FIRST STEP TOWARD EU REGULATION ON ARTIFICIAL INTELLIGENCE – THE EUROPEAN PARLIAMENT APPROVED THE AI ACT.
After an initial positive opinion from the Internal Market Committee and the Civil Liberties Committee of the European Parliament on the AI Act, the favourable vote of the EU Parliament also came on June 14, 2023.
Negotiations will now be started with the EU member states on the final aspect of the Regulation, with the goal of concluding negotiations by the end of the year and proceeding to final approval and entry into force of the Regulation by 2024.
Apart from the issue of Privacy, Copyright protection is one of the major issues at stake in this Regulation.
Issues related to generative AI creations have raised great interest and numerous questions regarding the regulation of the inputs used in the creative process and the protectability as well as the possible authorship of the outputs generated by it.
With this Regulation we see a first attempt to offer an answer to these questions.
Two important obligations for artificial intelligence providers were introduced in the AI Act, namely to:
– indicate the copyrighted content used to train the model
– indicate that the content was produced by an artificial intelligence.
Regarding the first issue, there is a requirement for generative AI developers to provide a detailed summary of the content that was used to train the artificial intelligence to provide authors with the opportunity to verify that the utilized input does not infringe on their copyrights.
Article 29(b)(4) is straightforward on this point:
“Providers of foundation models used in AI systems specifically intended to generate, with varying levels of autonomy, content such as complex text, images, audio, or video (“generative AI”) and providers who specialise a foundation model into a generative AI system, shall in addition
1. comply with the transparency obligations outlined in Article 52 (1),
2. train, and where applicable, design and develop the foundation model in such a way as to ensure adequate safeguards against the generation of content in breach of Union law in line with the generally-acknowledged state of the art, and without prejudice to fundamental rights, including the freedom of expression,
3. without prejudice to Union or national or Union legislation on copyright, document and make publicly available a sufficiently detailed summary of the use of training data protected under copyright law”.
However, an aspect of copyright that is not covered by the regulation concerns the authorship of AI-generated works.
As a result, no changes were introduced compared to Resolution No. 2020/2015 on intellectual property rights and AI-generated technologies in which the European Parliament “Notes that the autonomisation of the creative process of generating content of an artistic nature can raise issues relating to the ownership of IPRs covering that content; considers, in this connection, that it would not be appropriate to seek to impart legal personality to AI technologies and points out the negative impact of such a possibility on incentives for human creators; […] considers that works autonomously produced by artificial agents and robots might not be eligible for copyright protection, in order to observe the principle of originality, which is linked to a natural person, and since the concept of ‘intellectual creation’ addresses the author’s personality”.
In addition to the Regulation in question, two other initiatives concerning artificial intelligence are moving in parallel: the AI Code of Conduct and the AI Pact.
The AI Code of Conduct which, as communicated by Margrethe Vestager – EU Executive Vice President for Competition and Digital Strategy – will be proposed at the G7.
The EU and the U.S. are working together to develop a voluntary code of conduct for generative AI with the goal of developing non-binding international standards on risk audits, transparency and other requirements for companies developing artificial intelligence systems before the AI Act enters into force.
The AI Pact would cover the creating of non-binding principles on transparency and accountability as an interim solution for the rapidly developing technology. This “pact” would be aimed at companies who develop AI systems in an effort to comply with the rules contained in the AI Act before the regulations enter into force, thereby accelerating the transition.
The news that Google’s CEO Sundar Pichai, after a meeting with Thierry Breton, the European Union’s internal market commissioner, agreed to work with the European legislators on the AI Pact is a sign that companies are also likely to welcome this non-binding regulation.
m.baccarelli@macchi-gangemi.com
c.bonino@macchi-gangemi.com
THE EU INCREASES ITS “CLIMATE AMBITION”: THE NEW CBAM REGULATION.
“Climate change is a global problem that needs global solutions”(European Commission). Among the actions taken at EU level, the most important intervention is represented by Regulation (EU) No. 2023/956, published on 16th May 2023 in the EU Official Journal, which established the Carbon Border Adjustment Mechanism (CBAM).
On 10th May 2023, the EU Member States signed the CBAM Regulation, which entered into force the day after its publication in the EU Official Journal on 16th May 2023, with the aim to prevent “carbon leakage”, occurring when EU-based companies relocate carbon-intensive production abroad, to non-EU countries having less stringent climate policies.
The CBAM, being gradually introduced, will allow a fair price to be set on the carbon emitted during the carbon-intensive production of goods, ensuring that the price of imports will be equivalent to the carbon price of domestic production.
Pursuant to Art. 2 of CBAM Regulation, it “applies to goods listed in Annex I originating in a third country, where those goods, or processed products from those goods resulting from the inward processing procedure (…), are imported into the customs territory of the Union.”. The CBAM will apply to imports of certain goods whose production is carbon intensive and presents the most significant risk of carbon leakage (i.e. cement, iron, steel, aluminium, fertilisers, electricity and hydrogen).
What will change for companies?
A first transitional phase, from 1st October 2023 to 31st December 2025, will be a learning phase for the parties involved (importers, producers and authorities) and will set initial rules for importers of goods to report greenhouse gas emissions (GHG) incorporated in their imports, without making any payment. In particular, each importer will have to submit the so-called “CBAM Report” to the Commission, containing the following information:
– the total quantity of each type of goods (in MWh for electricity and in tonnes for other goods);
– the total actual embodied emissions (expressed in t of CO2 emissions and per MWh for electricity or, for other goods, in t of CO2 emissions and per t of each type of good);
– total indirect emissions;
– the carbon price due in a country of origin for emissions embedded in imported goods.
During the transitional period, the European Commission, after consultation with the CBAM Committee, will have to adopt an implementing act containing rules and requirements for reporting under the CBAM. It is also possible that the CBAM will be reviewed to assess the inclusion of other goods produced in sectors covered by the EU ETS within the CBAM.
As of 1st January 2026, the CBAM system will enter into full force, requiring importers:
(i) to apply for – and obtain – a special authorisation to import goods, thus obtaining the status of “approved CBAM registrant”;
(ii) to declare each year the quantity of goods imported into the EU in the previous year and the related incorporated greenhouse gases, while delivering the corresponding number of CBAM certificates.
The certificates will be priced according to the average weekly auction price of EU ETS allowances expressed in €/t of CO2 emitted.
For additional information:
a.salvatore@macchi-gangemi.com
f.dicesare@macchi-gangemi.com
d.michalopoulos@macchi-gangemi.com
MANDATORY JOINDER IN THE APPEAL JUDGMENT: THE OMITTED NOTIFICATION OF THE APPEAL, ITS EFFECTS AND RELATED NECESSARY REMEDIES.
It has been a while since the Supreme Court has established that the appeal judgment must indeed is a case of mandatory joinder, which means that all the parties who participated to the judgement of first instance must take part in the appeal judgment whenever there is a concrete risk of conflicting rulings.
When the Court is going to issue a ruling which concerns multiple parties, either for substantial or for procedural reasons, the participation of all said parties to the judgment becomes essential. In fact, if one of the parties is absent, the judge orders that it is brought to trial within a fixed deadline (art. 102 of the Italian Code of Civil Procedure).
Such regime, prescribed by the law raises a question: if the ruling issued by the court of first instance is notified only to some of the parties of the judgment, either by choice or by mistake, can the Court of Appeals issue the ruling anyways? Or should it be considered a case of mandatory joinder and consequently require that all the parties of the judgment of first instance are brought to trial?On the matter, art. 331 of the Italian Code of Civil Procedure dictates that if the ruling, which was issued at the end of a judgment concerning multiple parties, must be challenged with regard to all said parties. Otherwise the Court of Appeals shall order that the absent parties be brought to trial; the Court also establishes a time limit their subpoena and, if necessary, schedules an hearing for their appearance.The Italian Supreme Court has addressed the topic and has declared that art. 331 of the Italia Code of Civil Procedure shall apply not only to the cases in which the joinder was mandatory even in the first instance by reasons of substantial law (such as joint ownership of the disputed right), but also to the cases of so called “procedural mandatory joinder”. The latter occur whenever the participation of multiple parties to the judgment of first instance must be assured in the Appeal judgment as well, in order to avoid possible conflicting rulings regarding the same issue and among the same parties (Italian Court of Cassation, court order no. 11044 of April the 27th 2021).
As a matter of fact, the Supreme Court has argued that, lacking the completion of the adversarial hearing during the judgment of appeal, the latter is to be regarded as entirely invalid. The same fate is reserved to the ruling issued by the Court of Appeals in such circumstances, whose invalidity can even be detected ex officio during the judgment before the Supreme Court (Italian Court of Cassation, court order no. 11044 of March the 29th 2019).
It also should be noted that, in the field of challenging of civil awards, the adversarial hearing completion is mandatory, according to art. 331 of the Italian Code of Civil Procedure, not only in case of inseparable claims, but also when the claims, while being separable, must solve issues which are logically dependent from each other or they share a common factual premise (so called “interdependent claims), when those claims have been previously decided in a single judgment. Such regime is imposed with the intention of avoiding that future procedural issues may lead to definitive conflicting rulings (Italian Court of Cassation, ruling no. 27485 of December the 30th 2016).
A different question, concerning the same topic, is the following: if the act of appeal is notified only to some of the parties who participated to the first instance judgment, does it produce its effects with regard to the parties who weren’t notified as well? The question is not irrelevant since the previous ruling may even become definitive for those parties who weren’t subpoenaed for the appeal judgement.
According to various Supreme Court decisions, if the act of appeal is not notified to one of the mandatory joinder parties, its admissibility and promptness are not affected, so much so that it prevents the ruling of first instance to become definitive, even for the party who was not notified with the act of appeal. However, completion of the adversarial hearing shall be ordered by the judge. Its omission leads to the invalidity of the judgment, which can also be detected ex officio during the higher grades of judgement, even when the mandatory joinder party was not included in the act of challenge (Italian Court of Cassation, ruling no. 19910 of July the 27th 2018, in Giust. Civ. Mass. 2018 – previously in accordance also Italian Court of Cassation, ruling no. 18364 of July the 31st 2013, in Giust. Civ. Mass. 2013 – also Court of Cassation, ruling no. 3071 of February the 8th 2011 – and Court of Cassation, ruling no. 9977 of April the 16th 2008).
In light of the above it can be concluded that the notification of the act of appeal, made only to some of the parties of the previous judgment, does nevertheless prevent the first instance ruling from becoming definitive for all of the mandatory joinders, even those who were not notified with the act of appeal and have not participated to the second instance judgment. Nonetheless, the Court of Appeals has the duty to order the completion of the adversarial hearing, in order to avoid the invalidity of its own future ruling.
LIABILITY OF ENTITIES PURSUANT TO ARTICLE 231/01: NEW CASE LAW ABOUT THE ORGANISATIONAL FAULT OF THE ENTITY AND CULPA IN VIGILANDO.
The Criminal Court of Milan, in the judgement no. 3314/2023, held Johnson & Johnson Medical S.p.a. liable for the inadequacy and ineffective implementation of the organisational model, convicting the company under articles 5(1)(b), 7 and 25(2) of Legislative Decree 231/2001.
The case in question provided an opportunity for the Judges to clarify the criteria to determine the adequacy and effectiveness of the implementation of the organisation, management and control model (hereinafter also referred to as the “Model”), depending on whether the perpetrator of the predicate offence is a manager or a subordinate.
In particular, in the judgment in question, as a preliminary point, the Court stated that under articles 6 and 7 of Legislative Decree 231/01, the Model is not mandatory because “the 231 system represents a burden (an opportunity, in a certain sense) for companies, but not an obligation” and, consequently, “the organisational fault – ontologically impersonal – may also consist in a deliberate disorganisation: the entity deliberately chooses not to adopt the organisational model”.
However, when the entity decides to adopt the Model, as in this case, those obligations must be considered as being ‘incorporated’ and formalised in the Model itself, and their correct and effective implementation prior to the commission of the offence is indeed a reason to exclude the entity’s liability.
On this point, the Court held that there were no significant differences – for the purposes of assessing the adequacy and effective implementation of the Model – between the regime laid down in Article 6, in relation to liability for offences committed by senior management, and that provided in Article 7, in relation to offences committed by employees.
The Court explained that “culpa in vigilando, which incorporates the element of a link between the offence and the organisation in the case of offences committed by non-key managers, does not necessarily involve the “culpable” conduct of a natural person in a position of control, but is (and in any event remains) linked to the structural guilt of the organisation, which is a form of “impersonal guilt” peculiar to the societas and directly related to the collective organisation, even if – as was also found in this case and as will be repeated below – it is innervated by the inadequate behaviour of individuals superior to the employees to whom the offence is attributed”.
In order to assess the liability of the entity for the offence, it is necessary to put oneself in the position of the entity at the time of the facts, assessing the conduct of the persons subject to the direction of others on the basis of the elements known and knowable at that time.
In particular, it will be necessary to consider whether: i) the employees (or other subordinates) correctly framed the activity at risk and complied with the policy and procedures laid down in the Model in relation to that activity; and ii) if not, whether the dysfunction in relation to the Model was identified and therefore corrected.
Applying the principles set out above, the company was convicted on the basis of the outcome of a complex investigation which revealed organisational and control system deficiencies and the systematic disapplication of sanctions.
m.divincenzo@macchi-gangemi.com
a.buttarelli@macchi-gangemi.com
THE WINDSOR FRAMEWORK AND THE NEW HYBRID CUSTOMS REGIME BETWEEN THE TWO IRELANDS.
The ‘Northern Ireland Protocol’ signed by the United Kingdom and the European Union on 1 January 2021 has been much criticised over the years by the people of Northern Ireland for being excessively burdensome. On 27 February 2023, an agreement was reached to amend the Protocol. Once entered into force, such agreement will lead to both the simplification of procedures applicable to the exchange of goods between Great Britain and Northern Ireland and to the recognition of autonomy for the Northern Irish Parliament (Stormont Parliament) in the application of specific European trade rules.
Prior to Brexit, trade between Northern Ireland (one of the four constituent countries of the United Kingdom) and the Republic of Ireland (a country completely independent from the United Kingdom) had always been smooth thanks to the European Union single market rules. In 2016, however, following the outcome of the Brexit referendum, negotiations aimed at obtaining a customs agreement had to be undertaken to ensure a fluid continuation of trade between Northern Ireland and the Republic of Ireland.
This agreement has long been at the centre of Brexit negotiations, given the political history of the Irish region and the need to preserve the balances painstakingly achieved with the Good Friday Agreement.
An initial solution to this issue was reached by former Prime Minister Boris Johnson, who agreed with the European Union the ‘Northern Ireland Protocol’, which became part of international law and officially entered into force on 1 January 2021.
This agreement introduced a series of controls on all goods destined for or transiting Northern Ireland, including those coming from Great Britain.
The Protocol was immediately criticised by the Unionist parties and Northern Irish businesses as the new controls on goods, in their view, would have only created an effective and unwanted border between the two Irelands, and increased costs and red tape.
On 27 February 2023, after much mutual effort, the United Kingdom and the European Union jointly announced the ‘Windsor Framework’, an agreement that will amend the 2021 Protocol as soon as it enters into force. The main changes will be:
1. Simplification of customs practices;
2. Powers to suspend EU rules, through the so-called ‘Stormont Brake’;
3. Enforcement of British food regulations in Northern Ireland.
Simplification of customs practices
The Windsor Framework eases controls on goods coming from Great Britain to Northern Ireland (and vice versa) by assigning them to the ‘Green Lane’. Operators in the Green Lane will complete one digital certificate per ‘truck movement’ instead of several forms for each load. This will eliminate the need for export declarations for most goods moving from Great Britain to Northern Ireland.
In contrast, goods bound for the EU single market (i.e. the Republic of Ireland) will be subject to full customs controls in the ‘Red Lane’ at Northern Ireland ports.
Stormont Brake
The protocol concluded by Boris Johnson provides for certain specific European trade rules to continue to apply in Northern Ireland.
The Windsor Framework in this regard introduces a major innovation: the ‘Stormont Brake’.
In essence, the Northern Ireland Parliament, which consists of 90 MPs, has the power to intervene if specific changes are made to EU laws, applied in Northern Ireland, that would have a significant and lasting impact on the daily lives of Northern Irish citizens.
For this to happen, at least 30 members of the Stormont Parliament, from at least two different political parties, are required to sign a petition containing solid arguments showing that the harmful impact of the changes is likely to persist. Activation of the ‘Stormont Brake’ does not require a majority of the Belfast Assembly, allowing both members of the unionist DUP party and independence supporters such as Sinn Féin to appeal without mutual consent.
Once the petition is signed, the UK government can immediately suspend the application of the European law blocked by Northern Ireland.
At this point, the dispute, if not resolved by a joint committee composed by of British and European officials and established under the Windsor Framework itself, will be referred to an arbitration panel.
This panel, appointed by both parties, will have the task of deciding whether the activation of the ‘Stormont Brake’ was justified and fulfilled all necessary requirements.
In the event that the arbitration decision rules that the circumstances necessary for the activation of the ‘Stormont Brake’ had not been met, the new European law would also apply to Northern Ireland.
On the other hand, if the arbitration decision confirms the correctness of the activation of the ‘Stormont Brake’, the new European rule would be disapplied in Northern Ireland. In this second case there would be a ‘regulatory divergence’ from the neighboring Republic of Ireland, and the European Union would have to take specific ‘corrective measures’ to address this new situation.
Food regulations
Finally, the new Protocol, as amended by the Windsor Framework, will stipulate that the UK public health and safety rules will apply to all food and drink retailing in the UK domestic market. UK rules on public health, marketing, organic products, labelling, genetic modification and drinks (such as wines, spirits and mineral waters) will also apply in Northern Ireland. This will result in the elimination of more than 60 European food standards contained in the original protocol.
Thus, the Windsor Framework is likely to be welcomed by supermarkets, wholesalers, hospitality establishments and food producers, as they will simplify their business operations.
In conclusion the Windsor Framework is a good compromise: on the one hand it guarantees the customs border between the EU and the UK, while on the other hand it recognises the UK’s customs unity and sovereignty to Northern Ireland.
s.macchi@macchi-gangemi.com
p.marangoni@macchi-gangemi.com
DISCLAIMER: This newsletter merely provides general information and does not constitute legal advice of any kind from Macchi di Cellere Gangemi. The newsletter does not replace individual legal consultation. Macchi di Cellere Gangemi assumes no liability whatsoever for the content and correctness of the newsletter.
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