A battery of legal developments for the digital economy in the final stretch of the year
The final stretch of 2021 will come loaded with legal developments in the digital field. There are numerous legislative initiatives underway that will take new steps in the coming months, both at national and European level: from the new regulatory framework for digital business and e-commerce to the regulation of audiovisual services, including developments in privacy, artificial intelligence, crypto-assets and intellectual property.
We analyze, below, the most relevant issues to be taken into account by companies in the digital economy and also for those that, from traditional business models, already play an important role in the digital field.
A new regulatory framework for the Internet
At the European level, the proposal to create a new regulatory framework for the Internet and digital platforms will be key to setting the rules of the game in the common market. The European Commission is engaged in an ambitious legislative reform that focuses on digital service providers, especially online platforms, that target their services to European citizens (e.g. social networks, search engines or marketplaces). The package of measures takes the form of two major texts, the Digital Services Act (DSA) and the Digital Markets Act (DMA).
Developments in data protection, electronic signatures and artificial intelligence
The aforementioned regulation (DSA/DMA) also has implications for data protection, an area in which several reforms are underway at European level. This is the case of the Data Governance Act or Data Governance Regulation, a European Commission proposal that has been under public consultation between June 3 and September 3. The aim is to create a legal framework to facilitate the secure exchange of data throughout the European Union.
In addition, the Council of the European Union agreed, on February 10, its position on the rules on the confidentiality of electronic communications in the context of privacy regulation (e-Privacy). In this area, attention will have to be paid to questions such as, for example, in which cases service providers will be authorized to process electronic communications data or have access to data stored on end-user devices (new regulation of the well-known “cookies”).
On the other hand, the European Union is finalizing the revision process of its digital identity project through an initiative to amend Regulation (EU) 910/2014 of July 23, 2014 (eIDAS Regulation), which would go on to form an e-IDAS 2 Regulation. Among the anticipated new features, the regulation of a European digital identity wallet, and of the electronic ledger (which will clarify the fit of self-sovereign identity models and transaction authentication systems based on distributed registration technologies) stand out.
The evolution of the European Union’s strategy on artificial intelligence will also need to be monitored. The proposal for a regulation laying down harmonized rules on the subject was made public last April. The new regulation could mark the red lines in the use of artificial intelligence. The European Data Protection Committee and the European Data Protection Supervisor have recently expressed their views on this proposal, through a joint document that seems to point to a long debate in the European legislative process on this matter.
In this field, the European Commission presented in February 2020 its strategies in relation to data and artificial intelligence, in the terms in which they were set out in this press release.
Changes in audiovisual services and intellectual property
In audiovisual and intellectual property matters, Spain has yet to transpose the Audiovisual Services Directive into national law. The deadline for doing so expired a year ago, on September 19, 2020. Currently on the table is the Draft Bill of the General Law on Audiovisual Communication (in public hearing until July 12), whose objective is to adapt the current regulatory framework to the new technological reality. The workhorses of the draft bill are the financing of RTVE and the reinforcement of the obligations for the promotion and financing of European audiovisual works.
The Copyright Directive in the Digital Single Market (DEMUD), whose deadline expired on June 7, is also pending transposition in Spain. The European Commission has opened a file to Spain, which now has until December 2021 to approve the new regulation and avoid sanctions. This new law could have a very significant impact on online content intermediation services and on business models based on content shared by users.
Reform and extension of the scope of application of telecommunications regulation.
Another awaited regulation is the new General Telecommunications Law, of which there is already a preliminary draft. It has its origin in the European Directive establishing the European Electronic Communications Code. Last February, the European Commission announced the opening of a case against Spain for not having yet transposed the rules of the new European code into its national legal framework, which led the Council of Ministers to agree, at the end of March, to process it as a matter of urgency. In this area, it will be necessary to pay attention to the new requirements for electronic communications operators in relation to consumers, investment in high-capacity networks and innovative services and infrastructures.
One of the most relevant novelties of the new regulation is that it will include in its scope of application both traditional telecommunications operators and new operators of digital communications services that operate over telecommunications networks (the so-called OTT -over the top- services, which include instant messaging services, for example) and which, until now, have not been obliged to comply with electronic communications regulations.
Strengthening cybersecurity
The European Commission has also proposed revising the NIS (Network and Information Systems) Directive, which harmonizes cybersecurity measures for networks and information systems. This new regulation, called NIS 2, concluded its last public consultation period last February. In Spain, it coincides with the recent entry into force of the regulation approved by Royal Decree 43/2021, which develops the Law transposing the NIS Directive in Spain (Royal Decree-Law 12/2018).
Also in relation to cybersecurity, a year ago (September 24, 2020) the European Commission published the proposed Digital Operational Resilience Regulation for Financial Institutions (DORA). The aim is to create a European legal framework of cybersecurity obligations, principles and requirements for the financial sector and its service providers.
Regulatory framework for cryptoassets and crypto-asset-related services
In the field of European law, it is worth following very closely the deployment of the so-called package of measures for digital finance and, in particular, the so-called “digital finance strategy”, whose main regulatory pieces of implementation are as follows:
the proposal for a Regulation on markets in crypto-assets (MICA)
the proposal for a Regulation on the pilot scheme for market infrastructures based on distributed registry technologies
the aforementioned proposal for a DORA regulation on operational resilience.
In Spain, it is worth highlighting the inclusion of providers of services for the exchange of virtual currency for fiat currency and electronic wallet custody services (amendment of art. 2 of Law 10/2020, of April 28, by means of Royal Decree-Law 7/2021, of April 27, which completed the transposition of the 5th Directive on the Prevention of Money Laundering and Terrorist Financing) among the parties obliged by the regulations on the prevention of money laundering and the financing of terrorism. This amendment also entails the creation of the Registry of service providers for the exchange of virtual currency for fiat currency and the custody of electronic purses, which is entrusted to the Bank of Spain. Virtual currency exchange and electronic purse custody service providers will have to register in this registry.
On the other hand, a public consultation period has been open, until August 31, on the draft Circular regulating the advertising of crypto-assets, of the National Securities Market Commission (CNMV). It remains to know the final wording of the text, once the CNMV assesses the comments collected during this time.
Digital delivery platforms facing the ‘Rider Law’.
In the labor field, on August 12, the so-called ‘Rider Law’ (Royal Decree-Law 9/2021) came into force, which establishes a presumption of labor in the field of digital delivery platforms when certain requirements are met and sets new reporting obligations on algorithms. Since then, it is already having an impact on the business models to which it applies.
We will have to keep an eye on possible European legislative developments. On June 15, 2021, the European Commission launched the second phase of consultation of the European social partners on how to improve the working conditions of people working through digital work platforms. Following the first phase of the consultation (which was open between February 24 and April 7, 2021), the European Commission concluded that the European Union must take action to ensure core labor standards and rights for people working through digital platforms. At the end of this second phase (September 15), negotiations between the social partners for an agreement could begin or the European Commission could present a proposal before the end of 2021.
What’s new for startups?
Finally, it will be necessary to keep an eye on the draft bill to promote the startup ecosystem, which aims to introduce various measures to facilitate the legal and tax regime for startups, and which is due to be presented publicly this autumn. The draft bill, which was subject to a public information and allegations procedure between July 6 and 27, contained various types of measures, among which we would like to highlight those detailed below.
In the commercial field, there are still some aspects that it would be interesting to clarify in the proposed regulation: to know the real scope of the registration of the shareholders’ agreement of the emerging companies and the agility of the Empresa Nacional de Innovacion SME, S.A. (Enisa) to evaluate the nature of the company. (Enisa) to evaluate the innovative nature of these companies (as well as to understand what the criteria are), since, according to the draft bill, it is intended to be done on an annual basis. On the other hand, the text intends to regulate the treasury stock in emerging companies that are limited liability companies, but does not include or regulate what happens to such treasury stock in the event that the company in question ceases to be an emerging and/or innovative company. It also seems appropriate that notaries may request the assignment of the tax identification number for those foreigners who become partners in an emerging company on the occasion of an increase of its capital stock or other corporate operation.
The text also includes important novelties in the tax field, among which we highlight the following. First, the corporate income tax rate applicable to “emerging companies” is reduced from 25% to 15% during the first tax period in which the taxable income is positive and the following three tax periods, under certain conditions. In addition, deferral of the payment of corporate income tax, without guarantee and without accrual of late payment interest, is allowed during the first two positive periods in which a positive taxable income is obtained, under certain conditions. In line with the aforementioned rule to make treasury stock more flexible, the exempt amount for the delivery of shares or participations derived from the exercise of stock options is increased from the current 12,000 euros to 45,000 euros, simplifying the rest of the requirements for its application. Likewise, both the base (100,000 euros, from the current 60,000 euros) and the percentage (40% instead of the current 30%) of the deduction for investment in new or recently created companies are increased. Finally, and applicable to all types of companies and not only “emerging” ones, the regulation makes the impatriate regime -popularly known as the Beckham Law- more flexible, extending it to a maximum of 10 years (instead of the current 5), and also extending it to the spouse and children under twenty-five years of age (or of any age with a disability) of the workers in question.