On 17 October 2024[i] the European Commission adopted the first implementing rules of cybersecurity of critical entities and networks, in consonance with the NIS2 Directive, in the form of an Implementing Regulation.[ii] The Regulation is set to come into force in late November, to be precise 20 days after its publication in the Official Journal – which took place on 7 November 2024.

The adoption of the Regulation also coincides with the last day of the deadline set for the EU Member States to transpose the NIS2 Directive into their national laws.

The implementing rules essentially detail measures pertaining to cybersecurity risk management, and reporting obligations to national authorities across the bloc which are imposed on companies providing digital infrastructures and services in the event “significant” incidents may occur. Specifically, those companies with provision of digital services for instance cloud computing service providers, data centre service providers, online marketplaces, online search engines and social networking platforms would fall under the scope.

NIS2 Directive[iii] re-categories and noticeably expands the previous scope, which initially covered two categories of i) operators of essential services (OESs) and ii) relevant digital service providers (RDSPs), by classifying covered entities under either Essential Entities (EE) or Important Entities (IE).

EE includes sectors of energy, transport, finance, public administration, health, space, water supply and digital infrastructure such as cloud computing service providers and ICT management.

IE includes sectors of postal services, waste management, chemicals, research organisations, food processing, manufacturing and digital providers such as social networks, search engines and online marketplaces.

With micro and small entities in principle excluded from the scope, the Directive puts in place a size threshold. In other words, a threshold of 250 employees, annual turnover of €50 million or balance sheet of €43 million concerning the EE entities, respectively a threshold of 50 employees, annual turnover of €10 million or balance sheet of €10 million concerning those under the IE list.

Nevertheless, an entity may still be considered as ‘essential’ or ‘important’ irrespective of its size, if it is the sole provider of a critical service for societal or economic activity in a given Member State, respectively a trust service provider or any central or regional government entity.

Similar to GDPR, the Directive requires Member States to impose penalties for non-compliance, the ratio of which would differ per classification. €10 million or at least 2% of global annual turnover for the previous fiscal year, whichever is higher, for the EE entities, respectively €7 million or at least 1.4% of global annual turnover for the previous fiscal year, whichever is higher, for the IE entities.

Notably, the covered entities’ management bodies, such as board of directors, would also be held liable for non-compliance.

On the other hand, the Swiss Information Security Act (Informationssicherheitsgesetz, ISG) applies primarily to the federal administration, cantonal authorities and their partner companies in the country, and its revised version is set to come into force by 1 January 2025. In this context, partner companies could be active in similar sectors as those within the scope of the Directive in the EU, such as financial and information and communication sectors as well as those service providers and manufacturers of hardware and software products that are used by critical infrastructures.

Therefore, supplier companies would indirectly fall under the scope of ISG, similar to that of the Directive in the EU. The Swiss entities forming part of a supply chain which ultimately target those EU based entities covered by the Directive, would as a result be affected by the requirements and obligations under both instruments.

Specifically, the subsidiaries and branches of Swiss entities registered within the EU, which fall under either of the EE or IE classifications, will have to comply with the Directive in the EU and comply with the requirement to register with the national authority of an affiliated Member State, among other things. In this scenario, the parent or affiliated entity in Switzerland may also be indirectly caught under the radar of the Directive through the supply chain connection.

[i] See here https://ec.europa.eu/commission/presscorner/detail/en/ip_24_5342.

[ii] See here https://eur-lex.europa.eu/eli/reg_impl/2024/2690/oj.

[iii] See here https://eur-lex.europa.eu/eli/dir/2022/2555.

Following the judgement of 4 October 2024 of the Court of Justice of the European Union (CJEU)[i], case C‑446/21 between Maximilian Schrems and Meta Platforms Ireland Ltd (“Meta”), the scope of collection of personal data on social media network platforms and the applicable restrictions thereof in particular in the context of targeted advertising were put under strict scrutiny.

Here, the EU General Data Protection Regulation (GDPR) principles of data minimisation and purpose limitation were specifically delved into.

Meta generally manages the provision of services of the online social network Facebook in the EU and is considered as the controller within the meaning of the GDPR. The present case concerns data collected from Facebook users’ activities by Meta not only on Facebook but also outside, including those data related to online platform visits and navigation patterns as well as third party websites and applications. For this, Meta is seen to utilise cookies, social plug-ins and pixels, which are embedded on the relevant websites, for the purpose of targeted advertising.

The CJEU decision brings further clarity to the following:

. the scope of the principle of data minimisation under Art. 5(1)(c) GDPR covers all personal data which is collected from data subjects or third parties by a controller, collected on or outside the platform, for the purpose of aggregation, analysis and processing in the context of targeted advertising, whereby the retention time would at all times need to be restricted and the type of personal data would need to be distinguished. Furthermore, the principle is applicable irrespective of the legal basis used for the processing, and even if a data subject may have consented to targeted advertising, their personal data cannot be used indefinitely.

. Article 9(2)(e) GDPR, on processing of special categories of personal data, would need to be interpreted in a restrictive manner, whereby the mere mentioning of a fact by a data subject in a public setting should not easily give rise to any other information related to that particular fact being labelled as “manifestly made public” and hence legally permitted to be processed.

As a consequence of the CJEU ruling, any operator of a social media network platform or online advertisement company would need to restrict their data pool and put in place an effective data deletion policy.  

[i] See here https://curia.europa.eu/juris/document/document.jsf;jsessionid=5CE53D5E3FCC1ABA77F2ACD5AAC2F038?text=&docid=290674&pageIndex=0&doclang=en&mode=req&dir=&occ=first&part=1&cid=1306139.

On 18 September 2024 Switzerland deposited its accession instrument to the Hague Convention of 30 June 2005 on Choice of Court Agreements (HCCH), and simultaneously filed a declaration under its Article 22 on non-exclusivity.

The HCCH accession, serving as the background to the Federal Parliament’s 2023[i] decision to adopt the amendment to the Federal Act on Private International Law (PILA), is set to become effective as of 1 January 2025. The step will regulate the validity of choice of court agreements, the jurisdiction of agreed courts in international commercial disputes and the cross-border recognition and enforcement of court judgements, which in turn is expected to bring about more legal certainty in favour of Switzerland as a location of choice for doing business in cross border settings, not only in terms of increased predictability in international disputes but also possibly due to decreased procedural costs.

Being largely compatible with the Swiss law, the HCCH accession will in practice only result in the amendment of PILA with respect to its Articles 5 and 6 on choice of forum, and respectively on implied consent.

In addition, Article 26 HCCH regulates possible conflicts with other international instruments such as the Lugano Convention, whereby the latter shall take precedence in cases of inconsistency.

On a different note, as the first State to ever file a declaration under Article 22 HCCH, “[…] Switzerland declares that its courts will recognise and enforce judgements given by courts of other Contracting States designated in a choice of court agreement concluded by two or more parties that meets the requirements of Article 3, paragraph c), and designates, for the purpose of deciding disputes which have arisen or may arise in connection with a particular legal relationship, a court or courts of one or more Contracting States.”

The application of this provision would nevertheless be conditional upon reciprocity between the State of origin and the State in which recognition or enforcement is sought, whereby both States’ declarations would already need to be in place for the non-exclusivity to become effective.

[i] See here https://www.admin.ch/gov/de/start/dokumentation/medienmitteilungen.msg-id-102325.html#:~:text=Das%20Parlament%20hat%20am%2022,Januar%202025.

On 22 May 2024 the Swiss Federal Council[i] decided on submitting further reforms in the realm of the anti-money laundering (AML) framework to the Parliament, with an aim to reinforce the competitiveness of the country both as a financial centre and a commercial hub.

These reforms, which are expected to come into force by early 2026, include the introduction of a non-public federal (transparency) register of beneficial owners. A simplified registration will be provided for not only associations and foundations but also sole proprietorships and limited liability companies. The register will be managed by the Federal Department of Justice and Police (FDJP).

Other proposals refer to the AML due diligence obligations applicable to certain advisory activities, in particular legal advice. While maintaining professional secrecy, these obligations will kick-in in certain activities with a potentially increased money laundering risk, such as the founding and structuring of companies as well as real estate transactions.

Precisely speaking, the following will be pivotal:

. The client’s identity must be verified and the beneficial owner and the object and purpose of the transaction or service must be identified;
. If the client, or the transaction or service, has a particularly high risk profile, it may be necessary to clarify the origin of the funds or to request additional explanations about the purpose of the requested transaction or service;
. The measures undertaken in connection with due diligence must be appropriately recorded.

In this respect, the responsibility for supervising the exercise of due diligence obligations by the affected lawyers and legal advisors will be vested upon the self-regulatory organisations (SROs).

Furthermore, additional organisational measures will be set in place against i) circumvention of sanctions under the Embargo Act, ii) cash payments exceeding CHF 15,000 in precious metals trading and iii) any amount in real estate business.

On a different note, on 22 May 2024 the Federal Council[ii] launched a consultation, set to run until mid September 2024, on the Cybersecurity Ordinance which essentially outlines the implementation of the obligation to report cyberattacks on critical infrastructures and the national cybersecurity strategy as well as the duties of the Swiss National Cyber Security Centre (NCSC).

The Ordinance also specifies exempted entities from the reporting obligation, namely those suffering a cyberattack which have no direct impact on the functioning of the economy or the well-being of the population. In addition, a general exemption would apply to companies with fewer than 50 employees, an annual turnover or annual balance sheet total of less than CHF 10 million and authorities that are responsible for fewer than 1,000 inhabitants.

Lastly, on 15 May 2024 the Federal Council[iii] decided to initiate a consultation, applicable until early September 2024, on extending the international automatic exchange of information in tax matters (AEOI). Set to apply from 1 January 2026, the extension would concern the new AEOI regarding cryptoassets and the amendment of the standards for the automatic exchange of financial account information.

Notably, the OECD update to the common reporting and due diligence standards for financial account information (CRS) and the new cryptoasset reporting framework (CARF) was published in October 2022. While the amendments to the CRS clarify interpretation issues and take practical experience into account, the CARF regulates the handling of cryptoassets and their providers.

Subject to parliamentary approval, Switzerland thus intends to also implement the CARF with an intention to effectively address existing gaps in the tax transparency mechanism and to ensure equal treatment with respect to traditional assets and financial institutions.

[i] See here https://www.admin.ch/gov/en/start/documentation/media-releases.msg-id-101100.html.

[ii] See here https://www.ncsc.admin.ch/ncsc/en/home/dokumentation/medienmitteilungen/newslist.msg-id-101088.html.

[iii] See here https://www.admin.ch/gov/en/start/documentation/media-releases/media-releases-federal-council.msg-id-101030.html.

Alongside the 2023 revision of Swiss company law where foundations were also inevitably affected, precisely from the perspectives of insolvency and disclosure requirements, as of 2024[1] the foundation law has become more simplified in a quest to provide for more flexibility.

The applicable changes, namely in the context of Articles 84 – 86 of the Swiss Civil Code (CC), could be summarised as follows:

On the other hand, the Swiss Federal Act on Private International Law (PILA) has recently[2] undergone a partial revision from the cross-border succession law perspective with the adoption of amendments on chapter 6 of the Act by the Swiss Parliament in December 2023.

While the date of entry into force of the amendments is yet to be precisely defined, a referendum deadline has been set until 18 April 2024.

The purpose behind the revision is to primarily improve the Act’s alignment with the EU Succession Regulation of 2012, applicable in all the EU Member States as of 2015 – save for Denmark and Ireland.  

With deceased’s last place of residence still serving as the primary connecting criterion, the changes aim at cutting down conflicts of jurisdiction in cases with a cross-border angle, and increasing party autonomy as per choice of applicable law to estate planning.

The changes include:

From a practical perspective, however, the exclusion of Swiss jurisdiction as well as the choice of a national jurisdiction and applicable law must be explicitly stipulated in the testamentary disposition of a testator or testatrix.

[1] See here https://www.fedlex.admin.ch/eli/oc/2022/452/de.

[2] See here https://www.parlament.ch/centers/eparl/curia/2020/20200034/Schlussabstimmungstext%201%20NS%20D.pdf.

The EU Data Act[1] aiming to regulate fair access to and use of data has entered into force in January 2024 following its publication in the Official Journal of the European Union. The Act is set to become applicable across the bloc as of September 2025.

Setting out rules for the use, access, availability and sharing of generated personal and non-personal data, the Act targets manufacturers of connected products and providers of related services irrespective of their place of establishment – all grouped under the umbrella term of ‘data holders’ either in the form of a natural or legal person.

In this context, ‘connected product’ is defined as “an item that obtains, generates or collects data concerning its use or environment and that is able to communicate product data via an electronic communications service, physical connection or on-device access, and whose primary function is not the storing, processing or transmission of data on behalf of any party other than the user”. In addition, the term ‘related services’ refers to “a digital service, other than an electronic communications service, including software, which is connected with the product at the time of the purchase, rent or lease in such a way that its absence would prevent the connected product from performing one or more of its functions, or which is subsequently connected to the product by the manufacturer or a third party to add to, update or adapt the functions of the connected product”.

Distinguished from the term ‘user’, ‘data recipient’ means “a natural or legal person, acting for purposes which are related to that person’s trade, business, craft or profession, other than the user of a connected product or related service, to whom the data holder makes data available, including a third party following a request by the user to the data holder.”

The following elements set out in the Act carry significance:

The Data Act shall be read without prejudice to the EU GDPR, whereby those data access rights granted under the former shall be treated separately from the access rights granted to individuals under the latter.

Lastly, the Act’s inherent extraterritoriality shall carry direct consequences for manufacturers and providers outside the bloc, including Swiss based entities. In other words, any commercial activity falling under the scope of the Act with products and services being offered to the EU market, respectively any engagement in data sharing with stakeholders within the EU would need to undergo necessary due diligence within the set timeframe in order to ensure timely compliance.

[1] See here https://eur-lex.europa.eu/legal-content/en/TXT/?uri=CELEX:32023R2854&qid=1707924358044.

After over a year from the European Commission’s proposal[i] for a new Cyber Resilience Act for protection of consumers and businesses from (digital) products, which contain inadequate security features, through the introduction of mandatory requirements, a political agreement[ii] has now been reached effective as of 1 December 2023 between the other two legs of the Trilogue, namely the European Parliament and the Council.

The rather comprehensive proposal is set to cover both hardware and software products which may entail varying levels of risk and therefore requiring different security measures. As a result, the type of conformity assessment per product is set to be adapted to respective risk level.

Consequentially, manufacturers of hardware and software, developers and distributors aiming to import and offer their products on the EU market, will essentially have to implement cybersecurity measures across the entire lifecycle of their products, from design and development stages to after placement on the market. Specifically, not only those that are sold to end users and consumers, but also those used in companies for production, sourced as precursors and further processed, or those forming part of supply chains.

Notably, those products that are already covered by other existing EU legislation, such as the scope of the NIS2 Directive, will be excluded.

In this context, compliance with the proposed legislation will essentially be rendered in the form of a CE marking which is an indication confirming that the products sold on the market of the European Economic Area (EEA) have been duly assessed to meet safety, health and environmental protection requirements.

Furthermore, manufacturers will be obliged to provide consumers with a precise length by which a given product would be expected to be utilised.

Applicable to all products that are connected directly or indirectly to another device or network, the proposed legislation will now have to be formally approved and expected to enter into force following its publication on the Official Journal.

Given that the EU serves as the most important sales market for many of the industries and sectors in Switzerland, the direct impact of the proposed legislation on Swiss actors and stakeholders is undeniable. Importantly, the Swiss exporters of those products that could be classified as “critical” within the meaning of the proposed text will have to firstly prove that the related digital components do meet the set security standards and to secondly submit conformity assessments as deemed necessary.

[i] See here https://ec.europa.eu/commission/presscorner/detail/en/IP_22_5374.

[ii] See here https://ec.europa.eu/commission/presscorner/detail/en/ip_23_6168.

The Swiss Federal Council has recently announced[1] the launch of a consultation process effective until 29 November 2023 in order to tighten the existing anti-money laundering rules.

The proposed framework particularly focuses on the identification of legal entities, whereby a mandatory federal (transparency) register is set to be introduced containing information on beneficial owners. The non-public register will be coordinated by the Federal Department of Justice and Police (FDJP) and accessible by competent authorities including financial intermediaries. Notwithstanding, a rather simplified procedure will also be put in place for certain legal forms such as sole proprietorships, foundations, associations as well as limited liability companies.

Furthermore, the monetary threshold for due diligence obligations in the context of trade in precious metals and stones will be significantly lowered from CHF 100,000 to CHF 15,000.

An all inclusive obligation for due diligence will also be introduced for cash payments in real estate business irrespective of the monetary amount involved.

By the end of the consultation period the proposal is expected to be presented at the parliament in early 2024.

[1] See here https://www.admin.ch/gov/en/start/documentation/media-releases.msg-id-97561.html.

With more than 750 member firms and 36,000 lawyers across 200+ countries, Nextlaw Referral Network[1] is considered the largest legal referral network in the world. Created by Dentons the network employs a detailed screening system to guarantee the quality of its member firms and has developed proprietary technology to allow members to identify lawyers, legal counsels and advisers at other member firms with jurisdiction-specific appropriate experience where clients need personalised consultancy.

[1] See here for more information: https://www.nextlawnetwork.com/.

The European Parliament (EP) has recently[i] voted to adopt its negotiating position in a plenary session on the Artificial Intelligence (AI) Act.

Essentially following a risk based approach, the discussions over rules span around ensuring that the developments and use of AI applications and systems in Europe would in theory comply with EU rights and values including “human oversight, safety, privacy, transparency, non-discrimination and social and environmental well-being”.

In a nutshell, next to a revised definition of an AI system in line with the OECD version, the proposed to-do list, targeting providers and deployers among other actors, contains the following:

Notably, the ban on “post” remote biometrics identification would be subject to the exception of law enforcement upon prior judicial authorisation in the context of serious crimes.

Furthermore, those generative AI systems based on foundation models, such as ChatGPT, would have to comply with transparency requirements and put in place effective safeguarding mechanisms against illegal content. In the case of use of copyrighted data for training models, detailed summaries would need to be made publicly available. Registration in the EU database will also be obligatory for foundation models.

Importantly, alongside defining responsibilities across AI value chain of various actors involved, the EP proposes the development of non-binding standard contractual clauses to regulate rights and obligations in line with each actor’s level of control in a given value chain.  

Taking into account that the AI Act is set to be also applicable to providers and users of AI systems located outside of the EU – provided that the output produced is intended to be used in the EU, these developments are pivotal for the Swiss market.

[i] See here https://www.europarl.europa.eu/pdfs/news/expert/2023/6/press_release/20230609IPR96212/20230609IPR96212_en.pdf; https://www.europarl.europa.eu/doceo/document/TA-9-2023-0236_EN.html.