The ECB’s liquidity lines – insuring deposits, both domestically and abroad

Blogpost 38/2023

During the global financial crisis in 2008 and the March 2020 market turmoil, liquidity facilities for foreign central banks – especially those of the Federal Reserve Bank of New York – were seen as essential to stabilise global financial markets (Bahaj/Reis 2022). They enabled central banks around the globe to distribute the foreign exchange needed to their economies to alleviate funding strains experienced by their financial sector. Among others, the ECB has been one of the main beneficiaries of this global scheme since the demand for US dollars in Europe was extraordinarily high during those crises. Furthermore, it enjoyed privileged access to the NY Fed’s emergency dollars among other Western central banks. By contrast, other monetary authorities were only granted access to those emergency dollars through the FIMA repo facility (Murau et al. 2022). One must distinguish between two financial instruments central banks use to implement their liquidity lines to other central banks. Either they agree on a currency swap, or they set up a repurchase agreement (repo). Both contractual agreements are effectively secured loans, but the borrowing conditions are significantly better under a currency swap agreement.

At the same time, the ECB also established a net of lines providing euro liquidity to other central banks, mainly to those in the vicinity of the euro area (Albrizio et al. 2023). After the 2020 market turmoil, the ECB quickly extended its facilities for central banks, now allowing a broad range of counterparties to access euros through them. However, like its American peer, the ECB grants privileged access to euros via swap lines only to some foreign central banks. All the others can only access euros through repo facilities. There is one elephant in the room since the vicinity of the euro area mainly includes non-euro area Member States: the ECB accords better borrowing conditions to some Member States’ central banks than others (Spielberger 2023). It set up swap lines for the Sveriges Riksbank, the Danmarks Nationalbank, and the Narodowy Bank Polski, while the Magyar Nemzeti Bank and the Banca Naţională a României may only borrow euros through a repo line.

In short, the ECB and its peers in other jurisdictions actively established a web of liquidity lines over the last 15 years essential for the globalised financial system. By using two different financial instruments to implement them, they privilege some central banks over others, which, in the case of the ECB, raises questions about its standing towards non-euro area Member States.

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Children and the Artificial Intelligence Act: Is the EU Legislator Doing Enough?

Blogpost 37/2023

The negotiations for the EU’s Artificial Intelligence Act are in full swing and there is plenty of debate about the proposed Regulation. One issue that has largely been forgotten is the protection of children. Should there be some specific rules for protecting children in AI contexts? At the moment, the EU legislator seems to say no. Even though the proposal for the AI Act has evolved in directions that take into account fundamental rights, the articles of the Regulation have clearly not been written with children’s protection in mind.

Many actors have emphasised children’s rights in the digital environment. Perhaps most importantly, in 2021 the UN Committee on the Rights of the Child adopted a general comment on children’s rights in the digital environment. It points the way towards more effective protection of children’s digital lives. Certain guiding principles should inform the implementation of children’s rights: non-discrimination, best interests of the child, the right to life, survival and development and the respect for the views of the child. In addition, the comment stipulates that the evolving capacities of children should be respected.

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The General Court finds Frontex not liable for helping with illegal pushbacks: it was just following orders.

Blogpost 36/2023

WS v Frontex, case T-600/21, decided by the General Court on the 6th of September 2023, concerns a number of Syrian nationals who arrived in 2016 on the Greek island of Milos with the intention of claiming asylum. They made this intention clear but just a few days after they arrived they were put on a plane which took them to Turkey.  They had no idea they were being taken there until they arrived. There followed a period in a Turkish reception centre and other locations and ultimately a journey to Iraq, because they were afraid that the Turkish authorities would return them to Syria.

The applicants claimed that their summary expulsion from Greece to Turkey was unlawful. They also said that as a result of this unlawful pushback they had suffered immaterial and material damage, varying from emotional harm, to the costs of living in Turkey and travelling to Iraq. Since it was accepted by all parties, and found as a matter of fact by the General Court, that the transport to Turkey was a joint operation by the Greek Republic and Frontex, they sued Frontex for compensation for their damage. Continue reading

Requirements for GDPR compensation after the ECJ decision in UI v Österreichische Post

Blogpost 35/2023

When do you receive compensation for illegal data use? How do you calculate the amount? Is a compensation always monetary? The judgment of the Court of Justice of the European Union (ECJ) in Case C-300/21 brings us a step closer to the answers.

The judgment is the first ECJ decision on non-material damages under the General Data Protection Regulation (GDPR), as an answer to several questions referred by the Austrian Supreme Court. Similar cases pending before the ECJ will likely be answered in comparable terms.

This blog post is aimed at providing a summary of the ECJ decision. It also outlines the main takeaways, in particular in regard to national courts and future judgments. This is a follow-up to a previous blog post regarding the Opinion of the Advocate General (AG) Campos Sánchez-Bordona in the same case.

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Addressing the power imbalance in the fashion industry: Can the Corporate Sustainability Due Diligence Directive finally put an end to unsustainable practices in the fashion industry?

Blogpost 34/2023

Ten years after the Rana Plaza disaster, the landmark Corporate Sustainability Due Diligence Directive (CSDD) passed the European Parliament (EP) vote on the 1st of June 2023. Within the fashion industry, there is a power imbalance between brands, manufacturers and other stakeholders. Fashion brands have enormous power which allows them to set the rules for the rest of the value chain in order to reduce costs of production as much as possible. In order to meet these demands, suppliers have to fall back on unsustainable sourcing practices and exploitative labour practices. The EP’s ambitious position has the potential to address this power imbalance as it includes purchasing practices in the due diligence obligations for companies and allows for a stronger voice for stakeholders by strengthening the stakeholder engagement framework. This way, the Directive would be capable of ensuring sustainable and responsible corporate behaviour within the fashion industry. The visionary instrument can lead to a shift in focus for companies from a single economic view towards a holistic view where companies genuinely incorporate sustainability into the governance of business across global value chains.

The EP’s position forms a strong premise for the trilogue discussions between the European Parliament, the Council and the Commission. This blogpost argues that a strong legal framework that addresses the power imbalance is necessary to address unsustainable purchasing practices and increase stakeholder engagement. To this regard, the blogpost will first explain what unsustainable purchasing practices entail in the fashion industry and how the EP’s position will address these. Secondly, the blogpost will analyse the importance of conducting meaningful stakeholder engagement and will continue by showing how the EP’s position aims to strengthen the role of stakeholders in the due diligence process.Continue reading

The Protection of Journalists through the Proposed European Media Freedom Act

Blogpost 33/2023

In 2021, while addressing the European Parliament during her State of the Union address, the Commission President, Ursula von der Leyen, referred to the dangers faced by journalists, concluding that “[i]nformation is a public good. We must protect those who create transparency, the journalists.” At that point, almost four years had passed since the murder of the Maltese investigative journalist Daphne Caruana Galizia, and the European Union had yet to take any measures to address this issue. It would be for another year before the Commission would publish its proposal for a regulation establishing a common framework for media services in the internal market (European Media Freedom Act).Continue reading

The EU AI Act at a crossroads: generative AI as a challenge for regulation

Blogpost 32/2023

Advances in artificial intelligence (AI) have once again surprised people. New approaches to training very large context-aware systems have enabled generative AI systems (GAI), especially large language models (LLMs), which can produce content that is, in many cases, indistinguishable from the products of the human mind. ChatGPT, an LLM, has proven to be one of the fastest-growing consumer applications, and such popularity raises the question of how to govern and regulate AI even more pressing. Discussions in the AI community have been at a fever pitch. Two letters with humongous support from the AI community tried to stir debates. One from the Institute for the Future of Life called for a 6-month moratorium on experiments to figure out how to deal with systems adequately. Another letter stressed the risk of extinction to get policymakers to act. These debates on GAI and large AI systems have landed them in the middle of deliberations over a proposed AI Act. While there is a great deal of overlap between the European Commission’s (Commission) original draft, the position of the Council of the European Union (Council), and the European Parliament’s (Parliament) position, they diverge on how to deal with the models that are under discussion. Continue reading

From C-73/14 to ITLOS Case No. 31: Examining the EU’s representation before International Courts and Tribunals, in light of the Principle of Sincere Cooperation under EU External Relations Law

Blogpost 31/2023

On 26 June 2023, the International Tribunal for the Law of the Sea (ITLOS) announced that it had received written statements from 31 States Parties and eight intergovernmental organisations with regard to Case No. 31 (Request for an Advisory Opinion submitted by the Commission of Small Island States on Climate Change and International Law). As expected, this included European Union (EU) member states’ submissions. More precisely, from Poland, Germany, Italy, Latvia, France, Portugal and the Netherlands.

However, perhaps somewhat surprisingly, the European Commission (EC) also submitted a written statement on behalf of the EU to ITLOS, adding an intriguing dimension to the proceedings. After all, the decision by the EC to submit a written statement revives the discussion on the EU’s representation before International Courts and Tribunals. For that reason, this blogpost aims to assess possible salient aspects regarding the statement submitted by the Commission on behalf of the EU. Does it contradict the views of the Member States that submitted their observations? What implications arise from the fact that the Member States themselves have submitted observations in this case? How does this align with the principle of sincere cooperation under EU external relations law, particularly considering the C‑246/07, European Commission v Kingdom of Sweden PFOS judgment?Continue reading

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