Below you will find the topics of the newsletter:
INTELLECTUAL PROPERTY LAW
Coronavirus – Protecting Against Supply Chain Disruption When Shipping Goods
Authors: Esme Saynor (Senior Associate, CMS Sheffield), Roderick Nieuwmeyer (Senior Associate, CMS EU Law Office)
Developing a supply chain response to the coronavirus outbreak involves being ready before such a crisis hits. Although the long-term consequences are yet to play out, the coronavirus outbreak already provides some lessons about how you can better prepare your company to deal with future large-scale crises.
Supply shortages and delays: The production and delivery of goods could be at risk. Inventory levels will often not cover short-term material outages, so envisage impact on popular components and materials. One example in history would be when Hurricane Rita struck Houston and western Louisiana, causing widespread shutdowns of oil refining assets in the region. Later that year petroleum-based packaging was in short supply because of the impact on supplies of the raw materials needed to make the packaging. Many firms redesigned packaging using old-style paper and cardboard.
Check certifications: Delays in transportation as a result of backlog in certification approval or shipment disruption may affect documentation needed to accompany the supply chain. It may be available to establish an enforcement position with a regulator who may be sympathetic to unforeseen delays, whereas because these aren’t contractual provisions, reliance on the legal concept of ‘force majeure’ will be difficult. Examples of such certifications and approvals that may be required for transportation of goods from one legal jurisdiction to another are:
- Phytosanitary certificates for forest-related products including crates or pallets, which expire after 14 days.
- Licences for movement of ozone-depleting substances such as HCFCs used for refrigeration, air conditioning, foam blowing fire-fighting or solvents. Licences take time to obtain, for example in the UK the current approximate time taken to obtain a licence is 15 to 29 days, but delays in obtaining licences may occur in the case of disruption to the normal running of the European Commission.
- Certification for movement of food and drinks, for example, export health certificates are required to export certain products of animal origin to specific third countries. Certification is usually required to confirm, as a minimum, that the product is produced in accordance with EU hygiene rules, fit for human consumption and freely available for sale within the EU. Again, the various bodies responsible for issuing such certification may experience a backlog in the event of disruption and staff shortages.
- Consents for movement of waste, for example in order to to export from England, consent must be obtained from the Environment Agency and importing competent authorities. This consent allows for up to 12 months to ship the waste (or potentially up to 3 years if shipping to a destination site with pre-consent status). Care should be taken in particular where authorisations are nearing their end.
- Licences for movement of chemicals, for example, importers or exporters of precursor chemicals must lodge an application for an authorisation with the competent authority in which the importer/exporter is established. Most applications will also be subject to a pre-export notification process, which currently takes up to 15 working days in addition to the standard processing time for applications, with a decision being reached regarding authorisation of the shipment after this process is completed.
“Respect competition and consumer protection law principles: Don’t forget that normal competition and consumer protection law principles will apply. Authorities are carefully studying current market behaviour and will not hesitate to take action. The Covid-19 outbreak is not a valid reason to form a (crisis) cartel. Authorities have specifically warned producers of healthcare products, such as face masks, to stay away from actions that would restrict competition. Also, with regard to vertical relationships, resale price maintenance is another hot topic for many competition authorities. Thus, be wary not to impose minimum resale prices for your products. If you’re in possession of a dominant market position, be careful not to take measures that could later be explained as abuse of such position, e.g. considerable and inexplicable market price increases. Additionally, be careful not to discriminate against your buyers. In many European countries this is behaviour that could be subject to scrutiny. This also applies to companies with relative market power. Finally, in expected difficult times like these, many companies are likely to ask financial support from their government. This typically raises questions relating to compatibility with State aid rules: specific criteria for public interventions in companies in difficulty may apply.”
Have a comprehensive emergency plan: Emergency operations centres should exist at head quarter and at the plant level, with predetermined action plans for communication and coordination, designated roles for functional representatives, protocols for communications and decision making, and emergency action plans that involve customers and suppliers. This should include identifying who is responsible for reviewing and monitoring risks and Government guidance.
Know your suppliers and consider supply chain design: Map your upstream suppliers and develop relationships in advance with key resources — it can be too late after the disruption has fully emerged. So how should companies design their supply chains to operate effectively in the face of widespread supply chain disruption? Each option involves trade-offs between the level of risk that the enterprises can tolerate and the amount of operational flexibility it wants to achieve. Two examples would be:
1) Firstly, providing backup capacity for supply, production, and distribution outages which spreads the risk of a disruption across two sources. Although this supply chain design lowers risk levels, it incurs higher administrative, quality monitoring, and unit costs. Also, economies of scale vary according to the amount of supply allocated to each supply source.
2) The second model design calls for a company to have production facilities with local sources of supply in each of its major markets. Like the above option, it spreads the risk. Since these sources are dispersed, the economies of scale are lower and the capital costs are higher in general, although the transportation costs will be significantly lower.
Although it is not possible to accurately anticipate global crises such as the coronavirus outbreak, impacts can be mitigated to a certain degree by putting in place strategies for foreseen eventualities. Action can be taken before a disruption occurs with adjustment afterwards when needed.
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Switzerland: New Statute Of Limitation For Liability for Personal Injuries
Author: Dr. Simone Brauchbar Birkhäuser, LL.M. (Counsel, CMS Zurich)
Health issues due to the exposure to harmful substances or other harmful impact may become apparent only years after the exposure to the same. In a case involving asbestos victims the European Court of Human Rights decided in 2014 that the Swiss limitation period is in breach of the European Convention on Human Rights. The court argued that in view of the relatively short Swiss limitation period (1 year from knowledge of the damage and 10 years from the injurious event) there is a risk that the absolute period of limitation has already expired before the damage becomes apparent. Therefore, the court held that the short Swiss limitation period infringes the claimants' right to a fair trial and denies effective access to justice.
Subsequently, Switzerland revised its statute of limitations. The revision includes among others new limitation periods for liability claims due to personal injuries. The revised statutes entered into force on 1 January 2020.
Under the revised law as regards both extra-contractual as well as contractual liability for bodily injury or death, the statute of limitation is 3 years from knowledge of the damage and the injuring party and 20 years from the injurious event or 20 years after its termination. The warranty periods under purchase and work contracts and the periods of limitation and forfeiture under the Product Liability Act were not changed.
Consumer protection organisations criticise that in case of health issues due to contact with harmful substances, it can take much more than 20 years from initial contact until the first symptoms appear and consequently, the new extended limitation periods are also not sufficient to protect the harmed persons' rights to damage compensation. However, taking into account the manufacturer's need for clarity and security, the revision appears to be a fair compromise. In addition, in out-of-court dispute resolution procedures such as settlement discussions, the parties may agree in writing that the statute of limitations shall stand still.
Since under the revised statute of limitations, legal proceedings can take place up to 20 years after (the end of) an injurious event, consumer product producers should keep all relevant documents in connection with the sale of products for a period of 20 years and not – as before – only 10 years. The same retention period applies to documentation on the functionality and composition of the products, possible marketing authorizations and other documents evidencing compliance with regulatory requirements of the products, especially the absence of their harmfulness to consumers.
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France: Anti-Wastage And Circular Economy Law - Preparing For The Demands Of The Anti-Wastage And Circular Economy Law
Authors: Céline Cloché-Dubois (Partner, CMS Paris), Virginie Coursière-Pluntz (Counsel, CMS Paris), Anne Plisson (Associate, CMS Paris), Amaury Le Bourdon (Associate, CMS Paris)
Law no. 2020-105 of 10 February 2020 on combating wastage and on the circular economy (hereinafter "Anti-Wastage & Circular Economy Law"), which was one of the legislative priorities for 2019/2020, should revolutionise certain production and consumption habits.
The objective of the legislation is ambitious: to break with the model of the linear economy (extract, manufacture, consume, throw away) and adopt a “circular” economic model based on the eco-design of products, responsible consumption, the extension of shelf life and recycling of products and waste.
This environmental aim will result in a significant number of new constraints for companies, inevitably accompanied by various sanctions, which will mainly be administrative fines.
Below, we present the main measures of the new scheme which should impact most business sectors.
New obligations to inform consumers
The Anti-Wastage & Circular Economy Law imposes on companies numerous new obligations intended to better inform consumers about the environmental characteristics of products, their recyclability as well as their repairability.
Measures relating to wastage in the Anti-Wastage & Circular Economy Law
The Anti-Wastage & Circular Economy Law complements the existing measures in the combat against food wastage and introduces new ones for non-food products.
Reinforcement and extension of the extended producer responsibility
The Anti-Wastage & Circular Economy Law lays down several important principles on the manufacture, holding, sale or provision of waste-generating products.
Measures relating to waste in the Anti-Wastage & Circular Economy Law
The Anti-Wastage & Circular Economy Law reinforces waste management obligations and combats illegal dumping of waste.
Combating plastic: what the Anti-Wastage & Circular Economy Law says
The Anti-Wastage & Circular Economy Law sets the objective of ending putting single-use plastic packaging on the French market by 2040.
While most of them are immediately applicable, the entry into force of others will be subject to the publication of a decree or postponed in order to give economic stakeholders a reasonable transition period.
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EU: New Regulation On Organic Production – How To Be Prepared!
Author: Izabela Biernat-Sadlak and Agnieszka Starzynska (Senior Associates, CMS Warsaw)
On 1 January 2021, the new Regulation (EU) 2018/848 of 30 May 2018 on organic production and labelling of organic products comes into force. Its aim is to reflect the changing nature of this dynamic sector. The current rules were established almost two decades ago and they are not keeping up with the changing environment. In particular, the current rules and derogations do not give enough legal certainty.One of the main changes relates to the categories of products that can be certified as organic. At the moment, such certification is possible for: (i) live and unprocessed agricultural products (animals, plants and seed, mushrooms), (ii) processed food and (iii) feed. Under the new Regulation, it will be possible to produce and certify as organic sea salt, silkworm cocoon, natural gums and resins, essential oils and other products as listed in Annex I to the Regulation. It will also be possible to amend the Annex I and add new products as the sector develops.
The new rules provide more flexibility with regard to justified exceptions, such as the temporary replacement of an organic ingredient by a non-organic one in cases of limited stocks. It will still be permitted but only for a limited period (up to 6 months with the possibility of two extensions), under regular control and assessment and will apply to all entities (to ensure fair treatment).
The Regulation does not only relate to EU organic products but also products imported into the EU from other countries. The new rules provide the change from the principle of equivalence to the principle of conformity i.e. the new rules will be the same for producers in the EU and those in third countries wanting to sell in the European Union single market.
As it is under the current provisions, restaurants and canteens will be outside the scope of the Regulation. However, national or private standards can be applied in this respect.
The new rules provide a major change in the control system, aiming at reducing red tape. Under the new Regulation, annual physical inspections will not be obligatory for all entities. It will be possible to conduct such inspections every 24 months if the entity has an established position (i.e. has passed the inspections for three consecutive years).
The new Regulation brings some simplifications for small farmers who will be able to apply for more cost-efficient group certifications. The new provisions provide specific criteria to define what categories of farmers can join the group. They would need to organise themselves into a group (legal entity) and in the case of a serious infringement by one member, the entire group may lose the certificate.
The rules on organic product labelling will not change significantly. The organic logo will still be used only on products that contain at least 95% of organic ingredients. There will be no change in the approach to products in “conversion” to organic farming (where organic methods have only just been introduced) that must not be marked as organic. However, there will be more flexibility on indicating the origin of ingredients. Currently, to mark a product as “EU agriculture” or “Polish agriculture”, at least 98% of the ingredients should originate from the EU (or respectively, Poland). The new Regulation decreases this threshold to 95% and the region of origin may even be indicated.
The adoption of the new Regulation is only the first step in changing the legal framework for organic food. The European Commission is working and consulting on draft delegated and implementing acts for specific areas of production and specific issues: such as animal production, aquaculture, processing, or catastrophic circumstances. The new regulations should be adopted and published well in advance of 1 January 2021 so that producers can prepare for their entry into force.
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Author: Philipp Rohdenburg (Senior Associate, CMS Cologne)
- According to a ruling of the European Court of Justice, a contractual clause that excludes a payment in the SEPA direct debit scheme if the payer is not a resident of the Member State in which the payee is domiciled violates the so-called SEPA Regulation (Regulation (EU) No. 260/2012) and is therefore inadmissible.
- One of the aims of the regulation is to enable consumers to use only a single account for direct debit payments within the Union. Therefore, direct debit recipients should not be allowed to specify in which Member State the payment account should be kept. However, since consumers generally maintain their payment accounts in their state of residence, the requirement of a domestic residence within the country is also indirectly in breach of this prohibition.
- It is irrelevant whether consumers are offered alternative methods of payment, such as credit card, PayPal or instant bank transfer. As soon as (also) a payment in the SEPA Direct Debit Scheme is offered, the requirements of the SEPA Regulation must be met.
(Online) merchants and service providers who offer their customers payment by SEPA direct debit must, according to the ECJ decision, grant this option to customers from all over the EU - even if this may lead to significantly higher costs for credit assessments or an increased risk of default for the payee. Since December 2018, the Geoblocking Regulation (Regulation (EU) 2018/302), has in many cases stipulated that customers may not be treated differently on the basis of their nationality, place of residence or other so-called "geo-factors". For SEPA direct debits, however, the SEPA Regulation sets even stricter requirements, as it does not provide for any exceptions to the ban on discrimination for cross-border payments, even for high-risk transactions. It is therefore advisable to carefully weigh up whether the direct debit scheme can be offered throughout Europe or whether payment by direct debit should be excluded altogether.
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EU: Online Merchants Do Not Always Have To Provide A Telephone Number (BGH, judgment of 19 December 2019 - I ZR 163/16 and ECJ, judgment of 10 July 2019 - C-649/17)
Author: Lars Eckhoff, LL.M. (Partner, CMS Cologne)
- Online traders do not necessarily have to provide consumers with a telephone number before the conclusion of the contract. All that is required is that customers are offered fast and efficient ways to contact them. If this is ensured, other means of communication than telephone, fax or email are also‑ possible, following the ECJ decision and the subsequent decision of the German Federal Court of Justice.
- The German provision, according to which online traders are always obliged to provide a telephone number before concluding a distance contract, contradicts the provisions of the Consumer Rights Directive (Directive (EU) 2011/83). This only obliges traders to provide each consumer with a means of communication which enables the consumer to contact the trader quickly and communicate with them effectively.
- The list of telephone number, fax number and e-mail address referred to in the Directive should be understood only as an example. Traders are therefore not obliged to set up a new telephone connection if they decide to conclude distance contracts online or otherwise. Also, an existing telephone number only has to be given if the trader at least also uses it for contact with consumers.
- It is crucial to provide consumers with fast and efficient ways to contact the traders and to ensure that customers are informed about these possibilities in a clear and understandable way. If traders ensure that customers have the opportunity to contact them quickly and easily and to communicate with them efficiently, they can also provide means of communication not explicitly mentioned in the Consumer Rights Directive.
For the time being, the judgments give online traders a little more flexibility with regard to the rigid pre-contractual information requirements in distance selling and thus more freedom in choosing the means of communication with their customers. The clarification that it is primarily the efficiency of the means of communication offered that is important is to be welcomed and is ultimately also in the interest of the customers.
However, this will change in the future. The Consumer Rights Directive (Directive (EU) 2011/83) was amended on 7 January 2020 by the new Directive for the better enforcement and modernisation of Union consumer protection rules (Directive (EU) 2019/2161, part of the "New Deal for Consumers") and, among other things, with regard to the provision of a telephone number the passage "where available" was deleted. In the future, therefore traders must provide
"the geographical address at which the trader is established as well as the trader’s telephone number and email address"
(Art. 4 No. 4 a) i) of the Directive (EU) 2019/2161 which amends Art. 6 paragraph 1 point (c) of Directive (EU) 2011/83).
The changes must be implemented by the member states by 28 November 2021 and the new national regulations must be applied from 28 May 2022. It must therefore be assumed that a telephone number will have to be provided again in any event from then on.
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Brexit - Deal or No Deal? Practical Considerations for Food Businesses
Author: Fiona Carter (Consultant, CMS London)
On 31 January 2020, the UK ended its membership of the EU. Although it has taken 3 years of political wrangling to reach this point, there is still uncertainty in relation to the food and drink rules that will apply after the transition period.
The European Union (Withdrawal Agreement) Act 2020 ensures that during the transition period, the EU regulations concerning food and drink continue to apply to the UK. The transition period will last until 31 December 2020. After this, the regulatory regime for food products will depend on the outcome of the trade agreement negotiations with the EU.
The UK Government has now published The Future Relationship with the EU: The UK’s Approach to Negotiations, which outlines thatthe future trade agreement (“FTA”) should be finalised by September. It has been reported that if progress is not made by June 2020, the Government will consider walking away to focus on no-deal preparations. The Government intends to invite contributions from a wide range of stakeholders about the economic implications of the future relationship with the EU via a public consultation, which will begin in the Spring.
Several advisory groups have urged the Government to avoid any diminution of choice and value for UK consumers. A recent report prepared by the Food and Drink Federationrecommends “careful thought should be given to the benefits and costs” of moving away from the existing EU technical standards.Food Businesses Operators (“FBOs”) are particularly alert to the risk of new tariff barriers arising from regulatory divergence between the UK and the EU.
Although there are clear attractions for FBOsin regaining regulatory autonomy, the erosion of existing integrated supply chains is seen as a risk to the UK’s ability to develop and compete in markets in the future. Decisions made about the approach to future autonomy have the potential to enhance or restrict consumer choice.
Some FBOs have already identified key areas of concern, as set out below.
Rules of Origin
UK negotiators are being urged not to make concessions on Rules of Origin. Currently, there are no origin requirements for internal trade within the EU. This means that once products enter the UK, no subsequent transformation is required for preferential treatment within the EU single market (i.e. to benefit from zero tariffs).
However, the UK food and drink sector is unusual in its tendency to use a mixture of imported and home produced ingredients in manufactured goods. If there is a No-deal Brexit, this could prevent such products qualifying for preferential treatment. An example would be a loaf of bread that is manufactured and packaged in the UK, sold under a UK brand but with the mix of flour consisting of a blend of grains from growers in Canada, the US and the UK. While the UK is part of the EU (provided the relevant import tariffs are paid), there are no origin requirements for selling this bread within the EU. However, such products could be subject to a costly range of new tariffs following the transition period. Unless the trade negotiation is successful, new rules of origin will also impact on what claims can be made and on packaging requirements. Arguably, the UK should therefore seek tailored rules of origin in the FTA that prevent such products fromnot qualifying for preferential treatment.
Novel Foods are defined as foods that have not been consumed to a significant degree in the EU before 1997. This may be newly developed, innovative food, food produced using new technologies and production processes, or food traditionally eaten outside of the EU. A successful application results in an authorisation and inclusion in the EU List of Novel Foods. This is a positive list containing all authorised Novel Foods for use in the EU.
In January 2019, the “new streamlined process” was introduced into the UK. This allows the Food Standards Agency (“FSA”) rather than the European Food Standards Authority (“EFSA”) to oversee all Novel Food applications. Although this was intended to speed up the increasingly cumbersome process, applications are still considered arduous and a decision can take at least 9 months, with a further delay for EFSA to provide an authorisation and add the product to the List of Novel Foods.
While no changes are forecast in the short term, questions arise as to what Brexit means for companies with EU approved Novel Foods. What happens to those that arecontemplating or mid-way through an application to the FSA?
The good news is that the FSA is encouraging a “business as usual” approach. Novel Foods currently authorised under EU law and approved for the UK market, and those authorised during the transition period, will remain authorised. However, when asked what will happen to those applications that have not been completed by 31 December 2020, the FSA has said it can’t give a definitive position on that yet.
These questions are particularly pertinent for entrepreneurs and other businesses which are involved in food product development, for example, those businesses that are currently competing for a share of the lucrative CBD market.
The difficulties arising from the lack of clarity from the FSA and EFSA are well illustrated by the changing response to CBD food products.
In January 2019, EFSA gave a clear indication that CBD food products are to be considered Novel Foods – and that to date, no such product has the benefit of Novel Foods authorisation. The FSA approach was muted; it expressed its support for EFSA, but also committed to finding a way forward by “working with…businesses…to achieve compliance in a proportionate manner”.
Last month (February 2020), new guidance from the FSA warned of the safety risks of CBD food products and set a deadline of 31March 2021 to submit valid Novel Food authorisation applications. After this, it seems that enforcement can be expected, which may take the form of requiring immediate removal of products from shelves and/or the commencement of criminal proceedings. As a result, any FBO wanting to enter or remain in the CBD food product market will need to have submitted a Novel Foods application by March 2021. The guidance emphasises that this needs to be more than an Article 4 approval, with the safety dossier needing to be “validated” by the FSA.
Nevertheless, a cautious approach in light of the risk of a no-deal Brexit would necessitatethat any application is duly validated by the end of the year, even though this would be 3 months ahead of the deadline.
It remains to be seen whether the FSA will take the opportunity to streamline and accelerate risk assessments (which no longer require the participation of 27 other EU countries), or whether the additional burdens relating to Novel Foods alongside the FSA’s increasing responsibilities will resulting in aslower administrative process.
Nutrition and Health Claims
A similar dilemma faces those FBOs seeking approval of health and nutrition claims in 2020. If an FTA is not agreed by the end of the transition period, will food businesses still be able to rely on authorised EU nutrition and health claims (both current and proposed) such as “helps lower cholesterol” or “no added sugar”?
Currently, permitted nutrition and health claims for food products sold in the UK are contained in the EU Nutrition and Health Claims Register. However, in the event of a no-deal Brexit, this register would no longer apply. As part of its no-deal preparations, the UK Government published a UK Nutrition and Health Claims Register, containing a comprehensive list of authorised nutrition and health claims that FBOs must instead comply with in the event that the UK left the EU without a deal. All claims that are contained in the EU Register as at 31 December 2020 will be adopted and included in the UK Register.
Nevertheless, divergence is expected to occur over time, and FBOs selling products in the UK as well as EU jurisdictions will have to be cautious in ensuring that any health and nutrition claims made in respect of such products are authorised under both registers.
The UK Government has also published a list of ‘on hold’ health claims that are still under consideration in the EU, which may continue to be used in the UK if there is a no-deal Brexit to minimise disruption to businesses.However, in the long term, the Government will launch a call for evidence in respect of ‘on hold’ health claims, to determine how these will be dealt with under the UK authorisation system.
In a no-deal scenario, FBOs seeking authorisation of a new health or nutrition claim for a product sold in the UK will have to submit an application to the UK Nutrition and Health Claims Committee (UKNHCC) rather than to EFSA. However, the UKNHCC has confirmed it will take a similar approach to that established by EFSA and applicants should continue to consult the EFSA guidance on the scientific requirements for health and nutrition claims related to the following:
- antioxidants, oxidative damage and cardiovascular health;
- appetite ratings, weight management, and blood glucose concentrations;
- bone, joints, skin, and oral health;
- functions of the nervous system, including psychological functions;
- muscle function and physical performance; and
- the immune system, the gastrointestinal tract and defence against pathogenic microorganisms.
To avoid delay, the UK Government recommends that applicants complete a Medicines Borderline Advice Form to be submitted to the Medicines and Health Products Regulatory Agency (MHRA) prior to submitting a health claim for assessment to UKNHCC. This will clarify whether or not the claim they wish to make about a nutrient or substance would be considered medicinal. For the same reason, applicants should also check with the FSA whether their food would be considered a novel food in the UK.
A further concern identified is the need for Mutual Recognition of Professional Qualifications.
For example, all food products that are produced, pre-packed and sold in the EU as organic must display the approved EU organic logo (“Logo”). The Logo can optionally be used on non-prepacked organic products and third country imported products that meet the EU requirements on the import of organic goods (although some products cannot qualify, such as cosmetics and food from hunting and fishing). The Logo can only be used on food products where at least 95% of the agricultural ingredients are organic. The remaining 5% of the ingredients can originate from non-organic sources but is also subject to control, for example, the same ingredient cannot be present in both organic and non-organic form. When used, there are strict rules about the colour, font and style of the Logo.
An FBO can evidence its eligibility to use the Logo by obtaining certification from an independent organisation confirming that its food product is in compliance with the requirements under the EU rules. The Soil Association is one of a number of approved certification bodies for organic products in the UK.
Following the UK’s withdrawal from the EU, the existing EU rules will continue to apply during the transition period. However, the mutual recognition of UKAS and EFSA approved independent bodies is likely to end after the transition period unless an FTA has been agreed. Thereafter, the EU will only recognise an EU approved independent body, such that a UK exporter will be unable to use the Logo without an EU approved independent certifier and conversely, the Logo will no longer be able to be used in the UK, unless the UK recognises the EU certifying body.
In the case of the Soil Association, an application for recognition by the EU has been prepared but could only be submitted after formal exit on 31 January 2020. The outcome of this application is awaited.
The impact of a no-deal Brexit will be much wider than the use of the Logo, with similar applications required for other certifying bodies that issue safety certifications for food products and ingredients that are recognised across the EU.
The outcome of negotiations with the EU will decide whether existing EU rules will apply in relation to food and drink or whether they will be replaced by a new UK regime.
If a new UK regime is adopted, FBOs in both the UK and the EU will need to make decisions about whether to manage dual or combined production lines. However, these and other decisions about labelling,reformulations and re-certification will likely need to be made well before 2021. The question remains as to the level of clarity businesses will have before the end of the transition period.
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Germany And France: Draft Law In Germany And Administrative Recommendation In France On The So-Called Nutri Score
Authors: Dr. Heike Blank (Partner, CMS Cologne), Dr. Jonas Kiefer (Associate, CMS Cologne), Virginie Coursière-Pluntz (Counsel, CMS Paris), Amaury Le Bourdon (Associate, CMS Paris),
After France, Germany is currently creating the legal framework for the voluntary use of the so-called Nutri-Score®, a system for simplified indication of nutritional properties on the packaging of food. While the new legal framework in Germany will not come into force until the second half of 2020, France has already gained some practical experience with the system. The experience in France provides an indication of what is soon to come in Germany.
A. The beginnings of the Nutri-Score® in France
The Nutri-Score (in France also known as the "5 C") was introduced in France in 2016 (Law on the modernisation of the health system of January 2016) in order to facilitate consumer information on the nutritional quality of processed foods. It is a nutritional labelling system with five levels (from A to E and from green to red) informing consumers about the nutritional value of food products. The rules for calculating the nutritional score of foodstuffs were set out in a Ministerial Order of October 2017.
The characteristics of the Nutri-Score® system are in particular that
- the use of the score is voluntary,
- the use requires registration with the French public health agency (‘Santé Publique France’) under the authority of the French Ministry of Health, and
- the use is subject to the rules of a so-called Usage Regulation for the ‘Nutri-Score-Logo’1 to which the food business operator is bound under private law by registering with the said body.
B. The planned Nutri Score® system in Germany
Since November 2019, a draft law for the voluntary use of Nutri Score® is available in Germany2. The draft law is the result of a long political process in which various possible models for consumer-friendly nutrition information were discussed. In the end, on the basis of a consumer survey, the responsible German Federal Ministry of Food and Agriculture decided in favour of the Nutri Score®, which is already established in France for a while and which is intended to provide information about the nutritional quality of a foodstuff in a very brief manner.
According to the draft law, the German system will not differ significantly from the French system. This is because the new regulation is only intended to create the legal framework for using the existing Nutri Score® system of France. This means that
- the use of the Nutri Score system will remain voluntary even within the borders of Germany (planned Sec. 3a (2) of the German Food Information Implementing Regulation, called LMIDV),
- the use requires that the food business operator obtains consent from the brand owner of Nutri Score® (Santé Publique France) and complies with its conditions of use, the above-mentioned Usage Regulation (planned Sec. 3a (3) LMIDV) – consequently, the same conditions for the classification of a foodstuff apply as in France.
The essential conditions of use and obligations therefore do not follow from the planned law, but from the private law conditions of Santé Publique France. These include, for example, that use is only possible if the food business operator uses the Nutri Score not only selectively but for all product categories sold under his brand name registered in the Nutri-Score® system (with exceptions for brands with a large number of products). A period of 24 months from the date of registration is granted for implementation. Furthermore, the calculation of the Nutri Score and the sanctions in case of non-compliance with the conditions of use are also regulated in the ‘Usage Regulation’.
C. Experience in France and implications for the German system
In France, the following findings on the use of the Nutri Score system are available so far:
In December 2019, the French Ministry of Agriculture and Food expressly recommended the affixing of this optional labelling on the front of packaging and pointed out that 90% of French people say they are in favour of the "5 C" logo.
The National Food and Nutrition Programme of September 2019, which sets the course for the French government's food and nutrition policy for the next five years, provides for specific actions concerning the Nutri-Score. This Programme notably plans to extend the "5 C" logo in the mass catering sector and for bulk products from 2020 and to promote it to the European Commission and other EU Member States so that it becomes mandatory at European Union level.
A private survey was published in February 2020 which measured the impact of the Nutri-Score on the behaviour of French consumers (1.1 million receipts from a retailer were examined). The following main lessons can be learned:
- Nearly half of the sales (46%) were made with products with a bad rating (D and E) against a third of sales made by products with a good rating (A and B);
- Yet, products with a good rating (A and B) enjoy the best growth, particularly for the most processed products (seafood, snacks, ready-made meals, etc.);
- 64% of consumers prefer one product over another because of its Nutri-Score.
For the German system, it can be concluded that voluntary labelling could only be a preliminary stage to a future mandatory labelling (at national or EU level). This is because not only France is making efforts in this direction, but also the German Federal Minister of Food and Agriculture, Julia Klöckner, has already expressly stated that she is in favour of a mandatory variant of the system in future.
Furthermore, the latter figures suggest that the Nutri Score does indeed have a consumer-directing effect and can certainly also be a useful marketing instrument on the German market.
D. Summary and recommendations
The experience in France suggests that the Nutri-Score® could also develop into a popular marketing instrument in Germany. In this context, however, food manufacturers and retailers are well advised to consider the downsides of participating in the system, such as the penalties for breaches of the Usage Regulation or the ‘all or nothing’ approach of the Nutri-Score® systems in Germany and France. The latter means that participants cannot select products for which they hope to achieve a positive marketing effect, but must participate with their entire products range for each brand they decide to register to the Nutri-Score system.
Entrepreneurs should therefore make detailed enquiries and, if necessary, seek legal advice as to which products are to be given which product classification and which rules are to be observed in connection with participation the Nutri-Score® system.
1 See https://www.santepubliquefrance.fr/media/files/02-determinants-de-sante/nutrition-et-activite-physique/nutri-score/reglement-usage-en
2 See https://www.bmel.de/SharedDocs/Downloads/GlaeserneGesetze/Referentenentwuerfe/1.VO-Aend-Lebensmittelinformations-DVO.pdf?__blob=publicationFile (only available in German language).
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Switzerland : Authorisations For New GMO-Products
Authors: Dr. Simone Brauchbar Birkhäuser, LL.M. (Counsel, CMS Zurich), Sergej Schenker (Attorney Trainee, CMS Zurich)
Genetically modified organisms are controversial in Switzerland and meet only little consumer acceptance. Already in 1995, Switzerland introduced an authorisation requirement for genetically modified foodstuffs. Namely, the placing on the Swiss market of foodstuffs that are (e.g., corncobs), contain (e.g., ketchup from GMO-tomatoes) or are derived from (e.g., GMO-soya oil) genetically modified organisms ("GMO") and are intended for sale to consumers must be authorised by the Federal Food Safety and Veterinary Office ("FSVO"). Not only genetically modified foodstuffs, but also genetically modified additives and processing aids are subject to prior authorisation (altogether "GMO-products"). However, small amounts of GMO in foodstuffs, additives and processing aids (i.e., 0,5 % per ingredient) that are, contain or are derived from genetically modified plants (not microorganisms) are tolerated on the Swiss market, if – among other – the GMOs have been assessed abroad in a procedure comparable to the Swiss procedure as suitable for use in foodstuffs and health (and environmental) hazards can be excluded based on an assessment by the FSVO (and the Federal Office for the Environment ["FOEN"]). Currently, Switzerland tolerates four maize varieties and one soya variety.
It is prohibited to import GMO-products that are neither authorised nor tolerated. Such products can be seized and destroyed by the authorities. Importers are obliged to ensure compliance with Swiss regulations. When handling GMO-products, they have to take specific quality assurance measures based on the Hazard Analysis and Critical Point (HAACP) concept to avoid unintentional mixing with conventional products in Switzerland. In addition, if GMO-products are intended for consumers, importers must comply with specific labelling requirements. Furthermore, anyone who imports or exports genetically modified organisms, or is responsible for their transit, is subject to a statutory duty of care and must provide accompanying documentation with specific content.
In practice, the authorisation procedure proves to be rather complex. A comprehensive application file must be submitted to the FSVO setting out detailed information on possible effects on health and environment. Against the background of the strict authorisation requirements, only ten GMO-products have been authorised on the Swiss market until recently; namely, one soya line, three maize lines, two vitamins, two rennet ferments and two processing aids. As of lately, the FSVO has authorised five additional GMO-products.
In September 2019, the FSVO authorised the use of the enzyme "Asparaginase", which is obtained from the genetically modified strain of the fungus Aspergillus oryzae, as a processing aid in the production of foodstuffs (cereals, potatoes and coffee). As of February 2020, the FSVO has issued further authorisations for the following fermenter products:
- for the enzyme "Serine Protease (Chymotrypsin)", which may now be used as a processing aid for the production of protein-containing foodstuffs, in particular in the production of infant formula and follow-on formula based on protein hydrolysates;
- for the enzyme "Asparaginase", which is obtained from the genetically modified strain of the microorganism Bacillus subtilis, and which may now be used as a processing aid in the production of foodstuffs (cereals, potatoes and coffee) in order to reduce the acrylamide content in such products;
- for the substances "2'-O-Fucosyllactose" and "Lacto-N-Neotetraose", which may now be used as ingredients in the production of foodstuffs or formula for infants and children, in order to make them as similar as possible to breast milk in composition.
It is to be emphasised that the FSVO thoroughly examines applications and authorisation is granted only if, according to the state of scientific knowledge, a risk to health and the environment can be excluded. However, if the FSVO authorises a GMO-product, such authorisation is valid for a ten-year period and upon request, the authorisation may be renewed. It remains to be seen whether this accumulation of new authorisations is a coincidence or represents a new trend.
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Italy : Plastic And Sugar Tax
Authors: Paola Ghezzi (Partner, CMS Rome), Massimo Alpigiani (Senior Associate, CMS Milan)
Italian Budget Law no. 160/2019 for the financial year 2020 has introduced two highly debated measures, which are destined to have important economic impact on the Food industry.
Plastic Tax and Sugar Tax are theoretically aimed at reducing the consumption of sweetened drinks and the production of plastic goods, considered harmful to the environment and health.
To understand the effect of these measures, a more detailed analysis of the same is necessary.
Italian Plastic Tax is related to the European Single-Use Plastics Directive, adopted last May by the EU Council; it applies to the consumption of the so-called "single-use items" ("SUI") intended to have function of containing, protecting, handling or delivering goods or food products. The SUI that fall within the scope of the Plastic Tax are those realized by using, even partially, plastic materials made of organic polymers of synthetic origin and which are not conceived, designed or placed on the market to make several transfers during their life cycle or to be re-used for the same purpose for which they were designed.
These items also include those SUI used for the closure, marketing or presentation of the same SUI or of products entirely made of materials other than plastics, as well as semi-finished products, realized by using, even partially, plastic materials used in the production of SUI. Tetrapak materials, initially excluded from the scope of the Italian Plastic Tax, now fall within the scope of the national legislation in its final version.
On the contrary, SUI which are compostable (pursuant to UNI EN 13432: 2002), as well as containers of medicines and medical devices, are excluded from the scope of the tax.
The obligation of payment shall be borne by the manufacturer located in the national Italian territory, or by the person who, in the exercise of his economic activity, purchases SUI in other European countries, or by the importer within Italian territory of the same from extra-EU countries, or by the seller who, within its economic activity, transfers these materials to private consumers. The tax becomes payable at the time of production or introduction/import of SUI in the national territory.
The tax is set at 0.45 euro per kilogram of plastic material contained in SUI and shall apply from July 2020.
Penalties for non-payment of the tax are heavy, however are balanced by the recognition of a tax credit of 10% on the expenses incurred by companies for technological adaptation aimed at the production of compostable products between 1st January 2020 and 31st December 2020.
Italian Sugar Tax applies to sweetened drinks with an alcohol content of less than or equal to 1.2% vol., with an overall content of sweeteners equal to or less than 25 grams per litre (for finished products), or 125 grams per kilogram (for products prepared for use after dilution), such as fruit or vegetable juices, mineral and sparkling waters with added sugar or other sweeteners or flavourings, other non-alcoholic drinks, intended for human consumption.
The payment obligation arises at the time of the transfer by the manufacturer or by the national entity that provides for the presentation for sale to consumers on Italian territory, or at the time of purchase by EU countries or import from extra-EU countries.
The tax is set at € 10.00 per hectolitre for finished products and € 0.25 per kilogram for products prepared for use after dilution.
The application of Sugar Tax is also deferred; in fact, the prior issuance of a decree of the Minister of Economy and Finance (to be published by August 2020) containing application modalities of the tax is necessary.
Although this kind of measures is generally considered necessary to deal with phenomena such as pollution and increase in diseases (obesity, diabetes) linked to the excessive intake of sugars, both taxes have been badly received, particularly by the international food and beverage companies. It has been announced that companies operating in the bottling of sweetened soft drinks business are seriously considering the possibility of relocating their production plants outside Italy in order to avoid taxation. Confindustria (General Confederation of Italian Industry) has expressed criticism because both taxes affect "factors and products and not behaviour".
In the coming months, it will be necessary to understand if and to what extent these taxes contribute to a change in environmental and food culture, or only represent another umpteenth unpleasant imposition of no use.
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INTELLECTUAL PROPERTY LAW
Sky vs. SkyKick: The CJEU Lets Trademark Owners Breathe A Sigh Of Relief
Authors: Dr. Egon Engin-Deniz (Partner, CMS Vienna), Dr. Nikolas Gregor, LL.M. (CMS Hamburg)
On 29 January 2020 the CJEU delivered its eagerly awaited judgment in the Sky vs. SkyKick case. However, the ruling does not have the wide-ranging consequences that were initially expected based on the opinion of the Advocate General. As a result, the CJEU did not follow the opinion of the Advocate General for the most part. This means that trademark owners can now breathe a sigh of relief.
The judgment in Sky vs. SkyKick is the response to a preliminary ruling by the British High Court in trademark infringement proceedings between the Pay-TV provider Sky and SkyKick, a provider of e-mail migration and cloud backup services. Sky registered its trademark "Sky" for goods and services, which included very broad terms such as "computer software" or "telecommunications services". Therefore, the referring court found a collision with SkyKick. SkyKick, however, denied trademark infringement and argued that the trademark "Sky" was invalid because the list of goods and services was too vague. In addition, the application for registration would have been filed in bad faith due to lack of intention to use the mark.
Clarity and precision
Although the Advocate General's original opinion called for strict clarity on the terms used in the lists of goods and services, the CJEU finally deviated from this legal interpretation.
The CJEU stated that a trademark cannot be declared invalid on the sole ground that the terms in the list of goods and services lack clarity and precision. It also made clear that apparently unclear and imprecise terms such as "computer software" are not defined so broadly as to be "contrary to public policy". The concept of "public policy" focuses only on the sign itself (in this case "Sky") in a commercial context and not on the terms used for the goods and services concerned. Such a clarification is a welcome relief for many trademark owners.
Originally, the Advocate General held that an application for a trademark is made in bad faith if the applicant applies for registration of a trade mark in a field for which he does not wish to use the trademark at all or only applies for registration in order to make it more difficult for competitors to enter the market. The CJEU backed off from this point as well and clarified that bad faith may not be assumed simply on the basis that the trademark applicant had not prepared for a business sector corresponding to the goods and services covered by the trademark application.
Instead, the CJEU refers to the 5-year grace period for use of a registered trademark. In this context, bad faith can only be assumed if there are conclusive and objective indications that the applicant intends to harm third party interests.
What are the consequences of the judgement?
The CJEU maintains the current status quo and there is no alignment with the US trademark system, according to which trademark registrations can be challenged on the grounds that there was no intention to use the mark at the time of registration. As a consequence, European trademark law will not require proof of the trademark applicant's intention to use the trademark.
Generally speaking, owners of trademarks which are protected for extensive goods and services do not have to fear the immediate cancellation of their trademarks if they are still within the 5-year grace period for use.
At the same time, the judgement highlights that future trademark applicants must conduct comprehensive research for possible conflicting trademarks before applying for their intended trademark. The reason for this is that registered trademarks which are protected for a wide range of goods and services may block the intended trademark application. Applying for a new trademark without infringing on any existing rights is therefore becoming an increasing challenge.
 CJEU 29.01.2020, C 371/18.
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