Week Ahead (13 November)

W/C Monday, 13 November – European Commission expected to unveil 12th package of sanctions

The European Commission is expected to present member states its 12th package of sanctions against Russia this week, following the support from the G7 group of developed nations for the inclusion of the trade of diamonds to the list of banned luxury goods. Even though the latest sanctions package was originally planned to be unveiled last week, the Commission has remained vague about the reasons for the delay, mentioning pressure from member states regarding specific measures.

On 23 June, EU member states reached an agreement on an 11th package of sanctions against Russia, targeting sanctions circumvention by countries such as Iran and China. At a joint meeting with EU foreign ministers in Kyiv last month, Ukrainian President Volodymyr Zelenskyy expressed concerns over the prolonged pause in sanctions against Russia, asserting that such breaks contribute to the duration of Russian aggression. Ukraine has stepped up calls for tougher sanctions, as the price cap on Russian crude oil is faltering, and following the recent emergence of reports suggesting that covert Russian-led operations have found ways to circumvent EU export controls on importing microchips into Russia.

Although the 11th package focused more on the enforcement of pre-existing sanctions, rather than the introduction of new measures, the next package is expected to include export restrictions on welding machines, chemicals, and military-related technologies with potential ‘’dual-use’’ applications, and bans on the exports of certain software licenses to Russia. It could also entail import restrictions on specific materials, such as metals, aluminium products, and construction materials.

Furthermore, a potential ban on Russian diamonds is anticipated, given its status as the largest producer of rough diamonds by volume. Diamonds have been one of the few major Russian exports untouched by EU sanctions due to challenges in determining the effective implementation of an embargo. Belgium, a significant diamond trading hub, had insisted on G7 political coverage for the ban, expressing concerns about potential trade diversion away from Antwerp. However, the EU’s foreign policy chief Josep Borrell confirmed on Thursday that the G7 foreign ministers' support during a meeting in Japan cleared a critical hurdle for the diamond ban.

Overall, these measures could amount to €5 billion in trade restrictions. If the package is presented this week, member state ambassadors would be the first to consider it, leaving less than four weeks for discussions before the last foreign affairs council of the year.

Wednesday 15 November - Deadline for potential amendments on the UK’s Digital Markets, Competition and Consumer Bill before House of Commons debate

Lobbying efforts surrounding the UK's Digital Markets, Competition and Consumers Bill will intensify early this week, with the government facing a Wednesday deadline for potential amendments before a House of Commons debate.

The bill, designed to regulate major tech platforms like Meta, Alphabet, and Amazon, grants legal powers to the Competition and Markets Authority (CMA) through its dedicated Digital Markets Unit (DMU), established over two years ago. It will apply to a select group of big tech companies identified with ‘’Strategic Market Status’’, a designation akin to the EU’s ‘’gatekeepers’’ under the DMA, giving the CMA the power to impose stricter rules. Violations could result in fines of up to 10% of global turnover for the designated companies.

One contentious point in the bill revolves around the companies' desire, including Apple, Meta, and Microsoft, to have the ability to appeal against the DMU's decisions through a "full merits" review. This contrasts with the current draft, which only allows businesses to request a judicial review assessing whether the DMU follows its own rules. This technical dispute has become a focal point of lobbying efforts, with big tech firms and their competitors stepping up their lobbying engagement as the bill progresses through parliament.

Wednesday, 15 November - Thursday, 16 November – Spanish parliament to debate controversial amnesty law, following Sánchez’s deal with Catalan separatists

This week, acting Prime Minister Pedro Sánchez will submit to the Spanish parliament a draft amnesty bill aiming to secure the support of the Catalan pro-independence parties in order to form a government.

Last month, the current acting prime minister reached a coalition agreement with the left-wing party Sumar. However, the support of Sumar’s 31 lower-house MPs alone is insufficient to form a government. To remain in power, Sánchez and his Socialist Party will need to secure votes from the Catalan pro-independence parties, namely Esquerra Republicana de Catalunya ERC and Junts. These parties have made granting an amnesty for those involved in the illegal 2017 independence referendum a prerequisite for their support. Consequently, the agreement, signed in Brussels between Sánchez and Junts’ Carles Puigdemont earlier last week, includes a crucial amnesty deal for leaders and activists involved in the 2017 referendum.

This breakthrough comes after months of political paralysis in Spain, following July’s national elections that resulted in a hung parliament. The draft amnesty bill has already triggered tensions both domestically and internationally. Critics, including politicians, judges, and journalists argue that Sánchez is jeopardising the rule of law for political gains, leading to ongoing protests in Madrid and other cities. The agreement proposes parliamentary "inquiry committees" overseeing the application of amnesty, raising worries about undermining judicial autonomy and the separation of powers, as highlighted by Spain's main judges' organisations. European Justice Commissioner Didier Reynders has also raised “serious concerns” about the deal in a letter to Spain’s justice minister. Furthermore, in Brussels, there is criticism that while Sánchez advocates fiscal solidarity among EU capitals, he has also entertained Junts' demand for Catalonia to retain 100% of its taxes, potentially violating the principle of equality before the law.

Debating and voting on the draft bill will take place on 15-16 November. If Sánchez fails to secure a majority in the parliament by 27 November, a repeat election will be scheduled in January 2024.

Thursday, 16 November - Deadline for designated ‘’Gatekeepers’’ to appeal their designation under the DMA to the General Court

Tech companies dissatisfied with their DMA classification as ‘’gatekeepers’’ will have the option to challenge in in the EU’s General Court, with the deadline for court filings expiring on 16 November. On 30 October, the European Commission released its updated set of decisions regarding the DMA, shedding light on ongoing debates with major tech companies regarding whether their services are subject to its provisions.

Apple unsuccessfully attempted to distance its App Store from the label of a digital gatekeeper under the DMA by arguing that its various app stores, designed for different devices, should be treated as separate entities. However, the European Commission issued a decision refuting Apple's argument, referring to its App Store as a single service in its official publications, irrespective of the device through which it is accessed. Last week, Google’s senior vice-president, alongside CEOs of major European telecom operators, namely Vodafone, Deutsche Telekom, Telefónica, and Orange urged the EU regulator to classify Apple’s iMessage as a ‘’core’’ service under the DMA. The service was not part of the Commission’s updated list. However, critics have argued that its potential designation would force Apple to make its messaging app fully compatible with competitors such as Meta’s WhatsApp.

TikTok's owner, ByteDance, has also disputed its classification as a social network under the DMA, contending that TikTok primarily focuses on content discovery rather than facilitating real-world connections. However, the European Commission also rejected ByteDance's arguments, maintaining that TikTok's features extend beyond those of a video-sharing platform service, enabling users to engage in shared activities and communities.

The purpose of the DMA is to regulate the digital market by preventing Big Tech companies, referred to as ‘’gatekeepers’’, from abusing their dominant market positions, and opening competition to smaller competitors. Companies with an annual turnover exceeding €7.5 billion, a market capitalisation of over €75 billion, and active monthly users in the EU totaling 45 million will fall under these rules. However, the European Commission retains some discretion in designating specific services and platforms of these companies. The designation of services under the DMA is part of the process of implementing these regulations, which will come into full effect in the spring of 2024.

Friday, 17 November – Deadline for the European Commission to announce decision on KKR and TPG £1 billion deal for a majority stake in A-Gas

This week, the European Commission will decide whether to allow the sale of a majority stake in A-Gas by the US private equity firm KKR to the TPG Rise Climate, the climate investment arm of TPG’s global impact investing platform. UK-based A-Gas is a company specialising in the supply and lifecycle management of refrigerant gases.

The £1 billion deal was announced in August, with the parties involved filing a notice of the proposed sale to the European Commission, pursuing a simplified procedure, on 18 October. Despite divesting a majority stake, KKR will continue to be a significant minority shareholder in A-Gas, with the deal expected to be completed by year-end, pending customary closing conditions and regulatory approvals.

The deal reflects the growing interest in climate-related investments and the continuing trend of private equity firms embracing ESG-focused investments.

Friday, 17 November – S&P Ireland’s credit rating; outlook expected to remain ‘’stable’’, despite declining trend in corporate tax revenue

On Friday, S&P Global Ratings will provide its updated credit rating for Ireland. In May, the credit rating agency raised Ireland's long-term sovereign credit rating to AA, up from AA-, the first change in its long-term rating since November 2019. The outlook is deemed "stable," positioning Ireland in the third-highest category within S&P ratings.

The upgrade is attributed to "solid" tax revenue growth, allowing Ireland to achieve budgetary surpluses through 2026 despite spending pressures. In the first six months of 2023, the budget surplus indicated a 20% increase to the corresponding period in the previous year.

Nevertheless, many advisory bodies and economists have called for caution because of the unreliability of corporate tax receipts. Ireland’s latest economic boom is primarily attributed to the concentration of corporate tax revenues from a handful of major companies. A potential vulnerability is highlighted as Ireland plans to raise its corporation tax rate to 15% in January, a move aligned with a global deal. Indicatively, Irish corporate tax receipts experienced a year-on-year decline for the third consecutive month in October. Last month, Ireland collected €1.3 billion ($1.4 billion) in corporate tax, marking a 45% decrease compared to the same month last year and the likelihood is that corporation tax receipts have peaked.

Although S&P will most likely maintain Ireland’s ‘’stable’’ outlook this week, a reference to this concerning trend should be expected.