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15 March 2022
Schoenherr publication
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to the point: technology & digitalisation l March 2022

Welcome to the March edition of Schoenherr's to the point: technology & digitalisation newsletter!

We are excited to present a selection of legal developments in the area of technology & digitalisation in the wider CEE region.

Insights waiting for you in this edition: 

It is unbelievable that these lines from Edwin Starr's famous anti-war protest song have gained such topicality again in Europe. Our thoughts are with the people in Ukraine suffering under the effects of the war. With economic sanctions also hitting the digital economy hard and with modern communication technologies and social media dominating the "information war", we are in many ways seeing a new 21st century concept of warfare.
 
Discussions meanwhile even arise over such relatively "profane" topics like intellectual property protection. The Russian Ministry of Economic Development recently announced that it is considering suspending intellectual property rights that protect goods and services that cannot currently be imported due to sanctions, and IP owned by companies that are closing their operations in Russia. There seem to be two main reasons for considering such an announcement: (i) mitigating the impact of foreign sanctions on the Russian economy, in particular when it comes to software and patents held by foreign companies and the use of which may be essential in certain industries and (ii) as retaliation action against foreign sanctions imposed against Russia.
 
While Russia generally could adopt national legislation on this to change the scope of protection of IP rights, even differentiating between national and foreign IP owners, it seems to be quite difficult to bring this in line with international treaties on the protection of IP and of foreign investments (such as the WTO TRIPS Agreement, the Paris Convention for the Protection of Industrial Property and bilateral investment treaties). It has to be seen whether the Russian legislator indeed will impose relevant restrictions on IP rights, what the actual effects of these would be and what measures foreign entities and even states may take against them.
 
In this edition of our Technology to the Point Newsletter we try to look beyond the tragedy and into a hopefully brighter future.

The current situation in Ukraine is moving everyone to take action, including tech companies. 

Tech giants like Elon Musk's Starlink are supporting Ukraine by delivering satellite internet terminals, while social media giants like Meta, YouTube and Twitter are restricting accounts that spread mass misinformation and banning advertising from Russian state media.

Netflix and TikTok have temporarily suspended their services in Russia in response to the new Russian "fake news law".

Airbnb announced it would provide free accommodation for up to 100,000 refugees from Ukraine. Hosts can offer their accommodation on Airbnb for free or at a lower price. The platform covers the costs of accommodation for Ukrainian refugees. In addition, Airbnb offers hosts all-round protection and liability insurance.

Gaming industry companies like Electronic Arts, Microsoft, Sony, Epic Games, CD Projekt Red and Activision Blizzard are suspending the sale of their games in Russia. Microsoft even supports Ukraine's cybersecurity systems to better protect the country against hackers from Russia.

Austrian start-ups and tech companies also want to contribute. In the transport sector, the Verkehrsverbund Ost-Region, ÖBB and Wiener Linien are providing free rides for all refugees from Ukraine and Asfinag is exempting all aid transports from motorway tolls.

A1, Magenta and Drei allow free phone calls and SMS from and to Ukraine and have temporarily suspended roaming charges.

Austrian software companies such as Celum or the online supermarket Gurkerl.at are organising fundraising campaigns, donating money or doubling the donations of their employees. The Austrian crypto exchange Bitpanda is calling on its own user community to donate and has quickly set up a Bitpanda Emergency Response Fund via a crowdfunding platform.

The Viennese telehealth start-up TeleDoc actually wanted to launch its service in Ukraine before the invasion and is now offering Ukrainians a free medical consultation by phone.

Under the new legislation, capital gains realised on the sale of crypto assets will be subject to 27.5 % capital gains tax, regardless of the holding period. But the law contains other points as well. For example, trades that take place exclusively between cryptocurrencies – without a detour via fiat currencies – will not be taxable in the future. So if you sell Bitcoin for Ether, for example, no tax will be incurred as a result. In addition, the law also stipulates that domestic financial service providers will have to pay capital gains tax directly to the tax office on behalf of their customers from 2024 onwards.

All the changes in a nutshell

  • Capital gains realised on the sale of crypto assets will fall under the capital gains tax of 27.5 %, regardless of the holding period
  • The special tax rate applies to all sales starting 1 March 2022
  • Trades solely between cryptocurrencies will not be taxable
  • Domestic financial services providers will have to pay capital gains tax directly to the tax office on behalf of their clients starting in 2024
  • Staking income does not have to be taxed until the crypto assets received in the process are exchanged for fiat money or used to pay for products or services

 
This article is just for information purposes and does not constitute tax advice. We highly recommend consulting a professional tax advisor.

The January announcement by Coinbase, one of the world's biggest crypto exchanges, of its acquisition of FairX, a small futures exchange, was the latest sign of the rise of crypto-based derivatives in the crypto markets. That crypto derivatives are gaining traction can be seen in surging trading volumes. In January, crypto derivatives reached a new all-time high in market share accounting for more than 60 % of total trading volumes in crypto currencies. Currently, most activity in crypto derivatives takes place on offshore venues (such as market leader Binance), which are subject to little or no regulatory oversight. However, to broaden their user base and challenge existing financial institutions offering trading in equities and other financial assets, the crypto industry is shifting deeper into regulated European derivatives markets. It will be interesting to see how the crypto industry will cope with the comprehensive European regulatory framework and, eventually, whether trading in crypto derivatives will continue to grow at this tremendous pace.

On 8 March 2022 the Polish Ministry of Justice launched the first service for making data collected in the National Court Register accessible through an application programming interface (API), based on the provisions introduced by the Act of 11 August 2021 on open data and reuse of public sector information. The scope of information and the amount of data made available from the National Court Register through API corresponds to the full and current excerpts from the commercial register (register of entrepreneurs) issued by the Central Information of the National Court Register, taking into account provisions of the GDPR. API should constitute a great tool to facilitate the obligation of updating documents regarding economic structure and AML-related issues.
The service is still a work in progress but has been made available under the following link: https://prs.ms.gov.pl/krs/openApi

At the beginning of 2022, the biggest fine to date was imposed on a seller of electricity, gas and heat in Poland. The fine amounted to nearly PLN 5m (approx. EUR 1m) and resulted from the failure to implement appropriate technical and organisational measures to ensure the security of personal data and the failure to verify the processor. The processor, on the other hand, was fined PLN 250,000 (approx. EUR 50,000). The inspection proceedings were commenced by the DPO ex officio. The data breach involved copying of the controller's customer data by unauthorised persons when a change was made to the ICT environment by the given processor. The controller discovered the breach from two independent internet users who claimed they had access to the controller's customer database.

The request for a preliminary ruling was based on the proceedings before the German courts between two suppliers of electricity to final customers. One of them asked an advertising company to insert advertisements into the e-mail inboxes of its customers who used the T-Online free e-mail service. Those users thus received advertising messages that were not visually distinguishable from other e-mails in the user's account except for the fact that the date was replaced by the word "advertisement" and no sender was mentioned.
 
From a technical point of view, a JavaScript code of an advertising server (TAG) is connected with the place in question in the inbox on the internet page consulted by the user of such an e-mail inbox. If the user clicks on the advertisement, the input is conveyed to the advertising server, which records it and redirects the browser to the advertiser's website.
 
The German Federal Court of Justice referred the preliminary question and the CJEU decided that:

  • Article 13(1) of Directive 2002/58 on privacy and electronic communications must be interpreted as meaning that the display in an e-mail service user's inbox of advertising messages in a form similar to that of real e-mails, without the recipients being randomly determined or the level of intensity and burden imposed on that user being assessed as relevant in that regard, constitutes "use of … electronic mail for the purposes of direct marketing", such use being allowed only on condition that the user was clearly and specifically informed of the distribution methods of such advertising, including within the list of private e-mails received, and indicated their specific and fully informed consent to receive such messages.

Annex I, point 26 to Unfair Commercial Practices Directive 2005/29/EC must be interpreted as meaning that an activity consisting of the display in an e-mail service user's inbox of advertising messages in a form similar to that of real e-mails, and placed in the same position as those e-mails, falls within the concept of "persistent and unwanted solicitations" of users of e-mail services, if the display of those advertising messages is (i) sufficiently frequent and regular to be classified as "persistent solicitations" and (ii) may be classified as "unwanted solicitations" in the absence of consent having been given by that user prior to that display.

Austria's first fintech unicorn Bitpanda started out as a virtual asset service provider but has expanded its product offerings significantly in recent years. Two subsidiaries of Bitpanda have also received licences as payment institutions under PSD2 and as investment firms under MiFID2. Most recently, the Bitpanda payment institution (i.e. Bitpanda Payments GmbH) was granted the first Austrian stand-alone e-money licence by the Austrian regulator the FMA. The possibility to issue e-money will enable Bitpanda to further increase and diversify its product offerings.

E-money is all electronically stored monetary value in the form of a claim on the electronic money issuer, issued on receipt of funds for the purpose of making payment transactions and accepted by another person (i.e. it requires a tri-party relationship). The main difference compared to mere payment institutions is that e-money institutions can issue e-money by receiving and safekeeping client money, which can then later be used with other parties (e.g. merchants) or be repaid to the client.

When purchasing a "smart" (connected) product such as a digital voice assistant, it is often unclear who is entitled to do what with the data generated by the product, or the contract provides for the exclusive use and ownership of all generated data by the product's manufacturer.

The European Commission is therefore stepping up its efforts in the field of digital transformation. After facilitating data sharing across all business sectors and Member States, it now has published a proposal for a regulation for the fair access to and use of this data – the Data Act. The Data Act aims to empower data holders, giving them more control over their data.

See here for more details on the proposed text and what obligations it could impose on businesses.

At the end of February, the European Commission published the draft regulation of the Data Act. This act will provide a new legal framework for the data economy and aims to ensure more innovation and competition in the EU data economy (to find out more please click here). Recently there have been several updates to two major European "initiatives" that both share one goal: creating a digital single market that will ensure Europe's global competitiveness and data sovereignty (the two initiatives are the "European Data Strategy" and the "European Digital Strategy"). Since all legal steps within the two initiatives are somehow related to digitalisation and therefore to data, we feel it's the right time for an overview of what's where (click link for overview table).

It seems EU and US policy on Big Tech is divided by more than just the Atlantic. While European and American officials agree that it is time to put Big Tech in its place, their approaches differ vastly. From an EU perspective, the main objective of the EU Digital Markets Act (DMA) is to force large tech companies to open up to competition. US officials counter that the DMA is more of a protectionist policy, underscored by the fact that the regulation seems intentionally designed to apply only to US companies.

A recently published letter signed by 30 members of the US House of Representatives urges President Biden to demand changes to the DMA, as the new policy would provide an opening for Chinese, Russian and other foreign companies to expand their operations in Europe. So far, the European Commission's competition chief Vestager has tried to resolve these differences by claiming that open and fair markets are a common objective of both the US and the EU. In light of the current geopolitical situation, however, the arguments made by the US representatives seem more prescient than ever. We will see over the coming months whether this will lead to a stronger influence of the US on the legislative process of the DMA or whether it will give cause for lasting transatlantic differences in this matter.

It's not only the US that has something to say about the DMA. German Federal Cartel Office (FCO) President Andreas Mundt again lamented in a recent speech at the 55th Symposium of the Institute for Economic Constitution and Competition that the EU's DMA looks likely to leave national competition authorities (NCA) on the side-lines. According to Mundt, this could create issues for Brussels regulators, should the DMA prove to be less easy to implement than expected. NCAs should therefore fight to ensure that their Big Tech regulations can continue to be applied on a national level. This advice does not come out of nowhere, as the FCA is one of the leading antitrust authorities in the world with respect to tech regulation. Since the application of national law in addition to the DMA is still a big question mark and has not yet been regulated in the DMA drafts (see also here) it can be expected that the FCO will continue pursuing cases in the digital economy on the basis of Section 19a German Cartel Act, even after the DMA has come into force.

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