China Newsletter | Q1 2025/Issue No. 63
In This Issue
This China Newsletter provides an overview of key Q1 2025 developments in the following areas:
1.
Antitrust
China Unveils Anti-Monopoly Guidelines for Pharmaceutical Sector
2.
Compliance
China Formally Finalizes First Anti-Corruption Guidelines for the Health Care and Life Sciences Industry
3.
Corporate
China Streamlines Company Registration: Key Changes Effective February 2025
4.
Data Privacy & Cybersecurity
China Issues Personal Information Compliance Audit Rule
China Issues Regulation for Facial Recognition Technology Applications
China Issues Measures for Labeling AI-Generated and Synthetic Content
5.
Foreign Investment
China Publishes 2025 Action Plan for Stabilizing Foreign Investment
6.
International Trade
China Promulgates Regulations for Implementing Anti-Foreign Sanctions Law
Read the Full Newsletter Here
Mexico Publishes Sustainability Reporting Standards
On May 13, 2024, the Mexican Financial Reporting and Sustainability Standards Board (CINIF) published the Sustainability Reporting Standards (NIS), which took effect Jan. 1, 2025. The NIS require any entities that report their financial statements under Mexican Financial Reporting Standards to include sustainability information in financial statements beginning in 2026 using data from the 2025 fiscal year. This GT Alert summarizes the most relevant aspects of the NIS.
I. Context
In response to the increased environmental and social demands in recent years, and in line with the United Nations’ Sustainable Development Goals (ODS) and the first international sustainability standards, IFRS S1 and S2, issued by the International Sustainability Standards Board (ISSB) May 13, 2024, CINIF issued the first Mexican NIS, NIS A-1, and NIS B-1. The promulgation of these standards corresponds to the first stage of CINIF’s strategy for issuing the NIS.
II. Purpose
The NIS aim to formalize and standardize ESG (Environmental, Social and Governance) information reporting. Specifically, the purpose of NIS-1 is to establish the conceptual framework of the NIS, in line with the conceptual framework of the Financial Reporting Standards (NIF). On the other hand, NIS B-1 establishes the standards for determining the Basic Sustainability Indicators (IBSO) and their disclosure.
III. NIS A-1
Establishes the conceptual framework and general requirements applicable to sustainability information, which are consistent with NIF.
NIS A1 provisions should be applied in conjunction with the detailed requirements provided in NIS B-1.
Defines the characteristics that must be met for sustainability information to demonstrate improvement from previous years’ reporting.
IV. NIS B-1
Establishes the criteria for the identification and disclosure of all IBSOs, which are applicable to all types of entities.
Introduces 30 IBSOs, 21 quantitative and nine qualitative, which must be fully disclosed:
Quantitative indicators
Qualitative indicators
Environmental
Social
Governance
Social-Human capital
Governance
1. Greenhouse gas (GHG) emissions, scope 1
2. GHG emissions, scope 2
3. GHG emissions, scope 3
4. Energy consumption
5. Renewable energy consumption
6. Sustainable investment
7. Incoming water
8. Water reuse
9. Wastewater discharge
10. Discharge of treated wastewater
11. Incoming water from water-stressed areas
12. Land use within or near irrigated areas for biodiversity
13. Dependence on substances and products that deplete the ozone layer
14. Generated waste
15. Used waste
16. Hazardous waste
1. Wage gap
2. Training hours
3. Performance evaluations and professional development of employees
4. Accidents and diseases at work that caused incapacity or death
1. Women on the board of directors
1. Management of equal opportunity and suitable work conditions
2. Occupational health and safety management
1. Board of directors
2. Independent supervisory body
3. Risk management policy
4. Sustainability strategy
5. Code of integrity and ethics
6. Information security
7. Protection and privacy of third-party data
For each of the quantitative IBSOs, the absolute and relative value must be determined and disclosed according to the specifications of the standard.
Entities must disclosure at least the following: (i) profile and context in which they operate; (ii) reporting period; (iii) comparable information with the previous year; (iv) economic sector to which they belong; (v) geographic regions in which they operate; (v) economic activities; and (vi) number of workers and categories of occupation, gender, and age ranges.
IBSO disclosure should be made in the notes of financial statements at the end of the reporting period, displayed in comparison with the previous period.
NIS B-1 outlines the sources that may be consulted to obtain the information required for the determination of each IBSO.
V. Effective Date
The NIS took effect Jan. 1, 2025.
VI. Additional Considerations
The NIS B-1 transitory provisions specify that in the first year of application, entities will not be required to present information from previous periods in comparative form with the current period.
The first reporting deadline will be in 2026, using data from the previous year.
In addition to the above, entities may not disclose Scope 3 GHG emissions1 during the fiscal year following Jan. 1, 2025.
1 Scope 3 GHG emissions are the result of activities from assets not owned or controlled by the reporting entity, but that the entity indirectly affects in its value chain.
Paula Maria De Uriarte contributed to this article
New Jersey Pay Transparency Law: NJ DOL Releases Guidance
Covered employers in New Jersey must now comply with pay transparency obligations for job advertisements and promotional opportunities, as described in our prior GT Alert. As a reminder, covered employers include any person, company, corporation, firm, labor organization, or association that has 10 or more employees over 20 or more calendar weeks, and does business, employs persons, or takes applications for employment within New Jersey. The New Jersey Department of Labor (NJ DOL) has now provided interpretative guidance on the new law in an FAQ.
Notable provisions in the FAQs include the NJ DOL’s position that an employer need not have an employee in New Jersey to be covered by this law:
Must an employer have an employee in New Jersey to be covered by the Pay Transparency law?
No. Under the Pay Transparency law, an employer may still be covered if it has 10 or more employees over 20 calendar weeks, whether those employees work inside or outside of New Jersey. However, if none of the employer’s employees work inside New Jersey, the employer will only be covered if it does business in New Jersey or takes applications for employment within New Jersey.
The FAQ also addresses nationwide job postings:
Are nationwide job postings included under the [New Jersey] Pay Transparency law?
It depends. If the employer has the minimum number of employees to be covered by the Pay Transparency law and the employer does business, employs persons, or takes applications for employment within New Jersey, then yes, its job postings must comply with the law, even if the employer is advertising nationally or accepting applications from anywhere in the country.
The NJ DOL also includes details regarding potential penalties:
Penalties for employers violating the Pay Transparency law.
Any employer who violates the Pay Transparency law can be assessed a penalty up to $300 for the first violation, and up to $600 for each subsequent violation.
Under the law, if an employer publishes the same job posting in multiple places at the same time – for example, in a newspaper, job search websites, and social media – NJDOL must consider these posts collectively as one violation of the law.
However, if an employer advertises multiple roles in its organization at the same time, NJDOL will assess one penalty for each role where the job posting fails to comply with the law.
(emphasis in original).
Employers should review these FAQs to confirm their understanding of their obligations under New Jersey’s Pay Transparency law and consult with with counsel to address any compliance questions.
Navigating Uncertainty: How Recent IEEPA Tariff Rulings Impact the Maritime Industry
On May 28, 2025, the United States Court of International Trade (“CIT”) issued a landmark decision in V.O.S. Selections, Inc. v. United States,[1] holding that tariffs imposed by the President under the International Emergency Economic Powers Act (“IEEPA”) exceeded the statutory authority granted by Congress. The CIT vacated the challenged tariff orders and permanently enjoined their enforcement nationwide. However, less than 24 hours later, the U.S. Court of Appeals for the Federal Circuit temporarily stayed the CIT’s order, preserving the tariffs while the government’s appeal is pending. A separate decision from the D.C. District Court also found the President’s IEEPA tariffs to be beyond the scope of the statute, though it imposed a more limited injunction.[2]
The CIT’s decision is significant for the maritime industry, as it directly challenges the President’s ability to impose broad, unbounded tariffs on imports under IEEPA. The CIT emphasized that IEEPA does not grant the President unlimited authority to regulate importation through tariffs, and that any such delegation of power must be clearly limited and guided by statutory principles. The CIT found that the tariffs in question—ranging from a 10 percent rate on all imports to higher, country-specific duties—were not sufficiently tied to the “unusual and extraordinary threat” required by IEEPA and lacked meaningful limitations in scope or duration.
Immediate Impact on the Maritime Industry
Although the CIT’s decision would have set aside all tariffs imposed under the challenged executive orders, the Federal Circuit’s stay means that these tariffs remain in effect for now. This ongoing legal uncertainty has several immediate implications for the maritime industry:
Continued Tariff Collection. Maritime carriers, freight forwarders, and port operators must continue to process shipments subject to the existing tariffs, as the stay preserves the status quo pending further judicial review.
Operational Uncertainty. The potential for a sudden removal or reinstatement of tariffs creates significant unpredictability for shipping schedules, contract negotiations, and supply chain planning. Maritime stakeholders should be prepared for rapid changes in tariff policy as the litigation progresses.
Customs and Compliance Considerations. Importers and logistics providers must remain vigilant in tracking the status of the litigation and any changes to tariff enforcement. Accurate documentation and compliance with current tariff requirements remain essential to avoid penalties or delays.
Long-Term Implications for Maritime Trade
The CIT’s decision, if upheld, would have far-reaching consequences for the maritime industry:
Potential Elimination of Additional Duties. If the tariffs are vacated, importers would no longer be subject to the additional duties imposed under the challenged executive orders. This could lead to increased cargo volumes and reduced costs for shippers and their customers.
Judicial Scrutiny of Emergency Tariffs. The decision signals that future attempts to use IEEPA to impose broad tariffs—especially as leverage in trade negotiations or to address general trade deficits—will face significant judicial scrutiny. This may provide greater predictability and stability for maritime trade policy going forward.
Distinction from Section 232 Tariffs. It is important to note that the CIT’s decision does not affect tariffs imposed under other authorities, such as Section 232 duties on steel, aluminum, and automobiles. These measures remain in place and continue to impact certain segments of the maritime industry.
Next Steps and Recommendations
Given the dynamic nature of the current legal landscape, maritime stakeholders should vigilantly monitor ongoing litigation developments and be ready to adapt their operations in response to changes in tariff policies. It is advisable to consult with legal counsel regarding the status of duties paid under the relevant tariffs and potential refund procedures if these tariffs are ultimately overturned. Maintaining robust compliance programs is essential to ensure adherence to all applicable customs and tariff requirements during this period of uncertainty.
Recent court rulings emphasize the importance of statutory limits on presidential authority to impose tariffs, highlighting the need for maritime industry stakeholders to stay informed and agile as the situation evolves.
[1] cit.uscourts.gov/sites/cit/files/25-66.pdf
[2] courthousenews.com/wp-content/uploads/2025/05/contreras-blocks-certain-trump-tariffs.pdf
Mastering the Art of the Follow-Up: How to Turn Events into Real Business Development Opportunities
You spent weeks or months planning the event. You invited the right people, chose a strong format and created the kind of setting where real conversations could happen. Maybe it was a cocktail reception. A panel. A small dinner. What matters is that you brought people together with intention.
But too many companies (and people) stop there. They let the energy die down. They wait too long to follow up or send the same message to everyone. That’s where the opportunity slips.
The follow-up is where the impact really happens. It’s how you turn a moment of connection into something more. A next step. A new matter. A stronger relationship.
This article walks through how to follow up the right way to build relationships, visibility and business. It covers what companies should do, what individuals should do, how to handle no-shows and how to use LinkedIn to keep things going. It also includes how to become a connector for others and why that’s one of the most effective ways to add value to your network.
What Your Company Should Do After the Event
Companies often spend most of their energy on planning. But if you don’t build a plan for what happens after, you’re leaving so much value on the table. The follow-up is how you extend the life of the event, bring people closer to your brand and give your team tools to move relationships forward. Here’s how to make sure your firm (and you) get the most out of the experience.
Send a thank-you message that adds something: A generic note won’t make an impression. Recap the purpose of the event and highlight a few moments that stood out. If there was a strong quote or a key takeaway, include it. Add a photo if it feels appropriate. Segment your outreach. Senior contacts should get a different message than junior professionals or peers. One size never fits all.
Post about the event on LinkedIn with intention: Skip the photo dump and vague caption. Share a real insight from the event, something that sparked conversation or prompted a new question. Keep it useful and brief. Tag people only when it makes sense. Make it about the substance, not the optics.
Turn the event into content worth reading: If the event focused on a timely issue or trend, create a short article or blog post based on what was discussed. Include your firm’s perspective. Focus on what clients need to know, not a recap. This content should reinforce your value and expertise, not repeat the agenda.
Equip your people to follow up quickly and well: Don’t assume everyone will know what to do next. Share the attendee list, notes from key conversations and follow-up templates. Identify high-priority contacts and offer talking points or next steps. Make it easy to take action. Most people won’t unless you give them the tools.
Update your tracking systems immediately: Add every attendee to your CRM or tracker. Note who they spoke with, what was discussed and what needs to happen next. Flag high-value targets for additional follow-up. If you don’t track this, it gets lost. Follow-up doesn’t work if it’s based on memory.
What Individuals Should Do After the Event
If you spent time talking to people at the event, the next step is on you. This is where most people hesitate. They tell themselves they’ll get to it later and then never do. I’ve seen it happen too many times and I’ve been guilty of it myself. Years ago I went to a packed industry dinner where I met someone who could have opened doors for a big opportunity. We had a great conversation, exchanged cards and promised to stay in touch. But I didn’t follow up until three weeks later and by then the moment had passed. I wasn’t top of mind anymore. That experience stuck with me.
The truth is, it doesn’t need to be perfect or overly polished. It just needs to be done. If you wait too long you risk losing the momentum. If you overthink it you’ll talk yourself out of reaching out. You’ve already made the connection. Now build on it while it’s still fresh. Send the note. Make the call. Keep the door open. It’s that simple.
Send a personal message within a day or two: Mention something you talked about. Keep it short and friendly. You’re just picking up where you left off.
Connect on LinkedIn: Consider including a personal note. Remind them where you met and thank them for the conversation. If you had a real exchange, this will feel natural.
Keep the relationship warm: Send a useful article, a relevant invite or just check in. Do it in a way that fits your relationship. The goal isn’t to pitch. It’s to stay in touch.
Track your outreach: Make a quick note to remind yourself when and how you connected. Set a calendar reminder to follow up again in a few weeks or months.
Be a super connector: Look for ways to bring people together. If someone you met at the event would benefit from knowing someone else in your network, make the introduction. It doesn’t have to be a big production. A quick email or message is often all it takes. When you make thoughtful connections, it shows you’re paying attention and thinking beyond your own relationships. It also signals that you’re someone people can trust to make smart, relevant introductions.
Speaking of Super Connectors…
One of the most valuable things you can do after an event isn’t about your own follow-up. It’s about helping other people. Introducing two smart contacts to each other can be more impactful than anything you say about yourself. And it leaves an impression that lasts.
You don’t have to be the most senior person in the room or have the biggest network. You just need to be thoughtful. When you connect people in ways that feel personal and intentional, you become someone others want to stay close to.
Here’s how to do it well:
Look for unmet needs: Pay attention to what people are working on. Is someone hiring? Are they trying to grow their presence in a certain market? Are they struggling with visibility or new business? Think about who you know who could help with that.
Make your introductions clear and specific: Don’t just say, “You two should know each other.” Explain why. Share a sentence or two about each person and what they’re focused on. Set the context. Make it easy for them to see the value in connecting.
Cross networks and roles: Great connections often happen outside the usual circles. Introduce people across industries, seniority levels or backgrounds. A founder might need a lawyer. A private equity partner might need a branding expert. Think big.
Stay organized: Keep track of who you’ve introduced and when. Follow up with each person later to see if the conversation happened. It shows you care and that you’re not just making connections to check a box.
Don’t overdo it: Every introduction should feel intentional. Quality matters more than quantity. You want to be known for sending the right names at the right time, not for flooding inboxes with random connections.
Being a connector shows people you’re paying attention. It also proves you’re not only thinking about yourself. That’s rare. And that’s the kind of person people want in their corner.
How to Handle No-Shows
An RSVP means something. Even if someone didn’t attend, they were interested. Maybe the topic spoke to them, or they knew someone hosting. They took the time to register, and that gives you a reason to follow up.
But what happens too often? Nothing. They get overlooked. They don’t hear from anyone. That’s a mistake. These are people who already signaled some level of connection. Now it’s your job to pick it back up and find a way to bring them back in. With the right outreach, you can restart the conversation and turn a missed event into a new opportunity.
Start with a prioritized list: Pull a list of no-shows and focus on the contacts who align with your goals. That might include clients, prospects, alumni or industry relationships. Don’t treat this as a mass outreach project. Be selective and strategic.
Make the outreach matter: A generic recap won’t do much. Think about what would be useful to them based on their role or industry. If a specific topic came up that’s tied to their business, start there. You don’t need to mention that they missed the event. Focus on what they would find helpful now.
Tie the follow-up to a next step: Share a relevant article or client alert. Invite them to a future event. Suggest a time to connect one-on-one. The goal isn’t to rehash what already happened. It’s to move the relationship forward from where it is now.
Assign outreach to the right people: If there’s an existing relationship, the message should come from that person. If not, choose someone who can speak with authority about the topic or the space the contact works in. The outreach should feel intentional, not random.
Track and follow through: Add these contacts to your internal tracking. Note what was sent and when. Identify who responded and what the next action should be. This isn’t just post-event housekeeping. It’s an extension of your business development strategy.
Connect with them on LinkedIn: If you’re not already connected, send a short note with your request. Mention the event briefly and let them know you’d like to stay in touch. This gives them an easy way to learn more about you and makes future outreach feel more natural.
Stay visible over time: If they’re not already in your LinkedIn network, send a connection request with a short, professional note. Continue to post and engage on topics that reinforce your expertise. Make sure your activity supports the outreach that’s already happened.
Think long term: Just because someone didn’t attend this time doesn’t mean they won’t engage next time. Keep the line open. Pay attention to what matters to them. Invite them to something more targeted. Stay consistent.
When it comes to this audience, also consider:
Debrief with your internal team: Identify which no-shows are worth a second look. Share relevant context and make sure there’s a clear owner and plan for each contact.
Loop in colleagues where it makes sense: If a no-show would be better served by another lawyer or team, pass the contact along thoughtfully. Make sure there’s follow-through.
Turn it into a check-in opportunity: If the contact is a current or former client, use the moment to reach out and ask what they’re seeing in the market or what’s on their radar.
Use no-show patterns to improve your invites: If the same people always RSVP and cancel, reconsider the format or content. They may be better served by a different kind of outreach.
The missed event doesn’t matter as much as what you do next. A thoughtful follow-up is often where the real relationship starts.
Using LinkedIn to Keep the Conversation Going
LinkedIn is one of the most effective ways to continue building relationships after an event. It helps people understand what you care about, how you think and where you show up. It also keeps you visible to the people you met without being intrusive. That visibility matters. When someone is deciding who to refer or hire, they often check LinkedIn first. What you do there reinforces everything you said in person.
Here’s how to use LinkedIn to build lasting connections after the event:
Connect with the people you met: Send a connection request within a few days while the conversation is still fresh. Always include a short note that reminds them where you met and what you discussed. A personal message makes the interaction feel intentional and thoughtful. Avoid sending a blank request or something overly generic. That small extra effort builds trust.
Post something thoughtful about the event: Choose one takeaway that stood out. This could be a quote, a topic that sparked strong reactions or a trend that came up in multiple conversations. Keep the post short and focused. Share your perspective. If you tag others, make sure there is a clear reason to do it. A good post extends the life of the event and gives your network something useful to think about.
Comment on posts from other attendees: When others post about the event, don’t ignore it. Add a meaningful comment or share it with your own thoughts. This helps you stay visible without writing something from scratch. More importantly, it shows you are engaged and paying attention. It’s also a good way to support your contacts and stay on their radar.
Share something relevant to the conversations you had: If your firm has a client alert, article or podcast episode that relates to something discussed at the event, share it privately or as a post. Explain why it’s helpful. This makes you a resource rather than someone trying to sell. Even if the person doesn’t respond, you’ve shown you listened and followed through.
Stay active in the days and weeks that follow: Many people will visit your profile after connecting with you. If you are posting and engaging with others, it gives them a better sense of who you are and how you think. You don’t need to post every day. A few consistent actions help build familiarity and make it easier for people to remember your strengths when opportunities come up.
Use your activity to reinforce your credibility: Your posts, comments and shares should align with the kind of work you want to be known for. If you’re in private equity, talk about trends you’re seeing. If you work with founder-led businesses, comment on news about those companies. The more your activity reflects your focus, the more likely it is that your connections will think of you when something relevant comes their way.
Follow up privately with content or a next step: LinkedIn doesn’t always need to be public. If you had a strong conversation with someone at the event, follow up with a short message that includes something of value. That could be a relevant article, an introduction or a quick note suggesting a future conversation. This helps you move from online visibility to actual relationship-building.
Watch for their updates and engage consistently: Staying in touch doesn’t require a big move. Watch for their updates, promotions, job changes or published content. Comment when it makes sense. A short, relevant response to one of their posts can be just as powerful as a full outreach email. It reminds them of who you are and keeps the connection alive.
LinkedIn works best when it’s used consistently and with intention. It shouldn’t replace your direct follow-up, but it plays a major role in keeping you visible, credible and connected. When done well, it turns a quick exchange at an event into a long-term relationship.
Make Follow-Up Part of the Plan
You can’t rely on good intentions to make follow-up happen. It needs to be built into the planning process from the start. Otherwise it gets delayed, rushed or forgotten.
Start by working follow-up into your event timeline. Think through what will happen after, who’s responsible and what tools they’ll need. Create a shared document that includes the full attendee list, who invited whom, who they spoke with and what kind of follow-up makes sense. Assign owners for key contacts. Don’t leave it vague.
Draft the follow-up materials in advance. That means thank-you emails, social media copy, LinkedIn templates and talking points. Also decide what content to share, whether it’s a blog post, a relevant client alert or an invitation to a future event. Having those pieces ready will make it easier for people to take action in a timely way.
It’s all about the follow up. Your follow-up doesn’t need to happen immediately, but it should happen within a few days while the event is still fresh. Block time on calendars if needed. Set internal reminders. Give your team what they need to reach out without having to start from scratch.
A few days later, check in. Who followed up. Who got a response. Who might need a second touchpoint. This is where marketing and BD can step in again to help think through what’s next.
Also pay attention to the people who RSVP’d but didn’t attend. Reach out to them. Send a quick note, a summary of what they missed or a link to a relevant resource. The interest was there. Don’t waste it.
If you want your events to lead to something more, you have to treat follow-up as part of the strategy. Not an extra task. Not something you’ll get around to when you have time. The real value of the event is built after it ends. That’s the part too many people skip.
Don’t Let the Event Be the End
Getting the right people in the room is only the beginning. What you do next is what matters.
The real value of an event is in what happens afterward. The conversations you continue. The relationships you deepen. The opportunities you create by staying visible and following through.
Make sure your colleagues know who they met and what steps to take next. Reach out while the connection is still fresh. Personalize every interaction. And don’t wait for someone else to do it.
This is where business gets done. Quietly. Thoughtfully. Intentionally.
Because the event might be over, but the window to make something real from it is just opening.
What a Cargo of Wheat Can Teach Us About Jurisdiction, Justice, and the Art of Drafting Contracts
In the pantheon of arbitration appeals, achieving success under sections 67, 68, and 69 of the Arbitration Act 1996 in a single case is rather like scoring a hat trick in a World Cup final – theoretically possible but rarely achieved. Yet this is precisely what CAFI Commodity & Freight Integrators DMCC (CAFI) managed in its recent victory against GTCS Trading DMCC (GTCS).
The decision in CAFI v. GTCS Trading, EWHC 1350 (Comm) (2025) offers a masterclass in how arbitration can go spectacularly wrong when tribunals tie themselves in jurisdictional knots, and how the Commercial Court can untangle even the most byzantine of procedural tangles. More importantly for commercial parties, it provides welcome clarity on when disputes can span multiple contracts – and why arbitrators cannot simply blind themselves to inconvenient contractual provisions.
A Tale of Two Contracts (and Some Sanctions)
As so many modern commercial disputes do, our story begins with the inconvenient incursion of geopolitics upon the noble pursuit of profit.
GTCS agreed to sell CAFI 28,000 metric tonnes of Russian milling wheat at a rate of $465 per tonne under a contract concluded in March 2022. The timing, one might observe, was not ideal. With US sanctions against Russia creating payment difficulties, CAFI found itself in the uncomfortable position of wanting wheat it could not easily pay for.
What followed was a commercial pas de deux familiar to anyone who has ever tried to salvage a deal going sideways. Through the intervention of a broker, the parties negotiated a second contract for the same cargo at a reduced price of $440 per metric tonne. Crucially, this second contract contained what the court termed a “Termination Clause” stating that the first contract was “terminated and considered void.” The cargo was duly delivered and paid for under the second contract.
One might have thought this the end of the matter – a neat commercial solution to an awkward geopolitical problem.
One would have been wrong.
The Arbitration Imbroglio
GTCS, perhaps suffering from seller’s remorse over the $25 per tonne price reduction, commenced Grain and Feed Trade Association (GAFTA) arbitration claiming damages for CAFI’s alleged repudiatory breach of the first contract.
GTCS’s argument was simple: CAFI had breached the first contract, and the fact that CAFI had subsequently agreed to buy the same cargo at a lower price merely quantified the damages. CAFI’s response was equally straightforward: the second contract’s Termination Clause had rendered the first contract “void” and thereby extinguished any liability for damages. This presented the GAFTA tribunal with a mealy interpretive puzzle – what exactly did “terminated and considered void” mean?
The First-Tier Tribunal sided with CAFI, finding that GTCS had waived its right to claim damages. GTCS appealed to the GAFTA Board of Appeal, which is where our journey takes a turn.
The Appeal Board found itself faced with what it perceived as a jurisdictional conundrum. Having been appointed under the arbitration clause in the first contract, could it interpret provisions of the second contract? The board concluded it could not: the second contract had its own arbitration clause, and any disputes about its meaning would require a separate arbitration. No arbitration had been commenced under the second contract, and so neither the First-Tier Tribunal nor the board had “jurisdiction to interpret the terms of the [second contract] or how any of those terms impact on the [first] Contract.”[1]
Having reached this conclusion, the board then proceeded to do exactly what logic suggested it could not: it awarded GTCS damages of $700,000, in effect determining that the Termination Clause did not extinguish liability under the first contract. The board’s reasoning was that while it could not interpret the second contract as a contract, it could consider it as “evidence” of what happened after the first contract was terminated.
This approach created a raft of failings.
The Court’s Triple Victory
CAFI challenged the board’s award. Its challenge succeeded on all fronts, providing a neat demonstration of how the three appeal grounds under the Arbitration Act can work in practice.
Section 67 (jurisdiction): The court held that the Appeal Board was wrong to conclude it lacked jurisdiction to interpret the second contract as a contract.[2] The arbitration clause in the first contract was decidedly vanilla, covering “[a]ny dispute arising out of or under this contract.” That language was broad enough to encompass disputes about whether subsequent agreements affected rights under the first contract. As Henshaw J noted, rational parties would not intend that disputes about the continuing validity of their contract should be carved out and sent to a different tribunal.[3]
Worse still, having found (wrongly) that it lacked jurisdiction to interpret the second contract, the board then went on to exceed the jurisdiction it thought it did have. It followed from the board’s finding that it lacked jurisdiction in respect of the second contract that it also lacked jurisdiction to determine the question of waiver. But by awarding damages without determining whether the Termination Clause extinguished GTCS’s right to claim them, the board made an implicit determination as to the effect of the second contract, and, by purporting to do so, exceeded its jurisdiction.
Section 68 (serious procedural irregularity): The board’s failure to properly grapple with the waiver issue created other problems too. The court found that even if the board’s finding as to jurisdiction was correct, it was not possible to determine whether CAFI was liable under the first contract without first determining whether GTCS had, through the second contract, waived its claims. By finding CAFI liable for breach without considering the waiver issue, the board, in dereliction of duty under section 33, pre-emptively determined the waiver issue against CAFI – an irregularity so serious it was within the scope of section 68.
Section 69 (error of law): Cementing the hat trick, the court also found that the board, by concluding it could award damages where a live issue existed as to whether liability had been extinguished and that issue had not been resolved by a competent tribunal, had committed an obvious error of law.
Additionally, although ultimately unnecessary for the court to determine,[4] Henshaw J noted that CAFI would have had “a strong case” that the Appeal Board’s conclusion that CAFI needed to show the Termination Clause had been “freely negotiated” or was the subject of “clear discussion” before it could be effective was obviously wrong in law.[5] That dicta confirms that the terms of a written contract speak for themselves, regardless of the process by which they came to be agreed—that a contract means what it says, not what the parties discussed (or failed to discuss) beforehand, and courts and tribunals should not journey beyond the words used in a hunt for evidence of specific negotiation of particular clauses.
Lessons From the Wheat Wars
From forum selection strategies to drafting precision, the case highlights opportunities and pitfalls, and offers kernels of wisdom for commercial practitioners navigating the complexities of multi-contract disputes.
When arbitrators fear to tread: For all its virtues, arbitration is only as good as the arbitrators who conduct it. When tribunals tie themselves in jurisdictional knots and attempt to avoid difficult interpretive questions, they risk creating the very problems they seek to avoid. The Appeal Board’s attempt to split the difference, denying jurisdiction over the second contract and disclaiming ability to discern its meaning while effectively doing exactly that sub silentio, satisfied nobody – and achieved nothing except procedural chaos. Jurisdictional questions demand confidence, not excessive handwringing.
A commercial victory: Commercial parties need not launch multiple arbitrations when subsequent agreements might affect rights under earlier contracts. A single, properly appointed tribunal can – and should – interpret one contract through the lens of later agreements between the same parties. This streamlined approach saves both time and the headache of coordinating parallel proceedings.
Forum shopping made simple: Jurisdiction clauses are not always mutually exclusive.[6] When parties weave together related agreements, each sporting its own arbitration clause, disputes can legitimately fall within multiple jurisdictional nets. The result? Claimants likely get to pick their preferred forum, but they should do so with caution given the attendant risk of parallel proceedings.
The price of poor drafting: Beyond the jurisdictional confusion lies a sobering lesson in the need for clear contractual drafting. The phrase “terminated and considered void” may have seemed like belt-and-braces language to the parties, but it created sufficient ambiguity to spawn two arbitrations, an arbitration appeal, and a Commercial Court appeal. Greater drafting precision might have saved everyone considerable time and expense.
The case provides an exposition of arbitration law in action, and a reminder that even in the esoteric world of GAFTA wheat disputes, basic principles of fairness and logical consistency still matter. The Commercial Court’s willingness to deploy all three statutory appeal grounds demonstrates that when arbitrators get it wrong, they can get it comprehensively wrong—and that the courts retain both the power and the will to put things right.
[1] Section 9.8, extracted in section 28 of the judgment.
[2] Section 43.
[3] Section 38, section 42.
[4] The Appeal Board did not attempt to construe the second contract as a contract and accordingly it was unnecessary to determine CAFI’s alternative challenge (advanced on the basis of section 69) that the board’s approach to interpretation was an obvious error of law.
[5] Section 62.
[6] Section 36.
Barrierefreiheitsstärkungsgesetz (BFSG) und die betroffenen Bankdienstleistungen
Am 28. Juni 2025 tritt das Barrierefreiheitsstärkungsgesetz (BFSG) in Kraft. Das Kernziel des BFSG ist es, allen Menschen die barrierefreie Teilhabe am Wirtschaftsleben zu ermöglichen. So ist die Teilhabe an digitalen Produkten und Dienstleistungen insbesondere für Menschen mit Behinderung oftmals nur eingeschränkt möglich. Das BFSG verpflichtet alle Wirtschaftsakteure zur Barrierefreiheit bestimmter Dienstleistungen und Produkte. Dies schließt ausdrücklich auch Bankdienstleistungen mit ein, sodass für sämtliche betroffenen Unternehmen der Finanzbranche Handlungsbedarf besteht.
WEITERE INFORMATIONEN
1. Hintergrund
Mit dem BFSG wird die Richtlinie über die Barrierefreiheitsanforderungen für Produkte und Dienstleistungen ((EU) 2019/882) in deutsches Recht umgesetzt. Ergänzend wurde am 15. Juni 2022 die Verordnung zum Barrierefreiheitsstärkungsgesetz (BFSGV) verabschiedet, welche konkrete Anforderungen an die Barrierefreiheit von Produkten und Dienstleistungen regelt.
2. Anforderungen an die Barrierefreiheit
Das BFSG gewährleistet die Barrierefreiheit von Produkten und Dienstleistungen im Interesse der Verbraucher und Nutzer.
Zu den erfassten Produkten gehören u.a. sogenannte Selbstbedienungsterminals, worunter auch Zahlungsterminals und Geldautomaten fallen.
Die Dienstleistungen umfassen Bankdienstleistungen für Verbraucher. Hierzu zählen Verbraucherkreditverträge und Immobiliar-Verbraucherkreditverträge sowie bestimmte, verbraucherbezogene Wertpapierdienstleistungen und Nebendienstleistungen, wovon insbesondere die Portfolio-Verwaltung und die Anlageberatung erfasst sind. Außerdem unterfallen auch Zahlungsdienste nach dem ZAG, mit einem Zahlungskonto verbundene Dienste und E-Geld dem BFSG. Ferner sind auch generell Dienstleistungen im elektronischen Geschäftsverkehr geregelt, die im Hinblick auf den Abschluss eines Verbrauchervertrags erbracht werden. Erfasst ist damit nicht nur der Abschluss eines Verbrauchervertrags über eine Website oder eine App, sondern bereits der vorvertragliche Bereich.Wirtschaftsakteure, die solche Produkte oder Dienstleistungen anbieten, haben grundsätzlich den Pflichten nach dem BFSG nachzukommen, und diese barrierefrei auszugestalten. Ausnahmen und Erleichterungen bestehen nur für Kleinstunternehmen (
ASIC Appeals Full Federal Court’s Finding in Favour of Block Earner: Key Takeaways for Crypto Companies
The crypto-asset industry has undergone unparalleled expansion and growth in recent years, leaving regulators globally grappling with how to keep up and enforce the existing regulatory frameworks. In Australia, the crypto-asset industry has been preparing for the impending regulation of crypto-assets, with the Government consulting on changes to the existing regulatory framework that will create additional licensing requirements for providers of services (such as exchanges and custodians) in respect of crypto-assets (previously discussed in our post). In addition, the Australian Securities & Investments Commission (ASIC) is consulting on changes to its own Information Sheet 225 (INFO 225), which provides guidance on the circumstances in which a crypto-asset related offering may be a financial product.
Against this backdrop, ASIC continues to pursue enforcement action against crypto-asset providers, most recently, seeking special leave from the High Court of Australia (HCA) to appeal the Full Federal Court’s recent decision. On 22 April 2025, the Full Federal Court in ASIC v Web3 Ventures (Block Earner) found in favour of Block Earner, reversing aspects of the primary judgment which had found in favour of ASIC in some respects.
The Full Federal Court’s decision was noteworthy for other cryptocurrency exchange and digital asset providers, given the clarity provided by the court regarding the characteristics of “managed investment schemes”, “facilities through which a person makes a financial investment”, and derivatives.
This decision may have implications for ASIC’s proposed updates to INFO 225, as it had been relying in part on the primary judge’s findings in this case as one of the justifications for needing to update INFO 225.
However, ASIC has now sought special leave to the High Court. If leave to appeal is granted, ASIC may use the appeal as a ‘test case’ for clarifying the definitions of a variety of products in the market. In these circumstances, even if the Full Federal Court’s decision is overturned, Block Earner is likely to seek to ensure that the penalty relief granted in the Federal Court remains.
Background
Block Earner provided two main “products” or “services” known as the “Earner” and “Access” products. The Access product was not considered by the Federal Court to be a financial product. The Earner product allowed customers to “loan” specified cryptocurrency in return for interest paid at a fixed rate. Block Earner was then able to use the loaned crypto assets to generate income by lending the cryptocurrency to third parties. At the end of the loan, users received their AUD calculated by reference to the price of the relevant cryptocurrency plus the fixed rate of return.
Customers were bound by the Terms of Use upon opening an account with Block Earner. Imperatively, under the Terms of Use, Block Earner was required to pay the fixed interest rate to users regardless of the amount of income it earned (if any) in relation to the cryptocurrency which was the subject of the loan.
The Full Federal Court’s Decision (22 April 2025)
The Full Federal Court found that the Earner and Access products were not “financial products” under the Corporations Act for reasons which are detailed below. On this issue, the Full Federal Court overturned the finding of the primary judge.
Managed Investment Schemes
In assessing whether there was a managed investment scheme, the Full Federal Court emphasised the need to assess the Terms of Use and some key provisions in it. In particular, the Terms of Use explicitly stated that the loaned cryptocurrency would not be used to generate a financial benefit for the users.
The Full Federal Court consider that what Block Earner did with the loaned crypto assets was entirely at its own discretion and customers had no right to benefits produced by those activities.
The primary judge had found that, although the Terms of Use did not mention pooling for any common benefit, it was sufficient that Block Earner had represented that contributions would be pooled in order to generate a financial benefit for users.
The FCAFC rejected this notion, instead finding that the clauses within the Terms of Use should be taken literally and objectively, as they were unambiguous.
The court also distinguished this case from cases where the court has gone beyond the terms of the loan agreement; where specific representations are made outside of and contrary to terms of loan and where there were specific commitments to use the funds in particular ways for the benefit of investors. Here, the Block Earner customers had no exposure to the benefits of whatever activities Block Earner undertook once it had borrowed cryptocurrency from those users.
Facility for Making a Financial Investment
The Full Federal Court also held that the Earner product was not a facility for making a financial investment under section 763B of the Corporations Act. The primary judge considered that money was being used to generate revenue to then pay a fixed yield back to customers, and therefore the users were making a financial investment. On the contrary, the Full Federal Court found that Block Earner had used the profit generated for itself, and to benefit itself, rather than ‘for’ the investors. The Full Federal Court again emphasised that users were bound by the Terms of Use which clearly indicated their fixed yield entitlement.
Key Takeaways
The Full Federal gave emphasis to the Terms of Use – and their literal interpretation – as opposed to what ASIC considered the terms to have “conveyed”.
Terms or other representations should be unambiguous and explicit, and not overly long or complex. This ensures that the terms are unable to be construed in any other way than how the business intends.
The legal relationship between the business and its customers should be clearly defined.
Conclusion
Further developments at the High Court are being watched closely, given their potential impact on digital asset businesses.
In the meantime, the Full Federal Court’s judgment provides clarity on the characteristics of managed investment schemes, facilities through which a person makes a financial investment and derivatives.
There may be implications for Information Sheet 225 as a result of the judgment, but this remains uncertain ahead of ASIC’s special leave request. We will provide further updates if there are any developments.
CMS Issues Request for Public Input on Hospital Pricing Transparency
Key Takeaways
1. Centers for Medicare & Medicaid Services (CMS) Aims to Strengthen EnforcementThe agency is evaluating how to better enforce hospital price transparency rules under the Executive Order.
2. Definitions and Data Quality Are Under ReviewCMS is considering how to define and ensure the accuracy and completeness of pricing data.
3. Stakeholder Input Will Shape PolicyHospitals, payors and others are invited to submit comments by July 21, 2025.
Earlier this year, President Donald Trump issued an Executive Order titled “Making America Healthy Again by Empowering Patients with Clear, Accurate, and Actionable Healthcare Pricing Information.” In the EO, President Trump ordered the Secretary of the Treasury, the Secretary of Labor, and the Secretary of Health and Human Services to take action within 90 days to enforce the health care price transparency regulations currently in effect. Specifically, the Departments were required to take action which would: (a) require the disclosure of the actual prices of items and services, not estimates; (b) issue updated guidance or proposed regulatory action ensuring pricing information is standardized and easily comparable across hospitals and health plans; and (c) issue guidance or proposed regulatory action updating enforcement policies designed to ensure compliance with the transparent reporting of complete, accurate, and meaningful data.
On May 22, 2025, in what appears to be one of the first steps in complying with this White House’s February Order, CMS issued a Request for Information (RFI) seeking public input on how to boost hospital compliance and enforcement and ensure hospital price transparency (HPT) data is accurate and complete. In particular, CMS has posed six questions about which it would like public input:
Should CMS specifically define the terms “accuracy of data” and “completeness of data” in the context of HPT requirements, and, if yes, then how?
What are your concerns about the accuracy and completeness of the HPT MRF (Machine-Readable File) data? Please be as specific as possible.
Do concerns about the accuracy and completeness of the MRF data affect your ability to use hospital pricing information effectively? For example, are there additional data elements that could be added, or others modified, to improve your ability to use the data? Please provide examples.
Are there external sources of information that may be leveraged to evaluate the accuracy and completeness of the data in the MRF? If so, please identify those sources and how they can be used.
What specific suggestions do you have for improving the HPT compliance and enforcement processes to ensure that the hospital pricing data is accurate, complete, and meaningful? For example, are there any changes that CMS should consider making to the CMS validator tool, which is available to hospitals to help ensure they are complying with HPT requirements, so as to improve accuracy and completeness?
Do you have any other suggestions for CMS to help improve the overall quality of the MRF data?
More details on the RFI are available here, which includes the web-based form by which comments should be submitted. The deadline to submit comments is 11:59 p.m. Eastern Time on July 21, 2025.
Investment Management Client Alert June 2025
ESMA Publishes Final Report on the Preparation of Securities Prospectuses
On 12 June 2025, the European Securities and Markets Authority (ESMA) published its final report with regulatory technical standards (RTS) for the preparation of securities prospectuses. This contains a proposed amendment to Delegated Regulation (EU) 2019/980, which contains the schedules for the content of securities prospectuses. This is intended to further elaborate and implement the amendments to the Prospectus Regulation, in particular due to the introduction of new prospectus types with the Listing Act adopted by the European Parliament on 14 November 2024.
The draft amendment to Delegated Regulation (EU) 2019/980 for European green bonds and nonequity securities that are advertised as considering Environmental, Social, and Governance (ESG) factors or pursuing ESG objectives provides for significant changes to the prospectus content. This applies in particular to information on the EU Taxonomy Regulation and on market standards or ESG labels. In addition, issuers of nonequity securities that are advertised as considering ESG factors or pursuing ESG objectives and that are based on an underlying asset (structured securities) must provide information on the extent to which this underlying asset is material for the assessment of the ESG factors or ESG objectives.
The European Commission now has three months to decide whether it will implement the final draft amendment to Delegated Regulation (EU) 2019/980.
ESMA Publishes Technical Advice on Harmonization of Prospectus Liability
On 12 June 2025, ESMA published technical advice on the further harmonization of civil liability in relation to securities prospectuses. A mandate from ESMA in this regard is provided for in the Prospectus Regulation following amendment by the Listing Act. To date, civil liability for prospectuses has largely been governed by the national laws of the member states. However, under the Prospectus Regulation, member states must establish a prospectus liability regime. ESMA had previously examined the liability regimes in the member states for its technical advice.
Like the market participants it consulted, ESMA does not see any fundamental need for reform or harmonization with regard to the prospectus liability rules. However, ESMA has identified two areas that it believes are worthy of discussion. Some prospectus liability regimes provide for an exemption (safe harbor rule) for forecasts in prospectuses, as these are generally inherently uncertain. ESMA proposes certain criteria and restrictions in the event that such a safe harbor rule should also be included in the prospectus liability provision (Article 11) of the Prospectus Regulation. ESMA also points out difficulties in determining the applicable national law in relation to prospectus liability claims. This is determined by the conflict rules of private international law (e.g., the Rome I and Rome II Regulations). In ESMA’s view, specific regulations for prospectus liability claims could be helpful here.
ESMA will publish its final report next.
BaFin’s Consultation on the Withdrawal of GwG Exemptions
On 6 June 2025, the German Federal Financial Supervisory Authority (Bundesanstalt für Finanzdienstleistungsaufsicht, or BaFin) started a hearing for a general ruling regarding the withdrawal of exemptions from the provisions of the German Anti-Money Laundering Act (Geldwäschegesetz, or GwG).
Under the version of the GwG in force until 20 August 2008, obliged entities could be exempted from the provisions of the GwG. BaFin and its predecessor authority had made use of this and issued corresponding exemption decisions, some of which are still valid today.
In light of the new EU Anti-Money Laundering Regulation, which will in general apply from 10 July 2025 and that also governs exemptions from the GwG obligations, BaFin no longer sees any scope for the continuation of the previously granted exemptions and plans to withdraw the exemptions by way of a general ruling by 10 July 2025.
ESMA Publishes Final Report on Active Account Requirement Under EMIR
On 19 June 2025, ESMA published its final report with RTS regarding the obligation to use an active account for OTC derivatives.
Financial counterparties and nonfinancial counterparties that are subject to the clearing obligation and exceed the clearing threshold for certain derivative contracts must maintain an active account with an authorized central counterparty for these derivative contracts in accordance with the European Market Infrastructure Regulation (EMIR) and clear a certain number of transactions on this account.
ESMA’s regulatory technical standards set out further requirements for the functionality and operation of active accounts, the conditions for stress tests, and the details of reporting in a draft delegated regulation. The requirements depend on the type of derivative and whether certain thresholds are reached.
The European Commission now has three months to decide on the adoption of the proposed Delegated Regulation.
ESMA Takes Action Against the Promotion of Unauthorized Financial Services
On 28 May 2025, ESMA sent a separate letter to the major social media providers asking them to take action against the promotion of unauthorized financial services. Accordingly, social media providers should take proactive steps to prevent the promotion of unauthorized financial services in the European Union. In particular, they should verify whether the firms that wish to promote a financial service on their platform have been authorized to provide investment services in the European Union or are acting on behalf of an authorized firm.
Building a Sustainable Future: Understanding Permissible Repair Vs Impermissible Reconstruction In Support Of A Circular Economy
The circular economy invites us to fundamentally reconsider our relationship with resources and products. By moving away from the outdated “take-make-dispose” model, companies are embracing a more sustainable approach that prioritizes longevity, repairability, and eventual recycling. This thoughtful design philosophy creates and preserves value throughout a product’s entire lifecycle. Effective management of intellectual property (IP) rights serves as a cornerstone of this forward-thinking vision. Companies that skillfully balance robust IP protection with accessible repair rights position themselves to foster continued innovation while advancing sustainability goals. These businesses develop products with extended useful lifespans that significantly reduce unnecessary waste and conserve valuable resources for future generations.
Businesses stands to gain numerous advantages by embracing repair as part of their product lifecycle. Customers increasingly recognize and reward brands that demonstrate genuine environmental responsibility, building stronger loyalty and trust in the products. Products designed with repair in mind naturally create more resilient supply chains that can better withstand parts shortages or other disruptions. This approach also contributes to vibrant local repair economies, reducing transportation-related environmental impacts while creating jobs and economic opportunities in communities where customers live and work.
The legal landscape governing repair rights varies significantly between regions like the United States and European Union. A clear understanding of these different frameworks empowers businesses to make informed decisions about how customers can legally interact with products after purchase.
Here, we highlight significant court decisions, relevant statutes, and practical implications for businesses and consumers, specifically for authorized purchasers of an IP-protected product and the holder of those same IP right. This knowledge allows a company to develop strategies that protect their valuable intellectual property while simultaneously supporting broader sustainability objectives. By thoughtfully balancing potential revenue from repair services against the needs and expectations of the customers, a company can position its business for long-term success.
U.S. Legal Framework
The doctrine of patent exhaustion plays a central role in understanding the right to repair. Under this doctrine in U.S. law, once a patented product is sold, the IP Holder’s rights over that specific item are exhausted. This means the Product Owner is free to use, repair, or resell the item without infringing the patent. The Supreme Court’s ruling in Impression Products v. Lexmark International (2017) reaffirmed this principle, rejecting attempts by IP Holders to enforce post-sale restrictions through patent infringement lawsuits. Repair is an affirmative defense to a patent infringement claim; however, where the line between a permissible repair ends and impermissible reconstruction begins is not always clear.
Permissible Repair
Permissible repair in the US refers to actions taken to preserve the utility and operability of an IP-protected product, typically a patented product. This includes replacing individual unpatented parts, one at a time, whether of the same part repeatedly or different parts successively. The Supreme Court’s decision in Aro Mfg. Co. v. Convertible Top Replacement Co. (1961), Impression Products both established (and most recently reaffirmed in (2023)) that such repairs are lawful and do not constitute patent infringement under U.S. law.
Impermissible Reconstruction
Impermissible reconstruction involves actions that effectively create a new article from the IP-protected product or embodiment after it has become spent. Typically, the product is protected by patents and thus, reconstruction generally relates to patent infringement. The key distinction lies in whether the activity amounts to making a new article, rather than merely preserving the existing one.
Distinguishing Repairs from Reconstruction
While there is no definitive rule, courts assess multiple factors to determine whether a Product Owner has created a new article, thereby reconstructing the patented product. These factors include:
Extent of Replacement – Courts look at how much of the patented product has been replaced at one time. If the replacement involves a substantial portion of the product at the same time, it is more likely to be considered reconstruction. However, even if the Product Owner sequentially replaces all the worn-out parts of a patented combination, courts have found this sequential replacement does not constitute reconstruction.
Nature of the Parts Replaced – Replacing minor, unpatented parts is generally considered repair, while replacing essential, patented components can be seen as reconstruction.
Purpose of the Replacement – The intent behind the activity is considered. If the replacement is intended to extend the life of the product or restore it to its original condition, it is more likely to be considered repair. However, if the replacement effectively creates a new product, it is more likely to be reconstruction.
A pertinent example provided by the court in the Karl Storz case illustrates the application of many of the factors listed above. The court held that if a patent is granted for an automobile, the replacement of a spark plug constitutes permissible repair. Conversely, retaining the spark plug while replacing the entirety of the car in one action is more likely deemed reconstruction.
Right to Repair at the Federal Level
Recent national developments have significantly impacted the landscape of the right to repair in the U.S. Major players such as Apple Inc. have endorsed federal legislation, while the Federal Trade Commission (FTC) has intensified its enforcement against restrictive repair practices.
Apple Inc. has publicly supported federal right to repair legislation, marking a significant shift in the company’s stance on repairability. On October 24, 2023, Apple announced its backing of a federal right-to-repair bill, committing to provide access to tools and parts for customers nationwide.
The Federal Trade Commission (FTC) has taken significant steps to combat illegal repair restrictions and restore the right to repair for consumers, small businesses, and government entities. In July 2021, the FTC adopted a policy statement prioritizing investigations into unlawful repair practices under relevant statutes, including the Magnuson-Moss Warranty Act and Section 5 of the FTC Act. Targeting practices that raise repair costs, stifle innovation, and limit business opportunities for independent repair shops, the FTC aims to address antitrust and consumer protection violations.
Right to Repair at the State Level
As of 2025, right to repair legislation has been introduced in all 50 states. These bills generally aim to guarantee consumers’ rights to access replacement parts, repair manuals, diagnostic data, and appropriate tools necessary for maintenance. States such as New York, Minnesota, Colorado, California, and Oregon have already passed right to repair laws, setting a precedent for other states to follow. These laws empower consumers by providing tools and information for self-repair, reducing dependency on manufacturers. They support independent repair shops by ensuring access to parts and tools, fostering competition and innovation.
The most notable example is Oregon’s 2024 right to repair law, which requires manufacturers to provide parts, tools, and information for repairing consumer electronics. It also bans software that prevents technicians from fully installing spare parts, known as “parts pairing.”
EU LEGAL FRAMEWORK
In the EU, the principle of exhaustion of IP rights also plays a central role in understanding the right to repair. once a product has been placed on the market by the IP Holder or with their consent, the exclusive rights to that specific product are typically considered exhausted. This means consumers can use the product as intended, including repairing it. However, there are no specific guidelines that apply uniformly across all EU member states or the UK for distinguishing repair from reconstruction. Article 64(3) of the European Patent Convention (EPC), which also applies to the UK despite it not being an EU member, requires national courts to handle disputes about European patents using their own laws. The following is an analysis of the general principles and themes that countries under the EPC apply when differentiating between repair and reconstruction.
Permissible Repair
Permissible repair in the EU involves actions that maintain the functionality of a product without infringing on the patent. The Supreme Court in the UK provided guidance in Schütz v Werit (2013), outlining factors to consider when determining whether an activity constitutes repair or reconstruction. These factors include:
Subsidiary Nature of the Replaced Component – Courts assess whether the replaced component is a relatively minor part of the product. If the component is subsidiary and does not embody the inventive concept of the patent, its replacement is likely considered repair.
Life Expectancy – The life expectancy of the replaced component compared to other parts of the product is evaluated. If the component has a significantly shorter lifespan and is expected to be replaced periodically, its replacement is generally deemed repair.
Ease of Replacement – The physical ease of replacing the component and its practical perishability is considered. Components that are designed to be easily replaceable and are relatively perishable in practice are typically associated with repair.
Inventive Concept – Whether the replaced component includes any aspect of the inventive concept of the patent is a critical factor. If the component does not embody the inventive concept, its replacement is more likely to be seen as repair.
Independent Identity – Courts examine whether the replaced part has any independent identity from the product. If the part is integral to the product’s identity, its replacement may lean towards reconstruction.
Impermissible Reconstruction
Impermissible reconstruction in the EU is defined similarly to the U.S., where actions that effectively create a new product from the patented entity are considered patent infringement. Key factors held by countries applying the EPC that indicate impermissible reconstruction include:
Extent of Replacement – Replacing all claimed elements of a patented invention without reusing any parts is likely considered reconstruction. Extensive replacement that transforms the product into a new article falls under reconstruction.b. Creation of a New Article – Activities that result in the creation of a new article from the patented entity are deemed reconstruction. This includes refurbishing a totally worn or spent product to make it operable again.c. Impact on Patent Rights – Reconstruction activities that infringe on the patent rights by creating a new product are impermissible. This includes using patented replacement parts or refurbishment methods without authorization.
Distinguishing Repairs from Reconstruction
Differentiating between permissible repair and impermissible reconstruction requires a careful analysis of the factors outlined above. Courts subject to the EPC assess the nature, extent, and purpose of the activity to determine whether it constitutes repair or reconstruction. The EU’s Right to Repair Directive further clarifies these distinctions by mandating that manufacturers provide access to spare parts, repair manuals, and diagnostic tools for certain products.
EU Directive on Promoting Repair
The European Union has introduced a new directive aimed at promoting the repair of goods, amending existing regulations to enhance sustainable consumption and reduce waste. The directive, officially titled “Directive (EU) 2024/1799 of the European Parliament and of the Council on Common Rules Promoting the Repair of Goods,” was adopted on June 13, 2024, and entered into force on July 30, 20241. Member States are required to transpose it into national law by July 31, 2026.
Key aspects of the directive include:
Obligation to Repair – Manufacturers of products subject to reparability requirements in EU law must repair those products within a reasonable time and at a reasonable price. This obligation applies to products listed in Annex II of the directive, which includes items such as fridges, smartphones, and washing machines.
Prohibition of Repair Impediments – Manufacturers are prohibited from using contractual clauses, hardware, or software techniques that impede the repair of goods listed in Annex II, unless justified by legitimate and objective factors.
Access to Spare Parts and Repair Information – Manufacturers must provide access to spare parts at reasonable prices and make repair information available to consumers in an easily accessible manner. This includes publishing indicative prices for typical repairs on their websites.
Consumer Awareness – The directive mandates that manufacturers inform consumers about the availability of repair services and spare parts, enhancing transparency and encouraging repair over replacement.
CONCLUSION
For companies in the repair business, distinguishing between permissible repair and impermissible reconstruction is crucial. In the U.S., the doctrine of patent exhaustion and key court rulings support the rights of product owners to repair their IP-protected products. Similarly, the EU emphasizes the principle of exhaustion of IP rights, allowing consumers to repair products as intended. However, companies must ensure their repair activities do not cross into reconstruction, which could lead to legal challenges.
Recent legislation in both regions supports consumer rights and independent repair shops, offering significant opportunities for growth. Federal and state laws in the U.S., along with the EU’s directive promoting repair, aim to empower consumers and support independent repair shops by ensuring access to necessary parts, tools, and information.
Finding this equilibrium between IP protection and repair accessibility enables a company to flourish in the emerging circular economy while making a meaningful contribution to environmental sustainability
DWR and Water Board Propose Key Updates to Desalination Policy Framework
As climate variability and drought continue to challenge California’s water supply, the state is renewing its focus on seawater desalination as part of a diversified water portfolio. While only a handful of large-scale desalination facilities have been approved along the California coast — including the Carlsbad, Dana Point, and Marina plants — desalinated water remains a small but potentially expandable component of the state’s water strategy. Over the past year, the Department of Water Resources (DWR) and State Water Resources Control Board (Water Board) have taken significant steps to evaluate and update the regulatory and planning frameworks that govern these projects.
In April 2024, the Department of Water Resources (DWR) released the 2023 California Water Plan Update (Water Plan), a key planning document that informs water resource decisions for water districts, cities, and counties across the state. The Water Plan identified a goal to increase desalinated product water by 28,000 acre–feet per year by 2030 and 84,000 acre–feet per year by 2040. It also included Desalination Resource Management Strategies (Desalination RMS), which assess the current landscape of desalination projects in California and identify both challenges and opportunities for future development.
The Desalination RMS outlines a series of policy recommendations aimed at integrating desalinated water into the state’s water supply portfolio. One notable recommendation calls for identifying potential updates to the Water Board’s California Ocean Plan (Ocean Plan) to address the permitting and operation of offshore desalination facilities. DWR also emphasized the need for increased stakeholder engagement and streamlined permitting processes to support responsible expansion of desalination.
In alignment with these recommendations, the Water Board held a public scoping meeting on October 28, 2024 to explore potential amendments to the Ocean Plan’s seawater desalination provisions. The Ocean Plan sets statewide standards to protect water quality and beneficial uses of the ocean along the California coastline and implements Water Code § 13142.5(b), which requires new or expanded coastal industrial facilities using seawater to use “the best available site, design, technology, and mitigation measures feasible shall be used to minimize the intake and mortality of all forms of marine life.”
At the October meeting, the Water Board presented 11 broad topics under consideration for revision. Some of its key proposals include the following:
Enhanced Stakeholder Engagement and Interagency Coordination: Future projects could be subject to requirements to engage with broader community interests, including Tribal communities and environmental justice groups. The permitting process, however, could be streamlined to require concurrent agency review of necessary approvals to improve overall efficiency.
Clarification on Subsurface Intake Requirements: While subsurface intakes are the preferred method for minimizing marine life intake, the Water Board currently allows exceptions when it is shown that subsurface intake is not feasible. The Water Board is considering amendments that would clarify when exceptions are permitted and what constitutes a valid feasibility analysis.
Protection of Coastal Freshwater Aquifers: The current Ocean Plan lacks guidance on assessing impacts to nearby freshwater aquifers from subsurface intake systems. Proposed revisions could include new instructions on the appropriate siting and design of subsurface intakes, as well as recommended management practices to protect those freshwater resources.
Volumetric Annual Reporting: There is no requirement to report the volume of desalinated seawater produced to the Water Board. While the state tracks volumes of desalinated brackish groundwater and brackish surface water, it does not have similar data for desalinated seawater. The proposed amendment to the Ocean Plan would establish an annual reporting requirement for seawater desalination facilities. This reporting would support a more comprehensive understanding of the state’s water supply portfolio, enable assessment of desalinated seawater efficiency, and advance DWR’s objectives for increased desalinated product water by 2030 and 2040.
Timing and Completion of Mitigation Measures: Under existing rules, facilities must submit a Marine Life Mortality Report and fully mitigate impacts from construction and operation of desalination facilities on marine life — but the timeline for doing so is unclear. The Water Board is proposing to clarify when such reports and mitigation measures must be completed to prevent facilities from beginning operations before risks are adequately assessed.
Although most of the proposed changes would apply to future projects, certain revisions — such as those clarifying mitigation timelines — could affect existing facilities. The Water Board is currently reviewing the comments it received during the public comment period, which closed on November 13, 2024. Although no additional meetings have been announced, further stakeholder engagement is expected as the Board refines its proposals. These ongoing efforts reflect a broader statewide push to balance the potential benefits of desalinated water with California’s environmental protection goals and regulatory clarity for project proponents.