NH SEPP’s new climate risk provisions are drafted, including whether they will be intended as development standards or prohibitions and whether any variation will be allowable. 

Next Steps

Developers should be aware that climate change risk assessment may be incorporated across all categories of development. Larger or more sensitive projects are likely to face more demanding climate scenario requirements. Consideration should also be given to how future projects may address urban heat, particularly in large urban zones. 

Exhibition of the proposed CC&NH SEPP and its supporting documents closed on 16 March 2026. We await the release of more detailed legal drafting following the Government’s consideration of submissions. 
 

A Strategic Path to Deployment

NSTM-3 sets as its key goal that “the United States will lead the world in developing and deploying space nuclear power for exploration, commerce, and defense.” It frames space nuclear power as “essential to unlock[] space exploration” and for meeting capability needs for US civil, commercial, and national security space missions. 

To meet this national objective, the memorandum sets multiple strategic goals including:

• A design competition to enable demonstration of low-, mid-, and high-power space reactors;³ 
• Deployment of a mission enabling nuclear reactor in Earth orbit by 2031;
• Delivery of a mid power lunar surface fission reactor by 2030 of at least 20 kilowatts electric during three years in orbit and five years on the lunar surface; and
• Continued development of higher-power systems to support propulsion, lunar infrastructure, and deep space missions.

Centralized White House Coordination and Agency Roles

The memorandum directs OSTP to coordinate interagency implementation of these objectives as well as individual directives to the National Aeronautics and Space Administration. (NASA), the Department of War (DOW), and the Department of Energy (DOE). 

NASA is directed to lead civil development of space nuclear systems, including lunar surface power reactors and nuclear electric propulsion systems including the deployment of a high-power space reactor in the 2030s.

The DOW is directed to pursue parallel development of defense relevant space nuclear capabilities, encouraging cross-proposals from NASA led program designs and deploying a mid-power in-space reactor by 2031.

The DOE is directed to support reactor development by assessing the readiness of the US industrial base within 60 days, conducting research, development, and analysis and providing uranium for reactor fuel if commercial sources are insufficient or unavailable. 

The memorandum expressly encourages interagency cooperation and coordination through cost sharing, joint use of testing infrastructure, and reuse of reactor designs to reduce duplication and speed deployment with coordination from OSTP.

Regulatory Pathway 

In the first (and only) space fission reactor mission ever launched by the United States through the Space Nuclear Auxiliary Power (SNAP) program, which ran from 1955 to the early 1970s, NASA worked in concert with the US Airforce (the Airforce) and the Atomic Energy Commission (AEC).⁴ In that program the Airforce was in charge of establishing the mission, and the AEC had project control while NASA worked in a support and contracting position.⁵ In other nuclear projects such as Radioisotope Power Systems, the DOE has indemnified NASA for liability for nuclear incidents.⁶ For this current mission, it’s likely that the federal government will take a similar approach, with NASA working closely with DOE and, perhaps DOW, to receive necessary authorization to possess and use nuclear materials.

Commercial First Procurement and Industrial Base Expansion

A defining feature of the National Initiative is its inclusion of the private sector and expansion of flexibility in building private sector contracts. NSTM-3 directs agencies to:

• Leverage and enable private sector innovation;
• Allow fixed price contracts and contractors to propose their own milestone based payments;
• Conduct parallel vendor competitions with agencies developing similar projects rather than single award development pathways; and
• Integrate commercial nuclear, aerospace, and manufacturing supply chains, where feasible.

Conclusion 

For aerospace, defense, energy, and advanced manufacturing companies, the National Initiative represents a significant opportunity as the United States moves to embed nuclear power at the core of its future space architecture. The firm’s Public Policy and Law team can help assess federal funding opportunities that will arise from the Nation Initiative, mitigate potential policy hurdles, and position your organization to participate in this developing industry.

Everything is bigger in Texas, and that includes funding opportunities. The state is betting on the expansion of advanced reactors, including small-modular nuclear reactors (SMRs) (around 300 megawatts electric (MWe) or less), to augment the large reactors (roughly 5,000 MWe from four reactors at two sites) that have been operating for decades in the state. To bolster advanced reactors in Texas, Governor Greg Abbott has announced historic levels of state funding that will support the development of and investment in these projects. 

US$350 Million in Historic Funding 

Launched on 1 April 2026, Governor Abbott stated that “[t]o power the Texas of tomorrow, we must boost our state’s advanced nuclear capacity.”¹

To do that, US$350 million is currently available from the Texas Advanced Nuclear Energy Office (TANEO) through the Texas Advanced Nuclear Development Fund (TANDF). The state intends for about US$70 million to go toward developing nuclear-power manufacturing while the other US$280 million will go to reactor developers. This funding is available through two tracks: the Advanced Nuclear Construction Reimbursement Program (ANCRP)² and the Project Development and Supply Chain Reimbursement Program.³

Texas is providing an incredibly short clock for applications to apply for funding. A required notice of intent is due by 23 April 2026, with full funding applications due by 14 May 2026. 

Each program has slightly different requirements, which we explore below.

Advanced Nuclear Construction Reimbursement Program

Under the ANCRP program, TANEO can reimburse eligible expenses associated with the construction of an advanced nuclear project.⁴ 

Qualifying expenses include: 

• Nuclear Regulatory Commission (NRC) review of the construction permit or license application;
• Procurement and development of long-lead components; or
• Construction activities, including manufacture, fabrication, quality assurance, placement, erection, installation, modification, inspection, or testing of an advanced nuclear project. 

Eligible applicants include businesses, nonprofits, governments, and universities that either “have or reasonably expect to have a docketed construction permit or license application for the project at the Nuclear Regulatory Commission on or before 1 December 2026.”

Project Development and Supply Chain Reimbursement Program

The development and supply chain program is designed to expedite the development and early stages for new advanced nuclear projects in the state and does not require a reasonable expectation of a docketed application with the NRC. Any business, government, nonprofit, or university can apply for reimbursement of a wide variety of eligible expenses, including: 

• Technology development;
• Feasibility studies;
• Site planning, including conceptual site-specific engineering studies;
• Front-end engineering design;
• Site and environmental characterization;
• NRC early site permit work;
• Preparation of the construction permit or license application to the NRC;
• Developing manufacturing capacity and readiness; 
• Fuel processing, manufacturing, and fabrication activities essential to the fuel cycle supply; 
• Preparation of local, state, and non-NRC federal permits; and 
• NRC licensing fees. 

These two programs represent an incredible opportunity to accelerate new nuclear programs in the state of Texas, but entities hoping to take advantage of this historic investment must move quickly. 

Texas Builds on a Long History of Expanding the Nuclear Field

This renewed interest is not new to the Lone Star State. Highlights of the state’s nuclear history include:

• The founding of Texas A&M University’s Nuclear Science Center in 1957, which completed a research and test reactor only a few years later in December 1961. 
• Two active sites with four reactors: South Texas Project in Matagorda County, which received its initial NRC operating license for Unit 1 in 1988⁵ and Unit 2 in 1989,⁶ and the Comanche Peak Nuclear Power Plant in Somervell County, which received its initial NRC operating license for Unit 1⁷ in 1990 and Unit 2 in 1993.⁸
• The Pantex Plant, home to the nation’s primary nuclear weapon assembly and disassembly facility.

Recently, Texas has been a hotspot of innovation in new nuclear projects: FluxPoint Energy is working to become the first new uranium conversion plant in the country in nearly 70 years; Long Mott Energy applied for a four 80 MWe modular plant on the Texas coast using the X-energy Xe-100 design, with US$1.2 billion in backing from the Department of Energy’s Advanced Reactor Demonstration Program; Aalo Atomics is designing a solid-fuel sodium-cooled reactor for factory mass production; Natura is building a 1 MW thermal research reactor in Abilene using liquid fuel dissolved in a molten salt mixture—racing the Idaho National Laboratory to build the nation’s first advanced liquid-fueled research reactor in over 60 years; and Atomic Alchemy is developing a radioisotope test reactor under the Department of Energy’s reactor pilot program,⁹ which fast-tracks the licensing of advanced reactors. 

Governor Abbott sees the potential for Texas as a home for advanced reactors, including SMRs, and is pushing the state to make it a reality. With state funding unseen elsewhere in the country and a renewed push to bring advanced reactor technology to the state, we are watching the newest chapter in Texas’s nuclear energy history. By putting money where it is needed most to supplement federal funds and support local companies, Texas is developing the benchmark that other states could follow.

An International Firm With Deep Texas Roots

Texas is often the political testing grounds for initiatives that are repeated in other states and at the national level, and nuclear power is no exception. The firm’s presence in Texas spans more than 50 years with offices in Austin, Dallas, and Houston. We regularly engage with every level of the Texas government, the Texas Commission on Environmental Quality, Public Utility Commission of Texas, Electric Reliability Council of Texas (ERCOT), and the NRC. Our experienced team in Texas is ready, willing, and able to help project developers, utilities, and other prospective clients navigate this and other funding opportunities.

For background, the Guiding and Establishing National Innovation for US Stablecoins Act (the GENIUS Act or the Act) authorizes certain entities to issue stablecoins in the United States, including a federal qualified payment stablecoin issuer (FQPSI) and a state qualified payment stablecoin issuer (SQPSI). However, SQPSIs must generally transition to the federal framework if they surpass an outstanding issuance of US$10 billion stablecoins (but they may seek a waiver). Treasury’s recent NPRM outlined the basic requirements to issue payment stablecoins as an SQPSI and answers a question in the back of many issuers’ minds: 

Why choose a state stablecoin framework if one would eventually have to transition to the federal framework anyway?

The NPRM both outlines the principles required to issue under a state framework and reveals two key strategic reasons for the state path, which have been largely overlooked.

See also our previous publications following the GENIUS Act (here for regulatory implementation considerations and here for stablecoin licensing implications).

Becoming a State Qualified Payment Stablecoin Issuer

In general, the NPRM specifies the “broad-based principles” for determining when a state regulatory regime is “substantially similar” to the federal framework, thereby allowing SQPSIs to issue stablecoins under a state law. The bifurcated state and federal frameworks for stablecoins resemble the current dual banking system, where a bank may opt for either a state or federal charter.

The NPRM establishes five sets of principles under which a state must certify its stablecoin law as “substantially similar” to the GENIUS Act, generally summarized below: 

Overall Broad-Based Principles

The state law must “meet or exceed” the requirements under Section 4(a) of the GENIUS Act (i.e., general issuer requirements) but may deviate for “nonsubstantive matters.” 

Broad-Based Principles for Uniform Requirements Under Section 4(a) of the Act

The state law must be consistent with the federal framework “in all substantive respects” with respect to certain “Uniform requirements” (listed in the table below). These requirements set the GENIUS Act standards as a baseline, including reserve requirements, anti-money laundering, and sanctions program requirements.

Broad-Based Principles for State-Calibrated Requirements Under Section 4(a) of the Act

The state may exercise some discretion to deviate from the Act with certain “State-calibrated requirements” (listed in the table below). Treasury, however, expects these discretionary areas to be “at least as stringent and protective as the Federal regulatory framework.” Indeed, the State-calibrated requirements are largely constrained by the GENIUS Act or are nonsubstantive. However, one very significant provision is nested in proposed section 1521.4(h)(2)(i)(B), concerning digital asset service providers (discussed below).

Broad-Based Principles for Other Provisions of the GENIUS Act

States have discretion in implementing other miscellaneous or nonsubstantive provisions, including: transitioning to federal oversight; applications and licensing; and supervision and enforcement. Such other provisions, however, must generally follow the federal framework.

Why Issue Stablecoins Under State Law? 

As written, a state’s stablecoin regime certified under the NPRM might effectively serve as an on-ramp to eventual federal supervision. Indeed, by the time they must transition to the federal framework, an SQPSI will have already complied with the substantive requirements governing all permitted payment stablecoin issuers. There are, however, two strategic reasons why an issuer might initially choose a state regime.

Digital Asset Service Provider Activities

Many states, including California and New York, have developed bespoke laws governing digital asset service providers (DASPs) that extend well beyond stablecoins, to cover broader activities around any virtual currency, including exchange, custody, and transmission. Critically, while the GENIUS Act generally preempts the current stablecoin provisions within DASP laws, it does not displace the broader digital asset provisions. An issuer engaged in non-stablecoin digital asset activities would likely still require a license under these related state DASP laws.

DASPs, therefore, have the opportunity to leverage their current state licenses as GENIUS Act-compliant licenses to issue stablecoins (provided that the state law is first certified as “substantially similar,” as discussed above). This creates a meaningful advantage over a purely federal pathway, where stablecoin issuance may be federally supervised (e.g., under the Comptroller of the Currency), but related digital asset activities could still require separate state-by-state licensing in states that require such licensing.

In practice, the SQPSI model may allow a vertically integrated virtual currency platform to consolidate regulatory oversight and decrease compliance burdens, rather than navigating parallel and potentially duplicative federal and state regimes for different components of the same business. However, that is not to say that these state-specific DASP laws may also be passported; SQPSIs must continue to weigh the applicability of these laws in each state. The state framework option, therefore, could be viewed as reducing the need for DASPs to obtain a separate federal authorization (provided that such state laws are first properly certified as “substantially similar” to the GENIUS Act). 

Streamlined, Effective, and Well-Developed State Regime

Similar to Delaware being the most common state of incorporation for businesses (due to its efficient and well-maintained corporate framework), states may create well-administered stablecoin regimes in terms of faster licensing, cleaner applications, and responsiveness or accessibility of regulators. A state’s regime or regulator may also better accommodate more innovative business models, particularly at earlier stages, thereby reducing regulatory frictions around emerging technologies.

A state stablecoin regime incentivizes creating an efficient and well-maintained state framework since one state’s stablecoin law is generally passported to the other states. Unlike money transmission laws, where licenses are obtained in every state in which a company is doing business, SQPSIs may operate across state lines with respect to stablecoin issuance activities, without needing separate state-by-state stablecoin licensure (but note that state DASP laws will still require licensing to engage in digital asset activities, as discussed above).

Conclusion

There are important strategic considerations for issuers evaluating whether to issue under a state stablecoin regime. While Treasury’s NPRM makes clear that state frameworks will largely converge with the federal baseline, the state pathway could have meaningful advantages. In particular, issuers could see tangible benefits in the ability to leverage a more efficient and well-maintained state licensing process and, most critically, engage in DASP activities under a state framework. 

The NPRM reinforces that state regimes do not replace the substantive requirements of the GENIUS Act—but rather offer an alternate route that may, if pursued strategically, provide issuers with meaningful advantages (read the NPRM here).

Appendix A to the NPRM: Mapping of GENIUS Act Sections to Part 1521 Principles

The Amendment Bill doubles the maximum civil and criminal penalties for breaches of both the Competition and Consumer Act 2010 (Cth) (CCA) and certain sections of the Australian Consumer Law (ACL). It is the latest step in recent legislative reform aimed at deterring conduct by businesses that is anticompetitive or harmful to consumers.

We set out the key aspects of the Amendment Bill below, along with some salient changes to the Competition and Consumer Amendment (Unfair Trading Practices) Bill 2026 (UTP Bill) that was introduced on 1 April 2026 following a consultation draft circulated in February 2026.

IN BRIEF

WHAT'S NEW UNDER THE AMENDMENT BILL?

The explanatory statement to the Amendment Bill notes that it is intended to "strengthen the penalty regime under the CCA, including the ACL, to deter non-compliant conduct and reduce the financial benefits and incentives for businesses to engage in conduct in breach of competition and consumer law".

The Amendment Bill doubles the value of the first limb of this test from AU$50 million to AU$100 million (as part of the below three limb test), which increases the maximum penalty that can be imposed for a breach.

The maximum penalties are now the greater of:

• AU$100 million per contravention (previously AU$50 million);
• Three times the value of any benefit obtained from the contravening conduct; or
• 30% of adjusted turnover during the breach period (if the value of the benefit cannot be determined).

These increased penalties apply to a range of key provisions in the CCA and ACL, including:

Key Changes to the UTP Bill

Following an earlier exposure draft circulated in February 2026, the UTP Bill was introduced into the Australian  House of Representatives on 1 April 2026 and will be moving through parliament in the coming weeks.

The key changes to the UTP Bill from its previous exposure draft are:

The UTP Bill specifies (at section 21) that the amendments introduced by it will be reviewed two years after coming into effect.  

What Does This Mean for Your Business?

Doubling of Penalties Under the Amendment Bill

The increase in penalties from AU$50 million to AU$100 million under the Amendment Bill, alongside the prospective provisions enacted by the UTP Bill, continues the shift in the regulatory and enforcement landscape toward imposing heavier penalties for violations of the CCA or ACL.

With significantly increased penalties, the ACCC is expected to take a more assertive approach to its enforcement activities and pursue higher penalties in future. Courts will also be in a position to order even steeper penalties to businesses found to have violated the CCA or ACL (as has been the trend in recent years).

Businesses should take stock of their existing compliance frameworks and take a proactive approach to building and strengthening their internal compliance culture. To "get their house in order", businesses should:

• Assess the business's risk exposure against the sections of the CCA and ACL that the penalty increase applies to—identifying higher risk activities or practices and considering whether an updated risk assessment would be appropriate;
• Consider the existing compliance and governance programs of the business against the new penalties—are the current frameworks sufficient to protect the business?;
• Examine the need for any additional risk training for business personnel (both senior executives and regular staff) to encourage awareness and visibility of key risks to the business under the CCA and ACL; and
• Remember to inform the ACCC about any acquisitions that must be reported under the new merger rules, which started in January 2026, before completing the transaction or putting it into effect.

Prospective Changes Under the UTP Bill

Should the UTP Bill be passed, its provisions will become effective from 1 July 2027.

In anticipation of the UTP Bill's provisions becoming law, businesses should conduct a thorough evaluation of their operations and procedures to confirm compliance with the new disclosure obligations.

Our previous Insight article here reporting on the UTP Bill's exposure draft sets out some practical considerations in relation to the UTP Bill's various aspects to guide businesses in assessing their compliance.

If you require assistance in carrying out any of the above or have any queries about how your business may be affected, please contact us and we can assist you further.

Alleged DEI Practices at Issue

The settlement resolves claims that certain International Business Machines Corporation (IBM) employment practices allegedly considered race, color, national origin, or sex (protected characteristics) in ways that conflicted with contractually required equal employment obligations. The settlement resolves alleged practices dating back to 2019, which included:

• Using modifications or adjustments to compensation that caused managers to take protected characteristics into account when making employment decisions, including a “diversity modifier” that tied bonus compensation to achieving demographic targets;
• Applying “diverse interview slates,” “diverse sourcing,” and altered interview eligibility criteria based on protected characteristics in making hiring or promotion decisions;
• Developing race and sex demographic goals for business units; and
• Offering training, mentoring, leadership development programs, and similar opportunities with eligibility based on protected characteristics.

Critical to invoking the FCA, the DOJ alleged that the company certified compliance with the anti-discrimination requirements in seeking payment for services provided under its federal contracts, while knowingly maintaining these allegedly violative practices. IBM did not admit liability, and in fact expressly denied that it engaged in the at-issue conduct.

The DOJ credited IBM for its cooperation and remedial steps, which included early disclosure of facts gathered in IBM’s independent investigation, providing information to assist in the calculation of damages and penalties, and terminating or modifying various of the at-issue practices. As part of the settlement, the company will pay US$17 million, nearly half of which is restitution.

Practical Takeaways for Federal Contractors

DOJ Is Moving Forward With DEI-Related Enforcement

Over the past 15 months, the Trump administration has issued announcements and policies targeting “illegal DEI.”² Acting Attorney General (then-Deputy) Todd Blanche created the Civil Rights Fraud Initiative to focus on this topic, and numerous speeches and memoranda have highlighted the potential for FCA liability for recipients of federal funding that maintain illegal DEI practices. This resolution marks the first public example of this policy priority in action.

Reassess Employment Practices

The settlement identifies examples of DEI-related conduct that DOJ considers illegal. Companies—particularly federal contractors and other recipients of government funding—should consider how their own practices compare to the at-issue conduct in the settlement. Of particular note, the settlement relates to conduct beginning in 2019—well before this administration’s policy shift on DEI.

Cooperation Credit and Remediation Measures

The settlement credits the company’s early, substantive cooperation and remedial steps, which led to a reduced financial penalty. This credit was awarded notwithstanding the fact that the company did not admit violations and expressly denied the underlying conduct.

Be Mindful of Potential Whistleblowers

Although not the situation in this settlement, companies should keep in mind that the FCA allows private citizens to file lawsuits on behalf of the government (a “qui tam” action), and DOJ has openly encouraged it in DEI cases. Significant financial incentives for whistleblowers accompany such actions.

Contact us to discuss the implications of this action and its impact on your business. Our team is well-versed in federal anti-discrimination and government contracting requirements, defending against FCA investigations and litigation, and conducting audits or internal investigations of potentially problematic conduct.

Reality of 50-State Enforcement Risk

The aggressive expansion of state-level regulation across product safety, environmental standards, consumer protection, and labeling has created a 50-jurisdiction enforcement landscape that is impossible to navigate through federal compliance alone. A company can be fully compliant with every applicable federal regulation and still face substantial litigation exposure at the state level: California,¹ New York,² and Illinois³ each provide robust private rights of action, and the Supreme Court⁴ has significantly narrowed federal preemption defenses in product cases.  

What Companies Should Do Now

The practical response to 50-state enforcement risk is not to maintain 50 separate compliance programs; it is to build a regulatory intelligence function that monitors state-level developments systematically and maps exposure against the company’s actual footprint. At minimum, that means designating ownership for monitoring in California, New York, and Illinois and building a process to translate new state requirements into labeling, formulation, and marketing review checkpoints. Federal preemption should be assessed product-by-product rather than assumed as a default defense. Companies should also review whether existing liability insurance programs cover state regulatory enforcement actions and associated defense costs; many policies do not, and that gap is worth closing proactively.

Product Claims and Supply Chain Verification

The risk compounds because commercial pressure to push aspirational claims such as “pure,” “sustainable,” and “Made in USA,” even as global supply chains make those claims increasingly difficult to substantiate at the stock keeping unit level. As a result, labeling litigation has expanded well beyond traditional false advertising. Courts have recently upheld claims that challenge: 

• "Made in USA” representations where components are sourced offshore, including cases where only a minority of inputs were foreign.⁵ A March 2026 executive order has directed agencies to prioritize these cases;⁶
• "Pure,” “clean,” and “free of” claims where testing turns up trace contaminants, including microplastics or Per- and polyfluoroalkyl substances (PFAS) the manufacturer never intentionally added;⁷ and
• "Eco-friendly,” “recyclable,” “sustainable,” and “carbon neutral” claims where the company cannot document the methodology or where practice diverges from it.⁸

In many of these cases, the representation originated in marketing without a fully developed process to link the claim to sourcing data, test results, or production specifications. 

What Companies Should Do Now

The central discipline required here is closing the loop between commercial teams and supply chain operations before a claim goes on a label. That means instituting a formal claims substantiation protocol in which every material claim (“Made in USA,” “pure,” “clean,” “sustainable”) should be mapped to documented supply chain data, third-party test results, or production specifications before it is approved for use. Marketing and legal should conduct joint review of new claims, and existing claims should be audited against current sourcing realities on a regular cadence, particularly when suppliers or manufacturing locations change. For “Made in USA” claims, companies should understand their exposure under both Federal Trade Commission standards and the March 2026 executive order, which directs agencies to prioritize enforcement. 

PFAS and Emerging Contaminant Exposure

PFAS litigation has moved well past chemical manufacturers. Companies that use PFAS-containing inputs in packaging, coatings, lubricants, cleaning agents, or manufacturing processes now face claims on multiple fronts, including product liability, Superfund remediation, water contamination, and property transactions. In many cases, those companies cannot readily identify exactly where PFAS compounds appear in their supply chain. As a result, PFAS presents simultaneously as a supply chain issue, a product safety issue, an environmental issue, and a marketing issue for any company making purity or safety claims. Because no single function owns the issue, it often goes unaddressed until litigation forces it into view.

What Companies Should Do Now

Because no single function owns PFAS exposure, the first step is to assign it. Companies should designate cross-functional ownership spanning procurement, research and development, operations, legal, and communications and conduct a supply chain mapping exercise to identify where PFAS compounds may appear, including in packaging, coatings, processing aids, and manufacturing equipment. That exercise should feed directly into a remediation roadmap that prioritizes the highest-volume and highest-visibility inputs first. Where PFAS phaseout is not immediately feasible, companies should develop a documented transition plan, both to demonstrate good faith and to ensure that no product makes a purity or safety claim that the underlying supply chain cannot support. Companies that are or may become potentially responsible parties under Superfund should also evaluate their indemnification and contribution rights against upstream suppliers and consult with environmental coverage counsel on whether legacy policies provide remediation cost coverage.

Environmental, social, and governance (ESG) and Sustainability Commitments

ESG-related securities and consumer class actions have roughly doubled in two years, increasing from 16% of class actions in 2024 to roughly 30% as of September 2025. Public sustainability commitments, whether made in investor materials, marketing materials, or corporate social responsibility (CSR) reports, establish benchmarks that plaintiffs can test against what a company actually did. 

For consumer products companies, the risk is not abstract. Executives may announce commitments without first confirming whether the company can meet them, how progress will be measured, and what records will substantiate performance. When plaintiffs eventually place the commitment alongside the operational record, the gap between the two often becomes the theory of the case.

What Companies Should Do Now

The discipline ESG commitments require is the same discipline that governs any representation made to investors or consumers: as discussed above, do not make a claim you cannot substantiate and build the recordkeeping to prove substantiation before a commitment is announced, not after litigation demands it. In practice, that means establishing a pre-clearance process for public ESG commitments—one that includes legal review, a defined measurement methodology, and a documentation plan—before executives make statements in earnings calls, CSR reports, or marketing materials. Existing commitments should be audited against current operational performance. Where gaps exist between commitment and practice, companies face a choice: close the gap operationally, revise the commitment, or disclose the variance. The riskiest position is to leave a known gap unaddressed and undisclosed. Companies should also evaluate their directors and officers and securities liability programs to confirm that coverage extends to ESG-related securities actions, which are now a material and growing category of exposure.

CPSC Reporting Obligations

Section 15 of the Consumer Product Safety Act requires manufacturers, distributors, and retailers to report to the Consumer Product Safety Commission (CPSC) whenever they obtain information that reasonably supports the conclusion that a product contains a defect creating a substantial hazard.⁹ The statutory trigger is information—not incidents, not injuries, and not a formal defect determination. Recent enforcement actions make clear that the CPSC and the Department of Justice are willing to pursue significant civil penalties and, for the first time, criminal charges against executives who fail to report.¹⁰

The problem is structural. Information that should trigger a Section 15 review typically originates from customer service, quality assurance, warranty processors, and retail partners—functions that are rarely integrated into a legal escalation protocol. The information exists, but the pathway to act on it often does not. That gap now carries criminal exposure, not just civil liability.

What Companies Should Do Now

The structural fix for Section 15 compliance is a formal information escalation protocol that connects the functions where safety-relevant information originates—customer service, quality assurance, warranty processing, retail partners, and field sales—to the legal or regulatory function responsible for making reporting determinations. The protocol should define the categories of information that trigger escalation, the timeline for review, and the individuals accountable for decisions. It should be tested periodically against live data flows to confirm it is capturing what it is designed to catch. Companies should also conduct a current-state audit of how customer complaints and warranty claims are classified and retained, because that documentation will be among the first things a government investigator or plaintiffs’ counsel requests. Equally important: ensure that legal holds and document preservation protocols extend to these operational functions, not just traditional legal and finance records.

Our Consumer Goods and Services industry group advises clients across the regulatory lifecycle, helping them build durable compliance systems before issues arise and defending those systems when they are tested. We have counseled many of the world’s leading consumer brands on claims substantiation, supply chain risk, CPSC reporting obligations, PFAS exposure, ESG-related securities and consumer litigation, and insurance coverage review. With an integrated international platform, we are positioned to scale across jurisdictions as state enforcement continues to expand. We welcome the opportunity to discuss how these developments may impact your business.

The session was opened by Maria Kostytska, who set the scene with a historical perspective on one of Paris’s most iconic infrastructure projects—and the emblem of PAW 2026—the Eiffel Tower. Built for the 1889 Universal Exhibition, the tower famously faced aesthetic criticism and even litigation brought against the City of Paris by neighboring property owners concerned about obstructed views. While dispute resolution mechanisms at the time were rudimentary, the example underscored how today’s large-scale infrastructure projects rely on far more sophisticated legal tools, setting the stage for the discussion that followed.

We welcomed distinguished in-house counsel Julien Maniere Lagon (Vinci Energies), Hans David Hahn (AREVA Germany), and Elisabeth Nicolas (SUEZ) who framed the questions at the heart of modern infrastructure disputes.

They were joined by K&L Gates speakers Guillaume Hess, Matthew Walker, Rodolphe Ruffié Farrugia, and Stefano Bardella, who shared insights drawn from their experience advising on complex infrastructure disputes across multiple jurisdictions. 

The session concluded with closing remarks and a synthesis of key themes by Louis Degos.

What We Shared

The discussion focused on the practical realities facing parties involved in large-scale infrastructure projects and the strategic decisions that shape how disputes are managed.

Selecting the appropriate dispute resolution mechanism was a central theme. The panel examined mediation, dispute boards, arbitration, further litigation before international chambers of local courts, noting that each mechanism has distinct advantages. Speakers agreed there is no universal solution; the effectiveness of any mechanism depends on factors such as the stage of the project and whether the priority is continuity of works or suspension.

The panel also emphasized that, while arbitral institutions provide robust procedural frameworks, the choice of seat and arbitrator often outweighs the choice of institution and arbitration rules in complex, multi-stage infrastructure disputes.

In particular, the seat determines critical issues such as potential annulment proceedings and enforcement pathways. Drafting teams were encouraged to consider the project location, the parties’ nationalities, and—where relevant—jurisdictions linked to asset locations or treaties that facilitate enforcement.

Finally, cost optimization emerged as a core concern for in-house counsel. The discussion highlighted the importance of:

• Transparent collaboration between in-house and external legal teams
• Strong, well structured contract drafting from the outset
• Early identification of potential issues by in-house teams to avoid escalation

What We Learned

While the discussion covered a broad range of perspectives, several points stood out:

• There is increasing recognition that dispute resolution strategy must be tailored, not standardized, particularly in long term, multijurisdictional infrastructure projects.
• The seat of arbitration remains a critical strategic decision, influencing both risk management and enforceability.
• Budget predictability and cost control are front of mind for in-house counsel, reinforcing the value of early legal input, disciplined drafting, and proactive issue spotting throughout the project lifecycle.

We extend our sincere thanks to all speakers and participants for contributing to a thoughtful and engaging exchange during Paris Arbitration Week.

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

The request includes explicit funding for many of the goals espoused in the president’s Maritime Action Plan (MAP)² and Executive Order 14269, Restoring America’s Maritime Dominance,³ signaling an aggressive shift toward expanding the American maritime industry, including US$65.8 billion for US Navy shipbuilding and conversion, the largest request since 1962,⁴ and US$2.6 billion for the US Maritime Administration (MARAD).⁵ 

The request also contains significant programmatic funding increases, new institutional structures, and legislative proposals that could materially reshape the landscape for federal maritime policy. These funding increases and program realignments, if implemented, will have a significant impact throughout the maritime section. 

Historic Shipbuilding Proposals

The US$65.8 billion funding for naval shipbuilding represents a nearly 50% increase over the fiscal year 2026 (FY26) enacted level of approximately US$42 billion. In total, the president’s budget request proposes the procurement of 34 new vessels for the US Navy, including 18 battle force ships and 16 nonbattle force ships.

On top of this historic investment in naval shipbuilding, the administration included proposals for additional construction of new vessels for the US Army, US Coast Guard, MARAD, National Oceanic and Atmospheric Administration, National Park Service, and National Science Foundation, signaling a clear commitment to investing in growing the US fleet.

Maritime Security Trust Fund

Perhaps the most structurally significant element is the proposed formation of a new Maritime Security Trust Fund (MSTF). The MSTF is designed to provide a mandatory and self-sustaining funding stream for programs that strengthen US shipbuilding capacity, fleet expansion, and maritime workforce development. The MAP called for the MSTF to be capitalized through a universal fee on all foreign-built commercial vessels entering US ports, assessed on the weight of imported tonnage. Notably, this funding stream would be independent of the appropriations process, unlike other federal maritime programs. 

The FY27 budget request provides US$1.4 billion for the MSTF as an initial appropriation until revenue streams can be established. This initial funding will supplement multiple MARAD programmatic requests for mandatory appropriations, representing a potential long-term revenue source for US maritime investment. 

The MSTF is fashioned as a legislative proposal, so it still needs to be authorized by Congress in addition to appropriations in order to move forward. 

Maritime Administration Programmatic Funding

The FY27 budget request provides MARAD with considerable programmatic funding increases, consistent with the MAP’s directive to fully resource the agency. Key programmatic investments include:

Port Infrastructure Development Program 

US$450 million in mandatory funding from the MSTF and US$500 million in total budgetary resources to support projects that improve the safety, efficiency, and reliability of the movement of goods through domestic ports.

Commercial Shipbuilding Infrastructure Development Program

US$250 million in funding from the MSTF. This mandatory allocation would allow the new program to provide grant funding to larger shipyards with more than 1,200 employees. This is another newly proposed program that will also require legislative authorization.

Small Shipyard Grant Program

US$105 million—US$70 million above the FY26 enacted level—to provide grant funding for infrastructure improvements at qualified small US shipyards.

Center for Maritime Innovations

US$25 million from the MSTF to provide funding to the US Center for Maritime Innovations. These funds would be used to monitor and assess innovative technologies, conduct research, provide guidance on emergent technologies, and collaborate with workforce-development programs.

Maritime Security Program (MSP)

US$400.5 million for the MSP, US$10.5 million above the FY26 enacted level. Funding supports a fleet of up to 60 US-flag vessels participating in the program at the full authorized level.

Tanker Security Program (TSP)

US$167.6 million for the TSP, US$86 million above the FY26 enacted level. This investment supports up to 20 US-flag product tankers at the full authorized level and addresses an urgent and critical national security need for US-flag product tankers.

Implications of the FY27 Budget Request

It is important to note that the FY27 budget request is only a proposal, and Congress retains ultimate authority over federal appropriations. Congress rejected significant portions of the administration’s FY26 request last year, and the prerogative of Congressional appropriators and budget restraints of the federal funding process often curtail the ambitions and objectives of the White House’s agenda.

However, the administration’s use of mandatory spending through the budget reconciliation process could still fundamentally reshape the balance of power for federal maritime funding.

In the weeks to come, Congress will begin the arduous process of implementing the goals of the president’s budget request, including legislative hearings, committee markups, and discussions with the administration on policy priorities. Additionally, the administration is expected to release more details on a legislative package that will outline the contours of how certain programs developed in the MAP will be implemented.

Our team is actively engaged on these issues, including by monitoring developments and advising clients on how these changes may impact their businesses. If your company intends to stay ahead of the curve or play an active role in reshaping federal maritime policy, we encourage you to engage in the process. The firm's Public Policy and Law team can help assess federal funding opportunities, mitigate potential policy threats, and position your organization to participate in the policy discussions that could define the future of the maritime industry.

In particular, the law strengthens Italian employers’ health and safety obligations towards employees working remotely. It provides that:

• The employer must deliver a written information notice to both the employee and the Health and Safety Representative at least annually that must identify general and specific risks connected with remote working, including those related to the use of display screen equipment; and 
• Employees remain under a duty to cooperate in the implementation of preventive measures.

The provision applies to all Italian employers, regardless of company size.

Importantly, failure to provide the written notice triggers sanctions under Article 55 of Legislative Decree no. 81/2008, including:

• Imprisonment from two to four months; and
• Fines of up to €7,403.96. 

The reform confirms a consolidated trend aimed at identifying the written information notice as the key tool for ensuring compliance with health and safety obligations in remote working regime, in light of the specific risk profile associated with this working model.

For US businesses, the key point is that the current framework is no longer limited to narrow, company-specific relief. The US Treasury Department’s Office of Foreign Assets Control (OFAC) has issued a series of general licenses opening additional pathways for authorized business in Venezuela, while still preserving important conditions, limitations, and exclusions. Businesses that have been watching Venezuela from the sidelines should now consider whether the current framework creates an opportunity for market entry, project development, supply arrangements, or longer-term strategic positioning.

Recent visits by senior US officials to Caracas have further underscored the direction of US policy. In February 2026, the US Energy Secretary traveled to Venezuela for discussions centered on energy-sector reform and sanctions relief, and in March 2026, the US Interior Secretary led a delegation of US mining and minerals companies to the country. These visits suggest that the United States is not simply relaxing sanctions in the abstract; it is actively supporting a phased reopening of Venezuela to US commercial participation in key sectors. For US businesses, that signal matters. It suggests that companies considering opportunities in Venezuela should view the current moment as a potentially durable policy opening, while still approaching the market with careful sanctions and regulatory analysis.

The principal recent developments include the following General Licenses (GLs) that have been issued by OFAC:

• GL 46B authorizes certain transactions by established US entities involving the lifting, exportation, sale, storage, purchase, delivery, transportation, and refining of Venezuelan-origin oil, as well as certain Venezuelan-origin petrochemical products. This remains one of the core authorizations underpinning the current reopening of Venezuela’s energy sector to US business.
• GL 47 authorizes certain transactions related to the export and sale of US-origin diluents to Venezuela to support specified oil-sector activities. Although narrower than some of the later licenses, it reflects an early step in restoring operational activity in Venezuela’s energy sector.
• GL 48 authorizes US persons to provide goods, technology, software, and services for specified Venezuelan oil-sector activities. This is particularly relevant for equipment suppliers, technical service providers, infrastructure companies, and other businesses that may support Venezuela-related operations without themselves acting as producers or traders.
• GL 49A authorizes the negotiation of and entry into contingent contracts for investment in Venezuela’s oil, gas, petrochemical, or electricity sectors, provided performance remains subject to any required further authorization. This is an important development because it allows US businesses to begin diligence, negotiations, and transaction planning even where later-stage implementation may still require additional approvals.
• GL 50A authorizes certain transactions related to oil and gas sector operations in Venezuela by specified energy companies and their subsidiaries. Although limited to named entities, it is another indicator of the US government’s broader willingness to facilitate renewed commercial engagement in Venezuela’s energy sector.
• GL 52 authorizes certain transactions involving PdVSA and PdVSA-entities by established US entities, subject to conditions and limitations. This is one of the clearest signs that the current framework is intended to support a wider range of commercial dealings involving Venezuela’s state energy sector.
• GL 30B authorizes certain transactions ordinarily incident and necessary to port and airport operations in Venezuela. That matters because it supports the logistical architecture needed for broader commercial activity, not just upstream energy transactions.
• GLs 51A, 54, and 55 extend the recent opening into the minerals sector. In general terms, these measures authorize certain transactions involving Venezuelan-origin minerals, permit the supply of certain items and services for minerals operations, and authorize contingent contracts for specified investment in the sector. These licenses suggest that the current policy shift is not limited to hydrocarbons and may expand further into other strategic sectors.

These general licenses do not amount to a blanket authorization to do business in Venezuela. Many remain tightly drafted, with conditions on counterparties, covered activities, and transaction structure. For example, GL 46B’s authorization is limited to “established” US entities, which is defined as any entity organized under the laws of the United States or any US jurisdiction on or before 29 January 2025. This cut-off date is intended to prevent non-US parties from setting up operations in the United States just to take advantage of the new authorization. In practice, US businesses should assess not only whether there is a potentially applicable general license, but also whether the full transaction structure, payment flow, contract terms, and operational model fit within the scope of that authorization.

For US businesses in the energy, petrochemical, electricity, logistics, shipping, infrastructure, insurance, mining, and investment spaces, the practical takeaway is clear: Venezuela is no longer a market that can be dismissed as categorically off limits under US sanctions. The legal framework is becoming more permissive, and the policy direction is increasingly clear. Businesses that move early, but with careful sanctions and regulatory analysis, may be best positioned to take advantage of the opening.

The next step for many businesses will be less about monitoring headlines and more about evaluating how the current framework applies to specific opportunities. That includes assessing whether a contemplated activity is covered by an existing general license, whether a transaction can be structured to fit within current authorizations, whether additional OFAC engagement may be needed, and how evolving US policy and Venezuelan legal reforms may affect timing, risk, and commercial viability.

The firm's International Trade, Investment Controls, and National Security team is closely monitoring these developments and can assist companies contemplating entry into the sectors of the Venezuelan market impacted by these sanctions changes.

As Low As Reasonably Achievable (ALARA)

EO 14300 directed the NRC to reconsider the use of ALARA and the linear-no-threshold model in the agency’s radiation protection standards.⁴ In response to comments on the proposed rule for part 53, the final rule does not use the term ALARA.⁵ For example, § 53.850(b) in the proposed rule would have required, among other things, the holder of an operating license or combined license to develop, implement, and maintain a program for keeping the doses to members of the public from radioactive effluents as low as is reasonably achievable. The final rule does not include this requirement and requires the holder of an operating license or combined license to develop, implement, and maintain a program for the control of radioactive effluents and for environmental monitoring. In its response to public comments related to ALARA, the NRC stated that “referring to 10 CFR Part 20 is sufficient to address radiation protection standards.”⁶ This could signal the NRC’s approach to ALARA more broadly.

Expanded Use of Probabilistic Risk Assessment (PRA)

Different from parts 50 or 52, part 53 expands and elevates the use of PRA. Where PRA is largely complementary under parts 50 or 52, PRA is central to safety classification, emergency planning, and security planning under part 53 and is expected to cover internal events; external hazards; multi-module effects; and risks from novel fuels, coolants, or configuration. Compared with the prescriptive requirements of parts 50 and 52, under part 53, applicants propose comprehensive risk metrics and associated risk performance objectives, appropriate systematic risk assessment techniques, and demonstrate how their design and associated programmatic controls protect public health and safety. Importantly, the NRC notes that the risk performance objectives “do not constitute a real-time requirement that must be continuously demonstrated by the licensee.”⁷

While parts 50 and 52 will continue to be options for applicants that choose those licensing pathways, the NRC could choose to incorporate the PRA-based approach as an option for security planning under parts 50 and 52. The NRC has already provided such a pathway for emergency planning for non-power production or utilization facilities and small modular reactors as that term is defined in 10 C.F.R. § 50.2.⁸

Financial Qualifications

Part 53 updates the requirements for financial qualifications to align with the “appears to be financially qualified” standard in 10 C.F.R. part 70. This contrasts with the financial qualification standards in 10 C.F.R. § 50.33(f) that require an applicant to demonstrate that it possesses or has reasonable assurance of obtaining the funds necessary for construction and operation. In 2022, the NRC was pursuing a similar change to the financial qualification standards for facilities licensed under 10 C.F.R. parts 50 or 52.⁹ The Commission subsequently disapproved that rule and instead directed the staff to consider updates to financial qualification requirements during the development of part 53.¹⁰ The Commission also directed the staff to solicit feedback on whether parts 50 and 52 should have the same financial qualification requirements as part 53.

The proposed rule for part 53 did not contain the “appears to be financially qualified” standard.¹¹ Instead, it solicited feedback from the public on whether the standard should be changed. Comments on the proposed rule stated that part 53 should use the “appears to be financially qualified standard” and that the financial qualification standards in 10 C.F.R. parts 50, 52, and 53 should be the same.¹² The NRC agreed with the commenter in part and revised part 53 to align with the financial qualification standards in 10 C.F.R. part 70. However, the NRC stated it “disagree[d] with making similar changes to the requirements in 10 CFR Parts 50 and 52 in this rulemaking” because it was outside the scope of the part 53 rulemaking.¹³

This change is important for nonutility applicants because the “appears to be” standard should, in practice, be easier to satisfy than the current standard in parts 50 and 52.¹⁴

Finality 

In a different approach from 10 C.F.R. parts 50 or 52, 10 C.F.R. part 53 provides finality on NRC findings on a reactor design used in an operating license or combined license proceeding that is then in the subject of a subsequent design certification application. Such finality only binds the NRC staff and the Advisory Committee on Reactor Safeguards (ACRS), not members of the public or the NRC.¹⁵ A similar approach could be provided in an update to parts 50 and 52 to allow finality for information in an operating license under part 50 or combined license under part 52 in a subsequent design certification application.

Referral to ACRS

Part 53 removes the requirement to refer design certification renewals or manufacturing license renewals to the ACRS, consistent with current agency practice regarding operating license renewals, which requires associated exemptions.¹⁶ This approach aligns with EO 14300, which ordered that ACRS functions and personnel be “reduced to the minimum necessary to fulfill ACRS’s statutory obligations,” and that only “novel or noteworthy” issues should merit ACRS review.¹⁷ A future update to parts 52 and 54 could remove the requirement to refer renewals of design certifications, manufacturing licenses, early site permits, and operating licenses to the ACRS to align with part 53 and current agency practice.¹⁸

Licensed Operators

The NRC has been considering approaches to operator staffing for small or multi-module facilities licensed under parts 50 or 52 for some time.¹⁹ Such previously considered approaches would require exemptions for facilities licensed under parts 50 or 52. Part 53 provides a pathway to customize licensed operator staffing requirements based on analyses.²⁰ Part 53 also introduces the concept of generally licensed reactor operators for self-reliant mitigation facilities.²¹

Load Following

Load following is defined as “a commercial nuclear plant automatically changing its output to match expected demand in response to externally originated instructions or signals.”²² It is not currently allowed under § 50.54. However, part 53 recognized that new technological considerations and concepts of operation may justify load following under certain circumstances.²³ As such, load following is permitted under part 53, provided that appropriate measures are in place to provide assurance that plant output considerations are not permitted to lead to challenges to safe reactor operations.²⁴ The NRC previously “identified the development of guidance for load following as a potential future action to provide additional clarity on flexibility for applicants and licensees under 10 CFR Parts 50 and 52.”²⁵

Manufacturing Licenses (MLs)

The final rule provides increased flexibility for MLs issued under part 53. The major change from existing regulations is the allowance to load fuel into manufactured reactors at the factory provided that features are in place to prevent criticality during transport.²⁶ Additional flexibilities include that departures for MLs under part 53 do not require special circumstances that outweigh any decrease in safety that may result from the reduction in standardization from the departure²⁷ and licensees in timely renewal under part 53 are not prohibited from beginning the manufacture of a reactor less than three years before the expiration of the ML.²⁸

Fitness for Duty

Subpart M of part 26, added to address part 53 applicants and licensees, allows “the use of a variety of biological specimens for drug testing as well as innovative technologies for drug and alcohol screening and testing” that are not described or provided for, except in limited circumstances, under subparts A-K, N, and O of part 26. A future update to part 26 could align these subparts with subpart M to allow for the use of other biological specimens for drug testing and innovative technologies for drug and alcohol testing.

Department of Energy (DOE)/Department of War (DOW)’s New Role in Testing Reactors

On 2 April 2026, the NRC released its proposed rule on referencing and leveraging prior DOE or DOW authorizations in the NRC licensing process.²⁹ The proposed rule provides an explicit pathway under 10 C.F.R. § 50.43 for streamlined reviews for licensing commercial reactor designs that have received a prior authorization from DOE or DOW and have been tested and demonstrated the ability to function safely, aligning regulation with presidential directive and building off NRC’s December 2025 staff guidance for interagency coordination.³⁰ Part 53 contains a similar provision in § 53.440. In order to leverage a prior DOE or DOW authorization, an applicant for an NRC license “would be required to identify how aspects of the prior authorization satisfy NRC regulations” and “address how any changes to the design, its functionality, associated hazards, siting information, or underlying safety assumptions from those considered in prior authorization reviews meet NRC requirements.”³¹ This approach aligns with the NRC’s Principles of Good Regulation and recent statements from the NRC’s chairman that the NRC is committed to independence but not isolation.³²

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: 

Type 1

This category applies to 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. 

Type 2

This category applies to 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. 

Type 3

This category applies to 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: 

Low-Impact Amendment

This category applies to small scale amendments where public submissions and panel referrals are not required. 

Medium-Impact Amendment

This category opens the amendment to public submissions, but dispenses with panel referrals. 

High-Impact Amendment

This category applies where 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

These orders require wrongdoers to publicise their own offences, typically in electronic and print media.

Commercial Benefits Orders

These orders require payment of up to three times the estimated gross commercial benefit derived from the offence.

Supervisory Intervention Orders

These orders impose compliance requirements of up to one year for systematic or persistent offenders.

Industry Exclusion Orders

These orders prohibit 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.

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.

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.

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.