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A raft of new legislation on the digital economy in the last leg of the year
La recta final de 2021 llegará cargada de novedades legales en el terreno digital. Son numerosas las iniciativas legislativas en marcha que darán nuevos pasos en los próximos meses, tanto a nivel nacional como a nivel europeo: desde el nuevo marco normativo para los negocios digitales y el 'e-commerce' hasta la regulación de los servicios audiovisuales, pasando por las novedades en materia de privacidad, inteligencia artificial, criptoactivos o propiedad intelectual.
A raft of new legislation on the digital economy in the last leg of the year
The last leg of 2021 will come laden with new legislation in the field of digital services. Multiple legislative initiatives have been launched which will take further steps over the coming months, in Spain and in the EU: from the new legislative framework for digital business and e-commerce to the legislation on audiovisual services, along with new developments concerning privacy, artificial intelligence, crypto-assets or intellectual property.
Below we take a look at the most important issues needing to be taken into account by businesses in the digital economy and also for businesses operated on traditional business models, which now have an important role in the digital field.
New rules for the internet
In Europe, the proposal to create new rules for the internet and for digital platforms will be key to determining the rules of play in the single market. The European Commission is immersed in an ambitious legislative reform which focuses on providers of digital services, especially online platforms, that target their services at European citizens (social media, searchers or marketplaces, for example). The digital services package is set out in two laws: the Digital Services Act (DSA) and the Digital Markets Act (DMA), discussed here, which could see further progress over the coming months.
New developments for data protection, electronic signature and artificial intelligence
This legislation also has implications in data protection, a field where a number of reforms are in progress in Europe. This is the case of the Data Governance Act or the Regulation on Data Governance, a European Commission proposal which was launched for public consultation between June 3 and September 3. The aim is to create a legal framework that will facilitate secure data sharing across the European Union.
Additionally, on February 10, the European Council agreed on its position regarding the rules on confidentiality in electronic communications in the context of e-privacy. In this field, attention will be needed to such matters as the cases in which service providers will be allowed to process electronic communications data or have access to data stored on end-users’ devices (new rules on cookies).
Elsewhere, the European Union is finalizing the review of its digital identification project through an initiative to amend Regulation (EU) 910/2014 of 23 July 2014 (eIDAS Regulation), which will produce an e-IDAS 2 Regulation. The key new expected elements are rules on a European digital identity wallet, and on an electronic ledger (which will provide clarification of the basis for self-sovereign solutions and for transaction authentication systems based on distributed ledger technology).
Another element to watch is progress of the European Union's strategy on artificial intelligence. The proposal for a regulation laying down harmonised rules on artificial intelligence was made public in April. The new regulation could mark the red lines for the use of artificial intelligence. The European Data Protection Board and the European Data Protection Supervisor recently published a joint opinion on this proposal, which appears to signal a long debate in the European legislative process on this topic.
In this field, the European Commission presented in February 2020 its strategies in relation to data and artificial intelligence, as described in this press release.
Changes in audiovisual services and intellectual property
In the domain of audiovisual and intellectual property matters, Spain has yet to transpose the Audiovisual Services Directive into its domestic law. The period for doing so ended a year ago, on September 19, 2020. Currently in the pipeline is the Preliminary Bill for the General Audiovisual Communication Law (a period for public comment was run and ended on July 12). The aim of this preliminary bill is to adapt the existing rules to the new technological reality. The points of contention for the preliminary bill are the financing of RTVE (Spanish public broadcasting company) and the strengthening of obligations for promoting and financing European audiovisual works.
Another deadline that has passed by is the June 7 time limit for transposing the Copyright in the Digital Single Market (CDSM) Directive. The European Commission has started a procedure against Spain which now has until December 2021 to approve the new legislation and avoid penalties. This new law could have a very significant impact on intermediation services for online contents and on business models based on users sharing content with one another.
Reform and broadening of scope of the telecommunications legislation
Another expected law is the new General Telecommunications Law, for which a draft bill already exists. It stems from the European directive establishing the European Electronic Communications Code. The European Commission announced last February the opening of a procedure against Spain because it had not yet implemented the rules on the new European code in its domestic law, which prompted the Council of Ministers to approve, at the end of March, a decision to complete the process as a matter of urgency. The elements to watch out for in this field are the new requirements for electronic communications operators in relation to consumers, investment in high capacity networks or innovative services and infrastructure.
One of the most important new features of the legislation is that it will apply to both traditional operators and operators of over the top (OTT) services provided on telecommunications networks, including instant messaging services, for example, which until now had not been required to comply with the electronic communications legislation.
Strengthening of cybersecurity
The European Commission has also proposed a review of the Network and Information Systems (NIS) Directive, harmonizing cybersecurity measures for networks and information systems. The last public consultation period for this new instrument, known as NIS 2, ended in February. In Spain it coincides with the recent entry into force of the regulations approved by Royal Decree 43/2021, implementing the Law that transposed the NIS Directive in Spain (Royal Decree-Law 12/2018).
Also in relation to cybersecurity, a year ago (September 24, 2020) the European Commission published the proposal for a Regulation on digital operational resilience for the financial sector (Digital Operational Resilience Act, or DORA). The aim is to create a set of EU rules on cybersecurity obligations, principles and requirements for the financial sector and its service providers.
Regulatory framework for crypto-assets and associated services
In the area of EU law, a process that will need to be followed very closely is the rolling out of the digital finance package, in particular the so-called “digital finance strategy”, implemented mainly in the following pieces of legislation:
- the proposal for a Regulation on markets in crypto-assets (MICA)
- the proposal for a Regulation on a pilot regime for market infrastructures based on distributed ledger technology
- the proposal for the “DORA” Regulation on operational resilience, mentioned above
In Spain a notable new amendment to the law is the inclusion among obliged parties under the anti-money laundering and counter-terrorist financing legislation of providers engaged in exchange services between virtual and fiat currencies as well as custodian wallet providers (amendment of article 2 of Law 10/2020, of April 28, 2020, through Royal Decree-Law 7/2021, of April 27, 2021, which contemplated the transposition of the fifth European anti-money laundering and counter-terrorist financing directive). This amendment will also entail the creation of a register for providers engaged in exchange services between virtual and fiat currencies and custodian wallet providers, which is to be kept by the Bank of Spain. All providers engaged in exchange services between virtual and fiat currencies and custodian wallet providers will have to be entered on this register.
Elsewhere, a public consultation was run until August 31, on the draft Circular on crypto-asset advertising, issued by the Spanish Securities Market Commission (CNMV). We will know the final wording of the Circular after the CNMV has assessed the comments gathered in this period.
Delivery digital platforms and the “Rider Law”
Turning to employment matters, the so called “Rider Law” (Royal Decree-Law 9/2021) came into force on August 12. It requires an employer-employee relationship to be presumed to exist for people working for delivery digital distribution platforms where certain requirements are met and determines new reporting obligations on algorithms. Since then it has already started to have an impact on the business models falling within its scope.
We will need to stay alert for potential new European legislation. On June 15, 2021, the European Commission launched the second-stage consultation of social partners on how to improve the working conditions for people working through digital labour platforms. Following the first-stage consultation (which ran between February 24 and April 7, 2021), the European Commission concluded that the European Union needs to take further action to ensure basic labor standards and rights for people working through digital platforms. After the end of this second phase (September 15), negotiations between social partners may start with a view to concluding an agreement or the European Commission may present a proposal before the end of 2021.
New developments for startups
Lastly, we will need to watch out for the Bill promoting the startup ecosystem, which seeks to introduce various measures to soften the tax and legal regime for startups, and should be presented to the public this autumn. The draft bill, on which a public information and comment period was run between July 6 and 27, contained a diverse range of measures, which are discussed below.
In the field of corporate law, there are still a few elements that it would be useful to clarify in the proposed legislation: providing the real scope of the registration of startups’ shareholders’ agreements and how long Empresa Nacional de Innovacion SME, S.A. (Enisa) will take to assess the innovative nature of these firms (as well as an understanding of the criteria to be used), because, according to the draft bill, this is intended to take place yearly. Moreover, the wording seeks to regulate treasury shares at startups that are limited liability companies, but does not set out or regulate what will happen to those treasury shares if the company concerned ceases to be a startup and/or innovative firm. It seems to be a good move to allow notaries to request assignment of a taxpayer identification number for foreigners who become shareholders of a startup by reason of a capital increase or other type of corporate transaction.
The draft bill also contains important new legislation in the tax field, notably as described below. Firstly, the corporate income tax rate applicable to startups has been lowered from 25% to 15% in the first tax period they have taxable income and in the following three periods, subject to certain conditions. Furthermore, deferred payment of corporate income tax is allowed, without providing security and without giving rise to late-payment interest, for the first two tax periods they obtain taxable income, subject to certain conditions. These companies are also excluded from the obligation to make prepayments in the first three periods they have taxable income. In line with the more flexible treasury shares rule discussed above, the exempt amount is raised for shares handed over in exchange for exercising stock options, from the existing €12,000 to €45,000, and the other requirements for claiming it have been simplified. Moreover, an increase is made to both base (€100,000, from the existing €60,000) and percentage (40% instead of the existing 30%) for the tax credit for investment in newly or recently created companies. Lastly, and applicable for all other types of companies as well as startups, the bill relaxes the inbound expatriates regime —commonly known as Beckham’s Law—, to extend it to up to 10 years (instead of the existing 5 years), and extend it also to spouses, and children below twenty-five (or of any age with a disability), of the workers concerned.