Week Ahead (5 June)
W/C Monday, 5 June – EU member states to agree on 11th sanctions package against Russia
EU member states are set to finally reach agreement on an 11th package of sanctions against Russia by the end of this week, following an updated draft proposal by the European Commission. Ambassadorial talks have been taking place since 10 May, after the President of the European Commission, Ursula von der Leyen, unveiled the proposed package the previous day.
The new set of measures focuses on tackling sanctions circumvention and aims to address the issue of "third" countries that are finding ways to bypass current sanctions. Notably, the proposed sanctions introduce counter-measures against these countries helping Russia circumvent the EU's trade embargo. This means that for the first time, sanctions could target companies from countries beyond Russia, including Iran and China. Central Asian countries such as Uzbekistan and Kazakhstan are expected to be the first targets.
Although the proposal is not as tough as the U.S extraterritorial sanctions, it aims to step up diplomatic pressure on countries that have done little to cut the flow of goods to Russia. Nevertheless, some EU diplomats are cautioning against the proposal, citing political risks and warning that it could push third countries toward Russia or China, leading to a series of delays in the adoption of the package. This group of member states, led by Germany, are calling for a greater focus on targeting companies in those countries rather than the countries themselves.
To ease these concerns, the European Commission has incorporated additional safeguards in the latest version of the proposal, outlining a more cautious and gradual approach before imposing penalties on third countries, designating such measures as ‘’exceptional, last resort measures’’, hoping to pave the way for a final breakthrough.
Furthermore, the proposal includes phasing out an exemption that allows Germany and Poland to import crude oil from Russia through the Druzhba pipeline. Berlin and Warsaw were previously granted temporary derogations to import Russian crude through the northern section of the pipeline, but the draft proposal confirms that these exemptions will now come to an end. While Poland has already been cut off from supplies through the pipeline, Germany has agreed to import oil from Kazakhstan instead. The exact timing of its enforcement will depend on negotiations among EU countries.
Wednesday, 7 June – European Banking Authority to hold hearing on AML guidelines for crypto
On Wednesday, the European Banking Authority, the EU’s banking regulator, will hold a hearing on AML guidelines for crypto, outlining its expectations for crypto companies regarding safeguards against illicit financiers.
Last week, EBA published draft measures following the launch of a consultation on possible amendments to its Guidelines on money laundering and terrorist financing (ML/TF) risk factors. In its proposed changes, EBA suggests the expansion of the scope of its guidelines to include ‘’crypto-asset service providers’’. The paper argues that these guidelines should include warnings about transactions with self-hosted crypto addresses and crypto service providers that do not fall under the regulatory reach of the incoming Markets in Crypto Assets (MiCA) regulation, the world’s first major regulation setting standards for digital assets. Industry stakeholders will have until 31 August to provide their input and feedback on the proposed guidelines.
Meanwhile, EBA is also currently working on guidelines to assist national regulatory bodies in assessing the effectiveness of AML and illicit finance safeguards implemented by crypto companies. The aim is for these guidelines to provide national watchdogs with a framework to evaluate whether the measures put in place by crypto companies are suitable and effective in combating financial crime.
Thursday, 8 June –Trilogues on due diligence bill to begin, following Parliament’s vote
On Thursday, interinstitutional negotiations between the European Commission, the Parliament, and the Council of the EU on the Corporate Sustainability Due Diligence Directive will kick off.
In February 2022, the European Commission published its proposal for a ‘’just and sustainable economy’’, laying down rules for companies to respect human rights and the environment in global value chains. The bill aims to increase scrutiny on companies for environmental, social, and governance risks (ESG), ensuring their supply chains are sustainable. Last December, the Council adopted its position on the bill. Last Thursday, the European Parliament adopted its own position, paving the way for the launch of trilogue talks. MEPs voted in favor with 366 votes, despite a last-minute attempt by the European People’s Party to topple the compromise deal. In April, all major groups agreed on the compromise deal in the legal affairs committee, however, the EPP, made a U-turn on Thursday’s vote calling for an additional amendment.
The Parliament’s agreed position recommends that all large companies in the EU with more than 250 employees and exceeding a specific turnover threshold should conduct risk assessments to identify any abuses along their global value chains. This assessment should encompass the entire lifecycle of their products, from the sourcing of components to product sales and waste management. In addition, MEPs propose imposing penalties of up to 5% of a company’s global turnover if they have been found to have violated their obligations regarding human rights or environmental protection.
Thursday, 8 June – Court of Justice Advocate General to issue non-binding opinion on Amazon tax state aid
On Thursday, the advocate general of the Court of Justice of the EU (EUCJ) will issue its non-binding opinion on the Amazon tax state aid case (C-457/21 P Commission v Luxembourg and Others).
In May 2021, the European General Court decided that the European Commission's decision to demand that Amazon pay €250 million in unpaid taxes to Luxembourg was incorrect. In October 2017 Margrethe Vestager, the European Competition Commissioner, announced that Amazon had benefited from a Luxembourgish tax scheme that contravened state aid rules. The Commission confirmed in September 2018 that these back taxes, plus interest, had been gathered from Amazon. The Commission said that Luxembourg had permitted the US giant to channel profits through a holding company tax-free, allowing it to avoid tax on three-quarters of all profits booked in the European Union. The General Court overruled the Commission’s decision, arguing that its conclusion that Amazon was granted a tax advantage "is based on an analysis which is incorrect in several respects".
Subsequently, the Commission appealed to the CJEU, the EU’s highest court. Earlier this year, Amazon’s legal representative told the CJEU that the Commission’s appeal lacked merit and used the wrong reference framework to determine whether Amazon had a selective advantage.
Although the CJEU advocate general’s opinion will be non-binding, the CJEU’s final judgement, expected in a few months, is likely to resemble the advocate general’s opinion.
Thursday, 8 June – CSO to release data on consumer prices in Ireland
The Central Statistics Office (CSO) will release its Consumer Price Index data on Thursday, covering the situation through May.
The release of Consumer Price Index data in April revealed that prices rose by 7.2% between April 2022 and April 2023, with notable jumps in prices for housing, water, electricity, gas, and other fuels (up by 20.8%) and Food & Non-Alcoholic Beverages (up by 13.1%).
Although the figures for April marked a second consecutive drop from 8.5% in February and 7.7% in March, this was the 19th straight month where the annual increase in the CPI has been at least 5.0%.
Nevertheless, according to CSO’s flash estimates, this week’s release is expected to confirm another easing of inflation in May.