Tag: European Union

EU watchdog tells banks to speed up Brexit preparations

KV Prasad Jun 13, 2022, 06:35 AM IST (Published)

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Banks have failed to make enough progress on their Brexit preparations and should not expect “miracle” public intervention to help them, the European Union’s banking watchdog said on Monday.

While Britain and the EU have agreed in principle on a transition deal lasting from Brexit next March to the end of 2020, it is part of a broader divorce settlement that has yet to be formally adopted.

Banks‘ preparations for the potential departure of Britain from the EU without a ratified withdrawal agreement are inadequate, the European Banking Authority (EBA) said in a statement on Brexit.

“This should be a wake up call. Time is running out, in some cases it has run out, and don’t assume there will be a transition period,” said Piers Haben, EBA director of banking markets, innovation and consumers.

Banks in Britain are submitting applications for licences to set up or expand operations in the EU to ensure continuity of service after March. UK branches of banks from the EU need permission to continue serving customers in the United Kingdom.

“Big banks can’t assume they can put off the full application process,” Haben said.

The EBA said banks must have enough staff at new operations to manage risks from the first day after Britain’s withdrawal on March 29, 2019, and financial stability must not be put at risk because lenders want to avoid costs.

The EBA – itself relocating from London to Paris by March due to Brexit – said preparations by banks must advance more rapidly in a number of areas without further delay.

No miracle coming

Lenders in Britain and the EU should quantify exposures to counterparties in each other’s jurisdictions, including the billions of euros in cross-border derivatives contracts.

The Bank of England (BoE) has said UK and EU legislation is needed to ensure continuity in contracts that span many years in some cases. The EU has shown no willingness to legislate, and the EBA said no public solution may be proposed or even agreed in time.

The European Central Bank and BoE are in talks on how to keep markets orderly around Brexit Day next March, raising expectations that some public action will take place.

“There is widespread perception there will be a public policy miracle. I don’t think banks can rely on a general, catch-all public intervention,” Haben said.

The watchdog sets out a “sequence” of tasks banks must complete.

The EBA said banks should explain to regulators how they will continue to swap data between units in Britain and the EU without falling foul of data protection rules.

EU-based lenders will also have to explain if any bonds they have issued under UK law remain valid after Brexit for plugging capital shortfalls in a crisis.

Continental lenders must also show how they could meet potentially higher capital charges for exposures to UK assets no longer deemed to be covered under EU law.

The EBA also wants details about where and how banks will book and manage risks from market transactions after Brexit. Banks must tell customers in clear language what they can expect to happen next March.

Elon Musk forms several ‘X Holdings’ companies to fund potential Twitter buyout

3 Mins Read

Thursday’s filing dispelled some doubts, though Musk still has work to do. He and his advisers will spend the coming days vetting potential investors for the equity portion of his offer, according to people familiar with the matter

KV Prasad Journo follow politics, process in Parliament and US Congress. Former Congressional APSA-Fulbright Fellow

Divided EU leaders convene for emergency talks on migration

KV Prasad Jun 13, 2022, 06:35 AM IST (Published)

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European Union leaders gather in Brussels on Sunday in an attempt to bridge their deep divisions over migration, an issue that has been splitting them for years and now poses a fresh threat to German Chancellor Angela Merkel.

Though arrivals across the Mediterranean are only a fraction of what they were in 2015, when more than a million people reached Europe, a recent opinion poll showed migration was the top concern for the EU’s 500 million citizens.

Under heavy pressure from voters at home, EU leaders have been fighting bitter battles over how to share out asylum seekers in the bloc.

Unable to agree, they have become more restrictive on asylum and tightened their external borders to let fewer people in. They have given money and aid to countries in Northern Africa and the Middle East to keep people from heading for Europe.

Only 41,000 refugees and migrants have made it to the EU across the sea so far this year, UN figures show.

But the issue has in the meantime won and lost elections for politicians across the bloc from Italy to Hungary, with voters favouring those advocating a tougher stance on migration.

On Saturday, French President Emmanuel Macron said France favoured financial sanctions for EU countries that refuse migrants with proven asylum status.

Merkel is under pressure because her longtime conservative allies, Bavaria’s Christian Social Union (CSU), have threatened to start turning away at the German border all asylum seekers already registered elsewhere in the EU unless the bloc reaches an agreement on distributing them more evenly.

They mostly live in countries like Greece and Italy – both long overwhelmed with arrivals – or wealthy states like Germany or Sweden, where they choose to try to start a new life.

The ex-communist states in the EU’s east led by Hungary and Poland have refused to host any of the new arrivals, citing security risks after a raft of Islamist attacks in Europe.

The bloc has been unable to break the deadlock, the bad blood spilling over to other areas of their cooperation, including crucial talks on the bloc’s next seven-year budget from 2021.

With Germany being the main contributor to the bloc’s joint coffers, the southern gateway countries were promised more money to handle migration, while the reluctant easterners face cuts in development aid.

Hastily Arranged

Merkel is now pushing other EU states, including Italy, to do more on migration so that fewer people get to Germany and she can convince the CSU not to go ahead with their plan.

She opposes the idea by the CSU, which will face the anti-immigration AfD party in Bavarian elections in October, because it would mean rigid border controls inside what is normally the EU’s coveted control-free travel zone.

To placate the CSU, Merkel must get something from Sunday, arranged hastily among more than a dozen EU capitals, and also from the full summit of the bloc’s 28 leaders on June 28-29.

All EU leaders agree they must further curb immigration by working with third countries, though that often proves slow.

Berlin’s other idea is to send back those asylum seekers who make it to countries like Germany to the states of their first arrival, like Italy.

But Rome has already rejected measures that could see it handle even more people and the Sunday talks are all but certain to see the two countries clash.

In the mid-term, the EU is only going to become tougher on migration, something rights groups denounce as turning it into a “fortress” beyond reach for those less privileged.

The U.N. refugee agency chief Filippo Grandi reminded the bloc that the height of their migration crisis was back in 2015.

“Despite today’s dramatically lower arrival rates, the shockwaves of that event still reverberate – at the political level, and in the tendency towards restrictive, unilateral approaches that some European countries have pursued,” he said.

“EU policies on asylum can and should set an example on how to manage refugee situations with compassion and solidarity,” he added, urging the bloc to overcome its divisions to help those in need rather than focus on just winning the next election.

Elon Musk forms several ‘X Holdings’ companies to fund potential Twitter buyout

3 Mins Read

Thursday’s filing dispelled some doubts, though Musk still has work to do. He and his advisers will spend the coming days vetting potential investors for the equity portion of his offer, according to people familiar with the matter

KV Prasad Journo follow politics, process in Parliament and US Congress. Former Congressional APSA-Fulbright Fellow

EU supporters march in London to call for Brexit deal referendum

KV Prasad Jun 13, 2022, 06:35 AM IST (Published)

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Thousands of supporters of the European Union gathered in central London on Saturday to call on the British government to hold a final public vote on the terms of Brexit.

Two years after the country voted 52 to 48 percent to leave the world’s biggest trading bloc, polls show political divisions over Brexit are entrenched and, despite some confusion over what Brexit will mean, there has been no clear change of heart.

The “People’s Vote” campaign, which includes several pro-EU groups, aims to ensure a public ballot “so that we can decide if a decision that will affect our lives for generations makes the country better or worse off”.

A Survation poll earlier this week found that 48 percent of respondents supported a referendum on the final deal, while 25 percent were opposed.

As yet there is no certainty about what the final deal could look like amid infighting in Prime Minister Theresa May’s Conservative government as well as among some of its opponents about what they want from Britain’s new trading ties with the EU after it leaves in March next year.

“Freedom To Bust Out”

Britain’s foreign minister Boris Johnson, one of the main proponents of the “Leave” vote, has meanwhile written an article in the tabloid newspaper the Sun defending Brexit.

Britain had voted for “the freedom to bust out of the corsets of EU regulation and rules” he said, and any softening of the final deal – such as continued membership of the single market and customs union – would be unwelcome.

Those who voted for Brexit had not changed their minds, he said. “They don’t want some bog roll Brexit – soft, yielding and seemingly infinitely long” he said, using a British slang expression for toilet paper.

Johnson was also quoted in the Telegraph newspaper by two diplomatic sources as strongly dismissing business leaders’ concerns about the impact of Brexit.

Speaking on BBC radio Jurgen Maier, head of German manufacturer Siemens in Britain, said slogans about Brexit were “incredibly unhelpful”.

“What we need to do now is get closer to our European partners and work out what a realistic, pragmatic Brexit is, which works for both sides,” he said.

On Friday, Airbus said that if Britain were to leave the EU without a deal it would be forced to reconsider its long-term position and put UK jobs at risk.

Elon Musk forms several ‘X Holdings’ companies to fund potential Twitter buyout

3 Mins Read

Thursday’s filing dispelled some doubts, though Musk still has work to do. He and his advisers will spend the coming days vetting potential investors for the equity portion of his offer, according to people familiar with the matter

KV Prasad Journo follow politics, process in Parliament and US Congress. Former Congressional APSA-Fulbright Fellow

EU to tax Harleys, peanut butter and other US goods from Fri

KV Prasad Jun 13, 2022, 06:35 AM IST (Published)

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The European Union will start taxing on Friday a range of imports from the US, including quintessentially American goods like Harley-Davidson bikes and cranberries, in response to President Donald Trump’s decision to slap tariffs on European steel and aluminum.

The 28-nation EU was first expected to do so only next month but EU Trade Commissioner Cecilia Malmstrom said they would introduce the “rebalancing” tariffs on about 2.8 billion euros’ ($3.4 billion) worth of US products this week.

The goods targeted include typical American exports, including bourbon, peanut butter, cranberries and orange juice, in a way that seems designed to create the most political pressure on Trump and US politicians.

“We are left with no other choice,” Malmstrom said in a statement. Trump imposed tariffs of 25 percent on steel imports and 10 percent on imported aluminum from the EU on June 1. Europeans claim that is simply protectionism and breaks global trade rules.

“The rules of international trade, which we have developed over the years hand in hand with our American partners, cannot be violated without a reaction from our side,” she said. “Needless to say, if the US removes its tariffs, our measures will also be removed.”

Trump said the measures against the EU are meant to protect US national security interests, but the Europeans claim it cannot be that close allies, many of them NATO partners, would endanger US security.

The EU exported some 5.5 million tons of steel to the US last year. European steel producers are concerned about a loss of market access but also that steel from elsewhere will flood in.

The EU, which is the world’s biggest trading bloc, has also taken its case to the World Trade Organization. If the WTO rules in its favor, or after three years if the case is still going on, the EU plans to impose further tariffs of 3.6 billion euros on US products.

Elon Musk forms several ‘X Holdings’ companies to fund potential Twitter buyout

3 Mins Read

Thursday’s filing dispelled some doubts, though Musk still has work to do. He and his advisers will spend the coming days vetting potential investors for the equity portion of his offer, according to people familiar with the matter

KV Prasad Journo follow politics, process in Parliament and US Congress. Former Congressional APSA-Fulbright Fellow

EU to impose duties on US imports Friday after Trump tariffs

KV Prasad Jun 13, 2022, 06:35 AM IST (Published)

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The European Union will begin charging import duties of 25 percent on a range of US products on Friday, in response to US tariffs imposed on EU steel and aluminium early this month, the European Commission said on Wednesday.

The move confirms a tit-for-tat dispute that could escalate into a full trade war, particularly if US President Donald Trump carries out his threat to penalise European cars.

The Commission formally adopted a law putting in place the duties on 2.8 billion euros ($3.2 billion) worth of US goods, including steel and aluminium products, farm produce such as sweetcorn and peanuts, bourbon, jeans and motor-bikes.

“We do not want to be in this position,” EU Trade Commissioner Cecilia Malmstrom said in a statement, adding that the “unilateral and unjustified” US decision had left the EU with no choice.

She called the EU response proportionate and in line with World Trade Organization rules and said that they would be removed if Washington removed its metal tariffs. EU steel and aluminium exports now facing U.S. tariffs are worth a total of 6.4 billion euros.

Donald Trump hit the EU, Canada and Mexico with tariffs of 25 percent on steel and 10 percent on aluminium at the start of June, ending exemptions that had been in place since March.

Canada has announced it will impose retaliatory tariffs on C16.6 billion ($12.5 billion) worth of US exports from July 1.. Mexico put tariffs on American products ranging from steel to pork and bourbon two weeks ago.

Some of the products chosen are designed to target the states of Republicans, who are seeking to retain control of both chambers of Congress in November elections.

The EU also has in reserve potential tariffs of 10 percent to 50 percent that it could impose on a further 3.6 billion euros of U.S. imports in three years’ time.

Elon Musk forms several ‘X Holdings’ companies to fund potential Twitter buyout

3 Mins Read

Thursday’s filing dispelled some doubts, though Musk still has work to do. He and his advisers will spend the coming days vetting potential investors for the equity portion of his offer, according to people familiar with the matter

KV Prasad Journo follow politics, process in Parliament and US Congress. Former Congressional APSA-Fulbright Fellow

Back the bill, urges UK’s May as Brexit law faces crunch test

KV Prasad Jun 13, 2022, 06:35 AM IST (Published)

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British Prime Minister Theresa May urged lawmakers to back the legislation that will end Britain’s membership in the European Union, ahead of a series of crunch parliamentary votes that could see a rebellion by those who want closer EU ties.

May’s Brexit plan will begin its most severe test to date on June 12 when she asks her divided Conservative Party to overturn changes made to the European Union (Withdrawal) Bill by parliament’s upper chamber.

“I hope what everybody will see when they come to vote next week is the importance of ensuring that we get the EU withdrawal bill onto the statute book, because it’s that EU withdrawal bill that ensures that we’re able to have that smooth transition when we leave the European Union,” May said, speaking to reporters on Thursday during a flight to Canada, where she will attend the G7 summit.

The most contentious changes centre on Britain’s future economic relationship with the EU. Namely whether Britain should leave the EU’s customs union, as May wants, or stay closely aligned with the bloc’s border regime, as some members of her party want.

Elon Musk forms several ‘X Holdings’ companies to fund potential Twitter buyout

3 Mins Read

Thursday’s filing dispelled some doubts, though Musk still has work to do. He and his advisers will spend the coming days vetting potential investors for the equity portion of his offer, according to people familiar with the matter

KV Prasad Journo follow politics, process in Parliament and US Congress. Former Congressional APSA-Fulbright Fellow

UK food, fuel, medicine short under ‘no deal’ Brexit, says report

KV Prasad Jun 13, 2022, 06:35 AM IST (Published)

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British civil servants have warned of shortages of food, fuel and medicines within weeks if the UK leaves the European Union next year without a trade deal, a newspaper reported.

The Sunday Times said government officials have modeled three potential scenarios for a “no deal” Brexit: mild, severe and “Armageddon.”

It said under the “severe” scenario, the English Channel ferry port of Dover would “collapse on day one” and supermarkets and hospitals would soon run short of supplies.

Britain wants to strike a deal on future trade relations with the EU before it officially leaves the bloc on March 29, 2019, but officials are also drawing up plans for negotiations ending without an agreement.

The UK’s Department for Exiting the European Union rejected the downbeat scenario, saying it was drawing up no-deal plans but was confident “none of this would come to pass.”

Britain and the EU are aiming to strike an overall Brexit agreement by October, so parliaments in other EU nations have time to ratify it before Britain leaves the bloc.

But British Prime Minister Theresa May’s Conservative government is split between ministers who favor a clean-break “hard Brexit,” that would leave Britain freer to strike new trade deals around the world, and those who want to keep the country closely aligned to the EU, Britain’s biggest trading partner.

EU leaders are frustrated with what they see as a lack of firm proposals from the U.K. over how to resolve major issues around customs arrangements and the status of the border between Northern Ireland and the Republic of Ireland. That will be the U.K.’s only land border with the EU after Britain leaves the bloc.

Irish Deputy Prime Minister Simon Coveney said Saturday that the UK must produce “written proposals” for the border within two weeks, ahead of a June 28-29 EU summit.

British Home Secretary Sajid Javid said Sunday that the British government would have “a good set of proposals” to submit to the bloc at its June meeting.

Elon Musk forms several ‘X Holdings’ companies to fund potential Twitter buyout

3 Mins Read

Thursday’s filing dispelled some doubts, though Musk still has work to do. He and his advisers will spend the coming days vetting potential investors for the equity portion of his offer, according to people familiar with the matter

KV Prasad Journo follow politics, process in Parliament and US Congress. Former Congressional APSA-Fulbright Fellow

After Brexit, Itexit looms, Spanish order caves in: God help Europe

KV Prasad Jun 13, 2022, 06:35 AM IST (Published)

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Pardon the postscript first. With the appointment of Giuseppe Conte, a lawyer, as a compromise Prime Minister of Italy, the wheel has come full circle. But before the Italian see-saw could stabilise, Spains Mariano Rajoy has thrown in his towel in the face of corruption charges that actually never left him since 2015. Establishments in Italy as well as Spain have been mauled in recent days by Peoples Power. This Peoples Power has been given an insulting name by the rulers — “Populism”.

Meanwhile herewith the column I wrote from Rome yesterday (Thursday) before travelling to the troubled countryside.

From the terrace bars, Rome’s current vogue, the monuments look mysterious in soft light even as St. Peters towers above all. But this panoramic grandeur disguises the tumult into which Italy has been tossed after President Sergio Mattarella, a judge by training, refused to swear in Paolo Savona, the 83-year-old economics professor who is staunchly against the European Union (EU).

Savona’s name had been proposed by the victorious alliance which came to power following the elections in March. The Five Star Movement is anti-austerity and anti EU; the League is sharply xenophobic on the migrant issue.

While the Interim Prime Minister Giuseppe Conte was more of Five Star nominee, the Finance Minister rejected by President Mattarella shared the League leader, Matteo Salvini’s anti-German bent. A growing anti-German sentiment is becoming part of Italy’s political rhetoric. Matteo Salvini pulls no punches on that score.

“German newspapers call us beggars, ungrateful, lazy, freeloaders and they want us to choose a Finance Minister they like.”

Alessandro Gilioli, Deputy Editor in Chief of the influential L’Espresso, was candid. He thought that the Leader of the Five Star, Luigi Di Maio, who never sought a Euro exit, would have been amenable to a compromise even in the first round negotiations with President Mattarella last week. But Di Maio could not have stuck his neck out with a softer line on Europe: That would have been a huge advantage to the League. An almighty competition in radicalism is on between unlikely competitors.

President Mattarella, a Europhile, acting under heaven knows what impulse or pressure, invited a 64-year-old IMF official Carlo Cottarelli to become Interim Prime Minister. This was like a red rag to the Five Star-League bull. Mattarella came under further pressure to reverse the decision which would have given the coalition a formula to grow exponentially in the next elections.

An even more muscular, menacing combination of Five Star and the League would be, in the perception of Brussels, not the medicine that the doctor had ordered for Italy, the world and certainly for the EU, which is still reeling from the Brexit blow and looking at disturbing developments in Spain. An Itexit would be a disaster of unimaginable proportions. So all the world’s establishments leaned on the President to open up consultations which have resulted in the reappointment of Conte. The compromise is: Conte minus Savona. What is being attempted in Italy is to delay the day of reckoning — when People disgusted with established parties will install their representatives whom the rulers continue to call Populist.

Consider what happened in Spain. In 2015, Pablo Iglesias, with his communist portfolio, riding a crest of Podemos (Yes We Can, echoes of Obama’s first campaign) burst upon the Spanish scene on a platform to get rid of Rajoy, noted for corruption even then.

Look how Rajoy managed to stay on until the latest vote. The stop-gap Prime Minister Pedro Sanchez of the declining socialist party standing on rotten stilts will fall sooner rather than later. Will that be the end of the Establishment in Spain? As an insurance, a Centre-Right youth party, Ciudadanos, Citizen’s Party, has been floated successfully, borrowing Podemos’s aesthetics. Its leader, Albert Rivera, has boosted his image on a nationalist platform opposing Catalan independence.

Remember also how the world’s progressive groups had built castles in the air when Alexis Tsipras of Greek communists, Syriza, promised the utopia where “austerity” will be forever banished? Today he is a contented poodle in the German lap.

But the new turn in European affairs seems to suggest that Tsipras too might be a nine days wonder. In fact, Yanis Varoufakis, the former Finance Minister, whom he sacked under German and EU pressure, has resurrected himself on the platform which Tsipras discarded. On Mattarella’s initial undemocratic action, Varoufakis was scathing. “By grounding their candidate for Finance, you have given a fantastic gift to populist forces.”

“You said nothing when the League leader Salvini named himself the Minister for Interior, when he was committed to throwing out 5,00,000 immigrants?”

During the Cold war, Christian Democrats were kept in power by the entire Western alliance. Italy at this period had a much loved Communist party which, paradoxically, was considered a taboo for power — at least while the Soviets were around. Soviet collapse, by that token, deprived the CD of its blackmail card to stay in power.

Italy’s conscientious judges, who had held their fire for fear of unsettling a system which had served as a bulwark against the global Left, now began to investigate the corruption in which the Italian power structure was sunk neck deep. From 1992 onwards, hundreds of politicians, civil servants, businessmen went to jail for brazen corruption.

When Berlusconi became Italy’s Prime Minister in 1994, he owned every TV channel. Naturally, the media backed him to the hilt during his subsequent spells in power. Over a decade ago, a comedian Beppe Grillo started a blog to engage young people on basic issues like technology, water, pollution, unemployment, economic distress. Italians, suffocated by Berlusconi’s self-serving media monopoly, built an internet revolution on the platform created by Grillo’s blog. This is the platform on which the current alternative Italian political structure is being erected.

There may be differences in detail, but Europe these days is convulsed by two currents fiercely opposed to each other: People’s Power, from the Left and the Right (disparagingly named “Populism”), is out to dethrone the established order. Until the other day this order seemed invincible: The Establishment had many instruments in its toolkit. But developments in Spain suggest that the seemingly invulnerable are running out of steam. Change and status quo are in conflict on an unprecedented scale.

Elon Musk forms several ‘X Holdings’ companies to fund potential Twitter buyout

3 Mins Read

Thursday’s filing dispelled some doubts, though Musk still has work to do. He and his advisers will spend the coming days vetting potential investors for the equity portion of his offer, according to people familiar with the matter

KV Prasad Journo follow politics, process in Parliament and US Congress. Former Congressional APSA-Fulbright Fellow

UK considering giving Northern Ireland joint UK, EU status

KV Prasad Jun 13, 2022, 06:35 AM IST (Published)

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The United Kingdom is considering attempting to break the deadlock in Brexit negotiations with a proposal to give Northern Ireland joint UK and European Union status so it can trade freely with both, a government official said.

The government has considered proposing a 10-mile (16-km)- wide trade buffer zone along the border for local traders like dairy farmers after the UK leaves the bloc, said the official, who spoke on condition of anonymity.

The plan is one of several ideas being discussed and may not be proposed to the EU, the official said.

A spokeswoman for the Department for Exiting the European Union declined to comment. It was not immediately clear whether the EU would accept such a proposal.

The plans are likely to be opposed by the Northern Irish party, the Democratic Unionist Party, that supports Prime Minister Theresa May’s minority government and has said it would oppose any Brexit deal that sees the province operate under different regulations to the rest of the United Kingdom.

Both the UK and the EU are committed to keeping a free flow of people and goods over the Irish border without returning to checkpoints — symbols of the three decades of violence in the region largely ended by the Good Friday Agreement of 1998.

However, finding a practical solution for any customs checks needed after Brexit is proving elusive.

The government is considering a special economic zone that will mean traders, who constitute 90 percent of cross-border traffic, can operate under the same rules as those south of the border, according to The Sun newspaper, which first reported that the idea was being considered.

May previously pledged to take the UK out of the EU customs union by considering two options. One would be “max fac” in which the UK and EU would be entirely separate customs areas but would try to use technology to reduce friction and costs at the border.

The other option being considered is a “customs partnership”, according to which the UK would cooperate with the EU more closely and collect tariffs on its behalf with no requirement of declarations of goods crossing the border.

EU officials are warning time is running out to seal a Brexit deal this year because there has been not enough progress in negotiations, and have criticized May for not setting out how the UK would achieve a frictionless border with the EU without erecting a land border on the island of Ireland.

London suggested earlier this month that it would be willing to extend the use of EU tariffs as a backstop if there were delays in ratification of a Brexit deal to avoid a return to a hard border between Northern Ireland and Ireland, adding the government did not want to use that option.

Elon Musk forms several ‘X Holdings’ companies to fund potential Twitter buyout

3 Mins Read

Thursday’s filing dispelled some doubts, though Musk still has work to do. He and his advisers will spend the coming days vetting potential investors for the equity portion of his offer, according to people familiar with the matter

KV Prasad Journo follow politics, process in Parliament and US Congress. Former Congressional APSA-Fulbright Fellow

What the European Union’s data protection rules mean for your business

KV Prasad Jun 13, 2022, 06:35 AM IST (Published)

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The General Data Protection Regulation (GDPR), a law enacted in the European Union (EU), comes into effect tomorrow. It sets down the minimum standards for processing of personal data of EU citizens, and strict conditions that need to be satisfied for any cross-border transfer of EU data.

The law will therefore have implications not only for businesses within the EU, but for any company outside of the EU that processes consumer data of EU citizens.

The IBEF estimates that India’s IT industry constitutes 7% of the global market, and most of this is constituted by India’s services exports.

IBEF further estimates that India’s market share globally in the services sourcing business is around 56%, and in the Business Process Management (BPM) sourcing segment is 38%. Our most important market continues to remain the US, which represents 62% of India’s exports in this sector. India’s modest share of exports in the IT services market of the UK (estimated at 17% of India’s exports in 2017), and the rest of the EU (estimated at 11%) has often been attributed to the stringent data protection laws in the EU.

The GDPR was preceded by the Data Protection Directive of 1995. The main difference from the earlier framework is that the GDPR significantly strengthens the rights of individuals, as well as paves the way for greater collaborative/concerted actions by regulators across the EU. It also strengthens enforcement actions, with the maximum fine reaching up to €20 million, or 4% of the worldwide annual revenue of the concerned company.

The India Connection

Data protection laws in the EU have always been an important agenda item in the India-EU negotiations for a free trade agreement (India-EU FTA) since 2007. With the new GDPR coming into play, data protection continues to have a crucial role in the negotiations. The UK, after Brexit, is also expected to continue its implementation of a law similar to the GDPR. Cross-border flow of information of consumers for processing by Indian IT service industries, therefore, will hinge on preparedness to adhere to the rules of the GDPR.

The underlying premise for cross-border data transfers of personal data from the EU to occur, whether under the earlier law or the GDPR, continues to remain the same: the jurisdiction in which the data recipient is located, needs to provide an “adequate” level of data protection.

The list of “data adequate” jurisdictions in the pre-GDPR phase included Andorra, Argentina, Canada (for organisations that are subject to Canada’s PIPEDA law), Switzerland, the Faeroe Islands, Guernsey, Israel, Isle of Man, Jersey, New Zealand, and Uruguay. This will continue till further review of enhanced compliance as required under GDPR is met.

At the same time, the GDPR also provides a concrete framework for working out innovative solutions in the absence of a recipient country’s entire legal framework standing up to the ‘adequacy’ test. This includes:

(a) National public authorities in the EU can enter into MOUs/agreements with similar authorities in a third country, to lawfully transfer data between themselves on this basis. The further processing of such data by an Indian IT services company, can be facilitated as a result of such an agreement.

(b)The GDPR provides for the requirements and procedures for “Binding Corporate Rules” (BCRs), for enabling companies within the same group to share information with their subsidiaries located in third countries.

(c) Contracts for data transfers to entities outside of the EU can incorporate model clauses approved either by the European Commission or the national authorities of EU member states.

(d) The GDPR also envisages approved “certification schemes” and codes of conduct based on which cross-border data transfers can occur.

Implications on IT Sectors

While mechanisms such as BCRs existed under the earlier EU data protection law, their actual utilisation was impeded by the time taken for approvals. The main difference is that the GDPR provides for clear requirements and procedures, which should, theoretically, enhance certainty and predictability in the approval of such rules. Similarly, the use of model clauses has also been streamlined further under the GDPR. Certification schemes are a new concept, and its actual implementation remains to be tested.

With the US policies towards outsourcing and IT services imports going through a phase of flux, the need to ensure greater regulatory certainty in other export markets assumes a higher degree of significance. A significant difference between now and 2007 when the India-EU negotiations commenced, is that India today is at the cusp of having its own data protection regulatory framework.

After the landmark Supreme Court ruling that privacy is a fundamental right, the BN Srikrishna Committee constituted to develop India’s framework law on protecting data, is expected to circulate the draft law for discussion soon. If such a law matches EU’s adequacy test, it could potentially have significant benefits for the export of Indian IT services.

In the interim, the onus will be on the government and industry to ensure that the flexibilities provided under the GDPR are utilised to the maximum extent possible for ensuring concrete outcomes.

RV Anuradha is partner, Clarus Law Associates, New Delhi, and specialises in international economic laws

Elon Musk forms several ‘X Holdings’ companies to fund potential Twitter buyout

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Thursday’s filing dispelled some doubts, though Musk still has work to do. He and his advisers will spend the coming days vetting potential investors for the equity portion of his offer, according to people familiar with the matter

KV Prasad Journo follow politics, process in Parliament and US Congress. Former Congressional APSA-Fulbright Fellow