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Focus on Regulation

EMA Publishes New GMP Guidance on Data Integrity

The European Medicines Agency (EMA) has released new good manufacturing practice (GMP) guidance concerning measures intended to ensure data integrity throughout the “data lifecycle” from generation of data, processing, use in decision making, to disposal. The document provides a set of frequently asked questions and answers for companies that process data generated in the process of testing, manufacturing, packaging, distribution and monitoring of medicinal products.

The Q&A was developed by the GMP / Good Distribution Practice (GDP) Inspectors Working Group to facilitate implementation of national and EMA guidance related to the data integrity ALCOA principals:

  • Attributable to the person generating the data;
  • Legible and permanent;
  • Contemporaneous;
  • Original record (or true copy); and
  • Accurate.

The guidance provides that senior management of companies are responsible for assessing data integrity risks and the implementation of proportionate corporate data governance systems. Data integrity should be ensured from the manufacture of starting materials to the delivery of products to persons authorised to supply medicinal products to the public in the EU. This requires cooperation by staff at all levels, as well as with suppliers and distributors, and the importance of data integrity should be included in training programmes. Responsibility for data integrity at different stages along the supply chain should be defined in contracts between relevant actors. Ultimately, responsibility for ensuring compliance throughout the supply chain lies with the Qualified Person responsible for certifying batch release.

The scope of the measures taken should be commensurate with the risks to data integrity, the type of decision that the data is relevant for (e.g. whether decisions relate to product quality or safety) and the importance of the data in making such decisions. The guidance provides factors that senior management should take into account when assessing risks such as the complexity and consistency of data processes, subjectivity of outcomes, and vulnerability of data to involuntary or deliberate amendment or deletion.

The guidance provides examples of data risks to be assessed and recommendations at each stage of the data lifecycle:

  • Generation and recording of data e.g. the completeness of recorded meta data and ability to reconstruct processing activities; storage of data in temporary or permanent memory; vulnerability of original data to amendment or deletion.
  • Processing of data to useable information e.g. the use of approved, identifiable and version controlled methods of processing; documentation of data processing; extent of human influence on how data is reported or presented (e.g. whether employees can change the scale of graphical reports).
  • Checking completeness and accuracy e.g. availability of original data and a complete audit trail; access to all data generated and all processing activities including any failed or aborted activities and any data excluded from the final decision-making process.
  • Use of data for decision making e.g. whether any decisions are taken before a record is made and therefore excluded from the audit trail.
  • Retention of data e.g. security of storage; limiting access to authorised persons; back-up procedures and storage of original data or ‘true copies’; contracts that define ownership and retrieval arrangements particularly for outsourced data storage.
  • Disposal of data e.g. regulatory requirements for data retention period; compliance with an approved disposal procedure.

The advice applies to both paper-based and electronic systems, and the Q&A includes additional measures to take that are specific to each system. Companies’ paper documentation system should provide template forms, each with a unique reference number, and ensure that distribution of forms is controlled and traceable. Electronic data should be reviewed in light of the risks detailed above before making batch release decisions and other quality related decisions.

The guidance also includes responsibility of companies and measures to ensure data integrity for activities contracted out to another company. Companies outsourcing activities should formally assess the systems and procedures of contractors and suppliers for their competency and compliance in relation to data integrity principals prior to approval, and on a regular periodic basis thereafter. If an approved contractor is issued a statement of non-compliance regarding data integrity from an authority, the contract-provider should carry out a risk assessment to determine the appropriate action to take including whether to terminate existing arrangements with the contractor.

The Q&A guidance is available on the EMA’s website.

DEA Keeps Marijuana in Schedule I While Expanding Access for Research and Clarifying Rules on Hemp

Yesterday, the U.S. Drug Enforcement Administration (DEA) took a number of actions regarding the federal control of marijuana, including denying a citizen petition to transfer the substance out of Schedule I, issuing a policy change to expand the number of entities the federal government will allow to grow marijuana for research, and concurring in a USDA statement of principles regarding industrial hemp.

DEA’s decision to decline to reclassify marijuana was published in response to two petitions requesting DEA transfer marijuana out of Schedule I, filed in 2009 and 2011, respectively. In response to the petitions, DEA requested a scientific and medical evaluation and scheduling recommendation from the Department of Health and Human Services (HHS), which was conducted by the U.S. Food and Drug Administration (FDA) in consultation with the National Institute on Drug Abuse (NIDA). DEA concluded “[b]ased on the legal standards in the CSA, marijuana remains a schedule I controlled substance because it does not meet the criteria for currently accepted medical use in treatment in the United States, there is a lack of accepted safety for its use under medical supervision, and it has a high potential for abuse.” See DEA, Press Release at 1.

DEA found that the existing body of data did not meet these thresholds. It elaborated, “the DEA and the FDA continue to believe that scientifically valid and well-controlled clinical trials conducted under investigational new drug (IND) applications are the most appropriate way to conduct research on the medicinal uses of marijuana. Furthermore, DEA and FDA believe that the drug approval process is the most appropriate way to assess whether a product derived from marijuana or its constituents is safe and effective and has an accepted medical use. This pathway allows the FDA the important ability to determine whether a product meets the FDA criteria for safety and effectiveness for approval.” Id.

However, DEA also expanded the number of entities that may become DEA registered to cultivate marijuana in the United States. In a policy statement, DEA explained that persons may become registered with DEA to grow marijuana not only to supply federally funded or other academic researchers, but also for strictly commercial endeavors funded by the private sector and aimed at drug product development. This marks a significant change from DEA’s historic policy to only permit the cultivation of marijuana from one federal source, the University of Mississippi under contract with the National Institute of Drug Abuse. DEA’s limitation on growth for research has been alleged as posing an unreasonable impediment to research on potential legitimate and therapeutic uses of the marijuana. DEA also explained in its statement that “under the new approach, should the state of scientific knowledge advance in the future such that a marijuana-derived drug is shown to be safe and effective for medical use, pharmaceutical firms will have a legal means of producing such drugs in the United States—independent of the NIDA contract process.” DEA’s statement elaborates on the factors that it will consider both under the CSA and the Single Convention on Narcotic Drugs in determining whether to grant an entity a registration to cultivate marijuana.

Simultaneous with these actions, the U.S. Department of Agriculture (USDA), in concurrence with FDA and DEA, issued a statement informing the public of how federal law applies to activities involving industrial hemp. The statement suggests the clarification should resolve open questions regarding the application of federal law created by the enactment of section 7606 of the Agricultural Act of 2014. The statement clarifies, among other things that “Section 7606 specifically authorized certain entities to “grow or cultivate” industrial hemp but did not eliminate the requirement under the Controlled Substances Import and Export Act that the importation of viable cannabis seeds must be carried out by persons registered with the DEA to do so.”

“Institutional Review Board (IRB) Written Procedures” Draft Guidance and NIH’s “Single IRB Policy” Offer Food for Thought to IRBs Charged with Oversight of Human Subjects Research

Last week, the U.S. Food and Drug Administration (FDA) and the Office for Human Research Protections (OHRP) of the U.S. Department of Health and Human Services (HHS) issued joint draft guidance on responsibilities for preparing and maintaining written policies and procedures for Institutional Review Boards (IRBs). The agencies, both responsible for issuing and enforcing federal regulations designed to protect human subjects in research, have been working together to harmonize federal regulatory requirements and guidance in this area. The draft guidance entitled “Institutional Review Board (IRB) Written Procedures: Guidance for Institutions and IRBs” (the Draft Guidance) is designed to assist IRBs and institutions responsible for the review and oversight of human research protections under both FDA (21 CFR Parts 50 and 56) and HHS regulations (45 CFR Part 46).

FDA and HHS regulations generally require IRB review and approval of regulated clinical research to safeguard the protection of human subjects. The regulations require that IRBs draft and follow written procedures for certain activities listed under 21 CFR 56.108 and 45 CFR 46.103. Written procedures must cover, for example: conducting review of research, reporting findings/actions to the investigator and institution, determining the timing of review, and ensuring that (1) changes in research are not initiated without IRB approval except in limited circumstances; and (2) certain issues are promptly reported to the IRB, FDA, OHRP, and other appropriate institutions. However, the regulations do not describe in detail the content of IRB written procedures. Continue Reading

MHRA Publishes Draft Guidance on GxP Data Integrity

The UK Medicines and Healthcare products Regulatory Agency (MHRA) has published for public consultation a draft guidance on GxP Data Integrity which includes definitions of key terms.

The draft Guidance applies to both paper and electronic data in all areas of GxP (good laboratory practice, good clinical practice, good manufacturing practice, good distribution practice and good pharmacovigilance practice). It is intended to assist organisations involved in all aspects of chemical and pharmaceutical development that are regulated by MHRA to comply with regulatory requirements relating to data quality and integrity. The Guidance should be read in conjunction with existing guidelines for each GxP.

The draft document provides guidance on the arrangements that organisations should put in place with respect to people, systems and facilities to ensure “Data Integrity” i.e. that data is complete, consistent and accurate throughout the data lifecycle. The scope of the measures will depend on related risks to data integrity and the importance of the data for making decisions relating to quality, safety and efficacy. The draft Guidance provides that senior management of organisations are responsible for the implementation of appropriate corporate Data Governance systems and identifying the risks.

The draft Guidance provides factors to be taken into account in conducting risk assessment. These include:

  • The type of data or data processing (e.g. the guidance recommends supervisory measures for manually recorded data such as second person verification or cross checks of data);
  • The degree to which data can be deleted, amended, manipulated or repeated (e.g. to achieve desired outcomes);
  • Complexity of the data system (e.g. a simple pH meter as opposed to statistical analysis tools or other complex software);
  • Subjectivity of outcomes;
  • Inconsistency of processes; and
  • The extent of human intervention, in particular where this would influence how or what data is recorded.

All assessments of risk and appropriate measures within organisations should be documented, communicated to senior management and monitored.

Companies should provide for appropriate staff training on the principals of data integrity; adequate access by staff to proper facilities for recording or processing data; appropriate accessibility of data for data processing and checks; and restriction of unauthorised access.

A corporate Data Governance system should ensure that data is:

  • attributable to the person generating the data;
  • legible and permanent;
  • contemporaneous;
  • original record (or true copy); and
  • accurate.

Companies should describe appropriate procedures for data recording including the process for supervisory (scribe) recording to record activity performed by another, which should be limited to exceptional circumstances. The procedure should provide that in these circumstances, recording should be contemporaneous, and any supervisory records should preferably be countersigned by the task performer.

Corporate data systems should ensure that access to data is limited to specific individuals, rather than through a shared or generic user access. System administrator access should be assigned to a minimum number of people; in particular such access by individuals with a direct interest in the data should be restricted where possible. An audit trail system should be put in place that records any changes or deletions of electronic data, throughout the processes of data capture, process, report, storing and archiving. Previous versions and the original data should be retained, and the time/date and author of any changes should be recorded. If data is to be excluded, this should be scientifically justified and documented.

The draft Guidance distinguishes between “original records” and “true copies”. Companies may retain true copies in place of the original record, provided that each copy is verified by a dated signature or validated electronic signature, and the integrity of the record is preserved. Additionally the draft Guidance provides that paper copies of electronic raw/source data is not considered to be “raw data” itself.

Corporate arrangements for the retention of data should ensure that the data is protected from deliberate or inadvertent alteration or loss. Where data is stored through cloud providers or equivalent services, service contracts should define responsibilities for the security and storage of the data and ownership of the data. Data storage should comply with the laws applicable to the physical location where the data is held. The contract should also ensure that data owners and competent authorities have timely access to the stored data upon request.

The draft Guidance provides that companies should undertake routine reviews of individual data sets, as well as periodic audits to verify the effectiveness of control measures and the possibility of unauthorised activity. These data reviews should be documented, and a procedure should also be put in place that describes the corrective actions to be taken if any errors or omissions are identified during reviews.

The draft Guidance also includes definitions of key terms including “data transfer/migration”, “data processing”, “computer system transactions”, “electronic signatures” and “data retention”.

Interested parties have until 31 October 2016 to submit any comments on the draft Guidance.

For further information including how to submit comments on the draft Guidance visit https://www.gov.uk/government/news/mhra-gxp-data-integrity-definitions-and-guidance-for-industry.




Renewable Fuels Association Calls On EPA and CFTC to Investigate RIN Markets

In an August 1, 2016 letter to the Commodity Futures Trading Commission (CFTC) and the Environmental Protection Agency (EPA), the Renewable Fuels Association (RFA) called for an investigation into Renewable Identification Number (RIN) trading and recent increases in RIN prices.  RINs are the currency used for compliance with EPA’s Renewable Volume Obligations under the Renewable Fuel Standard (RFS) program.  In the August 1 letter, RFA calls upon the CFTC and EPA to take action under the recently-executed memorandum of understanding (MOU), in which EPA and CFTC agreed to coordinate and share information regarding the RIN and renewable fuels markets.  Under the MOU, CFTC also agreed to “advise EPA” and “conduct appropriate oversight” to deter fraud and market abuse.

Advocating on behalf of the ethanol industry, RFA asserts that recent spikes in RIN pricing do not correlate with increased ethanol production levels. Instead of being driven by basic supply and demand market fundamentals, RFA alleges that RIN prices are being manipulated by those seeking reform or repeal of the RFS program. Accordingly, RFA’s letter urges the agencies to investigate RIN price volatility.

Some, however, attribute the continued price increases to inadequate supply of RINs. For example, a recent study published by the University of Illinois predicts an upcoming shortfall in the supply of RINs.  The study, by Scott Irwin and Darrel Good of the University of Illinois’ Department of Agricultural and Consumer Economics, included an analysis of supply and demand across all RIN categories. The study finds that EPA’s recent policy of setting RFS mandates sufficiently high to increase biofuel consumption, combined with the increased consumption of gasoline driven by falling oil prices, motivates the increased use of RINs to meet RFS compliance obligations. Irwin and Good have made this point in prior studies as well, linking EPA’s demonstrated seriousness of getting the RFS program “back on track” to RIN price spikes in 2013 and 2015.

EPA and CFTC have not yet responded to the letter.

New Guidance Makes Clear that FDA Is Focused on Insanitary Conditions at Pharmacy Compounders

Today, FDA published yet another draft guidance targeting drug compounders, entitled Insanitary Conditions at Compounding Facilities (the Draft Guidance). Notably, it makes clear to pharmacy compounders that although they may be exempt from FDA’s current Good Manufacturing Practice (cGMP) requirements, they are not exempt from FDA’s prohibition on insanitary conditions. And FDA, along with state governments, will be monitoring pharmacy compounders for such compliance. The Draft Guidance is available here. It applies to both pharmacies compounding under section 503A of the Federal Food, Drug, and Cosmetic Act (FDCA) and outsourcing facilities compounding under section 503B of the FDCA—the Draft Guidance refers to these entities collectively as “compounding facilities.”

By way of background, pharmacies compounding under section 503A of the FDCA are exempt from FDA’s cGMP requirements. See 21 USC 353A(a); 21 USC 351(a)(2)(B). But they are not exempt from FDA’s prohibition on insanitary conditions—that is, any drug prepared, packed, or held under insanitary conditions is “deemed to be adulterated” within the meaning of the FDCA. 21 USC 351(a)(2)(A).

According to FDA, the Draft Guidance is intended to both “assist compounding facilities in identifying insanitary conditions so that they can implement appropriate corrective actions” and to “assist State regulatory agencies in understanding some examples of what FDA considers to be insanitary conditions that could cause a drug to become contaminated or rendered injurious to health.” Draft Guidance at 2. The goal of assisting State regulatory agencies appears to be the primary driving force behind the Draft Guidance, as in it FDA describes the Agency’s reliance on State regulatory agencies:

[C]ompounding facilities that are not registered with FDA as outsourcing facilities are primarily overseen by the States and, as explained above, generally are not routinely inspected by FDA. Therefore, FDA encourages State regulatory agencies to assess during inspections whether compounding facilities that they oversee engage in poor practices, including those described below, and if so, to take action, as appropriate, consistent with State laws and regulations, and to contact FDA.

Draft Guidance at 2 – 3.

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Antitrust Liability for Anti-competitive Behaviour by Employees and Contractors

Liability for anti-competitive behaviour by your employees and outside contractors: when you are off the hook and when you are not

In its recent VM Remonts judgment, the Court of Justice of the EU has confirmed the strict liability of companies for the anti-competitive behaviour of their employees, even if the employee was acting contrary to instructions of senior management. The Court also clarified under which conditions a company can be liable for the anti-competitive conduct of its outside contractors or third-party service providers, which include when the company “could reasonably have foreseen” the conduct and “was prepared to accept the risk”. As discussed below, companies should therefore seek advice on how to secure antitrust compliance as part of an employee’s employment contract or a contractor’s services contract.

Strict liability for the behaviour of employees

Any anti-competitive conduct by an employee is attributable to their employer, and that company is held liable under EU competition law for the conduct “as a matter of principle”.

It is not necessary for there to have been action by, or even knowledge on the part of, the principal managers of the company concerned. Thus no ‘rogue employee’ defence is available, and the European Commission has even refused to accept the fact that employees were acting contrary to the instructions of their employers as a mitigating circumstance.

Thus the only option for the company is to publicly distance itself from any anti-competitive behaviour, in such a way that the other participants will recognise that it is putting an end to its participation; and to consider seeking immunity from fines by reporting the behaviour to the administrative authorities as soon as possible.

Strict liability for the behaviour of outside contractors that are employees in disguise

Physical persons may also act on behalf of legal entities in a different capacity, for instance as an outside contractor, service provider, independent consultant or agent, or a proxy holder.

In VM Remonts, the Court considered when the conduct of such contractors may be attributable to their client for the purposes of competition law liability. It confirmed that the essential question is whether the service provider, which presents itself as independent, is in fact acting under the direction or control of the company that is using its services, thus disguising what is in reality an employment relationship within the same economic unit.

Such direction or control might be inferred from the fact that the activity is carried out with little autonomy or flexibility, or from specific legal or economic links between the service provider and the user of the services.

Liability for the behaviour of genuine outside contractors

What about liability for the acts of a service provider that is genuinely independent?

In the VM Remonts case, a company, A, instructed external legal counsel to respond to a call for tenders by a Latvian municipality (for the supply of food products to educational establishments).  External legal counsel in turn used a sub-contractor, which, without informing company A, had also undertaken to complete the same responses for two other companies, B and C. The sub-contractor used A’s response to prepare the tenders of B and C, even though A was not aware of this.  As the Latvian court was uncertain as to whether company A could be held liable for the behaviour of its sub-contractor (as A had not authorised the actions taken by the sub-contractor and was not aware of those actions), it requested a preliminary ruling from the Court of Justice.

The Court ruled that a company may, in principle, be held liable for a concerted practice through the acts of an independent service provider supplying it with services only if one of three scenarios applies: either the service provider was in fact acting under the direction or control of the company; or the company was aware of the anti-competitive objectives pursued by its competitors and the service provider and intended to contribute to them by its own conduct; or it could reasonably have foreseen the anti-competitive acts of its competitors and the service provider and was prepared to accept the risk which they entailed.  In the present case, whether company A could reasonably have foreseen that its service provider would share its commercial information with its competitors (and also its readiness to accept that risk) was left for the national court to assess.

The conditions for liability set out above are not cumulative. Liability may thus be triggered when the company “could reasonably have foreseen” the anti-competitive conduct and “was prepared to accept the risk”.  The concept of ‘reasonable foresight’ under the third condition could turn out to involve a relatively low threshold for liability, almost akin to an automatic (rebuttable) presumption of liability.

At what point does liability end?

The facts in the present case involved the delegation of work from an external legal counsel to a sub-contractor, thus implying that the liability of companies for the conduct of their contractors can extend even further down the chain to sub-contractors.

This extensive approach to liability fits with other developments in the case-law. For example, a company may be held liable through its use of a third party IT platform.  The Court of Justice recently held that travel agencies that were aware of a proposal communicated by email from Eturas, a third party platform, to uniformly cap their discounts, but which failed to distance themselves from it, violated EU competition law (see our previous note here).

Importance of securing competition law compliance in contracts with employees and/or outside contractors

Because of the extensive approach to antitrust liability in the EU, companies should seek advice on how to secure antitrust compliance as part of employees’ employment contracts and contractors’ services contracts.  For instance, companies should assess whether to include clauses regarding antitrust compliance in contracts of employment, codes of conduct or works rules backed up by regular compliance training and audits.

Moreover, companies should not just “switch off” when they outsource an activity to external service providers, because they could incur antitrust liability through negligence – it might be found that they “could reasonably have foreseen” anti-competitive conduct that occurs and were “prepared to accept the risk”.  As a start, companies might consider, for example, whether to include a confidentiality clause in the services contract relating to the information that the service providers receive from the company and/or an exclusivity clause to prevent the service providers working with several competitors at the same time. Besides regular compliance training for employees – and internal audits – companies should also consider how best to ensure that their service providers comply with the competition rules, and that any indications that they are failing in this respect are recognised and acted upon.

Brexit: a play in four acts?

The stage is set for the Euro-drama of our time. We know that giving effect to the UK’s vote for Brexit could require as many as four sets of distinct but closely linked negotiations, or “acts”, dealing with the terms of:

  1. the UK’s withdrawal from the EU;
  2. the UK’s future relationship with the EU after leaving;
  3. interim arrangements that may be needed to bridge the gap between the current position and the conclusion and coming into effect of such a future relationship; and
  4. trade agreements outside the EU, including to replace the 53 agreements between the EU and other non-EU countries, which will stop applying to the UK post-Brexit.

The plot is as yet unknown, but the cast list of players continues to grow.

Enter, Monsieur Barnier

On 27 July 2016, the European Commission appointed Michel Barnier, a former Vice-President of the Commission and a former French Foreign Minister, as its Chief Negotiator in charge of leading the Commission Taskforce for the Preparation and Conduct of the Negotiations with the UK under Article 50 TEU.

Mr Barnier’s previous experience also includes French Minister of State for European Affairs from 1995 to 1997, during which time he sat across the negotiating table from David Davis, who was the UK’s Minister of State for Europe between 1994 and 1997. With Mr Davis having recently been appointed the UK’s new Secretary of State for Exiting the EU, he and Mr Barnier will once again be locking horns on the issue of the EU.  As EU Commissioner for the Single Market and Services between 2009 and 2014, Mr Barnier was also responsible for financial services regulation immediately after the financial crisis, during which time the Commission proposed over 40 pieces of legislation concerning the financial regulation.

Due to start in his new role on 1 October 2016, Mr Barnier will report directly to the President of the Commission, Jean-Claude Juncker, and will have the best Commission experts at his disposal. He will be advised by a group of Directors-General dealing with the issues relevant to the negotiations.

The Commission press release announcing Mr Barnier’s appointment stated:

In line with the principle of ‘no negotiation without notification’, the task of the Chief Negotiator in the coming months will be to prepare the ground internally for the work ahead. Once the Article 50 process is triggered, he will take the necessary contacts with the UK authorities and all other EU and Member State interlocutors.

Mr Barnier is being billed by the Commission as the EU’s chief Brexit negotiator. However, the European Council had already appointed a head of its Brexit Special Task Force, Belgian diplomat Didier Seeuws, on 25 June 2016, only a day after the results of the UK’s EU referendum were announced.  Mr Seeuws was chief of staff to former European Council President Herman Van Rompuy and most recently director of transport, telecommunications and energy at the European Council.

At the time of Mr Seeuws’ appointment, it was reported that he would be responsible for the UK’s future relationship with the EU, while an “article 50 taskforce” set up by the Commission would be responsible for the withdrawal negotiations.  However, Politico, a newspaper that covers EU politics, also reported that the Commission was not happy with Mr Seeuws’ appointment, with Mr Juncker’s chief of staff, Martin Selmayr, reportedly characterising the appointment as a “power grab“.

This confusion derives from the wording of Article 50, which is unclear as to which of the EU institutions should lead the negotiations. Article 50 provides that the European Council, after having received a recommendation from the Commission, must adopt a decision authorising the opening of negotiations and nominating a head of the EU negotiating team.  Article 50 does not stipulate whether the negotiating team must be comprised of Commission or Council officials.  Generally, it is the Commission that negotiates agreements with third countries on behalf of the EU.  However, at the time of the negotiations, the UK will still be an EU Member State and, arguably, the wording of the EU Treaties leaves it open to the Council to nominate a Union negotiator other than from the Commission.

With the legal position unclear, both the European Council (made up of the heads of state and governments of the EU Member States) and the Commission (effectively the EU’s civil service) appear to be in the process of deciding who will be in the driving seat, with some Member States, who are reportedly worried about the Commission’s federalist tendencies, preferring for the European Council to lead.

The EU Parliament has passed a resolution that the Commission should do the negotiating. However, the UK Prime Minister is reportedly pushing for the European Council to take the lead, in the belief that it will be more open to compromise than the Commission.  Can Mr Barnier assert his authority to lead the negotiations from the EU side?  And what roles will the supporting cast of the members of the European Parliament (a majority of whom must consent to the final agreement) and individual Member States (who, subject to the terms of the agreement, may well need to consent as well)?

Domestic stagecraft

There is continued movement on the UK side of the negotiations too.

The Prime Minister has reportedly confirmed that Mr Davis will be taking the lead in negotiations on the UK’s future trade negotiations with the EU, not Liam Fox (Minister for International Trade).  This is in line with the Prime Minister’s Written Ministerial Statement on the structure of Government Departments, which stated that the Department for International Trade (the “DIT”) would be responsible for “preparing for and then negotiating free trade agreements and market access deals with non-EU countries“.

However, some have pointed out that the very existence of the DIT appears to be at odds with the Prime Minister’s claims that no decision has yet been made as to the UK’s Brexit negotiating position. Comments made by the Prime Minister and Dr Fox in the last week also highlight the conflict.

While visiting the United States of America last week, Dr Fox advocated for the UK leaving the EU customs union and the single market.  The EU customs union is, by definition, an agreement to share external relations with third countries.  It allows goods to move freely within the customs union with no tariffs, but imposes tariffs and administrative checks at its external borders.  It is a condition of membership of the EU customs union that only the EU negotiates trade deals with non-EU states and that it sets the same entry tariffs into all Member States.  Therefore, the UK would not be able to agree its own bilateral free trade agreements with non-EU states without leaving the EU customs union, hence Dr Fox’s position.

The EU customs union and single market are two aspects of the UK’s relationship that the Government needs to decide whether it wants to try to keep as part of its Brexit negotiations. At present, Turkey is part of the EU customs union but not the single market, while Norway is the opposite (not in the customs union, but part of the single market, except for fish and agriculture).

The Prime Minister has reportedly sought to distance herself from Dr Fox’s statements about leaving the EU customs union, reiterating that no decision has yet been made. However, there is a clear tension in the Government’s current position that needs to be resolved.

While in Northern Ireland and the Republic of Ireland last week, Mrs May stated that “no one wants a return to the borders of the past” and that there was a “strong will” to preserve the free movement of people between the UK and the Irish Republic.  It is difficult to see how the UK could leave the EU customs union without adopting some sort of a “border” between Northern Ireland and the Republic to prevent goods from third countries moving into the customs union without the requisite checks and tariffs.  Free movement could continue, but customs checks would need to be introduced so that goods are not smuggled across the border.

The Brexit scrutineers

What roles will the Members of the UK Parliament play?

The House of Lords EU Committee has published a report on Parliament’s role in scrutinising the negotiations.  The report is categorical about the need for Parliament to be involved in the process during the negotiations, which it states will have profound and lasting implications for the UK in terms of its economic prosperity, but does not comment on its role in relation to triggering Article 50, a matter which is the subject of high profile legal proceedings in the English courts.

The report states that the Committee:

  • believes that the two sets of negotiations in respect of the terms of the UK’s exit from the EU and its new relationship should be conducted in parallel; and
  • expects both houses of parliament to be involved, with regular debates, ministerial statements and answers to questions to allow for effective oversight; but
  • recognises the need for the degree of scrutiny to strike a balance between transparency and confidentiality so as to avoid undermining the UK’s negotiating position.

Nick Clegg has made an unexpected return to the stage. The former Deputy Prime Minister, Member of the European Parliament and trade negotiator in the Commission has laid low since he resigned as Liberal Democrat leader in the wake of the 2015 General Election.  Last week he re-emerged as the Liberal Democrat Brexit Spokesperson, announcing that he will be publishing a series of “Brexit challenge” papers that aim to explain and critique the Government’s negotiating options.  The first Brexit Challenge paper, on the single market, includes ten “questions that need to be answered” by the Government about its policy, including:

Will the government be up front about the fact that there is a fundamental trade-off between continued access to the Single Market and sovereignty over the rules?

Does the government distinguish between ‘access’ to the Single Market and ‘membership’ of the Single Market? If so, what is the distinction?

How will the government preserve the vital ‘passporting rights’ that allow UK banks and other businesses to offer their services across Europe from their base in the UK? Does the government accept that loss of ‘passporting rights’ (allowing banks and other businesses to offer services across Europe from a UK base) would drive business out of the UK?

The European Court of Justice is an essential part of the Single Market, resolving disputes and ensuring the fair application of European law to Member States. How will the government ensure that the UK can continue to benefit from the protection of the ECJ in upholding the law to guarantee our market access once it is no longer a member of the EU? How will the UK persuade the European Commission to bring actions against Member States who block the UK’s access to their markets?

In circumstances where Her Majesty’s Official Opposition are in the midst of a leadership election and the shadow Brexit Secretary, Emily Thornberry, is also the shadow Foreign Secretary (there is currently no shadow Minister for International Trade), Mr Clegg’s attempt to grapple with the detailed policy implications of Brexit could see him play an important oversight role in parliament over the coming months.

How Hogan Lovells can help

Hogan Lovells has its own Brexit team, offering impartial analysis on the implications of Brexit on the legal structures which currently underpin a variety of sectors. Visit www.hoganlovells.com/brexit to find out more.


U.S. Department of Education Launches New Feedback System for Federal Student Aid

shutterstock_404189200On July 1, the U.S. Department of Education (“ED”) launched the Federal Student Aid Feedback System, an online portal that allows federal student aid customers to submit complaints, provide positive feedback, and report allegations of suspicious activity regarding the federal student aid programs. The Feedback System was identified as a primary objective of the “Student Aid Bill of Rights” proposed by President Obama in March of 2015.

This new feedback system is part of a larger effort by ED to enhance its oversight and enforcement capabilities with regards to student loan borrowing. Although it does not create any new requirements for institutions participating in the federal student financial aid programs, the feedback system will provide new avenues for customers to alert ED about potential compliance issues or misconduct.

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German court refers questions on extradition discrimination to the Court of Justice in the case of the first business executive extradited to the U.S. on cartel charges

This week the request for a preliminary ruling (C-191/16) by the Regional Court of Berlin (RC Berlin) in the topical case Romano Pisciotti v. Germany was published in the Official Journal. The judges in Luxembourg will have to rule on the question whether it is compatible with the principle of non-discrimination under EU law that Germany extradited an Italian citizen to the United States (U.S.) under cartel charges while at the same time refusing to extradite a German national involved in the same cartel case.

The RC Berlin, on 18 March 2016, referred four questions to the Court of Justice requesting a preliminary ruling on whether Mr Pisciotti could have suffered discrimination and can claim compensation from the German government. The RC Berlin suggests that Germany may have breached the principle of non-discrimination (Article 18 of the Treaty on the Functioning of the European Union, TFEU), by extraditing Mr Pisciotti to the U.S., although the German Constitution prevents the government to extradite German citizens. Continue Reading