The Ninth Circuit’s ruling against the importer defendant further opens the door for the government and private relators to police customs and tariff compliance through the FCA.
Overview
In April, Gibson Dunn published a Client Alert forecasting increased False Claims Act (FCA) enforcement of customs violations in the wake of President Trump’s new tariff regime. That alert previewed a pending case in the Ninth Circuit with jurisdictional implications for such uses of the FCA. The Ninth Circuit recently ruled against the importer defendant, further opening the door for the government and private relators to police customs and tariff compliance through the FCA and raising the stakes for importers and others in the import chain.
Case Summary
On June 23, 2025, the Ninth Circuit upheld an almost $26 million jury verdict against a pipe importer in a case alleging customs duty evasion under the FCA. In the case, Island Industries, Inc. (Island) alleged that its competitor Sigma Corporation (Sigma) made two types of false statements on customs forms to avoid antidumping duties. Island alleged that Sigma: (1) declared that antidumping duties did not apply to its imported products; and (2) described its products as “steel couplings” to customs officials but marketed them to customers as “welded outlets.”[1] The United States declined to intervene. At trial, a jury sided with Island and awarded an over $8 million verdict. The trial judge tripled the verdict and awarded penalties, as mandated by the FCA, resulting in almost $26 million in damages and civil penalties.[2]
On appeal, Sigma argued that the civil penalties provision of the Tariff Act, 19 U.S.C. § 1952, “displaces the FCA” as the sole mechanism for recovering antidumping duties an importer has fraudulently avoided paying.[3] Sigma also argued that it could not be liable under the FCA because it “had no obligation to pay antidumping duties” under the statute.[4] Sigma also challenged, in the Court of International Trade (CIT), a Department of Commerce ruling that its “welded outlets” fell within the scope of the relevant antidumping order. As a result, on appeal the Ninth Circuit was confronted not only with a question about whether a key element of the FCA was satisfied, but also with whether it had jurisdiction over the case at all—or whether, alternatively, the case “needed to be initiated in the CIT and then appealed (if at all) to the Federal Circuit.”[5]
The Ninth Circuit held as follows:
- Relators can bring FCA actions for customs duties violations in federal district court. Although under long-standing Ninth Circuit precedent[6] an FCA suit filed by the United States to recover damages for the improper avoidance of customs duties must be brought in the CIT, “a relator is not the United States” for purposes of that requirement—meaning there is “no jurisdictional obstacle” to such FCA actions brought by relators in federal district court.[7]
- The civil penalties provision of the Tariff Act is not the sole mechanism for recovering fraudulently avoided customs duties. Importers who improperly avoid customs duties are also subject to FCA liability. Neither statute’s text identifies it as the exclusive remedy for such conduct, and the statutes’ statutory and legislative histories suggest Congress “specifically intended the two statutes to coexist.”[8]
- An “obligation” to pay money to the government is an essential element of a reverse false claims action to recover customs duties, and the obligation begins at the time of import.[9] Sigma argued it had no obligation to pay antidumping duties because the amount owed had yet to be fixed and was thus contingent. The Court found that Sigma “became liable for antidumping duties when it imported its welded outlets . . . even though the amount due was not yet fixed through liquidation.”[10] This holding tracks the text of the FCA and prior caselaw interpreting the definition of “obligation.”[11]
- Consistent with the Supreme Court’s SuperValu decision, courts evaluating evasion of customs duties claims should evaluate the FCA’s scienter element from the defendant’s subjective point of view. The Court thus rejected Sigma’s argument that it lacked scienter because it would have been objectively reasonable for Sigma to believe that it did not owe antidumping duties.[12] The Court clarified that Sigma could not “escape liability by arguing that an objectively reasonable person could have believed that the statements [Sigma] submitted to the government were true.[13]
Implications
The Ninth Circuit’s ruling likely will encourage FCA enforcement of customs violations—by both the federal government and private relators. Particularly in the Ninth Circuit, which has jurisdiction over a number of the largest ports of entry in the United States, private relators may be further emboldened to pursue FCA cases against importers and others in the import chain, including in declined cases. Moreover, the Ninth Circuit’s decision highlights that importers accused of improperly avoiding customs duties face the twin risks of an enforcement action under the FCA and a separate one for civil penalties under the Tariff Act––which, in cases of fraud or gross negligence, can result in civil fines that are four times the value of the imported merchandise or the amount of the avoided duties.[14] Finally, the relator in the Sigma case was the defendant’s competitor—highlighting the risk that competitors may be incentivized to file qui tam suits against each other where they perceive (accurately or not) that they are being disadvantaged by violations of customs rules by others.
Given the sheer size of the import market in this country and the current elevated levels of custom duties, the risks for importers are enormous. Thus, as we wrote in April, companies should ensure they have robust compliance mechanisms to prevent, detect, and remedy customs violations—not only their own violations, but those of their upstream and downstream business partners.
[1] Island Indus., Inc. v. Sigma Corp., No. 22-55063, 2025 WL 1730271 (9th Cir. June 23, 2025).
[2] 31 U.S.C. § 3729(a)(1).
[3] Sigma Corp., at *18.
[4] Id. at *22.
[5] Id. at *16.
[6] See United States v. Universal Fruits & Vegetables Corp., 370 F.3d 829, 836 & n.13 (9th Cir. 2004) (holding that proper “venue” for a FCA case based on customs duties brought by the United States is the CIT); but see United States v. Universal Fruits & Vegetables Corp., 30 C.I.T. 706, 711 (2006) (the CIT is “not vested with the authority to grant Plaintiff’s claim for damages and penalties pursuant to the FCA”).
[7] Sigma Corp., at *16-17.
[8] Id. at *20-21.
[9] 31 U.S.C. § 3729(a)(1)(g).
[10] Sigma Corp., at *23.
[11] See 31 U.S.C. 3729(b)(3) (“obligation” means “established duty, whether or not fixed”); United States ex rel. Lesnik v. ISM Vuzem d.o.o., 112 F.4th 816, 821 (9th Cir. 2024) (“‘fixed’ referred to the amount of an obligation, not whether any obligation existed”).
[12] Sigma Corp., at *25.
[13] Id.
[14] 19 U.S.C. § 1592(c)(1).
Gibson Dunn lawyers regularly counsel clients on the False Claims Act issues and are available to assist in addressing any questions you may have regarding these issues. Please contact the Gibson Dunn lawyer with whom you usually work, the authors, or any leader or member of the firm’s False Claims Act/Qui Tam Defense or International Trade Advisory & Enforcement practice groups:
False Claims Act/Qui Tam Defense:
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© 2025 Gibson, Dunn & Crutcher LLP. All rights reserved. For contact and other information, please visit us at www.gibsondunn.com.
Attorney Advertising: These materials were prepared for general informational purposes only based on information available at the time of publication and are not intended as, do not constitute, and should not be relied upon as, legal advice or a legal opinion on any specific facts or circumstances. Gibson Dunn (and its affiliates, attorneys, and employees) shall not have any liability in connection with any use of these materials. The sharing of these materials does not establish an attorney-client relationship with the recipient and should not be relied upon as an alternative for advice from qualified counsel. Please note that facts and circumstances may vary, and prior results do not guarantee a similar outcome.
A recent declination of prosecution for a private equity firm provides a first look at how timely voluntary self-disclosure, extensive cooperation, and proactive remediation can mitigate the risk of criminal and civil penalties for acquirors when discovering violations of national security-related laws by acquirees, including those related to economic sanctions and export controls.
Executive Summary
On June 16, 2025, the Department of Justice’s (DOJ) National Security Division (NSD) Counterintelligence and Export Control Section and the U.S. Attorney’s Office for the Southern District of Texas (SDTX) announced the first-ever declination against an acquirer and its affiliates under NSD’s Voluntary Self Disclosures in Connection with Acquisitions Policy (the “M&A Policy”). The current version of the M&A Policy, promulgated in March 2024 as part of revisions to NSD’s Enforcement Policy for Business Organizations (the “NSD Enforcement Policy”), is aimed at incentivizing acquiring companies to make timely disclosures of misconduct uncovered during the M&A process, cooperate with subsequent investigations, and quickly remediate the behavior at issue.
The declination was part of a broader set of resolutions, including a non-prosecution agreement (NPA) with the acquired company and a plea agreement with the acquired company’s former chief executive officer (CEO), that was coordinated between DOJ and other agencies, including the Department of the Treasury’s Office of Foreign Assets Control (OFAC) and the Commerce Department’s Bureau of Industry and Security (BIS).
These resolutions follow the DOJ Criminal Division’s May 12, 2025 announcement of its new approach to white collar and corporate enforcement, as discussed in our prior client alert. The Criminal Division’s announced priorities highlight national security-related offenses, including sanctions evasion, as a key area of focus. These resolutions, reached during the Biden Administration but announced during the Trump Administration, offer an example of how DOJ, in coordination with other federal agencies, enforces such priorities in the M&A context. The resolutions also demonstrate the substantial benefits that can be obtained by acquirors, and potentially acquirees, if they promptly discover potential wrongdoing, make timely voluntary self-disclosures, carry out swift remedial action, and cooperate with subsequent action by authorities.
Background
According to the resolution documents, after acquiring Texas-based Unicat Catalyst Technologies LLC (Unicat), private equity firm White Deer Management LLC (White Deer) discovered that Unicat’s co-founder and former CEO Mani Efran had conspired to violate U.S. economic sanctions by directing the company to offer bids and conduct sales to customers in Iran, Syria, Venezuela, and Cuba over the course of roughly seven years. This directive resulted in 23 illegal sales of chemical catalysts used in oil refining and steel production.
In addition to the illicit sales, some of which also violated export control laws, Efran and others made false statements in export documents and financial records regarding the locations and identities of customers, deceived some Unicat employees regarding the legality of conducting business with customers subject to sanctions, and falsified invoices to reduce tariffs on catalysts imported from China. In total, Unicat generated about $3.33 million in revenue from unlawful sales and caused a loss to the United States of nearly $1.66 million in taxes, duties, and fees. Under Efran’s leadership, Unicat made representations and warranties that the company was following U.S. sanctions and export control laws during acquisition negotiations. In June 2021, after Unicat had been acquired by White Deer, Unicat’s new leadership discovered dealings with a customer based in Iran, a comprehensively sanctioned jurisdiction. The company immediately cancelled the pending transaction, and, over the next month, directed outside counsel to launch an investigation. After determining there were possible criminal violations by Unicat employees related to multiple transactions, both companies made multiple voluntary self-disclosures to the U.S. government, including DOJ, OFAC, and BIS. A total of approximately ten months had passed between Unicat’s September 2020 acquisition and the voluntary self-disclosures of the misconduct.
Declination of Prosecution Pursuant to the M&A Policy
DOJ’s declination was made pursuant to NSD’s M&A Policy, a part of its NSD Enforcement Policy. The policy, most recently updated in March 2024, offers protections for acquiring companies against criminal prosecution for misconduct they uncover during, or shortly after, an acquisition. Specifically, these protections apply when an acquiror 1) concludes a “lawful, bona fide acquisition of another company;” 2) makes a timely and voluntary self-disclosure to NSD of potential violations of criminal laws by the acquired entity that bear on the national security of the United States; 3) unreservedly cooperates with any NSD investigation; and 4) “timely and appropriately remediates the misconduct.” When an acquiror qualifies for protections, NSD “generally” will not seek a guilty plea while there will be a presumption that it will decline to prosecute. Furthermore, the M&A Policy indicates that while NSD will not automatically extend a similar presumption to the acquired company, it will ascribe credit for self-disclosure by the acquiror, and it will separately examine whether the acquiree meets any of the requirements to be given benefits under the NSD Enforcement Policy.
According to the declination letter, several factors in this case influenced DOJ’s determination that White Deer’s voluntary self-disclosure warranted a declination. Specifically, DOJ highlighted that:
- the acquisition of Unicat was lawful and bona fide;
- there was no legal requirement for the acquirors to divulge any discovered misconduct;
- the disclosure was still timely despite occurring ten months after the Unicat acquisition due to a number of factors, including an investment strategy where White Deer sought to merge Unicat with another company it didn’t purchase until months later, delays to post-acquisition integration efforts stemming from the COVID-19 pandemic, the immediate cancellation of a deal with an Iranian customer by new leadership after learning of it (thereby reducing the potential for additional national security harm), and the rapid disclosure to NSD, which occurred only one month after White Deer became aware of potential violations and before their full extent was understood;
- the provision of “exceptional and proactive” cooperation to the government, characterized by quickly finding and disclosing all relevant facts, identifying relevant electronic records on employee and agent personal devices and messaging accounts, providing foreign records in accordance with applicable law, and agreeing to ongoing assistance with government investigations and prosecutions; and
- the redress of the misconduct within a year of becoming aware of it, including by firing and disciplining employees involved in it and creating and deploying a compliance and internal controls regime effective at preempting analogous future issues.
The declination letter also noted that prosecution was declined in spite of “aggravating factors at the acquired entity,” such as the involvement of senior management in the wrongdoing, since the source of those aggravating factors had since been removed.
In DOJ’s announcement of the resolution, Assistant Attorney General for National Security John A. Eisenberg highlighted that the decision to “decline prosecution of the acquiror and extend a non-prosecution agreement to the acquired entity…reflects the National Security Division’s strong commitment to rewarding responsible corporate leadership.”
Multiple Resolutions Involving Coordination Among Agencies
While DOJ declined to prosecute acquiror White Deer, DOJ did require that acquiree Unicat enter a Non-Prosecution Agreement (NPA) and forfeit $3,325,052.10, the value of the company’s revenue earned in connection with the violations of sanctions and export control laws. In the NPA, DOJ emphasized certain facts that made the agreement appropriate despite the existence of aggravating factors, including Unicat receiving credit for White Deer’s timely voluntary self-disclosure under the M&A Policy, Unicat’s extensive and proactive cooperation with DOJ’s investigation, including a thorough internal investigation, and its wide-ranging remediation efforts, including creation of a new compliance program.
Notably, DOJ coordinated this resolution with OFAC and BIS, with Unicat agreeing to pay $3,882,797 in administrative penalties to OFAC as part of a corresponding settlement for violations of sanctions laws, and $391,183 in administrative penalties to BIS as part of a similar settlement for violations of export control laws. OFAC allowed for the entire NPA forfeiture payment to count towards its penalty, requiring payment of a residual sum of $557,745, while BIS allowed for the payment to OFAC to be put towards the balance owed to it. OFAC noted that while the maximum statutory civil penalty for the matter was $8,035,626, the settlement amount reflected credit for actions including, but not limited to, voluntary self-disclosure, cooperation with investigations, and remedial measures after discovery of the misconduct, and was the appropriate penalty despite “egregious” violations by former Unicat leadership, employees, and representatives.
Unicat also agreed to pay $1,655,189.57 in restitution to the Department of Homeland Security, Customs and Border Protection (CBP) for tariff avoidance violations, while the former CEO, Mani Erfan, consented to a money judgement of $1,600,000 as part of a guilty plea to charges of conspiring to violate sanctions and conspiring to commit money laundering.
Key Takeaways
Acquirors Have New Guidance to Help Mitigate Criminal Risks
This first-ever declination under the M&A Policy provides important guidance to businesses that frequently acquire other entities on steps to take to mitigate the risk of government enforcement associated with criminal violations of national security laws by acquirees. By uncovering and making a timely voluntary self-disclosure of any misconduct, offering proactive and extensive cooperation to the government, and undertaking prompt effective remediation, acquirors may be able to secure favorable outcomes, such as the declination of prosecution, even where aggravating factors are present. In addition, credit for meeting the requirements of the M&A Policy by the acquiror can extend to the company it acquired, another potentially significant benefit of taking advantage of the policy.
Coordinated Multi-Agency Resolutions
The varied resolutions reached in this case provide an illustrative example of how various government agencies are coordinating their efforts to enforce national security-related laws. DOJ reached distinct resolutions, including a declination, an NPA, and a plea agreement, not only with the companies involved, but also with at least one culpable employee. In addition, DOJ coordinated with OFAC and BIS to reach parallel administrative settlements, with OFAC citing similar factors as DOJ when justifying the penalties it imposed. This case demonstrates that companies can expect violations of national security laws, especially those related to economic sanctions and exports controls, to prompt enforcement action by multiple government stakeholders.
Navigating the Administration’s Enforcement Priorities
Enforcement of national security laws has been announced as a key area of focus for the DOJ. In the context of this enforcement environment, these resolutions provide a roadmap for steps acquiring companies can take to mitigate enforcement risk during the M&A process, including maintaining robust diligence throughout the process, and, in cases where wrongdoing is discovered, being prepared to respond swiftly and transparently.
Gibson Dunn’s lawyers are available to assist in addressing any questions you may have regarding these issues. For additional information about how we may assist you, please contact the Gibson Dunn lawyer with whom you usually work, the authors, or the following leaders and members of the firm’s Sanctions & Export Enforcement, National Security, and International Trade Advisory & Enforcement practice groups:
United States:
Matthew S. Axelrod – Co-Chair, Washington, D.C. (+1 202.955.8517, maxelrod@gibsondunn.com)
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© 2025 Gibson, Dunn & Crutcher LLP. All rights reserved. For contact and other information, please visit us at www.gibsondunn.com.
Attorney Advertising: These materials were prepared for general informational purposes only based on information available at the time of publication and are not intended as, do not constitute, and should not be relied upon as, legal advice or a legal opinion on any specific facts or circumstances. Gibson Dunn (and its affiliates, attorneys, and employees) shall not have any liability in connection with any use of these materials. The sharing of these materials does not establish an attorney-client relationship with the recipient and should not be relied upon as an alternative for advice from qualified counsel. Please note that facts and circumstances may vary, and prior results do not guarantee a similar outcome.
This update provides a summary of the key features of the regime as currently set out in the Draft Regulations.
The Dubai International Financial Centre Authority (DIFCA) has published a draft of the Variable Capital Company Regulations (the Draft Regulations) for public consultation, proposing a novel corporate structure aimed at enhancing the DIFC’s attractiveness as a jurisdiction for structuring investment platforms, including for family offices, asset holding, and private investment purposes.
The new regime introduces the Variable Capital Company (VCC), which offers a flexible framework for segregating assets and liabilities through the creation of “Cells” within a single legal entity.
The consultation process remains ongoing, and the final form of the regulations may change depending on feedback received. This update provides a summary of the key features of the regime as currently set out in the Draft Regulations.
Background and Context
The DIFC currently offers a limited cell regime under its existing Protected Cell Company framework, which is available only to certain types of investment companies. However, this framework does not include features such as segregated cells (described below). The proposed VCC regime introduces a more versatile and commercially attractive vehicle, offering structuring options that go beyond what is currently available under the DIFC’s existing framework.
Similar vehicles are available in only a few other jurisdictions, such as Singapore and Mauritius, which have implemented their own VCC regimes in recent years. By introducing a comparable structure, the DIFC aims to enhance its competitiveness and appeal to global investors, family offices, and asset managers seeking flexible and cost-effective structuring options.
Overview of the VCC Structure
A VCC is a private company that may be established in the DIFC either with one or more Segregated Cells or Incorporated Cells (each, a Cell) but not both, which may hold assets and liabilities separately from those of the VCC and other Cells. A VCC may have any number of Segregated Cells or Incorporated Cells, or none, in each case as provided for in its Articles of Association. This allows for ring-fencing of liabilities and targeted investment structuring.
Notably:
- A Segregated Cell does not have separate legal personality but is treated as segregated for asset and liability purposes.
- An Incorporated Cell is itself a private company with separate legal personality but cannot own shares in other Cells or the VCC.
The VCC structure is modelled to appeal to family offices, private funds, and other investment vehicles seeking to consolidate multiple investments within a single corporate structure, while maintaining legal separation between them.
Qualifying Criteria
Applicants must satisfy one of the following conditions:
- The VCC will be controlled by GCC Persons, Registered Persons or Authorised Firms; or
- It is established, or continued in the DIFC for purposes of holding legal title to, or controlling, one or more GCC Registrable Assets;
- It is established for a Qualifying Purpose, defined to include Aviation Structures (persons having the sole purpose of facilitating the owning, financing, securing, leasing or operating an interest in aircrafts), Crowdfunding Structures (persons established for the purpose of holding the asset(s) invested through a crowdfunding platform), Intellectual Property Structures (persons established for the sole purpose of holding intellectual property for commercial purposes), Maritime Structures (persons having the sole purpose of facilitating the owning, financing, securing, chartering, managing or operating of an interest in maritime vessels or maritime units), Structured Financing (persons having the sole purpose of holding assets to leverage and/or manage risk in financial transactions), or Secondaries Structures (vehicles facilitating the transfer of investment assets to secondary investors); or
- It is established or continued in the DIFC has a Director that is an Employee of a Corporate Service Provider and that Corporate Service Provider has an arrangement with the DIFC Registrar pursuant to the relevant provisions in the Draft Regulations.
Key Features
1. Regulatory Oversight
- VCCs are subject to the DIFC Companies Law and other Relevant Laws, unless otherwise provided.
- The DFSA must authorise any VCC providing financial services.
- The license of the VCC established for a Qualifying Purpose shall be restricted to the activities specific to the Qualifying Purpose stated in its application to incorporate or continue in the VCC in the DIFC, or any other permitted purpose shall be restricted to the activity of Holding Company. A VCC shall not be permitted to employ any employees.
2. Share Capital and Distributions
- VCCs may issue and redeem shares based on the net asset of the company or individual Cells.
- Cellular distributions must relate solely to the assets and liabilities of the relevant Cell, and must not impact other Cells or the VCC’s general assets.
3. Asset Segregation and Liability Protection
- Officers may incur personal liability if they breach their duties regarding segregation and disclosure of cell identity in transactions.
- The regulations include detailed provisions governing the consequences of unlawful inter-Cell transfers and creditor protections.
- Each transaction with third parties must clearly specify the relevant Cell and limit recourse accordingly.
4. Conversions, Mergers, and Transfers
The framework allows for:
- Conversion of existing DIFC companies into VCCs and vice-versa;
- Transfer of incorporated cells between VCCs, subject to Registrar approval and creditor protection mechanisms;
- Merger or consolidation of Segregated Cells, with prior written notice and creditor opt-out rights.
5. Licensing and Naming
- VCCs must end their names with “VCC Limited” or “VCC Ltd.”
- Segregated Cells and Incorporated Cells must have unique identifiers (e.g., “VCC SC” or “VCC IC”).
- Licences are limited to the specific activities of the Qualifying Purpose, though VCCs controlled by Qualifying Applicants may be licensed for broader purposes.
6. Shareholder Transparency and AML Compliance
- VCCs must maintain separate registers of shareholders for each Cell.
- Ultimate beneficial ownership disclosure obligations apply in line with DIFC UBO Regulations.
7. Fees and Incorporation Process
The proposed incorporation and licensing fees are aligned with the DIFC’s broader cost-efficient regime:
- USD 100 for incorporation;
- USD 1,000 for an annual licence;
- USD 300 for lodging a Confirmation Statement.
Key Topics
Some of the key topics included in the consultation paper include questions around:
- the scope and breadth of the proposed qualifying-requirements test, including whether proprietary investment access is too wide or too narrow;
- appropriateness of allowing both Segregated Cells and Incorporated Cells within a single regime, and the implications of prohibiting a VCC from having both types concurrently; and
- adequacy of creditor-protection measures, notice, publication and court-application rights on conversion of a VCC into a standard DIFC company and vice versa.
Practical Implications
The proposed introduction of the VCC regime provides a robust framework for private clients and investment entities to achieve structural and operational flexibility within a regulated DIFC environment. Key advantages include:
- Legal segregation of assets/liabilities for risk mitigation.
- Simplified investment platform management.
- Suitability for private wealth structuring, crowdfunding, and secondary market transactions.
Gibson Dunn’s lawyers are available to assist in addressing any questions you may have regarding these issues. For additional information about how we may assist you, please contact the Gibson Dunn lawyer with whom you usually work, any leader or member of the firm’s Mergers & Acquisitions or Private Equity practice groups, or the authors:
Andrew Steele – Abu Dhabi (+971 2 234 2621, asteele@gibsondunn.com)
Omar Morsy – Dubai (+971 4 318 4608, omorsy@gibsondunn.com)
© 2025 Gibson, Dunn & Crutcher LLP. All rights reserved. For contact and other information, please visit us at www.gibsondunn.com.
Attorney Advertising: These materials were prepared for general informational purposes only based on information available at the time of publication and are not intended as, do not constitute, and should not be relied upon as, legal advice or a legal opinion on any specific facts or circumstances. Gibson Dunn (and its affiliates, attorneys, and employees) shall not have any liability in connection with any use of these materials. The sharing of these materials does not establish an attorney-client relationship with the recipient and should not be relied upon as an alternative for advice from qualified counsel. Please note that facts and circumstances may vary, and prior results do not guarantee a similar outcome.
As discussed below, the Conference concluded with a political declaration in which more than 170 States have called for urgent action to protect the ocean.
The 2025 UN Ocean Conference (UNOC3) took place in Nice, France, between 9 and 13 June, bringing together over 15,000 participants, including more than 60 Heads of State and Government,[1] and generating considerable publicity. The overarching theme of UNOC3—the third conference of its kind—was “[a]ccelerating action and mobilizing all actors to conserve and sustainably use the ocean”, supporting the delivery of the UN’s Sustainable Development Goal 14 (SDG 14).[2] SDG 14, “Life below water”, comprises 10 global targets focused on the conservation and sustainable use of the ocean, seas and marine resources for sustainable development.[3]
As detailed in this alert, UNOC3 concluded with a political declaration in which more than 170 States have called for urgent action to protect the ocean—including the expansion of marine protected areas (MPAs) and the decarbonization of maritime transport.[4] Other key developments included progress towards the entry into force of the “Agreement on the Conservation and Sustainable Use of Marine Biological Diversity of Areas beyond National Jurisdiction” (BBNJ Agreement), as several State Parties ratified the BBNJ Agreement during UNOC3. States also committed to progress negotiations (which began in 2022) of an internationally binding global plastics treaty, as well as joined calls for an outright ban, moratorium or precautionary pause on deep-sea mining.
Several of the international law matters discussed in this alert may impact global commerce and trade. If you would like to learn more about these developments—i.e., how they may relate to doing business and how to prepare—please contact Charline Yim and Stephanie Collins.
1. Background
The UN Ocean Conferences were established to advance SDG 14—part of the UN’s 2030 Agenda for Sustainable Development—as well as to enhance the implementation of international law as reflected in the UN Convention on the Law of the Sea (UNCLOS). The UN Ocean Conferences bring together governments, civil society, the scientific community, and the private sector—similar to the annual Conference of the Parties (COP) in the climate change context, which are held pursuant to the United Nations Framework Convention on Climate Change (UNFCCC). Previous Ocean Conferences have taken place in 2017 (New York) and 2022 (Lisbon).
UNOC3 had three main priorities: (i) work towards the successful completion of ocean-related multilateral processes to raise the level of ambition for ocean protection; (ii) mobilize funding for SDG 14 and support the development of a blue economy; and (iii) strengthen and better disseminate marine science knowledge for better policymaking.
Notably, one week prior to UNOC3, the European Commission (Commission) published the “European Ocean Pact” (Ocean Pact),[5] which was presented at the UNOC3 by Commission President Ursula von der Leyen. The Ocean Pact brings together the EU’s policies and actions related to the ocean and creates a coordinated plan for ocean management. It is built around six priorities: (i) protecting and restoring ocean health; (ii) boosting the competitiveness of the EU sustainable blue economy; (iii) supporting coastal and island communities, and outermost regions; (iv) advancing ocean research, knowledge, skills and innovation; (v) enhancing maritime security and defence; and (vi) strengthening EU ocean diplomacy and international ocean governance.
To achieve the Ocean Pact’s targets, by 2027, the Commission expects to present the “Ocean Act”, building on a revised Maritime Spatial Planning Directive. According to the Commission, the Ocean Act will establish a single framework to facilitate the implementation of the Ocean Pact’s key objectives. To aid implementation, the Commission will also set up a high-level Ocean Board, bringing together representatives from various ocean-related sectors.
2. Nice Ocean Action Plan
UNOC3 culminated in a political declaration, titled “Our ocean, our future: united for urgent action” (Nice Ocean Action Plan or Declaration).[6] Describing the importance of conserving the ocean and its ecosystems, the Declaration recalled the 2024 advisory opinion of the International Tribunal for the Law of the Sea on the request for an advisory opinion submitted by the Commission of Small Island States on Climate Change and International Law (previously reported on here). The tribunal concluded in that advisory opinion that anthropogenic greenhouse gas emissions constitute “pollution of the marine environment” as defined under UNCLOS, triggering certain positive obligations on States under UNCLOS. The Declaration also refers to the UNFCCC and the temperature goals of the Paris Agreement,[7] as well as to the importance of implementing the Convention on Biological Diversity and its Protocols, amongst other international agreements.
Amongst other issues, under the Declaration, States commit to the expansion of MPAs. The Declaration also reiterates the importance of increasing scientific knowledge on deep-sea ecosystems and recognises the work of the International Seabed Authority, created under UNCLOS, to progress rules and regulations in relation to deep-sea mining activities in the “Area” (i.e., the seabed and ocean floor and subsoil thereof, beyond the limits of national jurisdiction).
In addition, the Declaration calls for decisive action to ensure sustainable fisheries—and encourages member states of the World Trade Organization to deposit instruments of acceptance of the Agreement on Fisheries Subsidies 2022, which was designed to curb subsidies contributing to overfishing.
The Declaration also addresses the role of the private sector, referring to the importance of attracting investment to support a sustainable ocean-based economy, including through blue bonds and blue loans. The Declaration encourages the active and meaningful involvement of banks, insurers, and investors.
The Declaration further sets out over 800 voluntary commitments by governments, scientists, UN agencies, and civil society,[8] including the Commission’s announcement of an EUR 1 billion investment to support ocean conservation, science, and sustainable fishing.[9]
3. BBNJ Agreement
One of the principal objectives of UNOC3 was to accelerate progress of the entry into force of the BBNJ Agreement.[10] The BBNJ Agreement was adopted in 2023, with the aim of ensuring the conservation and sustainable use of marine biological diversity of areas “beyond national jurisdiction”, for the present and in the long term, through effective implementation of the relevant provisions of UNCLOS, as well as international cooperation and coordination.[11] It includes provisions addressing marine genetic resources and the fair and equitable sharing of benefits, and measures such as area-based management tools (including MPAs). It also includes an obligation to conduct Environmental Impact Assessments for planned activities before they are authorised, in areas beyond national jurisdiction.
60 States must ratify the BBNJ Agreement for it to enter into force. Over the course of UNOC3, 19 additional States ratified the BBNJ Agreement, bringing the total number to 50 as at Friday, 13 June 2025.[12]
4. Global Plastics Treaty
At UNOC3, there was also progress on the negotiation of a global plastics treaty (which we have previously reported on here). By way of context, the negotiation process for the treaty was launched in 2022, at the request of the UN Environment Assembly, which called for urgent action to end plastic pollution globally. Since then, several negotiation rounds have taken place—with the most recent round in South Korea in December 2024, concluding without a final agreement. The draft treaty[13] includes measures that would target the entire life cycle of plastic—from upstream production to downstream waste—and includes both mandatory and voluntary provisions. Private actors have contributed to the negotiation process.
At UNOC3, representatives from over 95 States[14] signed a declaration reaffirming their common ambition to end plastic pollution. Titled the “Nice call for an ambitious treaty on plastics”, the declaration is structured around five points which the signatories consider “key to reach an agreement”: (i) adoption of a global target to reduce production and consumption of primary plastic polymers; (ii) establishment of a legally binding obligation to phase-out the most problematic plastic products and chemicals of concern, by supporting the development of a global list of these products and substances; (iii) improvement, through a binding obligation, of the design of plastic products and ensure they cause minimal impact to the environment and human health; (iv) inclusion of a financial mechanism that supports its effective implementation; and (v) commitment to an effective and ambitious treaty that can evolve over time.[15]
Commitment towards the achievement of an international legally binding instrument on plastic pollution is also referenced in the Nice Ocean Action Plan, discussed in Section 2 above.[16]
The next round of negotiations for a global plastics treaty will take place in Geneva in August 2025.
5. Deep-Sea Mining
Deep-sea mining was another focus of UNOC3. In addition to the commitments in the Declaration, a number of States at UNOC3 joined calls for an outright ban, moratorium or precautionary pause on deep-sea mining during, bringing the total to 37. The States include Canada, France, Germany, Mexico, Spain and the United Kingdom.[17] In parallel, a number of major financial institutions announced that they would not fund deep-sea mining projects.[18]
This development comes just six weeks after President Trump issued an executive order granting concessions for seabed mining titled “Unleashing America’s Offshore Critical Minerals and Resources”.[19] The executive order states that the US has a “core national security and economic interest” in developing and extracting mineral resources.[20] The US sent non-participating observers to UNOC3 from the President’s Environmental Advisory Task Force.[21]
6. Observations
UNOC3 addressed a wide range of ocean-related issues, including the sustainable blue economy, the environment, climate change, social development and the use of ocean resources. The discussions and resolutions at UNOC3, as reported on above, may evolve into binding international instruments on ocean governance and management in the near future. Further, UNOC3 generated a significant degree of international media attention, which may signal the start of a more high-profile positioning of ocean-related issues on the international political stage. We will continue to monitor and report on developments in this space.
[1] See ‘UN Ocean Summit in Nice closes with wave of commitments’, United Nations News, 13 June 2025, <https://news.un.org/en/story/2025/06/1164381>, last accessed 24 June 2025.
[2] i.e., to “conserve and sustainably use the oceans, seas and marine resources for sustainable development”. See ‘2025 UN Ocean Conference’, United Nations, 9 June 2025, <https://sdgs.un.org/conferences/ocean2025>, last accessed 24 June 2025.
[3] See ‘Life Below Water’, The Global Goals, undated, <https://www.globalgoals.org/goals/14-life-below-water/>, last accessed 24 June 2025.
[4] See ‘UN Ocean Summit in Nice closes with wave of commitments’, United Nations News, 13 June 2025, <https://news.un.org/en/story/2025/06/1164381>, last accessed 24 June 2025.
[5] See Communication from the Commission to the European Parliament, the Council, the European Economic and Social Committee and the Committee of the Regions, The European Ocean Pact, COM(2025) 281 final, 5 June 2025, https://eur-lex.europa.eu/legal-content/EN/TXT/PDF/?uri=COM:2025:281:FIN, last accessed 24 June 2025.
[6] ‘Our ocean, our future: united for urgent action’, United Nations Ocean Conference 2025 Resolution, 13 June 2025, <https://docs.un.org/en/A/CONF.230/2025/L.1> last accessed 24 June 2025; ‘Nice Conference Adopts Declaration Underscoring Vital Importance of Ocean to Life on Our Planet, Essential Role in Mitigating Climate Change’, United Nations, 13 June 2025, here, last accessed 24 June 2025.
[7] Namely, to limit the temperature increase to well below 2 degrees Celsius above pre-industrial levels and to pursue efforts to limit the temperature increase to 1.5 degrees Celsius. See ‘United Nations Framework Convention on Climate Change’, United Nations, Treaty Series, vol. 1771, No. 30822, 9 May 1992, <https://treaties.un.org/doc/publication/unts/volume%202303/volume-2303-a-30822.pdf> last accessed 24 June 2025; see also ‘Report of the Conference of the Parties on its twenty-first session’, Paris Agreement, Article 2, p. 22 <https://docs.un.org/en/FCCC/CP/2015/10/Add.1>, last accessed 24 June 2025.
[8] See ‘UN Ocean Summit in Nice closes with wave of commitments’, United Nations News, 13 June 2025, <https://news.un.org/en/story/2025/06/1164381>, last accessed 24 June 2025.
[9] See ‘Commission adopts Ocean Pact with €1 billion to protect marine life and strengthen blue economy’, European Commission, 11 June 2025, https://commission.europa.eu/news-and-media/news/commission-adopts-ocean-pact-eu1-billion-protect-marine-life-and-strengthen-blue-economy-2025-06-11_en, last accessed 24 June 2025.
[10]See ‘UN Ocean Summit in Nice closes with wave of commitments’, United Nations News, 13 June 2025, <https://news.un.org/en/story/2025/06/1164381>, last accessed 24 June 2025; see also ‘Beyond borders: Why new ‘high seas’ treaty is critical for the world’, United Nations News, 19 June 2023, <https://news.un.org/en/story/2023/06/1137857>, last accessed 24 June 2025.
[11] See ‘Agreement under the United Nations Convention on the Law of the Sea on the Conservation and Sustainable Use of Marine Biological Diversity of Areas Beyond National Jurisdiction’, United Nations, 2023, <https://www.un.org/bbnjagreement/sites/default/files/2024-08/Text%20of%20the%20Agreement%20in%20English.pdf>, last accessed 24 June 2025.
[12] See ‘UN Ocean Summit in Nice closes with wave of commitments’, United Nations News, 13 June 2025, <https://news.un.org/en/story/2025/06/1164381>, last accessed 24 June 2025.
[13] See ‘Revised draft text of the international legally binding instrument on plastic pollution, including in the marine environment’, United Nations, 28 December 2023, <https://wedocs.unep.org/bitstream/handle/20.500.11822/44526/RevisedZeroDraftText.pdf>, last accessed 24 June 2025.
[14] Antigua and Barbuda, Armenia, Australia, Barbados, Benin, Burundi, Cabo Verde, Cambodia, Canada, Chile, Colombia, Comoros, Congo, Cook Islands, Costa Rica, Côte d’Ivoire, Democratic Republic of the Congo, Djibouti, Dominican Republic, Ecuador, Eswatini, European Union whose Member States are Austria, Belgium, Bulgaria, Croatia, Cyprus, Czech Republic, Denmark, Estonia, Finland, France, Germany, Greece, Hungary, Ireland, Italy, Latvia, Lithuania, Luxembourg, Malta, Netherlands, Poland, Portugal, Romania, Slovakia, Slovenia, Spain and Sweden; Fiji, Gabon, Gambia, Georgia, Ghana, Grenada, Guatemala, Guinea, Guinea-Bissau, Honduras, Iceland, Israel, Jamaica, Liberia, Madagascar, Malawi, Maldives, Marshall Islands, Mauritania, Mauritius, Mexico, Micronesia, Monaco, Mozambique, Namibia, New Zealand, Norway, Panama, Papua New Guinea, Peru, Philippines, Republic of Moldova, Saint Kitts and Nevis, São Tomé and Principe, Senegal, Seychelles, Sierra Leone, Solomon Islands, Sri Lanka, Switzerland, Togo, Tuvalu, Ukraine, United Kingdom, Uruguay, Vanuatu, Zimbabwe.
[15] See ‘The Nice wake up call for an ambitious plastics treaty’, United Nations Ocean Conference, 10 June 2025, here, last accessed 24 June 2025.
[16] See ‘Our ocean, our future: united for urgent action’, United Nations Ocean Conference 2025 Resolution, 13 June 2025, <https://docs.un.org/en/A/CONF.230/2025/L.1> last accessed 24 June 2025, p. 4.
[17] See ‘UN Ocean Conference Shines a Light on the Deep Sea: Now, Time for Action’, Deep Sea Conservation Coalition, 13 June 2025, <https://deep-sea-conservation.org/un-ocean-conference-shines-a-light-on-the-deep-sea-now-time-for-action/>, last accessed 24 June 2025.
[18] BNP Paribas, Crédit Agricole and Groupe Caisse des Dépôts announced their rejection of deep sea mining, which now means that 24 financial institutions exclude deep sea mining in some form. See ‘Three Major French Investors Reject Deep Sea Mining’, Deep Sea Mining Campaign, 17 June 2025, <https://dsm-campaign.org/french-investors-reject-dsm/> , last accessed 24 June 2025.
[19] ‘Unleashing America’s Offshore Critical Minerals and Resources’, The White House, 24 April 2025, <https://www.whitehouse.gov/presidential-actions/2025/04/unleashing-americas-offshore-critical-minerals-and-resources/>, last accessed 24 June 2025.
[20] ‘Unleashing America’s Offshore Critical Minerals and Resources’, The White House, 24 April 2025, <https://www.whitehouse.gov/presidential-actions/2025/04/unleashing-americas-offshore-critical-minerals-and-resources/>, last accessed 24 June 2025.
[21] See ‘US Skips UN Ocean Conference after rejecting Development Goals’, Bloomberg, June 2025, here, last accessed 24 June 2025.
Gibson Dunn’s lawyers are available to assist in addressing any questions you may have regarding these issues. Please contact the Gibson Dunn lawyer with whom you usually work, the authors, or any leader or member of the firm’s Geopolitical Strategy & International Law and ESG: Risk, Litigation, & Reporting practice groups:
Charline O. Yim – New York (+1 212.351.2316, cyim@gibsondunn.com)
Stephanie Collins – London (+44 20 7071 4216, scollins@gibsondunn.com)
Robert Spano – Co-Chair, ESG and Geopolitical Strategy & International Law Groups,
London/Paris (+33 1 56 43 13 00, rspano@gibsondunn.com)
Rahim Moloo – Co-Chair, Geopolitical Strategy & International Law Group,
New York (+1 212.351.2413, rmoloo@gibsondunn.com)
Patrick W. Pearsall – Co-Chair, Geopolitical Strategy & International Law Group,
Washington, D.C. (+1 202.955.8516, ppearsall@gibsondunn.com)
© 2025 Gibson, Dunn & Crutcher LLP. All rights reserved. For contact and other information, please visit us at www.gibsondunn.com.
Attorney Advertising: These materials were prepared for general informational purposes only based on information available at the time of publication and are not intended as, do not constitute, and should not be relied upon as, legal advice or a legal opinion on any specific facts or circumstances. Gibson Dunn (and its affiliates, attorneys, and employees) shall not have any liability in connection with any use of these materials. The sharing of these materials does not establish an attorney-client relationship with the recipient and should not be relied upon as an alternative for advice from qualified counsel. Please note that facts and circumstances may vary, and prior results do not guarantee a similar outcome.
Join us for a 40-minute briefing covering several M&A practice topics. This program is part of a series of quarterly webcasts designed to provide quick insights into emerging issues and practical advice on how to manage common M&A problems. Partner Rob Little, global Co-Chair of the firm’s M&A Practice Group, will act as moderator.
Topics to be discussed:
- Tariff-related due diligence in M&A transactions
- The impact of the Department of Justice’s new Data Security Program on M&A transactions
- Privilege ownership in purchase agreements
- New developments in case law governing advance notice bylaws
MCLE CREDIT INFORMATION:
This program has been approved for credit in accordance with the requirements of the New York State Continuing Legal Education Board for a maximum of 0.5 credit hour, of which 0.5 credit hour may be applied toward the areas of professional practice requirement. This course is approved for transitional/non-transitional credit.
Attorneys seeking New York credit must obtain an Affirmation Form prior to watching the archived version of this webcast. Please contact CLE@gibsondunn.com to request the MCLE form.
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California attorneys may claim “self-study” credit for viewing the archived version of this webcast. No certificate of attendance is required for California “self-study” credit.
PANELISTS:
Christopher T. Timura is a partner in the Washington D.C. office of Gibson, Dunn & Crutcher LLP and a member of the firm’s International Trade, White Collar Defense and Investigations, and ESG Practice Groups. Chris helps clients solve problems that arise at the intersection of U.S. national security, foreign policy, and international trade regulation. His clients span sectors and range from start-ups to Global 500 companies. He is regularly ranked in Chambers Global and U.S.A. guides for his work and is a regular speaker and writer on the policy drivers, trends, and impacts of evolving international trade policy and regulation.
Stephenie Gosnell Handler is a partner in Gibson Dunn’s Washington, D.C. office, where she is a member of the International Trade and Privacy, Cybersecurity, and Data Innovation practices. She advises clients on complex legal, regulatory, and compliance issues relating to international trade, cybersecurity, and technology matters. Stephenie ’s legal advice is deeply informed by her operational cybersecurity and in-house legal experience at McKinsey & Company, and also by her active duty service in the U.S. Marine Corps. Stephenie is regularly recognized for her excellence in the field, most recently being named to Financier Worldwide Magazine’s Power Players: Foreign Investment & National Security 2025 – Distinguished Advisers report.
Michelle M. Gourley is a Partner in the Orange County office of Gibson, Dunn & Crutcher and is a member of the firm’s Mergers and Acquisitions and Private Equity Practice Groups. Ms. Gourley is a corporate transactional lawyer whose experience includes advising both strategic companies and private equity clients (including their portfolio companies) in connection with public and private merger transactions, stock and asset sales, joint ventures, strategic partnerships, and other complex corporate transactions. Ms. Gourley works with clients across a wide range of industries, and has extensive experience working with life sciences companies (pharma and medical device) and media, technology and entertainment companies.
Mark H. Mixon Jr. is Of Counsel in the New York office of Gibson, Dunn & Crutcher and is a member of the firm’s Litigation and Securities Litigation Practice Groups. Mark is a general corporate and commercial litigator who represents individual and corporate clients in complex, high-stakes business and corporate governance disputes, including commercial breach of contract actions, corporate-control litigation, disputes related to directors’ and controlling stockholders’ fiduciary duties, stockholder derivative and securities litigation, M&A-related litigation, and antitrust and competition matters. He frequently litigates in the Delaware Court of Chancery, where he clerked for the Honorable J. Travis Laster, the Honorable Tamika R. Montgomery-Reeves, and the Honorable Donald F. Parsons, Jr. Mark has been recognized in Best Lawyers: Ones to Watch in America™ (2024, 2025).
Robert B. Little is a partner in Gibson, Dunn & Crutcher’s Dallas office. He is a Global Co-Chair of the Mergers and Acquisitions Practice Group and a member of the firm’s Executive Committee. Rob is consistently recognized for his leadership and strategic work with clients, having been named among the nation’s top M&A lawyers by Chambers USA every year for more than a decade. Rob’s practice focuses on corporate transactions, including mergers and acquisitions, securities offerings, joint ventures, investments in public and private entities, and commercial transactions. He also advises business organizations regarding matters such as securities law disclosure, corporate governance, and fiduciary obligations. In addition, he represents investment funds and their sponsors along with investors in such funds. Rob has represented clients in a variety of industries, including energy, retail, technology, infrastructure, transportation, manufacturing, and financial services.
© 2025 Gibson, Dunn & Crutcher LLP. All rights reserved. For contact and other information, please visit us at www.gibsondunn.com.
Attorney Advertising: These materials were prepared for general informational purposes only based on information available at the time of publication and are not intended as, do not constitute, and should not be relied upon as, legal advice or a legal opinion on any specific facts or circumstances. Gibson Dunn (and its affiliates, attorneys, and employees) shall not have any liability in connection with any use of these materials. The sharing of these materials does not establish an attorney-client relationship with the recipient and should not be relied upon as an alternative for advice from qualified counsel. Please note that facts and circumstances may vary, and prior results do not guarantee a similar outcome.
We are pleased to provide you with Gibson Dunn’s ESG update covering the following key developments during May 2025. Please click on the links below for further details.
- State Street Global Advisors (SSGA) launches sustainability engagement and voting service
On May 7, 2025, SSGA launched a new opt-in Sustainability Stewardship Service. The Sustainability Stewardship Service was created for clients seeking to prioritize engagement with portfolio companies on sustainability issues. The service incorporates sustainability considerations in proxy voting and engagement in line with SSGA’s 2025 Sustainability Stewardship Service Proxy Voting and Engagement Policy, and across certain key topics, including climate change, nature, human rights, and diversity. The service is available globally to SSGA’s institutional separately managed account clients. The new Sustainability Stewardship Service is in addition to SSGA’s existing proxy voting choice program, which provides eligible clients the option to choose a third-party proxy voting policy (rather than continuing to have SSGA vote in accordance with SSGA’s proxy voting policy).
- The Network of Central Banks and Supervisors for Greening the Financial System (NGFS) publishes its first short-term climate scenarios
The NGFS short-term climate scenarios, released on May 7, 2025, provide the first publicly available framework for central banks and other financial institutions to analyze the potential near-term impact of climate change and climate policies on the economy and the financial sector. The scenarios examine how extreme weather events, climate policies, economic trends, and sectoral shifts may affect economies and financial systems over the next five years.
- EU-UK Summit leads to commitment on Emissions Trading Scheme (ETS)
On May 19, 2025, the UK Prime Minister met with the President of the European Council and the President of the European Commission at the inaugural UK-EU Summit and unveiled a Common Understanding that reframes post-Brexit engagement. The UK and EU committed to negotiate a full link between the UK ETS and the EU ETS, coupled with mutual exemption from each side’s Carbon Border Adjustment Mechanism (CBAM), the carbon tax on imported goods. The sectors that are expected to be covered are electricity generation, industrial heat generation (excluding the individual heating of houses), industry, domestic and international maritime transport, and domestic and international aviation. The parties further agreed to explore UK participation in EU electricity trading platforms and to intensify cooperation on hydrogen, carbon capture, use and storage, and decarbonized gases, bolstering North Sea renewables, energy security and future innovation. The EU Commission will now seek out an EU Council mandate. The UK’s consultation on CBAM closes on July 3, 2025.
- UK Government launches two consultations on biodiversity net gain (BNG)
On May 28, 2025 the Department for Environment, Food & Rural Affairs (DEFRA) launched two parallel consultations on expanding England’s mandatory BNG regime. The first consultation seeks views on applying a minimum 10% BNG requirement to nationally significant infrastructure projects, which is scheduled to commence in May 2026. This is aimed at ensuring that major infrastructure projects improve biodiversity during the course of their development (i.e., a net gain). The second consultation addresses how BNG operates for minor, medium, and brownfield developments. The reforms are intended to reduce costs for builders while delivering the Environment Act 2021’s biodiversity targets. Both consultations close on July 24, 2025.
- UK Government launches Emerging Markets and Developing Economies Investor Taskforce (Taskforce)
On May 15, 2025, the UK government launched its Taskforce, an industry-led forum designed to channel UK private capital into climate-aligned opportunities across Latin America, Asia, Africa and the Caribbean. The Taskforce unites 15 major financial services firms, including insurers, pension funds, asset managers, banks, investment consultants and development finance institutions, with His Majesty’s Treasury and the Foreign, Commonwealth and Development Office. Its mandate is to explore the recommendations of “The UK as a Climate Finance Hub” report into opportunities, such as tailored products, capacity-building, and regulatory reform. The Institutional Investors Group on Climate Change will serve as the Secretariat of the Taskforce.
Other highlights:
- On May 16, 2025, the UK Government published comprehensive guidance on embedding gender equality, disability, and social inclusion (GEDSI) across all UK International Climate Finance (ICF) programmes. The publication establishes mandatory minimum standards such as requirements to conduct a GEDSI analysis to assess and mitigate risks of exacerbating inequalities and comply with UK legal obligations on equality and non-discrimination. It also sets an overarching ambition that every new ICF intervention be, at a minimum, “GEDSI-empowering.”
- On May 16, 2025, the UK Government opened an independent review of greenhouse gas removals (GGRs) and issued a Call for Evidence inviting views from all stakeholders on how engineered and nature-based GGR options can help deliver the UK’s statutory net zero goals. The Call for Evidence closed on June 20, 2025.
- Omnibus Simplification Package (CSRD, CSDDD): New Proposals by European Parliament’s lead rapporteur, Jörgen Warborn, and by the European Council and related discussions; Status update on ESRS revision
The legislative process on the Omnibus Simplification Package is moving further along:
The European Parliament’s lead rapporteur, Jörgen Warborn, published his draft report on June 12, 2025. Inter alia, he suggests deleting the requirement for companies to file mandatory climate transition plans in the Corporate Sustainability Due Diligence Directive (CSDDD) and raising the threshold for both, the CSDDD and the Corporate Sustainability Reporting Directive (CSRD), to companies with more than 3,000 employees and EUR 450 million in net turnover. For a more detailed analysis of the report by the European Parliament’s lead rapporteur, please see our client alert of June 18, 2025. It is expected that the European Parliament will vote on the proposed amendments in October 2025.
On June 23, 2025, the Council of the EU issued a press release briefly outlining its position on the Omnibus Simplification Package. Regarding the CSRD, the Council of the EU introduces a worldwide net turnover threshold of over EUR 450 million, in addition to the European Commission’s proposal to raise the employee threshold to 1,000 employees.
Regarding the CSDDD, the Council of the EU proposes increasing the applicability threshold to more than 5,000 employees and a worldwide net turnover exceeding EUR 1.5 billion. It maintains the proposed limitation of the CSDDD’s due diligence requirements to the company’s own operations, those of its subsidiaries, and those of its direct business partners, but it intends to shift the focus from an entity-based approach to a risk-based one and the companies should now only conduct a more general scoping exercise instead of a comprehensive mapping exercise. The Council of the EU suggests limiting the companies’ obligation to adopt a climate transition plan and postpones this obligation by two years. The Council of the EU also suggests postponing the CSDDD’s transposition deadline by one further year, pushing it back to July 26, 2028 and maintains the European Commission’s proposal to remove the EU harmonised liability regime.
On June 23, 2025, a status report on the revision of the European Sustainability Reporting Standards (“ESRS”) has been published by the European Financial Reporting Advisory Group (EFRAG). According to this report, it is intended to reduce the number of mandatory data points by 50 % or even more. In addition, the ESRS shall, inter alia, be aligned with the International Sustainability Standards Board (ISSB) Standards, there shall be a clear distinction and separation of mandatory and non-mandatory data points and the General Disclosure section (ESRS 2) shall be “drastically reduced” to avoid duplication.
Meanwhile, the EU Ombudsman, Teresa Anjinho, has launched an inquiry into the European Commission’s process for drafting the Omnibus Simplification proposal. While the Commission defends the expedited process as necessary to reduce complexity and implementation costs for companies facing CSRD reporting obligations in 2026, non-governmental organizations have filed complaints alleging insufficient stakeholder engagement and undue influence by fossil fuel interests. The Commission maintains that it used a staff working document—a shorter internal analysis intended to justify urgent proposals in lieu of full impact assessments—based on prior input from CSRD, CSDDD, and EU Taxonomy workstreams. It further cites stakeholder roundtable discussions conducted in February 2025 as a means of collecting targeted feedback on implementation hurdles and points to Directorate-General for Financial Stability, Financial Services, and Capital Markets Union-led outreach, including technical workshops and a stakeholder request mechanism, as evidence of broader engagement across sectors.
Furthermore, the European Central Bank (ECB) issued a statement in which it warned that reducing the scope of the CSRD could lead to systematic and unquantifiable bias due to unverifiable and selective voluntary disclosures. The ECB also opposed excluding financial institutions from the CSDDD, arguing this would weaken risk management and legal clarity. Additionally, it criticized the weakened requirements for implementing climate transition plans, warning that this may lead to increased litigation risks and regulatory fragmentation.
- Discussion on entire elimination of the EU’s CSDDD
German Chancellor Friedrich Merz called for a full elimination of the EU’s CSDDD, arguing that a postponement is insufficient, and that the directive imposes excessive regulatory burdens on businesses. This statement followed the German government’s plans in its coalition agreement to eliminate Germany’s own human rights and environmental supply chain due diligence law, the Supply Chain Act. A spokesperson for the German government later softened Merz’s statement and clarified that the goal should be to “streamline” and “de-bureaucratize” the directive rather than eliminate it entirely.
French President Emmanuel Macron echoed Merz’s original stance, explaining that the directive should be taken “off the table” to improve European competitiveness against the U.S. and China.
Belgium and Denmark strongly rejected the proposal, emphasizing the importance of maintaining and strengthening ethical standards in support of Europe’s green transition and calling for smarter, more digitalized, and manageable requirements that align with a competitive business environment.
In the meantime, also the European Parliament’s lead rapporteur Jörgen Warborn emphasized that while the CSDDD must remain in force to avoid a fragmented regulatory landscape across member states, the European Commission’s current simplification proposals do not go far enough.
- Corporate Climate Risk: German Court Breaks New Ground in decision on lawsuit brought by Peruvian farmer against German Energy Company
On May 28, 2025, the Higher Regional Court of Hamm, Germany, issued a long-awaited decision in the lawsuit brought by a Peruvian farmer against German multinational energy company RWE AG (RWE), marking a milestone in climate litigation.
The plaintiff claimed that RWE’s historical greenhouse gas emissions had significantly contributed to the melting of Andean glaciers, posing a threat of flooding to his property. Although the court dismissed the claim – finding the risk of damage in this specific case too low – it acknowledged in principle that major corporate emitters can be held liable for climate-related harm.
This ruling is significant: For the first time, a German appellate court explicitly recognized the potential for civil liability in transboundary climate claims. While the judgment sets a high bar for causation and imminence of harm, it underscores the evolving legal landscape in ESG and climate-related litigation.
- CSRD / Omnibus “Stop-the-clock” Directive transposition update
Since our last update, Denmark, Estonia, Finland, Hungary, Latvia, Lithuania, Luxembourg, Poland and Sweden have started the legislative process to transpose the Stop-the-Clock Directive into national law. Notably, Luxembourg has started the process even though it has not completed the transposition of the CSRD.
An overview of the current transposition status of CSRD into national laws and the “Stop-the-clock” process under the Omnibus Simplification Package can be found here.
Other highlights:
- On May 22, 2025, the European Parliament agreed to the European Commission’s proposal to introduce a 50-tonne threshold to the CBAM, which would exempt 90% of importers—primarily small and medium-sized enterprises—from the scope of CBAM rules.
- On May 27, 2025, the EU Council approved proposed amendments to a regulation on carbon dioxide (CO2) emissions standards for new passenger cars and vans. The amendments provide that compliance with specific emissions fleet targets of car manufacturers for the three years 2025, 2026, and 2027 will no longer be assessed annually, but on the basis of the average performance of each manufacturer over these three years, giving car manufacturers more time and flexibility to comply with CO2 targets and, thus, avoiding significant penalties.
- Recent developments in the Trump Administration’s litigation of laws and regulations addressing climate change and ESG
Following the Trump Administration’s April 8th Executive Order setting forth limits on certain state climate-related initiatives, on April 30, 2025, the Trump Administration filed lawsuits against Hawaii and Michigan seeking to prevent the states from pursuing climate change lawsuits against fossil fuel companies. The Administration’s complaints indicate that the United States filed the lawsuits to ensure the states do not interfere with the Clean Air Act or the Trump Administration’s interpretation of the federal government’s “exclusive authority over interstate and foreign commerce, greenhouse gas regulation, and national energy policy.” The next day, Hawaii filed suit against oil and gas companies in Hawaii Circuit Court alleging that the state suffered harm as a result of the companies’ misrepresentations regarding the impact of fossil fuel products on the climate and sea levels, asserting various causes of action, including negligence, public nuisance, failure to warn, and civil aiding and abetting.
On May 1, 2025, the Trump Administration filed similar lawsuits against the states of New York and Vermont alleging that their climate Superfund laws are preempted by the Clean Air Act and foreign affairs doctrine, violate the Constitution’s limits on extraterritorial regulation, and violate the Foreign Commerce Clause and Interstate Commerce Clause. The complaints allege that the laws, which were enacted in 2024, force out-of-state fossil fuel companies to fund state climate change adaptation projects and attempt “to usurp the power of the federal government by regulating national and global emissions of greenhouse gases” in violation of federal law. Various other cases have been brought challenging these laws.
As discussed in Gibson Dunn’s Transnational Litigation 2024 Year-End Update, courts disagree on whether federal law preempts these state law climate tort claims. Most state courts have concluded that federal law precludes states from using their own law to resolve claims seeking relief for injuries arising from interstate and global greenhouse gas emissions. However, on May 12, 2025, the Colorado Supreme Court joined the Hawaii Supreme Court in holding that these claims are not preempted by federal law. The Supreme Court has yet to weigh in on the issue, and decided not to hear a challenge to these state-law climate suits in March 2025. Our April 2025 ESG Update provides more information on the April 8, 2025 Executive Order that prompted the Trump Administration’s involvement in such litigation.
Additionally, on May 22, 2025, the Federal Trade Commission (FTC) and the U.S. Department of Justice (DOJ) Antitrust Division filed a joint Statement of Interest in a multistate antitrust case against BlackRock, Vanguard, and State Street. The lawsuit alleges that the asset managers used their management of stock in competing coal companies to drive reductions in output, resulting in higher energy prices for consumers. In their joint statement, the FTC and DOJ state that asset managers and other institutional investors may be liable under the Clayton and Sherman Acts when they use their stock holdings for anticompetitive purposes.
- Takeaways from the Securities and Exchange Commission’s (SEC) 2025 “SEC Speaks” conference
The annual “SEC Speaks” conference, which provides an update on the current initiatives and priorities at the SEC, took place on May 19 and 20, 2025. The program included remarks from SEC Chairman Paul Atkins and SEC Commissioners Mark Uyeda, Hester Peirce, and Caroline Crenshaw. In his remarks, Commissioner Uyeda reiterated his criticism on dedicating resources to “further attempts to use the SEC’s disclosure regime to achieve social or political goals” and emphasized the SEC’s return to its “core mission of regulating the capital markets.” Commissioner Uyeda also criticized the conflict minerals disclosures under Section 1502 of the Dodd-Frank Act as being ineffective and suggested the rule be re-evaluated. As of the date of publication, the SEC has not responded to the Eighth Circuit with an outline of the actions the SEC plans to take on the final climate-risk disclosure rule.
- Texas Governor signs bill increasing ownership thresholds for shareholder proposals under Rule 14a-8 of the Securities Exchange Act of 1934
On May 19, 2025, the Governor of Texas signed into law Senate Bill 1057 (SB 1057), which amends the Texas Business Organizations Code to allow certain publicly traded corporations to implement limitations on shareholder proposals submitted under Rule 14a-8 or the corporation’s advance notice bylaws. The law is set to take effect on September 1, 2025. As discussed in our recent client alert, SB 1057 applies to nationally listed corporations that either (a) have their principal office in Texas or (b) are admitted to a listing stock exchange that has its principal office in Texas or has received approval from the Texas Securities Commissioner. If the listed corporation follows certain requirements (including amending its governing documents and providing notice shareholders in a proxy statement in advance of adopting the amendment), it can require shareholders wishing to submit shareholder proposals to hold at least $1 million or 3% of the corporation’s voting shares and to solicit holders of shares representing at least 67% of the voting power of shares entitled to vote on the proposal. The new legislation, if implemented, would likely impact proponents that historically have advocated for or recommended in favor of ESG-related proposals.
Other highlights:
- On May 29, 2025, the California Air Resources Board held a virtual public workshop on California’s climate disclosure laws (SB 253, or the Corporate Greenhouse Gas Reporting Program, and SB 261, or the Climate-Related Financial Risk Disclosure Program), discussing the rulemaking process and initial reactions to themes in early feedback received.
- On May 22, 2025, the U.S. House of Representatives passed the “One, Big, Beautiful Bill,” which proposes repealing significant renewable energy tax credits.
- On May 28, 2025, DOJ informed the Fifth Circuit that it will engage in new rulemaking regarding the U.S. Department of Labor’s rule allowing fiduciaries to consider ESG and other factors in determining investment options for employee benefit plans, ending its defense of this rule. Our February 2025 ESG Update provides an overview of the Northern District of Texas’ decision to uphold the rule in a related case, Utah v. Micone.
- Senators Sheldon Whitehouse and Elizabeth Warren have launched an investigation into U.S. banks that have rolled back their climate commitments.
- The U.S. Department of Energy announced 47 deregulation actions on May 12, 2025, in accordance with President Trump’s executive order, “Zero-Based Regulatory Budgeting to Unleash American Energy.”
- New York City Comptroller Brad Lander announced that the city’s public pension funds have instructed their asset managers to submit a written plan describing their net zero plans by June 30, 2025.
In case you missed it…
The Gibson Dunn Workplace DEI Task Force has published its updates for May summarizing the latest key developments, media coverage, case updates, and legislation related to diversity, equity, and inclusion.
A collection of our analyses of the legal and industry impacts from the presidential transition is available here.
- State Bank of Vietnam (SBV) launches handbook to strengthen green finance and ESG risk management across Vietnam’s banking sector
On May 21, 2025, the SBV, in collaboration with the International Finance Corporation (IFC), launched the Environmental and Social Risk Management System (ESMS) Handbook to guide credit institutions in managing risks aligned with ESG principles. Deputy Governor Dao Minh Tu emphasized that green growth is now a mandatory requirement, especially for developing countries like Vietnam. The Handbook aims to provide practical and specific guidance for credit institutions to implement ESMS-related processes.
- EnergyAustralia settles with climate advocacy organization over allegations of “greenwashing”
On May 19, 2025, EnergyAustralia, one of Australia’s largest energy companies, confirmed that it has settled a landmark greenwashing lawsuit with climate advocacy group Parents for Climate, over allegations that the company misled over 400,000 customers by falsely marketing its Go Neutral program as carbon neutral. The program relied on carbon offsets while customers continued using fossil-fuel energy, with EnergyAustralia now acknowledging that offsets are not the most effective way to reduce emissions. The company admitted it should have communicated more clearly the limitations of offsetting and has shifted focus to supporting direct emission reductions. This settlement marks the first Australian case challenging “carbon neutral” marketing and is seen as a turning point in greenwashing litigation. EnergyAustralia has stopped offering the Go Neutral program to new customers and is phasing it out for existing ones.
- India consults on draft framework for Climate Finance Taxonomy
On May 7, 2025, the Indian government released a draft Framework of India’s Climate Finance Taxonomy and invited public comments by June 25, 2025. The framework outlines the approach, objectives, and principles that will guide the climate finance taxonomy. The taxonomy aims to facilitate greater resource flow toward sustainable activities that support the country’s 2070 net zero target and its 2030 climate goals and classifies activities into “climate supportive” and “transition supportive” categories to guide investments and prevent greenwashing. It focuses initially on hard-to-abate sectors like iron, steel, and cement, as well as sectors such as power, mobility, buildings, and agriculture.
Other highlights:
- The Shenzhen Stock Exchange revised the methodology for the ChiNext Index to place greater emphasis on ESG.
- The Accounting and Corporate Regulatory Authority of Singapore launched a guidebook for sustainability reporting training providers.
The following Gibson Dunn lawyers prepared this update: Lauren Assaf-Holmes, Carla Baum, Mitasha Chandok, Becky Chung, Mellissa Campbell Duru, Sam Fernandez*, Ferdinand Fromholzer, Saad Khan*, Vanessa Ludwig, Babette Milz, Kiernan Panish, Johannes Reul, Meghan Sherley, and Nicholas Tok.
Gibson Dunn lawyers are available to assist in addressing any questions you may have regarding these developments. Please contact the Gibson Dunn lawyer with whom you usually work, the authors, or any leader or member of the firm’s ESG: Risk, Litigation, and Reporting practice group:
ESG: Risk, Litigation, and Reporting Leaders and Members:
Susy Bullock – London (+44 20 7071 4283, sbullock@gibsondunn.com)
Perlette M. Jura – Los Angeles (+1 213.229.7121, pjura@gibsondunn.com)
Ronald Kirk – Dallas (+1 214.698.3295, rkirk@gibsondunn.com)
Julia Lapitskaya – New York (+1 212.351.2354, jlapitskaya@gibsondunn.com)
Michael K. Murphy – Washington, D.C. (+1 202.955.8238, mmurphy@gibsondunn.com)
Robert Spano – London/Paris (+33 1 56 43 13 00, rspano@gibsondunn.com)
*Sam Fernandez and Saad Khan are trainee solicitors in London and not admitted to practice law.
© 2025 Gibson, Dunn & Crutcher LLP. All rights reserved. For contact and other information, please visit us at www.gibsondunn.com.
Attorney Advertising: These materials were prepared for general informational purposes only based on information available at the time of publication and are not intended as, do not constitute, and should not be relied upon as, legal advice or a legal opinion on any specific facts or circumstances. Gibson Dunn (and its affiliates, attorneys, and employees) shall not have any liability in connection with any use of these materials. The sharing of these materials does not establish an attorney-client relationship with the recipient and should not be relied upon as an alternative for advice from qualified counsel. Please note that facts and circumstances may vary, and prior results do not guarantee a similar outcome.
The CLRC staff last week made new or revised proposals for changes to California competition law on mergers, “misuse of market power,” and single-firm conduct.
As summarized in our January 15, 2025 and March 25, 2025 Client Alerts, the California Law Revision Commission (CLRC) has been considering changes to the state’s antitrust law.[1] Over the past week, CLRC staff (1) proposed four options for a new California law to regulate mergers,[2] (2) revised its proposals for new legislation governing single-firm conduct law,[3] and (3) proposed two options for new legislation targeting alleged “misuses of market power.”[4] The staff’s favored proposals would be aggressive and far-reaching changes to existing competition law, making California law significantly broader, and more restrictive on businesses, than federal law.
The CLRC’s commissioners will now consider the staff’s recommendations. The CLRC is meeting on June 26, 2025 and September 18, 2025 to consider these issues, and the public can submit comments during this period. Gibson Dunn attorneys are monitoring these recommendations and are available to discuss the implications for your business or assist in preparing a public comment for submission to the CLRC.
Proposed Merger Language
At the federal level, Section 7 of the Clayton Act prohibits mergers whose effects “may be substantially to lessen competition, or to tend to create a monopoly.”[5] While mergers in certain industries can be challenged under state laws[6] and the California Attorney General can bring challenges to mergers under federal law, California currently lacks a broad state-level merger statute. The staff presented four options for a potential state merger provision. Each of these options are, to varying degrees, broader than federal antitrust law.
- Option 1 “largely mirrors the Clayton Act.”[7] But it would expand on federal law by also expressly prohibiting mergers that tend to create a monopsony[8] while removing analogous federal exemptions, such as those for common carriers.[9] The CLRC staff framed adopting a state analogue to the federal law as having the “downside” of importing existing federal jurisprudence on mergers.[10]
- Option 2 would adopt the modified federal analogue and (1) add a presumption that mergers which would result in a “a firm controlling an undue percentage share of the relevant market”—likely at or around 30%—and “a significant increase in the concentration of firms in that market” are inherently anticompetitive,[11] and (2) recognize the 2023 Federal Merger Guidelines as “persuasive authority” in interpreting the statute.[12]
- Option 3 would go farther than Option 2 and codify presumptions based on changes in the Herfindahl-Hirschman Index (“HHI”),[13] including a presumption of unlawfulness for mergers that result in a market with an HHI score of 1,800 or more, a market share greater than 30%, or a change in HHI of over 100 points.[14]
- Option 4 would create a “break from federal law,”[15] prohibiting mergers whose effect “may be to create an appreciable risk of lessening competition more than a de minimis amount.”[16] The practical effect would be to reduce the burden of proof required to prove the illegality of a merger.[17]
The CLRC did not present a formal recommendation for premerger notification laws, because a proposal addressing premerger notification is already pending in the Legislature.[18]
Revised Single-Firm Conduct Proposals
The CLRC staff also responded to public comments about its single-firm conduct proposals.
The staff has now recommended against adoption of two of its proposals. First, staff disapproved of the least aggressive reform proposal—to create an analogue to Section 2 of the Sherman Act[19]—in response to criticism from certain interest groups and the Single Firm Conduct Working Group, a group of economists appointed by the CLRC, who argued that this proposal would not go far enough.[20] Second, the staff recommended abandoning a proposal for a “clean break” from federal law that the Single Firm Conduct Working Group had championed.[21] Other commenters—from both sides of the antitrust bar—objected that that proposal would cause significant uncertainty and increased litigation.[22]
The staff recommended proposed legislation that would not only prohibit unlawful monopolization (as federal law does) but would also prohibit unilateral “restraints of trade.”[23] Several commenters raised concerns with this approach—noting that it conflates unilateral and joint conduct concepts;[24] that it is broad and vague, which risks creating uncertainty;[25] and that it could be construed to outlaw (and thus chill) many forms of procompetitive conduct.[26] CLRC staff largely dismissed these concerns but agreed the proposal should be limited to “prohibiting unreasonable restraints of trade.”[27]
Consistent with their recommendation for significant reform, CLRC staff had also proposed legislative declarations that California antitrust law should be broader than and not modeled on federal law—with specific language rejecting certain federal court decisions.[28] CLRC staff largely dismissed commenters’ concerns that the draft provisions would increase uncertainty and call into question procompetitive practices, like price-cutting and loyalty programs.[29]
Proposed Misuse of Market Power Language
Staff also proposed additional statutory provisions to address so-called misuses of market power—practices in which a company with more market power allegedly disadvantages its rivals or customers. This would in effect import concepts from European “abuse of dominance,” a standard that has never been adopted in any domestic competition law.
Specifically, the staff recommended that any company with thirty percent or more of the relevant market, or assets, net annual sales, or market capitalization greater than $500 billion be deemed to have significant market power.[30] They then proposed a list of conduct that would be presumed anticompetitive when practiced by a firm with such presumed power:
- Leveraging substantial market power in one market into a separate market;
- Bundling, tying, using loyalty rebates, or refusing to interoperate;
- Denying use of essential facilities or resources;
- Refusing to deal;
- Engaging in predatory pricing tactics such as pricing below costs;
- Imposing exclusivity as a condition of doing business;
- Self-preferencing; or
- Acquiring, directly or indirectly, the whole or any part of the stock, or other share capital of another person.[31]
These provisions are particularly notable because (1) they would allow for a presumption of market power based merely on a company’s size, contrary to general competition theory; (2) they significantly reduce the market share threshold generally required under federal law for unilateral conduct to be deemed anticompetitive; and (3) they presume numerous practices are anticompetitive even when economic theory and experience indicate that the practices are often procompetitive and beneficial to consumers.
Takeaways
The CLRC staff’s proposals continue to represent significant departures from existing law, with the potential to vastly expand antitrust risk, create a larger role for the California Attorney general, encourage litigation in California courts, and create uncertainty and compliance challenges for businesses, particularly those operating in multiple states.
The CLRC staff acknowledged that the mere addition of a state merger statute is itself “a significant change to California’s antitrust law.”[32] And many of the proposals would invite the courts to interpret California law differently than federal law, creating uncertainty and asymmetry where mergers or acquisitions could potentially be lawful under federal law and the laws of almost every state—but held up in California on state-law grounds.
The past week’s memoranda also indicate that the CLRC’s staff is proceeding with aggressive recommendations that, if adopted, would result in unprecedented restrictions on businesses operating in California—restrictions that could effectively bind such businesses across the United States. The CLRC staff appear to have largely dismissed concerns that a wide divergence with federal law is unwarranted and would create uncertainty. And the introduction of a “misuse of market power” prohibition would mark a dramatic change from existing state and federal law: It would deem companies to be dominant at lower levels than in the European Union or in New York’s proposed ‘Twenty-First Century Anti-Trust Act.’[33] And it would condemn a long list of conduct that is ill-defined, potentially sweeping, and often procompetitive.
The CLRC must review the staff’s recommendations, decide whether to adopt them, and then subject their own recommendations to a period of public comment before submitting them to the legislature. Because the CLRC’s final recommendations have historically been adopted into law at a high rate,[34] companies and industry associations should think carefully about how the staff’s proposals may affect their businesses and whether to provide comments for the CLRC before the June 26, 2025 and September 18, 2025 meetings at which the commissioners plan to discuss these options. Attorneys from Gibson Dunn are available to help in preparing a public comment for submission to the CLRC or to the legislature as they consider potential bills, to discuss how these proposed changes may apply to your business, or to address any other questions you may have regarding the issues discussed in this update.
[1] Minutes, Cal. L. Revision Comm’n (Jan. 23, 2025) at 4, https://www.clrc.ca.gov/pub/2025/MM25-12.pdf; Alex Wilts, California Law Revision Commission Advances Antitrust Law Study (Jan. 24, 2025), here.
[2] Memorandum 2025-31, Draft Language for Merger Provisions, Cal. L. Revision Comm’n (June 16, 2025) [henceforth “Merger Options Memo”], https://clrc.ca.gov/pub/2025/MM25-31.pdf.
[3] Memorandum 2025-30, Draft Language for Single Firm Conduct Provision and Public Comment, Cal. L. Revision Comm’n (June 17, 2025) [henceforth “SFC Public Comment Memo”], https://clrc.ca.gov/pub/2025/MM25-30.pdf.
[4] Memorandum 2025-32, Status Update: Draft Language on Misuse of Market Power, Cal. L. Revision Comm’n (June 19, 2025) [henceforth “MMP Options Memo”], https://clrc.ca.gov/pub/2025/MM25-32.pdf.
[5] 15 U.S.C. § 18.
[6] See Corp. Code §§ 5914 – 5926 (nonprofit health facilities), §§ 14700 – 14707 (retail grocery firms and retail drug firms), and Health & Safety Code §§ 127507 – 12507.6 (health care).
[7] Merger Options Memo at 3.
[8] Id. at 3-4.
[9] Id. at 3 n.20.
[10] Id. at 4.
[11] Id. at 5-6.
[12] Id. For additional detail on the 2023 Merger Guidelines, see Gibson Dunn’s December 21, 2023 Client Alert on the release of the Guidelines.
[13] The Herfindahl-Hirschman Index is a method for assessing market concentration; it takes the sum of the squares of the market shares in a given market. The greater the HHI score, the higher the concentration.
[14] Merger Options Memo at 8.
[15] Id. at 10.
[16] Id. at 10-11 (citing Senator Klobuchar’s Competition and Antirust Law Enforcement Reform Act, Sen. No. 130 119th Cong. 1st Sess. (2025)).
[17] Id. at 11.
[18] SB 25 (Umberg, 2025) is sponsored by the Uniform Law Commission (ULC) and requires a person who is
obligated to file a notification pursuant to the federal Hart-Scott-Rodino Antitrust Improvements Act of 1976 to file a copy of that form and any additional documentation, as specified, with the California Attorney General (AG), among other provisions under certain circumstances. SB 25 was passed by the Senate and ordered to the Assembly.
[19] Memorandum, Draft Language for Single Firm Conduct Provision, Cal. L. Revision Comm’n (Mar. 24, 2025) at 2-3 [henceforth “SFC Options Memo”], https://www.clrc.ca.gov/pub/2025/MM25-21.pdf.
[20] SFC Public Comment Memo at 5-6.
[21] Id. at 10-13.
[22] Id. at 12-13 (California Chamber of Commerce, California Life Sciences, Civil Justice Association of California, Economic Security California Action and its partners).
[23] SFC Options Memo at 3-5.
[24] SFC Public Comment Memo at 8 (California Life Sciences, Civil Justice Association of California, Motion Pictures Association).
[25] Id. at 8-9 (California Life Sciences, Civil Justice Association of California, Motion Pictures Association, Single Firm Conduct Working Group).
[26] Id. at 7-9 (California Chamber of Commerce, California Life Sciences).
[27] Id. at 8-9.
[28] SFC Options Memo at 9-14.
[29] SFC Public Comment Memo at 14-15.
[30] MMP Options Memo at 4-7.
[31] Id. at 3-4, 7.
[32] Merger Options Memo at 4.
[33] MMP Options Memo at 5 & nn.31-33. The legislature had these laws in mind when it directed the CLRC’s antitrust study. See 2022 Cal. Stat. Res. Ch. 147 (ACR 95).
[34] Cal. L. Revision Comm’n, https://clrc.ca.gov/ (last visited June 18, 2025).
Gibson Dunn’s lawyers are available to assist in addressing any questions you may have regarding the issues discussed in this update. Please contact the Gibson Dunn lawyer with whom you usually work, the authors, or any of the following leaders and members of the firm’s Antitrust and Competition, Mergers and Acquisitions, or Private Equity practice groups in California:
Antitrust and Competition:
Rachel S. Brass – San Francisco (+1 415.393.8293, rbrass@gibsondunn.com)
Christopher P. Dusseault – Los Angeles (+1 213.229.7855, cdusseault@gibsondunn.com)
Caeli A. Higney – San Francisco (+1 415.393.8248, chigney@gibsondunn.com)
Julian W. Kleinbrodt – San Francisco (+1 415.393.8382, jkleinbrodt@gibsondunn.com)
Samuel G. Liversidge – Los Angeles (+1 213.229.7420, sliversidge@gibsondunn.com)
Daniel G. Swanson – Los Angeles (+1 213.229.7430, dswanson@gibsondunn.com)
Jay P. Srinivasan – Los Angeles (+1 213.229.7296, jsrinivasan@gibsondunn.com)
Chris Whittaker – Orange County (+1 949.451.4337, cwhittaker@gibsondunn.com)
Mergers and Acquisitions:
Candice Choh – Century City (+1 310.552.8658, cchoh@gibsondunn.com)
Matthew B. Dubeck – Los Angeles (+1 213.229.7622, mdubeck@gibsondunn.com)
Abtin Jalali – San Francisco (+1 415.393.8307, ajalali@gibsondunn.com)
Ari Lanin – Century City (+1 310.552.8581, alanin@gibsondunn.com)
Stewart L. McDowell – San Francisco (+1 415.393.8322, smcdowell@gibsondunn.com)
Ryan A. Murr – San Francisco (+1 415.393.8373, rmurr@gibsondunn.com)
© 2025 Gibson, Dunn & Crutcher LLP. All rights reserved. For contact and other information, please visit us at www.gibsondunn.com.
Attorney Advertising: These materials were prepared for general informational purposes only based on information available at the time of publication and are not intended as, do not constitute, and should not be relied upon as, legal advice or a legal opinion on any specific facts or circumstances. Gibson Dunn (and its affiliates, attorneys, and employees) shall not have any liability in connection with any use of these materials. The sharing of these materials does not establish an attorney-client relationship with the recipient and should not be relied upon as an alternative for advice from qualified counsel. Please note that facts and circumstances may vary, and prior results do not guarantee a similar outcome.
BRP-Rotax GmbH & Co. KG v. Shaik, No. 23-0756 & Hyundam Indus. Co. v. Swacina, No. 24-0207 – Decided June 20, 2025
In two opinions issued on June 20, the Texas Supreme Court reaffirmed that a non-Texas company must purposefully direct conduct at Texas to be subject to specific personal jurisdiction.
“The stream-of-commerce-plus test requires a defendant to specifically target Texas; it is not enough that a defendant may foresee some of its products eventually arriving here.”
Justice Young, writing for the Court in BRP-Rotax GmbH & Co. KG v. Shaik
Background:
In two recent cases, plaintiffs sued foreign manufacturers in Texas state court after being injured in Texas by allegedly defective products. Both defendants were foreign companies that designed and manufactured their products abroad, sold them to foreign distributors, and had no direct presence, sales, or marketing efforts in Texas. Plaintiffs argued that indirect sales, knowledge that the products might reach Texas, English-language websites, and general regional targeting (targeting the North American market, for example) sufficed to establish personal jurisdiction.
The trial court and court of appeals held that jurisdiction was proper based on the actions of the companies’ foreign distributors and the targeting of broader regions that include Texas.
Issue:
Can Texas courts assert specific personal jurisdiction over a non-Texas company that doesn’t directly target Texas for business?
Court’s Holding:
No. Under the stream-of-commerce-plus test, a defendant must specifically and purposefully target Texas to be subject to personal jurisdiction. It’s not enough that the defendant merely foresees its product ending up there.
What It Means:
- The Court reaffirmed that the stream-of-commerce-plus test requires a defendant to “specifically target Texas.” BRP-Rotax at 2; Hyundam at 1. Merely “placing a product into the stream of commerce does not establish purposeful availment unless there is ‘additional conduct’ evincing ‘an intent or purpose to serve the market in [Texas].’” BRP-Rotax at 8.
- The Court emphasized that what matters is only the defendant’s own conduct—not the conduct of independent foreign distributors and other third parties. BRP-Rotax at 11–17. The Court cautioned, however, that a foreign company can’t avoid jurisdiction in Texas by “formalistic structuring” or “deploying others” to target the Texas market on its behalf. BRP-Rotax at 12–13. Here, neither defendant used a Texas-based distributor and their distributor agreements didn’t specifically target Texas. BRP-Rotax at 12, 14; Hyundam at 11.
- The Court also clarified that its recent decision in State v. Volkswagen Aktiengesellschaft, 669 S.W.3d 399 (Tex. 2023), didn’t subject a defendant to personal jurisdiction merely because the defendant targeted a broad region that included Texas. BRP-Rotax at 18; Hyundam at 9–10. Instead, “the critical inquiry is whether a nonresident defendant has established sufficient contacts with Texas—not whether those contacts are materially different from its contacts with other states.” Hyundam at 10.
- Justices Busby and Devine concurred to urge the U.S. Supreme Court to discard the fairness-based approach to personal jurisdiction as unworkable, inconsistent, and historically unsound. They note “[t]hese squishy, subjective standards” have led Texas federal and state courts to apply different versions of the stream-of-commerce test—making it easier for Texas federal courts to exercise jurisdiction over non-Texas defendants—and advocate a return to a sovereignty-based approach rooted in constitutional text and history. BRP-Rotax concurrence at 1.
The Court’s opinion in BRP-Rotax is available here, and the concurring opinion is available here. The Court’s opinion in Hyundam is available here.
Gibson Dunn’s lawyers are available to assist in addressing any questions you may have regarding developments at the Texas Supreme Court. Please feel free to contact the following practice group leaders:
Appellate and Constitutional Law
Thomas H. Dupree Jr. +1 202.955.8547 tdupree@gibsondunn.com |
Allyson N. Ho +1 214.698.3233 aho@gibsondunn.com |
Julian W. Poon +1 213.229.7758 jpoon@gibsondunn.com |
Brad G. Hubbard +1 214.698.3326 bhubbard@gibsondunn.com |
Related Practice: Texas General Litigation
Trey Cox +1 214.698.3256 tcox@gibsondunn.com |
Collin Cox +1 346.718.6604 ccox@gibsondunn.com |
Gregg Costa +1 346.718.6649 gcosta@gibsondunn.com |
This alert was prepared by Texas of counsel Ben Wilson and Texas associates Elizabeth Kiernan, Stephen Hammer, and Rebecca Roman.
This edition of Gibson Dunn’s Federal Circuit Update for May summarizes the current status of petitions pending before the Supreme Court, a recent en banc Federal Circuit decision concerning Federal Rule of Evidence 702, and recent Federal Circuit decisions concerning the safe harbor provision under 35 U.S.C. § 271(e), preliminary injunctions, and conception.
Federal Circuit News
Noteworthy Petitions for a Writ of Certiorari:
There were a few potentially impactful petitions filed before the Supreme Court in May 2025:
- In re Micron Technology, Inc. (US No. 24-1216): The question presented is “Does a district court clearly and indisputably err in ordering production of sensitive technical documentation without applying the standards set forth in the parties’ protective order and without considering the Executive Branch’s national-security interests in the documentation at issue?” Respondents waived the right to file a response, and the Court will consider the petition at its June 26, 2025 conference.
- McLeay v. Stewart (US No. 24-1181): The question presented is “Whether a court of appeals may sua sponte revive an argument the government has impliedly waived on appeal and rely on the waived argument in ruling in the government’s favor.” The respondent waived its right to file a response, and the Court will consider the petition at its June 26, 2025 conference.
We provide an update below of the petitions pending before the Supreme Court, which were summarized in our April 2025 update:
- Purdue Pharma L.P. v. Accord Healthcare, Inc. (US No. 24-1132): The respondent filed its response brief on June 2, 2025.
- The Court denied the petition in Converter Manufacturing, LLC v. Tekni-Plex, Inc. (US No. 24-866) and NexStep, Inc. v. Comcast Cable Communications, LLC (US No. 24-1137).
Federal Circuit En Banc Decisions:
EcoFactor, Inc. v. Google LLC, No. 23-1101 (Fed. Cir. May 21, 2025): EcoFactor owns a patent related to the operation of smart thermostats in computer-networked heating and cooling systems. Before trial, Google moved to exclude the testimony of EcoFactor’s damages expert, Mr. Kennedy, because his royalty rate for the patented technology was unsupported by a reliable methodology or sufficient facts. The district court denied the motion. At trial, Mr. Kennedy opined that Google should pay damages at a particular royalty rate. The jury found Google infringed and awarded EcoFactor over $20 million in lump-sum damages. Google moved for a new trial on damages, which was denied. Google appealed, and a Federal Circuit panel majority (Judges Lourie and Reyna) affirmed the denial of Google’s motion for a new trial on damages with Judge Prost dissenting. Google petitioned for rehearing en banc, which the en banc Court granted as to the issue of damages and Federal Rule of Evidence 702.
The en banc majority (Moore, C.J., joined by Lourie, Dyk, Prost, Taranto, Chen, Hughes, and Stoll, JJ.) reversed and remanded for a new trial on damages. The majority concluded that the denial of Google’s motion to exclude under Rule 702 was an abuse of discretion. Specifically, the majority determined that the payment provisions in the three licenses Mr. Kennedy relied upon for his royalty rate stated that the lump-sum payments in the licenses did not reflect or constitute a reasonable royalty. And while a couple of the licenses included a clause stating what EcoFactor thought the reasonable royalty rate was, it did not suggest that the licensees had agreed to that royalty rate. The majority therefore determined that the plain language of the licenses did not support Mr. Kennedy’s opinion that the licensees would have agreed to pay the royalty rate he set forth, and thus, the district court failed to fulfill its responsibility as gatekeeper under Rule 702 by allowing that testimony at trial. The majority further determined that it could not be sure the error did not influence the jury, and thus, reversed the denial of Google’s motion for a new trial and remanded for a new trial on damages.
Judge Reyna dissented. Judge Reyna did not think the district court abused its discretion in finding that the three license agreements constituted sufficient facts or data under Rule 702. In his opinion, the majority’s question of whether the three licenses bound the contracting parties to the royalty rate was not the correct inquiry. Instead, the right question should have been whether there were sufficient facts or data to support Mr. Kennedy’s testimony of what the reasonable royalty is.
Judge Stark also dissented. Judge Stark reasoned that the majority concluded that the district court abused its discretion by permitting Mr. Kennedy to testify to an opinion that rested on disputed facts and not insufficient facts. The three licenses could have been interpreted as supporting or refuting the royalty rate from Mr. Kennedy, and the jury could have reasonably credited EcoFactor’s interpretation of the disputed evidence. Judge Stark raised a concern that the majority’s opinion would encourage future panels of the Court to engage in improper appellate factfinding.
Upcoming Oral Argument Calendar
The list of upcoming arguments at the Federal Circuit is available on the court’s website.
Key Case Summaries (May 2025)
Jazz Pharmaceuticals, Inc. v. Avadel CNS Pharmaceuticals, LLC, Nos. 24-2274, 24-2277, 24-2278 (Fed. Cir. May 6, 2025): Jazz sells two sodium oxybate products (Xyrem and Xywav) for treatment of narcolepsy and idiopathic hypersomnia (IH), respectively. Xywav is the first, and currently, only FDA-approved treatment for IH. Avadel filed a paper New Drug Application (NDA) seeking FDA approval of its own product, Lumryz, for treatment of narcolepsy. Avadel’s paper NDA was eventually approved by the FDA, allowing Avadel to commercially launch Lumryz. In the interim, Jazz sued Avadel alleging its FDA submission constituted patent infringement under 35 U.S.C. § 271(e)(2)(A). Prior to trial, the parties stipulated to infringement, if the claim was not found to be invalid. A jury found that Avadel had not shown the claim to be invalid. The district court then entered a permanent injunction, which in part enjoined Avadel from initiating new clinical trials or studies for Lumryz.
The Federal Circuit (Lourie, J., joined by Reyna and Taranto, JJ.) reversed-in-part, vacated-in-part, and remanded. Under the safe-harbor provision of 35 U.S.C. § 271(e)(1), “experimentation with a patented drug product, when the purpose is to prepare for commercial activity . . . after a valid patent expires, is not patent infringement.” In addition, 35 U.S.C. § 271(e)(3) statutorily precludes such activity from being enjoined. The Court concluded that under this plain language of the statute, enjoining Avadel from initiating new clinical trials for Lumryz until after the expiration of Jazz’s patent is unlawful. The Court therefore reversed that portion of the district court’s injunction as unlawfully overbroad.
Incyte Corp. v. Sun Pharmaceutical Industries, Ltd., No. 25-1162 (Fed. Cir. May 7, 2025): Incyte sued Sun for allegedly infringing its patent, which claims deuterated versions of ruxolitinib used to treat diseases associated with autoimmune disorders. In July 2024, Sun secured FDA approval for Leqselvi, an oral deuterated ruxolitinib product for treating alopecia areata (AA) and was set to launch in October 2024. Incyte moved for a preliminary injunction to prevent the launch, which the district court granted.
The Federal Circuit (Moore, C.J., joined by Prost and Hughes, JJ.) reversed, holding that the district court clearly erred in finding irreparable harm. A patentee can be irreparably harmed by an alleged infringer’s improper “head start” because the alleged infringer can capture market share and secure a competitive lead. However, the Court determined that Sun’s head start was inevitable because it was prepared to launch imminently, while Incyte’s product would not launch until several years after the patent’s expiration in December 2026. And Incyte cannot enjoin Sun from launching after the expiration of its patent. Thus, Sun’s multi-year head start is inevitable regardless of any injunction. The Court therefore concluded that the district court’s finding that Incyte would be the first to market if the preliminary injunction were granted was clearly erroneous.
Gibson Dunn partner Paul Torchia argued this case on behalf of Sun, who was also represented by Charlotte Jacobsen, Josh Krevitt, Blaine Evanson, Alexander Harris, and Christine Ranney, also of Gibson Dunn.
Regents of the University of California v. Broad Institute, Inc., Nos. 22-1594, 22-1653 (Fed. Cir. May 12, 2025): Scientists at both Regents and Broad researched efforts relating to CRISPR (clustered regularly interspaced short palindromic repeats) technology, which is a revolutionary gene-editing technology that allows scientists to precisely modify DNA sequences. Both Regents and Broad claim to be the inventor of the CRISPR technology at issue here, and as a result the Patent Trial and Appeal Board (Board) declared an interference. The Board designated Broad as the senior party. The Board rejected Regents’ earliest asserted date of reduction to practice because Regents’ scientists did not know their CRISPR system would work before Broad’s earliest priority date.
The Federal Circuit (Reyna, J., joined by Hughes and Cunningham, JJ.) affirmed-in-part, vacated-in-part, remanded the main appeal, and dismissed the cross-appeal. The Court vacated the Board’s conception ruling, holding that the Board erred in requiring Regents’ scientists to have known their invention would work to prove conception. The Court determined that the Board focused almost exclusively on Regents’ scientists’ statements of uncertainty as to whether their invention would work, and instead, should have considered whether “routine skill” or methods were all that was necessary to reduce the Regents’ scientists’ idea to practice. The Court thus remanded for the Board to decide conception under the proper application of the legal framework.
Gibson Dunn’s lawyers are available to assist in addressing any questions you may have regarding developments at the Federal Circuit. Please contact the Gibson Dunn lawyer with whom you usually work, any leader or member of the firm’s Appellate and Constitutional Law or Intellectual Property practice groups, or the following authors:
Blaine H. Evanson – Orange County (+1 949.451.3805, bevanson@gibsondunn.com)
Audrey Yang – Dallas (+1 214.698.3215, ayang@gibsondunn.com)
Appellate and Constitutional Law:
Thomas H. Dupree Jr. – Washington, D.C. (+1 202.955.8547, tdupree@gibsondunn.com)
Allyson N. Ho – Dallas (+1 214.698.3233, aho@gibsondunn.com)
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Josh Krevitt – New York (+1 212.351.4000, jkrevitt@gibsondunn.com)
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© 2025 Gibson, Dunn & Crutcher LLP. All rights reserved. For contact and other information, please visit us at www.gibsondunn.com.
Attorney Advertising: These materials were prepared for general informational purposes only based on information available at the time of publication and are not intended as, do not constitute, and should not be relied upon as, legal advice or a legal opinion on any specific facts or circumstances. Gibson Dunn (and its affiliates, attorneys, and employees) shall not have any liability in connection with any use of these materials. The sharing of these materials does not establish an attorney-client relationship with the recipient and should not be relied upon as an alternative for advice from qualified counsel. Please note that facts and circumstances may vary, and prior results do not guarantee a similar outcome.
This update provides an overview of the regulatory framework for digital token service providers and contains a Q&A on its key implications.
The Monetary Authority of Singapore (MAS) has announced that its long-awaited regulatory framework for digital token service providers (DTSPs) will take effect on 30 June 2025.[1] The DTSP framework incrementally expands the territorial scope of Singapore regulation of digital-asset activities.
1. OVERVIEW OF THE DTSP FRAMEWORK
Background
The new DTSP framework is set out in Part 9 of the Financial Services and Markets Act 2022 (FSMA) and takes effect on 30 June 2025. From that date, DTSPs will need to either be licensed or cease their regulated activities. However, the MAS has indicated that it will generally not issue licenses under the DTSP framework, as the operating models of DTSPs carry inherently higher money-laundering risk and cannot be adequately supervised by the MAS.[2] The DTSP framework therefore effectively prohibits these operating models.
DTSPs are defined as individuals, partnerships and Singapore corporations that are operating from a place of business in Singapore or are formed or incorporated in Singapore but which provide digital token (DT) services “outside Singapore”[3] The regulation of activities “outside Singapore” is the defining element of the DTSP framework.
As such, the DTSP framework introduces an incremental territorial expansion of Singapore’s existing regulation of digital-asset activities. Existing regulatory frameworks for digital-asset activities – primarily the Payment Services Act 2019 (PS Act), the Securities and Futures Act 2001 (SFA) and the Financial Advisers Act (FAA) – already apply to activities conducted “in Singapore” (and to certain activities that have other defined touchpoints with Singapore). These legacy frameworks are viewed by the MAS as not being sufficiently comprehensive in their territorial coverage, and the DTSP framework seeks to plug the gaps in that coverage.
The rationale behind the DTSP framework is that it will allow Singapore to be fully compliant with the anti-money laundering and countering-the-financing-of-terrorism (AML/CFT) requirements under the Financial Action Task Force (FATF) guidelines for Virtual Asset Service Providers (VASPs). Under the AML/CFT guidelines for VASPs, an FATF member is expected to regulate a VASP if it is established in the member’s jurisdiction, irrespective of the territorial ambit of the VASP’s activities. Achieving this regulatory outcome was the stated aim of the DTSP framework when the MAS first consulted on its introduction in 2020, and it continues to be the driving factor.[4]
Products and services covered
Under the new DTSP framework, DTs include “digital payment tokens”, which include the most liquid cryptocurrencies such as Bitcoin and Ether as well as stablecoins (whether centrally collateralised or algorithmic) and the majority of altcoins and other cryptocurrencies listed and/or traded in the crypto ecosystem.[5] Additionally, a DT includes any digital representation of a “capital markets product” and therefore captures e.g. tokenised securities (such as debentures and equities) as well as tokenised units in a collective investment scheme.[6]
Activities regulated as DT services include dealing (i.e. buying and selling), exchange operation, inducement, transfer, safeguarding and advisory services in relation to DTs.[7]
Territorial scope
In relation to the territorial scope of the DTSP framework, the following is key to note:
- In determining whether a DTSP is carrying on a business of providing DT services “outside Singapore”, factors such as whether the DTSP’s front-office functions (e.g. sales, business development) or customers are located outside Singapore are relevant.[8]
- The MAS attaches particular importance to the location of customers and has indicated that DTSPs (e.g. Singapore corporations) will fall within the scope of FSMA where they provide DT services solely to customers outside of Singapore.[9] However, as noted above, it appears that the location of customers is not the sole determinative factor.
- Where an individual is an employee of a foreign-incorporated company that provides DT services outside Singapore, work done by the individual as part of his or her employment with the foreign-incorporated company will not, in itself, attract a licensing requirement.
Interaction with legacy frameworks
A person’s activities will not qualify as a DT service that is subject to the DTSP framework where the person is licensed or exempt for those activities under the PS Act, SFA or FAA.[10]
When determining the position of a digital-asset business under Singapore law, the starting-point is therefore to determine whether the activities of that business fall under the PS Act, SFA or FAA. These legacy frameworks capture activities conducted “in Singapore” as well as certain other activities with Singapore touchpoints (e.g. the SFA regulates capital markets services which are provided partly in and partly outside Singapore or which are provided outside Singapore but which have a substantial and reasonably foreseeable effect in Singapore).[11]
If the activities fall under the PS Act, SFA or FAA, then a licence or exemption will be required under the relevant legacy framework and no additional licence will be required for those activities under the DTSP framework. If the activities fall outside all of these legacy frameworks but nonetheless have Singapore touchpoints (e.g. are routed through a Singapore corporation), the DTSP framework may apply.
2. Q&A – KEY IMPLICATIONS
The following Q&A is based on the most frequent questions we have received from clients in relation to the DTSP framework.
How significant is this development for the digital-assets industry in Singapore?
The DTSP framework only introduces a relatively small incremental change in the territorial scope of Singapore regulation, and as such, is not expected to affect many digital-asset businesses. Companies operating in Singapore today are typically operating within the territorial scope of legacy regulatory frameworks (i.e. the PS Act, SFA and FAA), and indeed many of them have become licensed under one or several of those frameworks or have determined that the substantive nature of their activities does not attract regulation (this may be the case for e.g. pure technology service providers). The DTSP framework is unlikely to affect the position of those companies.
This appears like a sudden regulatory announcement. Why did the MAS not give the industry more notice?
The MAS first consulted on the DTSP framework in 2020 and subsequently published a response to industry feedback in 2022, followed by another consultation paper in 2024 and response in 2025. The MAS had also previously indicated that it would give the industry at least 4 weeks’ notice of the effective date of the framework. As such, the introduction of the DTSP framework was neither sudden nor unexpected.
Does the DTSP framework bring new product or service types into the scope of regulation?
The DTSP framework mainly intends to expand the territorial ambit of existing Singapore regulation for digital-asset activities. In other words, it brings activities that have been subject to legacy frameworks (i.e. the PS Act, SFA and FAA) into the scope of regulation in a larger number of territorial scenarios, but does not introduce new types of regulated products or services. For example, activities relating to payment token derivatives or lending that have to date been unregulated in Singapore will not become regulated when the DTSP framework takes effect.
The only caveat is that DTSPs will be regulated for DT advisory services, which include advisory services relating to digital payment tokens such as Bitcoin and Ether. This type of advisory service has not, to date, been in scope of the legacy PS Act which regulates activities relating to digital payment tokens.
Does the DTSP framework open up a new licensing route for companies in Singapore?
No, the main objective of the framework is to prohibit DTSP operating models. The MAS may, in principle, grant a licence to a DTSP, but it will do so only in very exceptional circumstances.
Our company holds a licence in Singapore. Is the DTSP framework relevant to us?
A company in Singapore which conducts activities for which it holds a licence under the PS Act, SFA or FAA will not be subject to the DTSP framework for those same activities. Accordingly, the vast majority of licensees under the PS Act, SFA and FAA will remain unaffected by the DTSP framework.
However, it cannot be excluded that a company holding a licence under the PS Act, SFA or FAA conducts activities which do not fall under that licence but which are instead caught under the DTSP framework. This is fact-dependent and requires an assessment of the company’s specific operating model and territorial footprint. In the case of the vast majority of existing licensees however, the DTSP framework is unlikely to apply.
Is this mainly targeted at unlicensed crypto platforms that operate out of Singapore and do not serve Singapore customers?
The MAS Clarificatory Statement (published on 6 June 2025) does seem to suggest that a small number of platforms that operate out of Singapore and do not serve Singapore customers will be affected by the DTSP framework, and that the MAS has already been liaising with them on the winddown of their operations.
However, it is important to note that DTSPs are not confined to the aforementioned operating model. The statutory definition of a DTSP does not turn on the location of customers, and other statements issued by the MAS suggest that additional factors (e.g. location of the DTSP’s front-office functions, such as sales or business development) are also relevant in determining whether the DTSP provides DT services outside Singapore. For example, in our view, a Singapore corporation may be in scope of the DTSP framework where it is supported by a team based wholly outside Singapore and only serves customers outside Singapore.
What are the implications for companies in decentralised finance (DeFi)?
Singapore has a very large community of founders and developers in the DeFi space, many of them operating through Singapore developer companies and supporting the operations of protocols that use offshore legal wrappers (e.g. foundations). The activities of many of these teams are centered in Singapore and as such, the legacy frameworks which apply to regulated services conducted “in Singapore” (the PS Act, SFA and FAA) are most relevant to the assessment of these activities. In most cases, the new DTSP framework is unlikely to impact the team’s existing regulatory position.
In our experience, whether a DeFi project with operations in Singapore falls into the scope of regulation will depend mainly on the degree of control it can be seen to exercise over the protocol operations, and notably over user assets. This assessment will not change with, or be affected by, the introduction of the DTSP framework.
What are the implications for companies in the real-world assets (RWA) space?
The scope of the DTSP framework does cover RWA activities, as it captures services relating to (among others) digital representations of capital markets products such as securities and units in a collective investment scheme. However, RWA businesses which operate in Singapore will already have had to assess their position under the legacy regulatory frameworks. Most of those businesses with teams in Singapore will likely be operating “in Singapore” and will have had to determine whether they need to be licensed or exempt for their activities under the SFA and/or FAA. In most cases, the new DTSP framework is unlikely to impact the team’s existing regulatory position.
As the application of the DTSP framework and other Singapore regulatory frameworks is highly fact-dependent, we recommend that digital-asset businesses with Singapore touchpoints seek legal advice on their position. For guidance on this assessment, please feel free to reach out to any member of our global regulatory team below.
[1] MAS Response to Feedback Received on Proposed Regulatory Approach, Regulations and Notices for Digital Token Service Providers issued under the Financial Services and Markets Act 2022, 30 May 2025 (“May 2025 Consultation Response”) (link).
[2] MAS Clarifies Regulatory Regime for Digital Token Service Providers, 6 June 2025 (“MAS Clarificatory Statement”) (link).
[3] Section 137(1) and (3) FSMA.
[4] MAS Consultation Paper on the New Omnibus Act for the Financial Sector, 21 July 2020 (link), paragraph 3.5. Subsequent MAS publications on this topic included a response to industry feedback dated 14 February 2022 (link), a further consultation paper dated 4 October 2024 (link), and the May 2025 Consultation Response.
[5] Whether a token constitutes a “digital payment token” must be assessed on a case-by-case basis.
[6] Section 136(1) FSMA.
[7] Part I, First Schedule, FSMA.
[8] May 2025 Consultation Response, paragraph 3.10.
[9] MAS Clarificatory Statement.
[10] Section 137(5) FSMA.
[11] Section 339 SFA.
Gibson Dunn’s lawyers are available to assist in addressing any questions you may have regarding these developments. If you wish to discuss any of the matters set out above, please contact any member of Gibson Dunn’s Financial Regulatory team, including the following:
Hagen H. Rooke – Singapore (+65 6507 3620, hhrooke@gibsondunn.com)
William R. Hallatt – Hong Kong (+852 2214 3836, whallatt@gibsondunn.com)
Jeffrey L. Steiner – Washington, D.C. (+1 202.887.3632, jsteiner@gibsondunn.com)
Michelle M. Kirschner – London (+44 20 7071 4212, mkirschner@gibsondunn.com)
Emily Rumble – Hong Kong (+852 2214 3839, erumble@gibsondunn.com)
Becky Chung – Hong Kong (+852 2214 3837, bchung@gibsondunn.com)
Jun Qi Chin – Singapore (+65 6507 3622, jqchin@gibsondunn.com)
QX Toh – Singapore (+65 6507 3610, qtoh@gibsondunn.com)
Nicholas Tok – Singapore (+65 6507 3621, ntok@gibsondunn.com)
Arnold Pun – Hong Kong (+852 2214 3838, apun@gibsondunn.com)
Jane Lu – Hong Kong (+852 2214 3735, jlu@gibsondunn.com)
© 2025 Gibson, Dunn & Crutcher LLP. All rights reserved. For contact and other information, please visit us at www.gibsondunn.com.
Attorney Advertising: These materials were prepared for general informational purposes only based on information available at the time of publication and are not intended as, do not constitute, and should not be relied upon as, legal advice or a legal opinion on any specific facts or circumstances. Gibson Dunn (and its affiliates, attorneys, and employees) shall not have any liability in connection with any use of these materials. The sharing of these materials does not establish an attorney-client relationship with the recipient and should not be relied upon as an alternative for advice from qualified counsel. Please note that facts and circumstances may vary, and prior results do not guarantee a similar outcome.
Stanley v. City of Sanford, Fla., No. 23-997 – Decided June 20, 2025
Today, the Supreme Court held 7-2 that the Americans with Disabilities Act does not extend to retired employees.
“[T]o prevail under [Title I of the ADA], a plaintiff must plead and prove that she held or desired a job, and could perform its essential functions with or without reasonable accommodation, at the time of an employer’s alleged act of disability-based discrimination.”
Justice Gorsuch, writing for the Court
Background:
The Sanford Fire Department previously provided health insurance until age 65 for two categories of retirees: (1) those who retired with 25 years of service and (2) those who retired earlier because of a disability. In 2003, Sanford reduced the insurance period for those who retired due to disability to 24 months following retirement.
Karyn Stanley started working as a Sanford firefighter in 1999. She retired due to disability in 2018. Under Sanford’s revised policy, she was only entitled to 24 months of post-retirement health-insurance coverage. In 2020, Stanley sued Sanford, alleging that providing different benefits to those who retired with 25 years of service and those who retired earlier due to disability was impermissible discrimination under Title I of the Americans with Disabilities Act.
The district court dismissed the suit, holding that Stanley was not a “qualified individual” under the ADA because she was retired. She was not able to perform the essential functions of a job she held or desired at the time the City ceased providing her health insurance. The Eleventh Circuit agreed, but acknowledged a split among the circuits as to whether the ADA reached retirees like Stanley.
Issue:
Under the Americans with Disabilities Act, does a former employee—who was qualified to perform her job and who earned post-employment benefits while employed—lose her right to sue over discrimination with respect to those benefits solely because she no longer holds her job?
Court’s Holding:
Yes. Title I’s anti-discrimination provision does not protect individuals who do not hold nor desire a job with the defendant employer at the time of the allegedly discriminatory act.
What It Means:
- Today’s decision clarifies that the ADA does not cover retired employees who neither hold nor desire a job at the time of the allegedly discriminatory conduct. But because retired employees might have other avenues by which to challenge changes to retirement-benefit plans, employers should continue to exercise caution in making such changes.
- A plurality of the Justices (Gorsuch, joined by Alito, Sotomayor, and Kagan) wrote separately to opine that, unlike retired employees, employees who were both disabled and “qualified” when their employer adopted a discriminatory retirement-benefits policy might be able to state a claim under Title I. Justice Jackson articulated a similar view in her dissent.
The Court’s opinion is available here.
Gibson Dunn’s lawyers are available to assist in addressing any questions you may have regarding developments at the U.S. Supreme Court. Please feel free to contact the following practice group leaders:
Appellate and Constitutional Law
Thomas H. Dupree Jr. +1 202.955.8547 tdupree@gibsondunn.com |
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Bradley J. Hamburger +1 213.229.7658 bhamburger@gibsondunn.com |
Brad G. Hubbard +1 214.698.3326 bhubbard@gibsondunn.com |
Related Practice: Labor and Employment
Jason C. Schwartz +1 202.955.8242 jschwartz@gibsondunn.com |
Katherine V.A. Smith +1 213.229.7107 ksmith@gibsondunn.com |
This alert was prepared by Cate McCaffrey and Elizabeth Strassner.
© 2025 Gibson, Dunn & Crutcher LLP. All rights reserved. For contact and other information, please visit us at www.gibsondunn.com.
Attorney Advertising: These materials were prepared for general informational purposes only based on information available at the time of publication and are not intended as, do not constitute, and should not be relied upon as, legal advice or a legal opinion on any specific facts or circumstances. Gibson Dunn (and its affiliates, attorneys, and employees) shall not have any liability in connection with any use of these materials. The sharing of these materials does not establish an attorney-client relationship with the recipient and should not be relied upon as an alternative for advice from qualified counsel. Please note that facts and circumstances may vary, and prior results do not guarantee a similar outcome.
McLaughlin Chiropractic Associates, Inc. v. McKesson Corporation, No. 23-1226 – Decided June 20, 2025
Today, the Supreme Court held that the Hobbs Act’s exclusive review provision for administrative orders does not prevent district courts from interpreting a statutory provision in civil enforcement proceedings.
“The Hobbs Act does not preclude district courts in enforcement proceedings from independently assessing whether an agency’s interpretation of the relevant statute is correct.”
Justice Kavanaugh, writing for the Court
Background:
The Hobbs Act provides that for certain pre-enforcement challenges to agency orders, “[t]he court of appeals . . . has exclusive jurisdiction to enjoin, set aside, suspend (in whole or in part), or to determine the validity of all final orders of the Federal Communications Commission” (FCC) and other agencies. 28 U.S.C. § 2342(1). Circuit courts were divided as to whether this channeled review provision required district courts to defer to the FCC’s interpretation in any subsequent civil enforcement actions after the period for court of appeals review had passed.
The Telephone Consumer Protection Act (TCPA) creates a private right of action against companies that “use any telephone facsimile machine, computer, or other device to send, to a telephone facsimile machine, an unsolicited advertisement.” 47 U.S.C. § 227(b)(1)(C). McLaughlin Chiropractic Associates brought a class action lawsuit against McKesson Corporation alleging that the company sent unsolicited messages using online fax services to market its medical software products. While the lawsuit was ongoing, the FCC issued an order determining that the TCPA did not apply to an online fax service because it was not a “telephone facsimile machine.” The district court followed the interpretation set forth in the FCC’s order and entered summary judgment for McKesson, reasoning that the Hobbs Act precluded the court from considering whether the FCC’s interpretation of the TCPA was correct. The Ninth Circuit affirmed.
Issue:
Whether the Hobbs Act binds district courts presiding over civil enforcement suits to an agency’s interpretation of a statute.
Court’s Holding:
No. The Hobbs Act channels pre-enforcement challenges of agency orders to the courts of appeals. But the availability of pre-enforcement review does not mean that district courts are bound by the agency’s interpretation in civil enforcement proceedings.
What It Means:
- Today’s decision continues a trend of the Court limiting the deference federal courts must give to an agency’s legal interpretations, following on Loper Bright Enterprises v. Raimondo, 603 U.S. 369 (2024), and other cases. The decision strengthens parties’ ability to request that a court issue a decision contrary to an agency’s interpretation, including in litigation between private parties.
- The Court emphasized that Congress can restrict judicial review in an enforcement proceeding, provided Congress does so clearly. Absent such a clear statement by Congress, courts presume judicial review is permitted and may independently assess the meaning of a statute in the context of an enforcement proceeding. Because the Hobbs Act is silent as to whether a party may contest the agency’s legal interpretation in subsequent enforcement proceedings, it does not preclude judicial review or bind district courts to the agency’s interpretation.
- The Court’s decision suggests that potential defendants might not be able to rely solely on agency determinations to provide a safe harbor, since a court may not be bound by the agency’s interpretation. However, defendants may still argue that the safe harbor correctly interprets the statute and is entitled to weight under Skidmore. They may also raise other arguments, including that principles of fair notice preclude liability or that other elements of the applicable statute are not satisfied.
The Court’s opinion is available here.
Gibson Dunn’s lawyers are available to assist in addressing any questions you may have regarding developments at the U.S. Supreme Court. Please feel free to contact the following practice group leaders:
Appellate and Constitutional Law
Thomas H. Dupree Jr. +1 202.955.8547 tdupree@gibsondunn.com |
Allyson N. Ho +1 214.698.3233 aho@gibsondunn.com |
Julian W. Poon +1 213.229.7758 jpoon@gibsondunn.com |
Lucas C. Townsend +1 202.887.3731 ltownsend@gibsondunn.com |
Bradley J. Hamburger +1 213.229.7658 bhamburger@gibsondunn.com |
Brad G. Hubbard +1 214.698.3326 bhubbard@gibsondunn.com |
Related Practice: Administrative Law and Regulatory
Stuart F. Delery +1 202.955.8515 sdelery@gibsondunn.com |
Eugene Scalia +1 202.955.8673 Assistant Dawn J. Forrester: dforrester@gibsondunn.com |
Helgi C. Walker +1 202.887.3599 hwalker@gibsondunn.com |
Akiva Shapiro |
Russell Balikian |
This alert was prepared by associate Salah Hawkins.
© 2025 Gibson, Dunn & Crutcher LLP. All rights reserved. For contact and other information, please visit us at www.gibsondunn.com.
Attorney Advertising: These materials were prepared for general informational purposes only based on information available at the time of publication and are not intended as, do not constitute, and should not be relied upon as, legal advice or a legal opinion on any specific facts or circumstances. Gibson Dunn (and its affiliates, attorneys, and employees) shall not have any liability in connection with any use of these materials. The sharing of these materials does not establish an attorney-client relationship with the recipient and should not be relied upon as an alternative for advice from qualified counsel. Please note that facts and circumstances may vary, and prior results do not guarantee a similar outcome.
From the Derivatives Practice Group: This week, the Senate voted 68-30 to pass the GENIUS Act, which now heads to the House of Representatives for a vote.
New Developments
- U.S. Senate Passes GENIUS Act. On June 16, the Senate passed the bipartisan Guiding and Establishing National Innovation for US Stablecoins Act, or GENIUS Act, in a 68-30 vote. If passed in the House, the GENIUS Act would establish the first federal rules for regulating stablecoins, a type of digital asset pegged to the value of another asset, oftentimes the U.S. dollar. The GENIUS Act now heads for a vote in the House. [NEW]
- Former CFTC Chairman William Bagley Dies at 96. On June 16, CFTC acting Chairman Caroline D. Pham released a statement on the passing of the Hon. William T. Bagley, the CFTC’s first chairman. Appointed to the position by President Gerald Ford, William Bagley served as the Chairman of the CFTC from 1975 to 1978. He passed away on June 9, 2025 at his home in San Rafael, California. [NEW]
- CFTC, SEC Further Extend Form PF Amendments Compliance Date. On June 11, the CFTC, together with the SEC, extended the compliance date for the amendments to Form PF, the confidential reporting form for certain SEC-registered investment advisers to private funds, including those that also are registered with the CFTC as commodity pool operators or commodity trading advisers, that were adopted February 8, 2024. The compliance date for these amendments, which was June 12, 2025, has been extended to October 1, 2025. The release provides that Form PF filers should continue to file the current version of Form PF until the date the release is published in the Federal Register. In connection with the extension, Commissioner Johnson released a statement indicating that the extension was due to “technology-based concerns as well as challenges with validation, testing, and ensuring effective capabilities for timely and accurate reporting of requested information.”
- Senate Agriculture Committee Holds Hearing on Quintenz Nomination. On June 10, the Senate Agriculture Committee considered Brian Quintenz’s nomination for Chairman and Commissioner of the CFTC. In his opening remarks, he states that his goals for the agency will include risk management, fostering innovation, and facilitating reciprocity with foreign jurisdictions. The hearing also focused on several core issues including event contracts, resource allocation within the CFTC, and 24/7 trading. Quintenz states that, in his view, all event contracts are permissible under the Commodity Exchange Act, though he highlighted that the statute should be clarified with respect to its “gaming” provision. Quintenz also maintained that the CFTC should have more resources to allocate for digital asset oversight. Finally, with respect to 24/7 trading, Quintenz stated that he intends to listen to all stakeholders in determining which markets may allow for longer trading hours. Quintenz previously served as a CFTC commissioner from 2017 to 2021.
- CLARITY Act. On June 10, the CLARITY Act, which seeks to establish a regulatory framework for digital assets in the U.S. and would give the CFTC authority over crypto spot markets, advanced to the full U.S. House of Representatives after passing in the House Committee on Financial Services (32 to 19), and the House Agriculture Committee (47 to 6).
- SEC to Resume Processing of Registration Applications From Swiss-Based Investment Advisers. On June 10, the SEC announced that it will immediately resume processing new and pending registration applications of investment
New Developments Outside the U.S.
- ESMA Publishes Final Report on Active Account Requirement Under EMIR 3. On June 19, ESMA published its final report on the Regulatory Technical Standards specifying the conditions under which the active account requirement should be met, as mandated under the European Market Infrastructure Regulation (“EMIR”) 3. ESMA has streamlined the operational conditions and the stress-testing in response to feedback to its public consultation. [NEW]
- ESMA Consults on Methodology for Computing EU Member States’ Market Capitalization and Market Capitalization Ratios. On June 19, ESMA announced that it is consulting on the methodology for calculating market capitalization and market capitalization ratios, as mandated by the Directive on faster and safer relief of excess withholding taxes. The proposed methodology is aligned with existing transparency frameworks and uses transaction data reported under the Regulation on markets in financial instruments. [NEW]
- ESMA appoints Ante Žigman to its Management Board and appoints new Chairs to two standing committees. On June 18, ESMA appointed Ante Žigman as a new member of its Management Board. The election took place at the Board of Supervisors meeting in Warsaw on 17 June, and he will take up his position on 6 July 2025. [NEW]
- ESMA’s activities in 2024 focused on strengthening the EU capital markets and putting citizens and businesses at the heart of it. On June 16, ESMA published its Annual Report for 2024. The activities conducted and results achieved in 2024 support ESMA’s strategic priorities and thematic drivers – to foster stable and effective markets, strengthen supervision, and enhance retail investor protection while enabling sustainable finance and facilitating technological innovation and the use of data. [NEW]
- ESMA Publishes Principles for Third-party Risk Supervision. On June 12, ESMA published its newly developed Principles on third-party risks supervision. ESMA said that the principles aim at supporting a common and effective EU-wide supervisory culture. According to ESMA, the 14 principles on third-party risks were developed to address the growing risks observed over recent years in the use of outsourcing, delegation, or other types of third-party services by supervised firms and that they are intended to provide a common supervisory basis to National Competent Authorities and ESMA, enhance the robustness of supervisory frameworks and help supervised entities understand and manage third-party risks.
New Industry-Led Developments
- ISDA Publishes Research Note on Interest Rate Derivatives Trading in the US, EU and UK. On June 18, ISDA published a research note that analyzes changes in interest rate derivatives trading activity in the US, EU and UK from 2021 to 2024. It examines how central bank interest rate policies influenced IRD trading volumes and how the composition of interest rate derivativesproducts has evolved due to the transition to alternative reference rates. [NEW]
- ISDA Responds to ESMA on Clearing Threshold Regime. On June 16, ISDA responded to ESMA’s consultation on the new clearing threshold regime. The new regime, based on uncleared positions, was introduced in the context of EMIR 3. In the response, ISDA comments on the data analysis provided by ESMA, the interaction with the active account requirements, in particular condition 2 of EMIR 3 Article 7a(1), and proposes an implementation approach suitable for financial and non-financial counterparties, in line with the European Union’s broader simplification and burden reduction agenda. [NEW]
- ISDA Launches Pre-adherence Period for Notices Hub. On June 12, ISDA began a pre-adherence process for the ISDA Notices Hub. The new protocol will change all agreements between adhering firms to allow them to use the ISDA Notices Hub – a secure online platform managed by S&P Global Market Intelligence that will enable the instantaneous delivery and receipt of termination notices and waivers ISDA has begun a pre-adherence process for the ISDA Notices Hub, enabling firms to sign up to a free protocol that will allow them to use the new platform when it launches on July 15.
- ISDA Publishes “Creating Value – IQ” June 2025. On June 10, ISDA published ISDA Quarterly, which explored how and why different types of firms use derivatives and the value they bring to individual companies and the broader economy. The report was published to coincide with ISDA’s 40th anniversary, and continue ISDA’s IQ anniversary series by looking at how ISDA and its members have worked to address some of the biggest challenges ever to face derivatives markets – from the rollout of margin requirements for non-cleared derivatives to the transition from LIBOR.
- ISDA Publishes Paper on the EC’s Sustainability Omnibus Proposal. On June 9, ISDA published a position paper setting out its views on the European Commission’s (EC) Sustainability Omnibus Package. In the paper, ISDA urges European authorities to, among other things, ensure a proportionate, harmonized and symmetrical approach to the use of derivatives across the EU’s sustainable finance framework in line with the EU’s Platform on Sustainable Finance derivatives recommendations.
The following Gibson Dunn attorneys assisted in preparing this update: Jeffrey Steiner, Adam Lapidus, Marc Aaron Takagaki, Hayden McGovern, Karin Thrasher, and Alice Wang.
Gibson Dunn’s lawyers are available to assist in addressing any questions you may have regarding these developments. Please contact the Gibson Dunn lawyer with whom you usually work, any member of the firm’s Derivatives practice group, or the following practice leaders and authors:
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Michael D. Bopp, Washington, D.C. (202.955.8256, mbopp@gibsondunn.com)
Michelle M. Kirschner, London (+44 (0)20 7071.4212, mkirschner@gibsondunn.com)
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Hayden K. McGovern, Dallas (214.698.3142, hmcgovern@gibsondunn.com)
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© 2025 Gibson, Dunn & Crutcher LLP. All rights reserved. For contact and other information, please visit us at www.gibsondunn.com.
Attorney Advertising: These materials were prepared for general informational purposes only based on information available at the time of publication and are not intended as, do not constitute, and should not be relied upon as, legal advice or a legal opinion on any specific facts or circumstances. Gibson Dunn (and its affiliates, attorneys, and employees) shall not have any liability in connection with any use of these materials. The sharing of these materials does not establish an attorney-client relationship with the recipient and should not be relied upon as an alternative for advice from qualified counsel. Please note that facts and circumstances may vary, and prior results do not guarantee a similar outcome.
FDA v. R.J. Reynolds Vapor Co., No. 23-1187 – Decided June 20, 2025
Today, the Supreme Court held 7-2 that tobacco product retailers may sue the FDA for blocking the marketing of new tobacco products, allowing challenges by more than just the product manufacturer.
“If the FDA denies an application, the retailers, like the manufacturer, lose the opportunity to profit from the sale of the new tobacco product—or, if they sell the product anyway, risk imprisonment and other sanctions. . . . Accordingly, the retailers are ‘adversely affected’ by a denial order and are therefore proper petitioners.”
Justice Barrett, writing for the Court
Background:
The Family Smoking Prevention and Tobacco Control Act (“TCA”) requires tobacco product manufacturers to apply to the Food and Drug Administration (“FDA”) for authorization to market “new” tobacco products. If the FDA denies an application, the Act’s judicial-review provision permits “any person adversely affected by” the denial to petition for review in the D.C. Circuit or “the circuit in which such person resides or has their principal place of business.” 21 U.S.C. § 387l(a)(1).
R.J. Reynolds Vapor Co. (“RJR Vapor”), a leading e-cigarette manufacturer, is incorporated and has its principal place of business in North Carolina. When the FDA denied its applications to market four e-cigarette products, it jointly petitioned for review of each denial along with two retailers that sell those kinds of e-cigarettes. The companies filed the joint petition in the Fifth Circuit, where the retailers were formed and have their principal places of business. The FDA moved to dismiss or to transfer the action to the D.C. Circuit or the Fourth Circuit, based on RJR Vapor’s residence. The Fifth Circuit denied the motion, holding that each entity was a person adversely affected by the denial and that the petition could be filed in the Fifth Circuit because the retailers have their principal places of business there.
Issue:
May tobacco product retailers challenge FDA marketing denials, such that a petition for review can be filed in a circuit where a retailer resides or has its principal place of business?
Court’s Holding:
Yes. A retailer who would sell a new tobacco product counts as “any person adversely affected” by an FDA order that bars marketing of that product under the TCA. The retailer can therefore file a petition for review in any circuit in which it resides or has its principal place of business.
What It Means:
- Today’s decision confirms that a tobacco product retailer is a “person adversely affected” under the TCA if it would have sold the new product for which the FDA issues a marketing denial. Noting that the phrase “adversely affected” is a term of art, the Court relied on cases interpreting the Administrative Procedure Act and other statutory causes of action to conclude that the TCA review provision “extends to any petitioner ‘with an interest arguably sought to be protected by the statute.’” The Court distinguished the statutory language here—“any person adversely affected”—from language in other statutes, which might limit judicial review to “the applicant” or a “party.” See NRC v. Texas, 605 U.S. __ (2025) (slip op., at 9).
- Applying that rule here, the Court held that if the FDA denies a marketing application, retailers, “like the manufacturer, lose the opportunity to profit from the sale of the new tobacco product—or, if they sell the product anyway, risk imprisonment and other sanctions.” Therefore, retailers’ interests are not “so marginally related to or inconsistent with the purposes implicit in the statute that it cannot reasonably be assumed that Congress intended to permit the suit.”
- By creating more opportunities to challenge FDA orders, the Court’s decision could mean that manufacturers and retailers are able to combat more effectively the FDA’s efforts to thwart marketing approval of new tobacco products.
- The Court also held that the Fifth Circuit correctly concluded that at least one proper petitioner had venue in that court because a retailer and trade association in this case have their principal places of business in the Fifth Circuit and could therefore file petitions for review in that circuit.
- The Court did not decide the separate question—with more far-reaching consequences—whether each petitioner in a joint petition must independently satisfy the TCA’s venue provisions. The Court noted that “[n]o court, including the Fifth Circuit in this case, has analyzed” that question and that its resolution “would inevitably inform debates about similar [venue] statutes,” including “the general venue statute for lawsuits against the Government.” The Fifth Circuit may consider that question on remand.
- In dissent, Justice Jackson (joined by Justice Sotomayor)—who would have held that only manufacturers can challenge a marketing denial—suggested that the TCA‘s venue provision limits the ability of manufacturers to sue outside the circuits in which they reside or have their principal places of business, “including through proxy suits that third parties file in other places on their behalf.” Companies should continue to think carefully about how to avail themselves of the best venue for challenging administrative action.
The Court’s opinion is available here.
Gibson Dunn’s lawyers are available to assist in addressing any questions you may have regarding developments at the U.S. Supreme Court. Please feel free to contact the following practice group leaders:
Appellate and Constitutional Law
Thomas H. Dupree Jr. +1 202.955.8547 tdupree@gibsondunn.com |
Allyson N. Ho +1 214.698.3233 aho@gibsondunn.com |
Julian W. Poon +1 213.229.7758 jpoon@gibsondunn.com |
Lucas C. Townsend +1 202.887.3731 ltownsend@gibsondunn.com |
Bradley J. Hamburger +1 213.229.7658 bhamburger@gibsondunn.com |
Brad G. Hubbard +1 214.698.3326 bhubbard@gibsondunn.com |
Related Practice: Administrative Law and Regulatory
Stuart F. Delery |
Eugene Scalia |
Helgi C. Walker |
This alert was prepared by associates Zachary Tyree and Audrey Payne.
© 2025 Gibson, Dunn & Crutcher LLP. All rights reserved. For contact and other information, please visit us at www.gibsondunn.com.
Attorney Advertising: These materials were prepared for general informational purposes only based on information available at the time of publication and are not intended as, do not constitute, and should not be relied upon as, legal advice or a legal opinion on any specific facts or circumstances. Gibson Dunn (and its affiliates, attorneys, and employees) shall not have any liability in connection with any use of these materials. The sharing of these materials does not establish an attorney-client relationship with the recipient and should not be relied upon as an alternative for advice from qualified counsel. Please note that facts and circumstances may vary, and prior results do not guarantee a similar outcome.
EPA v. Calumet Shreveport Refining, LLC, No. 23-1229 – Decided June 18, 2025
Today, the Supreme Court held 7-2 that, if EPA denies a Clean Air Act exemption as part of an “en masse” decision—applying one reasoning to multiple petitions—venue lies exclusively in the D.C. Circuit, even though the individual decisions are only locally or regionally applicable.
“[A]n action is ‘based on a determination of nationwide scope or effect’ . . . if such a determination supplies a core justification for EPA’s action . . . .”
Justice Thomas, writing for the Court
Background:
The Clean Air Act requires oil refiners to blend certain amounts of renewable fuel into transportation fuel sold within the United States. The Environmental Protection Agency (EPA) implements this requirement through the Renewable Fuel Standard program. The law permits small refineries to petition EPA for an exemption. Denial of a petition, like all EPA actions under the Clean Air Act, is reviewable in a federal court of appeals. 42 U.S.C. § 7607(b)(1). If EPA’s decision is “locally or regionally applicable,” venue lies in the refinery’s regional court of appeals; if it’s “nationally applicable” or “based on a determination of nationwide scope or effect,” venue is in the D.C. Circuit. Id.
In April and June 2022, EPA denied the exemption petitions of 105 small refineries in two omnibus notices that (1) described these en masse denials as a “new approach” to renewable-fuel exemptions and (2) stated that the denials were reviewable only in the D.C. Circuit.
The refineries nevertheless sought review in their regional court—the Fifth Circuit. EPA moved to transfer to the D.C. Circuit on the ground that they were made en masse with respect to 105 refineries nationwide as part of a broader policy change so the denials qualified as “nationally applicable” or “based on a determination of nationwide scope and effect” under Section 7607(b)(1).
A divided panel of the Fifth Circuit held that it had venue over Plaintiffs’ claims. The Fifth Circuit held that EPA’s exemption decisions were “locally or regionally applicable” because their “legal effect” was limited to the petitioning refineries and did not bind EPA in any future adjudication. On the merits, the Fifth Circuit held the challenged exemption decisions were unlawful. EPA sought certiorari, asserting that the Fifth Circuit’s decision was inconsistent with the Eleventh Circuit’s decision in a different case challenging the same en masse denial, as well as the decisions of several other circuits in similar circumstances.
Issue:
Under what circumstances is a decision by EPA “nationally applicable” or “based on a determination of nationwide scope or effect,” such that it may only be reviewed by the U.S. Courts of Appeals for the D.C. Circuit?
Court’s Holding:
An EPA “action” (defined by the Court to include only the enumerated acts Congress authorized EPA to take) is “nationally applicable” when “[o]n its face” it applies throughout the entire country. An EPA “determination” (defined by the Court to include any justification EPA gives for taking an action) is “of nationwide scope” if it applies throughout the country as a matter of law. An EPA “determination” is “of nationwide . . . effect” if it applies throughout the country as a matter of fact.
In this case, the Court concluded that each denial of a single refinery’s petition was a separate “action,” but that the decisions were of nationwide scope or effect because EPA made each decision on the same legal basis. Venue accordingly lay in the D.C. Circuit.
What It Means:
- The opinion distinguishes between “actions,” “determinations of national scope,” and “determinations of national effect,” establishing three different paths for EPA to lay exclusive venue in the D.C. Circuit.
- Courts analyzing venue in actions against EPA will need to walk through the two-step, tripartite system laid out in this opinion. First, a court will need to assess whether EPA’s statutorily authorized “action” applies nationwide on its face. If it does, venue will lie exclusively in the D.C. Circuit. Even if it does not, however, a court will still need to determine whether EPA’s reasoning for that act applies nationwide—“as a legal matter (de jure)” or “as a practical one (de facto).”
- This ruling reaffirms the special role of the D.C. Circuit, as distinct from the other Courts of Appeals, in reviewing certain agency actions.
- Litigants seeking to challenge EPA determinations may be more likely to find themselves limited to the D.C. Circuit—rather than potentially preferable courts in their own localities—when denials are made in en masse bundles supported by broad-reaching determinations.
- In a companion case also decided today, Oklahoma v. EPA, No. 23-1067, the Court applied the Calumet rule to hold that EPA’s disapproval of state implementation plans could be challenged in regional circuit courts. There, states and industry groups challenged EPA’s disapproval of state implementation plans for Oklahoma and Utah in the Tenth Circuit, which held that the challenges should have been brought in the D.C. Circuit. The Supreme Court reversed. Under the first step of Calumet’s two-step inquiry, the Court determined the relevant “action” is EPA’s disapproval of the state implementation plans, which is a prototypical locally or regionally applicable action. Under the second step of Calumet, the Court concluded that the disapprovals “were not based on any determination of nationwide scope or effect” because, unlike in Calumet, the disapprovals were based on a “fact-intensive, state-specific analysis.”
- The Court’s decision in Oklahoma v. EPA provides practical guidance on the Calumet framework and resolves uncertainty over the venue rules governing challenges to disapprovals of state implementation plans. Challenges to disapprovals of state implementation based on state-specific analysis may be filed in regional circuit courts.
The Court’s opinions are available here (Calumet) and here (Oklahoma).
Gibson Dunn’s lawyers are available to assist in addressing any questions you may have regarding developments at the U.S. Supreme Court. Please feel free to contact the following practice group leaders:
Appellate and Constitutional Law
Thomas H. Dupree Jr. +1 202.955.8547 tdupree@gibsondunn.com |
Allyson N. Ho +1 214.698.3233 aho@gibsondunn.com |
Julian W. Poon +1 213.229.7758 jpoon@gibsondunn.com |
Lucas C. Townsend +1 202.887.3731 ltownsend@gibsondunn.com |
Bradley J. Hamburger +1 213.229.7658 bhamburger@gibsondunn.com |
Brad G. Hubbard +1 214.698.3326 bhubbard@gibsondunn.com |
Related Practice: Environmental Litigation and Mass Tort
Stacie B. Fletcher +1 202.887.3627 sfletcher@gibsondunn.com |
Daniel W. Nelson +1 202.887.3687 dnelson@gibsondunn.com |
Related Practice: Administrative Law and Regulatory
Stuart F. Delery +1 202.955.8515 sdelery@gibsondunn.com |
Eugene Scalia +1 202.955.8673 Assistant Dawn J. Forrester: dforrester@gibsondunn.com |
Helgi C. Walker +1 202.887.3599 hwalker@gibsondunn.com |
This alert was prepared by Grace Hart, Cate McCaffrey, Elizabeth Strassner, and Tom Donovan.
Gibson Dunn and Morris Nichols hosted a webcast addressing recent legal developments in Delaware and Texas — two jurisdictions with long-standing influence on American corporate law, each now undergoing rapid and consequential changes. While Delaware continues to shape the national dialogue on fiduciary duties and corporate governance and has demonstrated an ability to evolve, Texas has emerged as a powerful forum for corporate activity and innovation. Understanding how these legal landscapes affect businesses is critical for directors, deal professionals, and legal advisors alike.
Key Topics:
- Notable Delaware cases impacting board processes and stockholder litigation
- Recent significant amendments to the DGCL
- Recent amendments to TBOC and state of relevant Texas case law
- Update on Texas Business Courts and other developments
- Considerations regarding litigation in the two states
- User-friendly comparison chart of Delaware and Texas law
- Practical guidance for companies and their boards
MCLE CREDIT INFORMATION:
This program has been approved for credit in accordance with the requirements of the New York State Continuing Legal Education Board for a maximum of 1.0 credit hour, of which 1.0 credit hour may be applied toward the areas of professional practice requirement. This course is approved for transitional/non-transitional credit.
Gibson, Dunn & Crutcher LLP certifies that this activity has been approved for MCLE credit by the State Bar of California in the amount of 1 hour.
Gibson, Dunn & Crutcher LLP is authorized by the Solicitors Regulation Authority to provide in-house CPD training. This program is approved for CPD credit in the amount of 1.0 hour. Regulated by the Solicitors Regulation Authority (Number 324652).
Neither the Connecticut Judicial Branch nor the Commission on Minimum Continuing Legal Education approve or accredit CLE providers or activities. It is the opinion of this provider that this activity qualifies for up to 1 hour toward your annual CLE requirement in Connecticut, including 0 hour(s) of ethics/professionalism.
Application for approval is pending with the Colorado, Delaware, Illinois, Texas, Virginia, and Washington State Bars.
PANELISTS:
Eric S. Klinger-Wilensky is a partner in the Wilmington, Delaware office of Morris Nichols Arsht & Tunnell. He advises corporations on a broad array of transactions, including mergers and acquisitions, spin-offs and split-offs, and capital raises. He has extensive experience representing special committees of independent directors in considering transactions involving potential conflicts of interest as well as transactions structured as tender offers followed by “medium-form” mergers. He served as a lead drafter of legislation that ultimately became Section 251(h) of the Delaware General Corporation Law (DGCL) that facilitated and led to an increase in the use of such transactions. Eric also served as a lead drafter of Section 267 of the DGCL, that allows non-corporate entities to be the acquiring entities in “short-form” mergers. A former clerk to Chancellor Chandler and Vice Chancellor Noble on the Delaware Court of Chancery, Eric has been actively involved in the national and local legal community, as well as firm governance. He has also served as a Lecturer in Law at the University of Pennsylvania Law School, where he has taught classes on M&A contract drafting and venture capital, and served on the Board of Trustees of the University’s Institute for Law and Economics.
Collin J. Cox is co-partner in charge of Gibson Dunn’s Houston office, a partner in the Litigation Practice Group, and a member of the firm’s Partnership Evaluation Committee. He is widely recognized for his successes in trying complex commercial disputes and has represented both plaintiffs and defendants in a variety of subject areas, including technology trade-secrets cases, actions related to the Bernard L. Madoff fraud, fraudulent-transfer cases, royalty disputes, patent litigation, and other business crisis situations. He was named “Litigator of the Week” by The American Lawyer this year following the $667 million verdict obtained by his client, Energy Transfer Partners, in a notable trial against Greenpeace. Collin is a fellow of the American College of Trial Lawyers and the International Society of Barristers. He currently serves as Vice President of the Houston Bar Association, President of Houston Volunteer Lawyers, and as Chairman and President of Da Camera of Houston.
Hillary H. Holmes is co-partner-in-charge of Gibson Dunn’s Houston office, co-chair of the Capital Markets Practice Group, and a member of the firm’s Executive Committee. She advises corporations, investment banks, and boards of directors in connection with capital raising, M&A transactions, complex situations, securities laws and corporate governance. Hillary has earned recognition as Corporate Lawyer of the Year in Houston, a Leading Dealmaker in Texas, and one of the Most Influential Women in Energy. She serves on the Corporate Laws Committee of the American Bar Association and as an officer of the Society for Corporate Governance Houston Chapter.
Julia Lapitskaya is co-chair of Gibson Dunn’s ESG: Risk, Litigation and Reporting Practice Group and a member of the firm’s Securities Regulation and Corporate Governance Practice Group. Julia’s practice focuses on SEC, NYSE/Nasdaq and Securities Exchange Act of 1934 compliance, securities and corporate governance disclosure issues, board and committee matters, corporate governance best practices, state corporate laws, the Dodd-Frank Act of 2010, SEC regulations, investor engagement and shareholder activism matters, proxy and annual meeting matters, sustainability and corporate responsibility matters, and executive compensation disclosure issues, including as part of initial public offerings and spin-off transactions. Julia is a frequent author and speaker on securities law, Delaware law and sustainability issues and is a member of the Society for Corporate Governance.
Gerry Spedale is a member of Gibson Dunn’s Capital Markets, M&A, and Securities Regulation and Corporate Governance Practice Groups where he advises public and private companies, investment banks and private equity groups on mergers and acquisitions, joint ventures, capital markets transactions and corporate governance. With over 30 years of experience covering a broad range of industries, Gerry focuses on the energy industry, including upstream, midstream, downstream, oilfield services, and utilities. Gerry serves on the State Bar of Texas Business Law Section Business Organizations Code Committee, which regularly reviews and proposes amendments to the TBOC.
© 2025 Gibson, Dunn & Crutcher LLP. All rights reserved. For contact and other information, please visit us at www.gibsondunn.com.
Attorney Advertising: These materials were prepared for general informational purposes only based on information available at the time of publication and are not intended as, do not constitute, and should not be relied upon as, legal advice or a legal opinion on any specific facts or circumstances. Gibson Dunn (and its affiliates, attorneys, and employees) shall not have any liability in connection with any use of these materials. The sharing of these materials does not establish an attorney-client relationship with the recipient and should not be relied upon as an alternative for advice from qualified counsel. Please note that facts and circumstances may vary, and prior results do not guarantee a similar outcome.
Draft Report by European Parliament’s Rapporteur proposes further cutbacks to sustainability reporting and due diligence obligations.
On June 12, 2025, the European Parliament’s rapporteur for the EU’s Omnibus Simplification Package, Swedish MEP Jörg Warborn (“Rapporteur”), presented his draft report[1] on the proposed amendments to the Corporate Sustainability Reporting Directive (CSRD)[2] and the Corporate Sustainability Due Diligence Directive (CSDDD)[3] (“Draft Report”). As we have reported previously, the legislative process was set into motion by the European Commission with its publication of the “First Omnibus Package” on February 26, 2025[4] (see here).[5]
In this alert, we analyze the proposed amendments of the Rapporteur within the context of the Omnibus Simplification Package discussions, and their implications for in-scope businesses under the CSRD and CSDDD. We also provide an update on the status of the Omnibus Process more broadly, including the expected next steps.
As the legislative process unfolds further, we will continue to monitor and report on any new developments.
1. Executive Summary and Key Takeaways
The Rapporteur’s proposal reflects his previously announced goal to “cut costs for companies and reduce burdens even more”. While the Draft Report is broadly in line with the European Commission’s Omnibus recommendations, it proposes even more significant cutbacks – especially regarding the scope of the CSRD and the due diligence obligations under the CSDDD. However, there is a possibility that the Rapporteur explicitly chose this approach to leave room for negotiations in the European Parliament.
Overall, the key changes in the Draft Report compared to the European Commission’s proposal are:
- The introduction of a raised, uniform threshold for CSRD, CSDDD and the EU Taxonomy Regulation,[6] limiting applicability to companies with an average of more than 3,000 employees and more than EUR 450 million net turnover.
- For U.S. or other non-EU companies, CSDDD applicability depends on a net turnover in the EU exceeding EUR 450 million (without employee thresholds).
CSRD Reporting
- The obligation to request and obtain information from out-of-scope companies in the reporting entities’ chain of activities is significantly reduced as a result of the increased applicability thresholds because requests to out-of-scope companies shall be limited to so called voluntary reporting standards.
- Companies are no longer required to report on a Climate Transition Plan, which aligns with the Paris Agreement, but on any Climate Transition Plan, if such a plan already exists.
- It is clarified that trade secrets are generally exempted from sustainability reporting obligations.
- Ultimate parent companies that are financial holding companies not involved in management activities are exempted from direct sustainability reporting obligations, if a designated subsidiary in the EU complies with reporting on their behalf.
CSDDD Obligations
- The obligation to adopt a Climate Transition Plan is eliminated. The purpose of this amendment is to reduce the administrative burden on companies and competent authorities.
- The full harmonization provisions of the CSDDD prohibiting deviations from the CSDDD in the transposition by the EU member states are expanded to include key elements such as scope, definitions, due diligence obligations, and supervisory mechanisms in order to prevent “gold-plating” by EU member states.
- Due diligence obligations are further reduced:
- Companies may prioritize and forego addressing less significant adverse impacts.
- First scoping of areas of adverse impacts shall only be done on the basis of reasonably available information without information requests to direct business partners.
- Further assessment of areas of adverse impacts at direct business partners with fewer than 3,000 employees shall be limited to reduced standards (i.e., voluntary reporting standards under the CSRD).
- Companies may forego suspending business relationships due to adverse impacts if doing so would cause substantial prejudice, provided they justify the decision – and thereby balancing due diligence obligations with economic and operational realities.
2. Status Quo of the Omnibus Process and Expected Timeline
As reported previously, the First Omnibus Package by the European Commission in February consisted of two separate proposals: (i) a Stop-the-Clock Directive[7] delaying certain reporting obligations and due diligence obligations, and (ii) an Amendment Directive,[8] revising key elements of the EU’s sustainability reporting and due diligence frameworks.
(a) Stop-the-Clock Directive already enacted
As expected, the Stop-the-Clock Directive[9] entered into force on April 17, 2025, without further legislative negotiations. This postponed entry of application of the CSRD by two years and of the CSDDD by one year (see below timeline). The Stop-the-Clock Directive does not include any amendments in substance, i.e. regarding thresholds for applicability. Therefore, the suggested amendments under the EU Commission’s and the Rapporteur’s proposals are not reflected in the graphic below.
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Several EU member states have already transposed or started to transpose the Stop-the-Clock Directive into national law, including Bulgaria, Denmark, Estonia, Finland, France, Lithuania, Luxembourg, Poland and Sweden.[10] Ensuring swift transposition is important because the majority of EU member states have already transposed the current CSRD (Belgium, Bulgaria, Croatia, Czech Republic, Denmark, Estonia, Finland, France, Greece, Hungary, Ireland, Italy, Latvia, Lithuania, Poland, Romania, Slovakia, Slovenia, Sweden). Therefore, the respective sustainability reporting obligations under national law must now also be delayed for two years.
There remain nine member states – Austria, Cyprus, Germany, Luxembourg, Malta, Netherlands, Portugal and Spain – where the CSRD transposition process has not been completed despite the expiry of the transposition deadline on July 6, 2024.
Regarding first wave companies (i.e. large Public Interest Entities (PIEs)), due to report under CSRD from January 1, 2025 and unaffected by the Stop-the-Clock Directive, the EU executive’s team leader for sustainability reporting, Tom Dodd, confirmed at a meeting of the European Parliament’s Committee on Legal Affairs on May 13, 2025 that the European Commission intended to adopt a “quick fix” delegated act “very soon” that would require first wave companies to continue reporting, while introducing a two-year delay for the phase-in provisions under the (current) European Sustainability Reporting Standards (ESRS).
(b) Discussion on Amendments in Substance Still Ongoing
The amendments in substance, i.e. the Amendment Directive, are being intensively discussed, and are not without controversy. The legislative process requires that all three legislative bodies of the EU (the European Commission, the European Parliament, and the Council of the EU) agree on a joint proposal.
- The European Commission started the process with its proposed Amendment Directive published in February (see above).
- The Draft Report by the European Parliament’s Rapporteur is a first step towards the ultimate proposal by the European Parliament and will form the basis of discussion for its members. It is currently expected that the European Parliament will conduct a final vote on the proposed amendments in October 2025.
- The Council of the EU has also started discussions in its plenary bodies and will likely present its position later in 2025.
After that, when all three legislative bodies have presented their proposals, so-called “trilogue negotiations” between the European Commission, the European Parliament and the Council of the EU will commence. There are currently no indications as to how long these negotiations will take. In a best-case scenario, the final adoption vote will occur in the first or second quarter of 2026.
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We note that, regarding the CSDDD, German Chancellor Friedrich Merz and French President Emmanuel Macron have called for a full elimination of the Directive to improve European competitiveness against the U.S. and China, arguing that the Directive imposes excessive regulatory burdens on businesses. Such statements were softened at a later stage. Other EU member states – including Belgium and Denmark – as well as the Rapporteur reject any elimination.
(c) Expected Timeline for Revision of the ESRS
Regarding sustainability reporting, the proposed revisions of ESRS will have a significant impact in practice, as the ESRS define the scope and content of the information to be disclosed in the sustainability statements of in-scope companies. The European Financial Reporting Advisory Group (EFRAG) has already presented a work plan for the simplification mandate from the European Commission[11] and intends to deliver its first ESRS simplification update by June 20, 2025, and a second version in mid-July of 2025. After a short public consultation in August and September, EFRAG aims to provide further technical advice on the draft amendments to ESRS in October 2025. There are currently no indications regarding when the final version of the revised ESRS will be adopted by the European Commission.
3. Proposed Amendments in the Rapporteur’s Draft Report
Introducing a uniform sustainability reporting threshold for CSRD, CSDDD and EU Taxonomy
A notable change in the Draft Report is the suggestion to use a common threshold of an average of more than 3,000 employees and more than EUR 450 million net turnover for the obligations under the CSRD, the CSDDD and the EU Taxonomy Regulation to apply to EU companies (subject to phase-in for CSDDD, see graphic above).[12]
While the European Commission’s Omnibus Proposal did not suggest any amendments to the scope of application of the CSDDD, but maintained the original threshold of more than 1,000 employees and a worldwide turnover of EUR 450 million, it did propose raising the threshold for CSRD and EU Taxonomy reporting from small and medium sized entities (SMEs) to large companies or parents of a large group with more than 1,000 employees and either a net turnover of more than EUR 50 million or a balance sheet total of more than EUR 25 million. The now proposed uniform threshold of more than 3,000 employees and more than EUR 450 million net turnover will significantly limit the number of companies in scope of all three legislative acts.
This particularly applies to reporting on non-EU ultimate parent companies by an EU branch pursuant to Article 40a of the Accounting Directive[13] as amended by CSRD: Instead of an EU branch’s net turnover of originally EUR 40 million, reporting shall only apply in case of a net turnover of the branch of EUR 450 million, increasing the threshold more than tenfold.
Notably, in the context of Article 40a of the Accounting Directive, the Rapporteur’s proposal abolishes the previous requirement of a net turnover generated in the EU by the non-EU ultimate parent company.[14] Regarding reporting on its ultimate parent company, this could create an obligation for EU subsidiaries operating as holding of hub companies which consolidate turnover of non-EU subsidiaries or generate turnover through non-EU branches. It is unclear whether net turnover by such EU subsidiaries generated outside of the EU on a consolidated basis or through non-EU branches counts towards the threshold to report on the non-EU parent company under Article 40a of the Accounting Directive. This could likely be addressed in further negotiations.
It can be expected that the applicability thresholds will be heavily debated during the legislative process. According to public reports, the Council of the EU has suggested to raise the CSDDD thresholds to more than 5,000 employees and a net turnover of more than EUR 1.5 billion.
(a) Proposed Amendments relating to CSRD Reporting
Reporting exemption for ultimate parent companies that are financial holding companies only
The draft report proposes that ultimate parent companies which are financial holding undertakings not engaging in operational or management decisions, may be exempted from direct sustainability reporting obligations. This exemption – mirroring the exemption in the CSDDD – is conditional upon the designation of an EU-based subsidiary to fulfill the reporting duties on behalf of the parent company.
Harmonize terminology by replacing the term “value chain” under the CSRD by the CSDDD’s term “chain of activities”
To harmonize terminology across EU legislation, the draft report replaces “value chain” in the CSRD with “chain of activities”. This change aims to reduce confusion and ensure consistency in reporting and due diligence obligations.
No link to Paris Agreement required for Climate Transition Plans
Pursuant to the Rapporteur’s proposal, companies are no longer required to report on a Climate Transition Plan specifically ensuring alignment with the Paris Agreement to limit global warming to 1.5⁰C under the CSRD, but on any Climate Transition Plan, if such a plan already exists.
Extending the subsidiary reporting exemption
The proposal extends the reporting exemption to all subsidiaries, including those classified as PIEs (and regardless of size), provided that the parent company reports at the consolidated level. Under the current CSRD, large PIEs were obliged to report even if a parent company was reporting as well.
Strengthening the protection of trade secrets
The draft report explicitly clarifies that sustainability reporting obligations do not override existing protections for trade secrets. Companies are not required to disclose information that qualifies as intellectual property, know-how, or business-sensitive data under Directive (EU) 2016/943. This safeguard ensures that transparency requirements do not compromise competitive advantages or legal confidentiality.
Setting a clear date for limited assurance
The proposal reaffirms that the European Commission must adopt limited assurance standards for sustainability reporting by October 1, 2026. While the European Commission is encouraged to consider stakeholder concerns and allow flexibility in the standards, the fixed date shall ensure timely implementation.
(b) Proposed Amendments to CSDDD obligations
Preventing “gold-plating” by EU member states
To avoid regulatory fragmentation, the draft report intends to limit the ability of EU member states to introduce stricter or divergent national rules – commonly referred to as “gold-plating”. It expands the full harmonization provisions of the CSDDD to include key elements such as scope, definitions, due diligence obligations, and supervisory mechanisms. This aims to ensure a consistent legal framework across the EU, enhancing legal certainty and reducing compliance complexity for companies operating in multiple jurisdictions.
Right to prioritize adverse impacts
Companies may duly prioritize and forego to address less significant adverse aspects without being exposed to fines.
Abolishing the obligation to adopt a climate transition plan
The draft report removes the mandatory requirement for companies to adopt a climate transition plan under the CSDDD in order to reduce the administrative burden on both companies and supervisory authorities, who would otherwise be responsible for monitoring and enforcing compliance with this obligation.
Reduced information request rights from direct business partners
The Rapporteur seeks to further reduce the due diligence obligations of in-scope companies and to protect companies with fewer than 3,000 employees from excessive data requests by in-scope companies. The Rapporteur’s proposal, therefore, suggests a risk-based approach to identify areas where adverse impacts are most likely to occur and to be most severe.
The first scoping of areas of adverse impacts shall only be done on the basis of reasonably available information without information requests to direct business partners. The further assessment of areas of adverse impacts at direct business partners with fewer than 3,000 employees shall be limited to reduced standards (voluntary reporting standards under the CSRD).
An assessment of indirect business partners has already been limited by the European Commission’s Omnibus Proposal to cases of plausible information of adverse impacts. The Rapporteur suggests clarifying that such plausible information must be “objective, factual and verifiable”.
Increasing flexibility regarding suspension of relationships with business partners
The proposal introduces greater flexibility for companies when deciding whether to suspend business relationships due to adverse impacts. If suspending a supplier would cause substantial prejudice – such as threatening the company’s financial stability or production capacity – companies may opt not to suspend, provided they justify the decision to supervisory authorities. Under the Commission’s Omnibus Proposal, such option was limited to situations where the adverse impact from suspending the business relationship was more severe than the unmitigated adverse impact by the business partner. This approach balances due diligence obligations with economic realities, especially in cases involving critical suppliers. It also requires companies to assess whether suspension would cause more harm than the issue it seeks to address.
Furthermore, companies shall face no fines and civil liability as long as there is a reasonable expectation that their enhanced prevention action plan will succeed.
[1] European Parliament, Committee on Legal Affairs, Draft Report 2025/0045 (COD), available at https://www.europarl.europa.eu/doceo/document/JURI-PR-774282_EN.pdf, last accessed on June 18, 2025.
[2] Directive (EU) 2022/2464, available here, last accessed on June 18, 2025.
[3] Directive (EU) 2024/1760, available here, last accessed on June 18, 2025.
[4]See EU Commission Press Release of February 26, 2025, available at https://ec.europa.eu/commission/presscorner/detail/en/ip_25_614, last accessed on June 18, 2025.
[5] See also our monthly ESG Updates here and here.
[6] Regulation (EU) 2020/852, available here, last accessed on June 18, 2025.
[7] COM (2025) 80 final, 2024/0044 (COD) – Directive of the European Parliament and of the Council amending Directives (EU)2022/2462 and (EU) 2024/1760 as regards the dates from which the member states are to apply certain corporate sustainability reporting and due diligence requirements, available here, last accessed on June 18, 2025.
[8] COM (2025) 81 final, 2024/0045 (COD) – Directive of the European Parliament and of the Council amending Directives 2006/43/EC, 2013/34/EU, (EU) 2022/2462 and (EU) 2024/1760 as regards certain corporate sustainability reporting and due diligence requirements, available here, last accessed on June 18, 2025.
[9] Directive (EU) 2025/794, available here, last accessed on June 18, 2025.
[10] We provide regular updates on the current transposition status in our monthly ESG Updates.
[11] See link to EFRAG Work Plan here, last accessed on June 18, 2025.
[12] The threshold for non-EU companies under CSDDD remains unaffected (net turnover of EUR 450 million).
[13] Directive 2013/34/EU, available here, last accessed on June 18, 2025.
[14] The original threshold was a net turnover in the EU of EUR 150 million which the European Commission suggested to increase to EUR 450 million.
Gibson Dunn’s lawyers are available to assist in addressing any questions you may have regarding these issues. Please contact the Gibson Dunn lawyer with whom you usually work, any leader or member of the firm’s ESG: Risk, Litigation, and Reporting, International Arbitration, or Transnational Litigation practice groups, or the authors:
Ferdinand Fromholzer – Partner, ESG Group, Munich (+49 89 189 33-270, ffromholzer@gibsondunn.com)
Susy Bullock – Co-Chair, ESG Group, London (+44 20 7071 4283, sbullock@gibsondunn.com)
Robert Spano – Co-Chair, ESG Group, London/Paris (+33 1 56 43 13 00, rspano@gibsondunn.com)
Stephanie Collins – London (+44 20 7071 4216, scollins@gibsondunn.com)
Carla Baum – Munich (+49 89 189 33-263, cbaum@gibsondunn.com)
Vanessa Ludwig – Frankfurt (+49 69 247 411 531, vludwig@gibsondunn.com)
Johannes Reul – Munich (+49 89 189 33-272, jreul@gibsondunn.com)
Babette Milz – Munich (+49 89 189 33-283, bmilz@gibsondunn.com)
© 2025 Gibson, Dunn & Crutcher LLP. All rights reserved. For contact and other information, please visit us at www.gibsondunn.com.
Attorney Advertising: These materials were prepared for general informational purposes only based on information available at the time of publication and are not intended as, do not constitute, and should not be relied upon as, legal advice or a legal opinion on any specific facts or circumstances. Gibson Dunn (and its affiliates, attorneys, and employees) shall not have any liability in connection with any use of these materials. The sharing of these materials does not establish an attorney-client relationship with the recipient and should not be relied upon as an alternative for advice from qualified counsel. Please note that facts and circumstances may vary, and prior results do not guarantee a similar outcome.
Gibson Dunn’s Workplace DEI Task Force aims to help our clients navigate the evolving legal and policy landscape following recent Executive Branch actions and the Supreme Court’s decision in SFFA v. Harvard. Prior issues of our DEI Task Force Update can be found in our DEI Resource Center. Should you have questions about developments in this space or about your own DEI programs, please do not hesitate to reach out to any member of our DEI Task Force or the authors of this Update (listed below).
Key Developments:
On June 5, the Supreme Court unanimously held that Title VII of the Civil Rights Act of 1964 imposes no additional evidentiary requirements on majority-group plaintiffs. The case is Ames v. Ohio Department of Youth Services, No. 23-1039, in which a straight woman sued her employer under Title VII, claiming she was denied a promotion and later demoted based on her sexual orientation, in part because her employer hired a gay woman for the position to which she had applied and a gay man to fill her previous position after the demotion. The decision invalidates a rule adopted in the Sixth, Seventh, Eighth, Tenth, and D.C. Circuit Courts of Appeal requiring majority-group plaintiffs to show “background circumstances to support the suspicion that the defendant is th[e] unusual employer who discriminates against the majority” in order to sustain a Title VII claim. Writing for the unanimous Court, Justice Ketanji Brown Jackson wrote that the “background circumstances” requirement was inconsistent with the statute and the Court’s interpretation of it. Justice Jackson emphasized in her opinion that Title VII prohibits covered discrimination of any kind, not merely discrimination against a limited set of historically disadvantaged groups, which comports with the Court’s modern approach to most anti-discrimination statutes. In circuits that previously applied the “background circumstances” requirement, this decision will lower the barrier for majority-group plaintiffs to bring (and increase the burden on employers to defend against) so-called reverse-discrimination claims. For more information on this opinion, please see our June 5 client alert.
On May 27, Judge Richard J. Leon of the U.S. District Court for the District of Columbia permanently enjoined enforcement of Executive Order 14250, which, among other things, ordered federal agencies to suspend security clearances for employees of the law firm Wilmer Cutler Pickering Hale and Dorr LLP (“WilmerHale”) and terminate government contracts with the law firm; required government contractors to disclose business they do with WilmerHale; restricted access to federal buildings for WilmerHale employees; and prevented WilmerHale employees from future federal employment. The EO asserted that the firm had “abandoned the profession’s highest ideals and abused its pro bono practice to engage in activities that undermine justice and the interests of the United States.” The EO specifically accused the law firm of “obvious partisan representations to achieve political ends, support[ing] efforts to discriminate on the basis of race, back[ing] the obstruction of efforts to prevent illegal aliens from committing horrific crimes and trafficking deadly drugs within our borders, and further[ing] the degradation of the quality of American elections, including by supporting efforts designed to enable noncitizens to vote.” The order also accused the firm of discriminating against employees through use of race-based “targets,” presumably in hiring and promotion.
In a 73-page opinion, the court granted a permanent injunction prohibiting enforcement of the order. Judge Leon opined in the introductory portion of the opinion that “this Order must be struck down in its entirety as unconstitutional. Indeed, to rule otherwise would be unfaithful to the judgment and vision of the Founding Fathers!” Judge Leon went on to consider and reject arguments by the government regarding WilmerHale’s standing to sue, the ripeness of the dispute, and whether aspects of the EO fell within the political question doctrine and outside the court’s reach. Turning to the merits, the court held that the EO retaliated against WilmerHale for its protected speech, discriminated against the firm for its viewpoint, violated the firm’s right to petition the government, and violated its clients’ right to freely associate with the firm, all of which violated the First Amendment. The court also held that the EO was an ultra vires presidential action in violation of the separation of powers, void for vagueness, and a violation of due process. The court rejected WilmerHale’s argument that the EO violated the Spending Clause, reasoning that the EO did not conflict with a mandate from Congress, as the Spending Clause requires. Judge Leon also rejected WilmerHale’s argument that the EO violated the Equal Protection Clause, because WilmerHale did not allege that a group of similarly situated firms were treated differently. The court held that the EO violated the Sixth Amendment right to counsel but not the Fifth Amendment right to counsel, as WilmerHale’s complaint acknowledged that other, similarly situated firms could represent WilmerHale’s clients in its place.
On May 23, Judge John D. Bates of the U.S. District Court for the District of Columbia permanently enjoined enforcement of Executive Order 14246, an order targeting the law firm Jenner & Block LLP (“Jenner”) similar in effect to the EO targeting WilmerHale discussed above. Like EO 14250, EO 14246 ordered federal agencies to suspend security clearances for Jenner employees and terminate government contracts with the law firm; required government contractors to disclose business they do with Jenner; restricted access to federal buildings for Jenner employees; and prevented Jenner employees from future federal employment. Section 1 of the EO accused the firm of “abandon[ing] the profession’s highest ideals, condon[ing] partisan ‘lawfare,’ and abus[ing] its pro bono practice to engage in activities that undermine justice and the interests of the United States,” specifically pointing to Jenner’s representation of transgender clients and asylum seekers, its decision to hire Andrew Weissmann as a partner after he participated in the Mueller investigation, and its alleged use of “race-based ‘targets’” in hiring.
In a 52-page opinion, the court granted Jenner’s motion for summary judgment and denied the government’s motion to dismiss. The court held that Jenner’s decision to represent transgender clients and asylum seekers—as well as Weissmann’s participation in the Mueller investigation and related statements about President Trump—was political expression, and that the EO retaliated against Jenner for that speech in violation of the First Amendment. The court also held that the EO violated Jenner’s clients’ Fifth and Sixth Amendment rights to choose their counsel. With respect to the EO’s mention of Jenner’s alleged race-based hiring practices, the court noted that the government has not “provide[d] any evidence” of this accusation “or [its] truth.” The court held that the president may not direct government agencies to investigate Jenner’s employment practices because of its speech. The court denied, however, Jenner’s request for a permanent injunction against future similar actions by the administration, taken pursuant to Section 1 of the EO, for lack of standing. Judge Bates explained that “Section 1 does not direct any action” but instead constitutes protected government speech. Judge Bates reasoned, “If this conclusion results in more federal action taken against Jenner, those actions could very well be equally unconstitutional. But Article III requires this court to place its faith in future courts to prevent harm from befalling Jenner if and when that occurs . . . At this juncture, the court cannot take that role for itself.”
On June 2, in response to the government’s May 29 motion, Judge Bates issued an order clarifying the scope of the court’s injunctive relief. First, the court explained that the injunction prohibiting the president from directing government agencies to investigate Jenner’s employment practices runs only in favor of Jenner. This clarification is identical to the clarification Judge Howell issued on May 20 in Perkins Coie LLP v. U.S. Dep’t of Justice, et al., No. 25-716 (D.D.C. 2025). Second, the court declined the government’s request to clarify that the order does not impact Section 1 of the EO. The court explained that while the order does not enjoin all future uses of Section 1 in the “abstract,” it properly requires that entities subject to the EO rescind past enforcement actions based on the statements in Section 1. The case is Jenner & Block LLP v. U.S. Dep’t of Justice et al., No. 25-916 (D.D.C. 2025).
On May 22, the U.S. Department of Homeland Security (“DHS”) stated in a press release that it would revoke Harvard University’s Student and Exchange Visitor Program (“SEVP”) certification, which would have prevented Harvard from enrolling any international students on F- or J-nonimmigrant visas for the 2025-2026 academic year. In the press release, the agency asserted that Harvard had refused to provide the department with information about certain campus activism involving foreign students, created an “unsafe campus environment,” including for Jewish students, and continued to enact “racist DEI practices.” The following morning, on May 23, Harvard filed a 257-paragraph complaint against DHS, U.S. Immigration and Customs Enforcement (“ICE”), Attorney General Pam Bondi, Secretary of State Marco Rubio, and others, alleging, among other things, that DHS’s actions violated the Administrative Procedure Act, the First Amendment, and the Fifth Amendment’s due process requirements. Harvard requested a preliminary and permanent injunction enjoining the revocation of the university’s SEVP certification, as well as a declaratory judgment that the action was unconstitutional. That same day, Judge Allison Burroughs of the U.S. District Court for the District of Massachusetts granted a temporary restraining order halting the revocation of the SEVP certification. The order found that DHS’s actions had the potential to “sustain immediate and irreparable injury.” This is the latest in a series of disputes between the White House and Harvard over Harvard’s DEI programs, alleged antisemitism, and response to protestors on campus. On April 29, after the government agreed to give the university 30 days to challenge the SEVP certification revocation in court, the court extended the temporary order until it decides a forthcoming preliminary injunction motion. The case is President and Fellows of Harvard Coll. v. U.S. Dep’t of Homeland Security et al., No. 1:25-cv-11472 (D. Mass. 2025).
On May 22, the EEOC issued a press release listing the “exhaustive efforts” the agency has taken during the second Trump Administration “to restore evenhanded enforcement of employment civil rights laws on behalf of all Americans.” This list includes, among other things, efforts to combat alleged discrimination “[a]rising [f]rom DEI.” The press release names several actions taken by the agency to effectuate this goal, including “root[ing] out DEI-related discrimination practices in our nation’s elite law firms” and “securing major commitments to merit-based employment practices in EEOC settlements with six of the nation’s largest law firms.” The press release also lists actions taken to effectuate the Administration’s goals of protecting religious freedom, combatting national origin discrimination involving “[p]references for [f]oreign [w]orkers,” defending “[w]omen’s [s]ex-[b]ased [r]ights,” and fighting for the rights of disabled veterans.
On May 20, Judge Beryl Howell of the U.S. District Court for the District of Columbia issued a minute order clarifying the scope of a previously issued injunction blocking the implementation of Executive Order 14230, which had targeted the law firm Perkins Coie LLP. The court explained that its injunction prohibits the president from directing government agencies to investigate Perkins Coie’s employment practices, but did not prohibit actions directed at other law firms. The order came hours after the U.S. Department of Justice (“DOJ”) filed a motion seeking clarification from the court on the scope of the injunction, particularly as it relates to a provision in the Executive Order that directs the EEOC and the U.S. Attorney General to investigate the employment practices of large law firms. The case is Perkins Coie LLP v. U.S. Dep’t of Justice, et al., No. 25-716 (D.D.C. 2025).
On May 20, the EEOC issued a press release in connection with the start of the “2024 EEO-1 Component 1 data collection” process, during which covered entities must report to the EEOC on the sex, race, and ethnicity of their employees. In the message, EEOC Acting Chair Andrea Lucas “remind[ed]” employers that they “may not use information about [their] employees’ race/ethnicity or sex—including demographic data [they] collect and report in EEO-1 Component 1 reports—to facilitate unlawful employment discrimination based on race, sex, or other protected characteristics in violation of Title VII.” Lucas further noted: “Different treatment based on race, sex, or another protected characteristic can be unlawful discrimination, no matter which employees or applicants are harmed. There is no ‘diversity’ exception to Title VII’s requirements.” She also noted that the President recently issued an executive order “direct[ing] all agencies, including the EEOC, to deprioritize ‘disparate impact’ enforcement.” Lucas stated that the EEOC will “fully and robustly comply with this and all Executive Orders” and will prioritize “remedying intentional discrimination claims” rather than disparate impact claims.
On May 19, DOJ announced that it was establishing a program called the Civil Rights Fraud Initiative, under which the DOJ intends to use the False Claims Act to investigate and enforce knowing violations of federal civil rights laws committed by recipients of federal funds. According to the May 19, 2025 memorandum about the initiative, issued by Deputy Attorney General Todd Blanche, an example of such a violation may include an educational institution that receives federal funds but “encourages antisemitism, refuses to protect Jewish students, allows men to intrude into women’s bathrooms, or requires women to compete against men in athletic competitions.” Under the initiative, the DOJ can also pursue legal claims against recipients of federal funds for “knowingly engaging in racist preferences, mandates, policies, programs, and activities, including through diversity, equity, and inclusion (DEI) programs that assign benefits or burdens on race, ethnicity, or national origin.” The memorandum asserts that many entities and institutions continue to have unlawful DEI practices after the Supreme Court’s decision striking down race-based admissions practices in SFFA v. Harvard but camouflage them “with cosmetic changes that disguise their discriminatory nature.” The memorandum also “strongly encourages” private parties to file lawsuits under the False Claims Act and to report discrimination by federal-funding recipients to DOJ.
On May 16, three anonymous law students filed an amended complaint against the EEOC in the U.S. District Court for the District of Columbia. The original complaint, filed on April 15, 2025, challenged the EEOC’s investigations into the DEI practices of 20 large law firms, which has probed firms’ hiring, promotion, and workforce reduction practices. The plaintiffs seek to enjoin the disclosure of, among other things, sensitive data on employees’ race, sex, and compensation. The plaintiffs allege that the investigations exceed the agency’s authority under Title VII, because they are not based upon a formal charge, as evidenced by the public nature of the investigations. The plaintiffs further claim that the EEOC’s investigation into law firms violates the Paperwork Reduction Act, because the EEOC did not undergo public comment or obtain approval from the Office of Management and Budget before posing “identical questions to the twenty firms.” The plaintiffs seek a declaratory judgment, an injunction barring the collection of the requested information, and an order compelling the EEOC to withdraw the investigative letters and return any information collected pursuant to those letters. The case is Doe v. EEOC, No. 1:25-cv-01124 (D.D.C. 2025). The amended complaint adds class claims, and notes that the plaintiffs seek to represent “[a]ll individuals whose names and other personal information are requested in EEOC’s investigative letters.”
On May 15, Judge Kacsmaryk of the Northern District of Texas vacated portions of a 2024 EEOC Guidance document (the “Guidance”), which had reflected the EEOC’s prior position that a harassment claim under Title VII can be based on “the repeated and intentional use of a name or pronoun inconsistent with the individual’s known gender identity (misgendering); or the denial of access to a bathroom or other sex-segregated facility consistent with the individual’s gender identity.” In August 2024, the State of Texas and the Heritage Foundation filed a lawsuit to challenge the Guidance under the Administrative Procedure Act. In ruling for the plaintiffs, the court reasoned that the text of Title VII refers to discrimination based on “sex,” and not “gender identity” or “sexual orientation.” According to the district court, the Supreme Court’s 2020 decision in Bostock v. Clayton County affirmed that the word “sex” refers “only to biological distinctions between male and female” and supports the proposition that an employer cannot fire an employee “simply for being homosexual or transgender,” but does not require that employers accommodate an employee’s dress, bathroom, or pronoun preferences. The case is State of Texas et al. v. Equal Employment Opportunity Commission et al., No. 2:24-cv-00173 (N.D. Tex.). The EEOC has since modified the Guidance to identify the portion vacated by the court. EEOC Chair Andrea Lucas has separately indicated that she continues to oppose the 2024 Guidance while acknowledging that rescinding the Guidance would require a majority vote by the Commission.
On May 30, the Tennessee State Attorney General’s Office announced in a LinkedIn post that it planned to “completely transform civil-rights enforcement Tennessee” through a new statutorily created Civil Rights Enforcement Division. The office is currently hiring attorneys, investigators, and intake professionals to staff the new office. The web postings related to this new office are not clear as to what enforcement priorities the Office will focus its efforts on.
Media Coverage and Commentary:
Below is a selection of recent media coverage and commentary on these issues:
- New York Times, “Trump Intends to Cancel All Federal Funds Directed at Harvard” (May 27): Stephanie Saul of the New York Times reports that the Trump Administration wrote in a letter to federal agencies on May 27 that it intends to cancel the federal government’s remaining contracts with Harvard University. Those contracts have an estimated value of $100 million. As Saul reports, “[t]he letter instructs agencies to respond by June 6 with a list of contract cancellations. Any contracts for services deemed critical would not be immediately canceled but would be transitioned to other vendors.” Contracts with nine agencies will be affected, including DHS (which contracts with the school for senior executive training) and the NIH (which contracts with the school to operate various studies). This news comes just one week after the U.S. Department of Health and Human Services (“HHS”) announced that it planned to terminate $60 million in federal grants to Harvard. As reported by Mrinmay Dey of Reuters, on May 19, HHS announced in a post on X that the action addresses “Harvard University’s continued failure to address antisemitic harassment and race discrimination.” Dey reports that the university has previously stated that it “cannot absorb the entire cost” of frozen federal funding and is working to help researchers acquire alternative funding. As Dey reports, these funding cuts follow nearly $3 billion in other federal funding cuts to the university over the last several weeks.
- Law.com, “Supreme Court Affirms Fraud Conviction of Business That Lied About Using Minority-Owned Subcontractor” (May 22): Law.com’s Jimmy Hoover reports on a May 22, 2025 decision by the U.S. Supreme Court upholding the convictions of a public works company and its manager who lied about using minority-owned subcontractors in connection with a public works project. In an opinion written by Justice Amy Coney Barrett, the Court held that the federal wire fraud statute did not require a showing that the defendant intended to hurt the victim’s bottom line. Justice Clarence Thomas wrote a concurring opinion criticizing the federal Disadvantaged Business Enterprise program as “impos[ing] an explicitly race-based classification system,” adding he is “skeptical” of the program’s legality. Thomas stated, “[i]t is implausible to think that a ‘reasonable person’ would ‘attach importance’ to contract provisions that mandate constitutional violations.”
- Law360, “DOJ to Probe Whether Chicago’s Hiring Is Too Pro-Black” (May 20): Law360’s Grace Elletson reports that DOJ’s Civil Rights Division sent a letter to Chicago Mayor Brandon Johnson informing him that the Division had opened an investigation into whether the city impermissibly prioritized Black job applicants. Elletson reports that the letter follows remarks by Johnson at a publicly livestreamed event, where he touted the diverse makeup of his administration and stated that, “Our people hire our people.” The EEOC has also joined the investigation. In a statement provided to Law360, the Mayor’s office stated that it is aware of the letter but has not yet officially received it.
- The New York Times, “Justice Dept. to Use False Claims Act to Pursue Institutions Over Diversity Efforts” (May 19): Glenn Thrush and Alan Blinder of the New York Times reports that DOJ announced on May 19, 2025, its intent to use the False Claims Act to challenge antisemitism and DEI initiatives at universities. They report that an internal memorandum states that the Department will seek fines and damages for violations of the False Claims Act and consider criminal prosecutions in extreme circumstances. According to Thrush and Blinder, the department’s anti-fraud unit and the Civil Rights Division will work together in this effort. The article highlights that the Department has focused to-date on Harvard University, including notifying the university that it is under investigation for alleged failure to comply with the Supreme Court’s ruling in SFFA. Thrush and Blinder report that universities have been subject to the False Claims Act before, noting that in 2019, North Greenville University in South Carolina struck a $2.5 million deal after being accused of paying unlawful incentive compensation to recruit students and that a decade prior, the University of Phoenix settled a student recruitment case for $67.5 million.
- Bloomberg, “Despite Backlash From Trump, DEI Hasn’t Disappeared at US Companies” (May 19): Bloomberg’s Simone Foxman reports that, following actions by the Trump Administration to eliminate DEI initiatives, many companies have made modest changes but have not entirely eliminated existing commitments and programs. Foxman writes that companies have faced backlash for DEI initiatives since their proliferation in 2020, including from politicians and activist groups. She states that, now, companies largely aim to avoid scrutiny by pulling back initiatives that inhabit legal gray areas. According to Foxman, many companies have sunset specific demographic targets and restructured DEI initiatives, but that other programs remain in place, including retaining employee resource groups that are now open to all and continuing to seek broad workforces while emphasizing that hiring pathways are open to all.
- AP News, “As Trump targets DEI, Republican-led states intensify efforts to stamp it out” (May 16): David A. Lieb of AP News reports that Republican-led states have seen a “surge” in efforts to end DEI initiatives since January 2025. He writes that, since 2023, two dozen states have passed laws limiting DEI in higher education, and that new laws in Tennessee, West Virginia, and Wyoming also limit DEI initiatives in state and local governments. Lieb reports that “more governors are issuing directives now,” noting, for example, that West Virginia Governor Patrick Morrisey ordered an end to DEI positions and activities in executive departments and state-funded institutions on his first day in office. He also highlights a recent Idaho law banning DEI offices and programs in higher education and prohibits schools from requiring certain courses for graduation, unless connected to a degree in race or gender studies.
Case Updates:
Below is a list of updates in new and pending cases:
1. Contracting claims under Section 1981, the U.S. Constitution, and other statutes:
- Strickland et al. v. United States Department of Agriculture et al., No. 2:24-cv-00060 (N.D. Tex. 2024): On March 3, 2024, the plaintiff farm owners sued the USDA over the administration of financial relief programs that allegedly allocated funds based on race or sex. The plaintiffs alleged that only a limited class of socially disadvantaged farmers, including certain races and women, qualify for funds under these programs. On June 7, 2024, the court granted in part the plaintiff’s motion for a preliminary injunction. The court enjoined the defendants from making payment decisions based directly on race or sex. However, the court allowed the defendants to continue to apply their method of appropriating money, if done without regard to the race or sex of the relief recipient.
- Latest update: On May 9, 2025, the parties submitted a joint motion for voluntary remand, which indicated that the USDA would revise the challenged programs “to cure the race and sex discrimination that the agency no longer defends.” The court granted the remand motion on May 15, 2025, retaining jurisdiction over the case during the pendency of the remand and ordering the USDA to finalize its reconsideration of the programs by September 30, 2025.
- Desai v. PayPal, No. 1:25-cv-00033-AT (S.D.N.Y. 2025): On January 2, 2025, Andav Capital and its founder Nisha Desai sued PayPal, alleging that PayPal unlawfully discriminates by administering its investment program for minority-owned businesses in a way that favors Black and Latino applicants. Desai, an Asian-American woman, alleges PayPal violated Section 1981, Title VI, and New York state anti-discrimination law (NYSHRL) by failing to fully consider her funding application and announcing first-round investments only in companies with “at least one general partner who was black or Latino.” She seeks a declaratory judgment that the investment program is unlawful, an injunction barring PayPal from “knowing or considering race or ethnicity” in administering the program, and damages. On April 16, 2025, PayPal moved to dismiss the complaint, asserting that the plaintiffs lack standing because they never applied for funding under the challenged program. PayPal also argued that the plaintiffs’ claims are untimely, and that the plaintiffs failed to state a claim on the merits. PayPal is represented by Gibson Dunn in this matter. On May 7, 2025, the plaintiff filed an amended complaint, adding a claim under the Equal Credit Opportunity Act (“ECOA”), which prohibits any creditor from discriminating in “any aspect of a credit transaction.” The plaintiff alleges that PayPal, as a creditor, violates the ECOA by racially discriminating against businesses who are excluded from PayPal’s investment program for minority-owned businesses.
- Latest update: On May 28, 2025, PayPal moved to dismiss the amended complaint. PayPal argued that the plaintiffs’ Section 1981 and state law claims are untimely, their credit discrimination claims fail on the merits because the plaintiffs do not allege they applied for or were qualified to receive credit under the challenged program, and their local law claim should be dismissed because the relevant fund investments were not public accommodations.
- State of Missouri v. Starbucks Corp., 4:25-cv-00165 (E.D. Mo. 2025): On February 11, 2025, the State of Missouri filed a lawsuit against Starbucks, alleging that Starbucks is violating state and federal anti-discrimination laws. Specifically, the complaint alleges that Starbucks unlawfully ties executive compensation to diversity-and-inclusion-related quotas and metrics; provides discriminatory advancement opportunities through race- and gender-based mentoring programs, training programs, and employee “networks”; and discriminates on the basis of race and sex with respect to its board membership. The complaint raises four claims under Title VII, including (1) unlawful hiring and firing practices, (2) unlawful training programs, (3) unlawful segregation or classification of employees, and (4) unlawful printing or circulation of discriminatory employment and training materials. The complaint also alleges discriminatory contract impairment under Section 1981 and related state-law claims. On April 7, 2025, the defendant filed a motion to dismiss for lack of jurisdiction and failure to state a claim.
- Latest update: On May 21, 2025, the plaintiff filed its opposition to the motion to dismiss, arguing that (1) the court has personal jurisdiction because Starbucks applies its “discriminatory policies” in Missouri; (2) the court has subject matter jurisdiction because Missouri can assert “quasi-sovereign interests” related to the well-being of its residents; (3) governments can bring claims under Title VII, and its exhaustion provisions are not applicable to states; (4) the Attorney General can bring a Section 1981 claim on behalf of its residents; and (5) the state law claims are within the Attorney General’s statutory authority because the defendant engaged in discriminatory practices affecting Missouri residents.
2. Challenges to statutes, agency rules, executive orders, and regulatory decisions:
- California et al. v. U.S. Department of Education et al., No. 1:25-cv-10548 (D. Mass. 2025): On March 6, 2025, the states of California, Massachusetts, New Jersey, Colorado, Illinois, Maryland, New York, and Wisconsin (collectively, “the Plaintiff States”) sued the U.S. Department of Education, alleging that it arbitrarily terminated previously awarded grants under the Teacher Quality Partnership (“TQP”) and Supporting Effective Educator Development (“SEED”) programs in violation of the APA. On March 6, 2025, the Plaintiff States filed a motion for a temporary restraining order to prevent the Department of Education from “implementing, giving effect to, maintaining, or reinstating under a different name the termination of any previously-awarded TQP and SEED grants.” The Plaintiff States argued that the “abrupt” termination of the TQP and SEED programs threatened imminent and irreparable harm. The court issued a TRO on March 10, 2025, concluding that the Plaintiff States were likely to succeed on the merits of their APA claim, that they adequately demonstrated irreparable harm absent temporary relief, and that the balance of the equities weighed in their favor. The government appealed the order the next day, arguing, among other things, that the district court lacked jurisdiction to review the Department of Education’s decisions on how to allocate funds because the APA does not permit judicial review of “agency action” that “is committed to agency discretion by law.” On April 4, 2025, the United States Supreme Court stayed the TRO, concluding that the government was likely to succeed in showing the district court lacked jurisdiction to grant the TRO under the Administrative Procedure Act (APA).
- Latest update: On May 12, 2025, the defendants filed a motion to dismiss or, in the alternative, transfer to the Court of Federal Claims. Relying on the Supreme Court’s April 4, 2025 decision, the defendants argue that the court lacks subject matter jurisdiction because the APA does not authorize suits against the government seeking to enforce a contractual obligation to pay money, and that plaintiffs are required to bring such suits in the Court of Federal Claims under the Tucker Act.
- Chicago Women in Trades v. President Donald J. Trump, et al., No. 1:25-cv-02005(N.D. Ill. 2025): On February 26, 2025, Chicago Women in Trades (“CWIT”), a non-profit organization, sued President Trump, challenging EOs 14151 and 14173. CWIT claims that these EOs violate principles of separation of powers, the First and Fifth Amendments, and the Spending Clause of the U.S. Constitution. On April 14, 2025, the court preliminary enjoined enforcement of key provisions of the EOs, including a provision terminating CWIT’s Women in Apprenticeship and Nontraditional Occupations Act grant, which served as one of five federal sources of funding for the organization. On April 18, 2025, CWIT moved to modify the preliminary injunction to prevent termination of its four other sources of federal funding. The court denied the motion on May 7, 2025, finding “CWIT has not shown a manifest error of law warranting modification of the preliminary injunction to encompass any of CWIT’s other sources of federal funding.” On May 9, 2025, the parties filed a joint status report regarding discovery. CWIT indicated its intent to seek discovery about, among other things, the administration’s guidance on implementing the challenged EOs, its definitions of DEI and DEIA as used in the EOs, guidance about what the government deems to be “illegal DEI and DEIA policies,” and the termination of grants on DEI-related grounds pursuant to those EOs. The government argued this discovery was unnecessary because “the at-issue claims are purely legal and require no factual development for resolution.”
- Latest update: Following a May 14, 2025 hearing, the court ordered discovery to proceed. On May 14 and 21, 2025, the Department of Labor filed status reports indicating its continued compliance with the court’s preliminary injunction.
- Do No Harm v. Gianforte, No. 6:24-cv-00024-BMM-KLD (D. Mont. 2024): On March 12, 2024, Do No Harm filed a complaint on behalf of “Member A,” a white female dermatologist in Montana, alleging that a Montana law requiring the governor to “take positive action to attain gender balance and proportional representation of minorities resident in Montana to the greatest extent possible” when making appointments to the 12-member Medical Board violates the Fourteenth Amendment. Do No Harm alleged that since ten seats are currently held by six women and four men, Montana law requires that the remaining two seats be filled by men, which would preclude Member A from holding the seat. Following Governor Gianforte’s motion to dismiss, on February 5, 2025, the court dismissed the complaint without prejudice. On March 7, 2025, the plaintiff filed a second amended complaint. On March 14, 2025, the plaintiff filed an unopposed motion to stay the case, as Montana is currently considering legislation that would amend the challenged statute to remove the language at issue. According to the plaintiff, if passed, the bill would moot this case. On the same day, the court issued a one-page order granting the plaintiff’s motion to stay the case, pending the state legislature’s action on H.B. 215. The order also required the parties to file a status report within 14 days after the legislative session concludes.
- Latest update: On May 16, 2025, Do No Harm filed a stipulation of dismissal on the basis that the Montana legislature had passed a law that repealed the challenged language. The court entered dismissal the same day.
- Defending Education v. Sullivan et al., No. 1:25-cv-1572 (D. Colo. 2025): On May 19, 2025, a coalition of conservative advocacy groups filed a complaint against Colorado Attorney General Philip Weiser and members of the Colorado Civil Rights Commission, alleging that a recently passed Colorado law, House Bill 25-1312, violates the First and Fourteenth Amendments of the U.S. Constitution for allegedly “compelling speech” regarding gender identity. House Bill 25-1312 expands Colorado’s anti-discrimination laws to bar discrimination on the grounds of a person’s chosen name, pronouns, and other gender-affirming language. The plaintiffs allege that, because the law “expands the definition of ‘gender expression’ to include . . . speech based on an individual’s ‘chosen name,’” public accommodations in Colorado are liable if they refer to someone without using their chosen name, preferred pronouns, or other gender-affirming terms. The plaintiffs seek a declaratory judgment that the law violates the First and Fourteenth Amendments. On May 20, 2025, the plaintiffs moved for a preliminary injunction preventing the defendants from enforcing parts of the law. Among other things, the plaintiffs argue that violating or threatening a constitutional right is “always an irreparable harm.”
- Latest update: The docket does not yet reflect that the defendants have been served.
- Doe v. EEOC, No. 1:25-cv-01124 (D.D.C. 2025): On April 15, 2025, three law students, proceeding under pseudonyms, sued the EEOC, challenging the EEOC’s investigations into law firms’ demographic and diversity-related data. The plaintiffs allege that those investigations exceed the agency’s authority under Title VII, because they are not based upon a charge. The plaintiffs further claim that the EEOC’s investigation into law firms violates the Paperwork Reduction Act, because the EEOC did not undergo public comment or obtain approval from the Office of Management and Budget before posing “identical questions to the twenty firms.” The plaintiffs seek a declaratory judgment that Lucas and the EEOC exceeded their authority, an injunction barring the collection of sensitive information through improper means, and an order compelling Lucas and the EEOC to withdraw the investigative letters and return any information collected pursuant to those letters.
- Latest update: On May 16, 2025, the plaintiffs filed an amended complaint, adding class allegations. The plaintiffs now seek to represent “[a]ll individuals whose names and other personal information are requested in EEOC’s investigative letters.”
- Doe 1 v. Office of the Director of Nat’l Intel., No. 1:25-cv-00300 (E.D. Va. 2025): On February 17, 2025, 11 unnamed employees of the Office of the Director of National Intelligence and the Central Intelligence Agency sued their employers after they were placed on administrative leave from their DEI-related positions. They assert that the decision to place them on administrative leave violates the Administrative Leave Act, the Administrative Procedure Act, and the First and Fifth Amendments of the U.S. Constitution. On February 17, 2025, the plaintiffs moved for a temporary restraining order. The court held a hearing on the plaintiffs’ motion for a temporary restraining order on February 27, 2025. On March 27, 2025, the plaintiffs moved for a preliminary injunction preventing the defendants from terminating their employment, as well as the employment of similarly situated individuals. The plaintiffs argued that they are likely to succeed on their Fifth Amendment Due Process claim, they will suffer irreparable economic and reputational harm absent an injunction, the balance of hardships weigh in their favor, and an injunction will serve the public interest. They asked the court to (1) order the CIA Director to “personally review and reconsider his termination decisions”; (2) order the CIA Director and the Director of National Intelligence “to state why each individual termination somehow serves the national interest”; and/or (3) allow the plaintiffs and other similarly situated individuals to be considered for reassignment to positions in the Intelligence Community. On March 31, 2025, the court enjoined the defendants from “effectuating or implementing any decision to terminate the Plaintiffs without further Court authorization.” The court ordered the defendants to “provide Plaintiffs a requested appeal from any decision to terminate him or her” and to “consider any Plaintiffs’ request for reassignment for open or available positions in accordance with their qualifications and skills.” On May 6, 2025, the defendants filed a notice of appeal of the court’s preliminary injunction order.
- Latest update: On May 16, 2025, the defendants filed a motion to stay the proceedings pending appellate review, arguing that it would be wasteful and duplicative to conduct briefing and discovery on substantive issues while the Fourth Circuit simultaneously considered them. On May 19, 2025, the court granted the defendants’ motion and stayed the proceedings pending resolution by the Fourth Circuit.
- Nat’l Ctr for Pub. Policy Research, et al. v. SEC, No. 23-60230 (5th Cir. 2023): The petitioners, Kroger shareholders, previously sought to require Kroger to include in its proxy materials a proposal that Kroger must report on risks associated with omitting “viewpoint” and “ideology” from the list of protected characteristics in its equal opportunity policy. The SEC concluded that Kroger could exclude the proposal from its proxy materials. In April 2023, the petitioners sought judicial review of the SEC’s decision in the Fifth Circuit. On November 14, 2024, the Fifth Circuit denied the petitioner’s motion for stay pending appeal and granted the SEC’s motion to dismiss for lack of jurisdiction and mootness. The court found that Kroger chose to include the challenged measure in its proxy materials, which extinguished any live controversy on appeal. The court also held that it lacked authority to resolve the dispute because the SEC failed to issue an order concerning this matter, final or otherwise. On January 29, 2025, the petitioners filed a petition for a rehearing en banc.
- Latest update: On May 14, 2025, the court denied the petition for rehearing.
- Nat’l Urban League et al., v. President Donald J. Trump, et al., No. 1:25-cv-00471 (D.D.C. 2025): On February 19, 2025, the National Urban League, National Fair Housing Alliance, and AIDS Foundation of Chicago sued President Donald Trump challenging EO 14151, EO 14168, EO 14173, and related agency actions, as ultra vires and in violation of the First and Fifth Amendments and the Administrative Procedure Act. The plaintiffs allege that these orders penalize them for expressing viewpoints in support of diversity, equity, inclusion, accessibility, and transgender people. They also claim that, because of these orders, they are at risk of losing federal funding. The complaint seeks a declaratory judgment holding that the EOs at issue are unconstitutional, as well as a preliminary injunction enjoining enforcement of these EOs. On February 28, the plaintiffs filed a motion for a preliminary injunction. On May 2, 2025, the court denied the plaintiffs’ motion for a preliminary injunction. The court determined that the plaintiffs failed to establish standing to challenge provisions of the EOs that are intra-governmental and “not aimed at them.” For the remaining challenged provisions of the executive orders—including provisions mandating certification by government contractors that they do not operate unlawful DEI and terminating grants relating to DEI and gender ideology—the court concluded that the plaintiffs failed to show a likelihood that they would succeed on the merits.
- Latest update: On May 20, 2025, the parties filed a joint motion to obtain leave for the plaintiffs to supplement their pleadings. The motion also proposed deadlines for the plaintiffs’ amendment, defendants’ response, and any motion to dismiss. The court granted the motion, setting forth deadlines for amendment and response to that amendment, as well as a briefing schedule for a motion to dismiss, should the defendants choose to file one.
- National Education Association v. Department of Education, No. 1:25-cv-00091-LM (D.N.H. 2025): On March 5, 2025, the National Education Association and other groups, including the ACLU of New Hampshire, sued the U.S. Department of Education (“DOE”), alleging that the DOE’s letters to universities and colleges, threating to revoke federal funding for pursuing certain DEI programs, violated the First and Fifth Amendments of the U.S. Constitution and the Administrative Procedure Act. The challenged actions include the Department’s February 14, 2025 “Dear Colleague” letter, which purported to “clarify and reaffirm the nondiscrimination obligations of schools and other entities that receive federal financial assistance” and instructed educational institutions to “(1) ensure that their policies and actions comply with existing civil rights law; (2) cease all efforts to circumvent prohibitions on the use of race by relying on proxies or other indirect means to accomplish such ends; and (3) cease all reliance on third-party contractors, clearinghouses, or aggregators that are being used by institutions in an effort to circumvent prohibited uses of race.” On April 24, 2025, the court granted the plaintiffs’ motion for a preliminary injunction, holding that the Dear Colleague letter is a “legislative rule” prescribing “new law and policy”—and not merely an “interpretive rule” providing guidance on existing law—because it imposes new, substantial obligations on schools. Accordingly, the court concluded that the plaintiffs were likely to succeed in their procedural challenge due to the Department’s failure to follow the procedural requirements that the APA imposes on legislative rules. The court also concluded that the Dear Colleague letter was likely impermissibly vague in violation of the Due Process Clause, and that the Frequently Asked Questions document “does not ameliorate” the letter’s vagueness “but rather, exacerbates it.” Finally, the court concluded that the agency actions likely violated the First Amendment by targeting speech based on viewpoint.
- Latest update: On May 12, 2025, the plaintiffs filed an amended complaint, adding allegations that the Dear Colleague Letter and other DOE letters violate the Spending Clause of the U.S. Constitution because they exert “undue influence” by “attaching conditions to federal funds” that make them impermissibly coercive. The plaintiffs also added allegations that the Dear Colleague Letter and similar letters are unconstitutionally vague and ambiguous.
- Young Americans for Freedom et al. v. U.S. Department of Education et al., No. 3:24-cv-00163-PDW-ARS (D.N. Dak. 2024): On August 27, 2024, the University of North Dakota Chapter of Young Americans for Freedom (“YAF”) sued DOE over its McNair Post-Baccalaureate Achievement Program, a research and graduate studies grant program that supports incoming graduate students who are either low-income first-generation college students or “member[s] of a group that is underrepresented in graduate education.” YAF alleges that the McNair program violates the Equal Protection Clause by restricting admission based on race. YAF requests, among other things, a preliminary injunction enjoining the DOE from enforcing all race-based qualifications for the McNair program. On December 31, 2024, the court denied the plaintiff’s preliminary injunction motion and dismissed the case without prejudice for lack of subject matter jurisdiction, ruling that there was no Article III standing because the McNair Program is not exclusively administered by the Department of Education. On January 24, 2025, the plaintiffs filed a motion to alter or amend the judgment arguing that the court should have allowed the plaintiffs to amend their complaint instead of dismissing the case outright. On March 10, 2025, DOE filed an opposition to the plaintiffs’ motion for reconsideration, arguing that the plaintiffs failed to identify any “manifest error of fact or law” in the court’s decision or demonstrate exceptional circumstances warranting relief.
- Latest update:On May 6, 2025, the court denied the plaintiffs’ motion for reconsideration of its dismissal.
3. Actions against educational institutions:
- De Piero v. Pennsylvania State University, No. 2:23-cv-02281 (E.D. Pa. 2023): A white male professor sued his employer, Penn State University, claiming that university-mandated DEI trainings, discussions with coworkers and supervisors about race and privilege in the classroom, and comments from coworkers about his “white privilege” created a hostile work environment that led him to quit his job. He claimed that after he reported this alleged harassment and published an opinion piece objecting to the impact of DEI concepts in the classroom, the university retaliated against him by investigating him for bullying and aggressive behavior towards his colleagues. The plaintiff alleged harassment, retaliation, and constructive discharge in violation of Title VI, Title VII, Section 1981, Section 1983, the First Amendment, and Pennsylvania civil rights laws. The parties filed cross-motions for summary judgment. On March 6, 2025, the court granted summary judgment to the university on the plaintiff’s hostile work environment claims. The court found that the behaviors complained of by the plaintiff, including “campus wide emails” pertaining to racial injustice, “being invited to review scholarly materials,” and “conversations about harassment levied by and against [the plaintiff],” could not reasonably be found to rise to the level of severe harassment. As to the “pervasive” conduct prong, the court explained that of the 12 incidents in the complaint, no “racist comment” was directed at the plaintiff and “only a few” involved actions that were directed at the plaintiff at all. On March 20, 2025, the plaintiff filed a supplemental brief in support of his remaining claims, arguing that these claims should proceed to trial. He presented what he asserted were undisputed facts to support his claims, including that he was reported for “micro aggressions” after objecting to racial harassment, that colleagues lodged false claims against him, and that he faced retaliatory disciplinary action and salary claw backs. On March 27, 2025, the university filed its own supplemental brief in support of summary judgment, arguing that the plaintiff’s putative Title VII and PHRA retaliation claims failed as a matter of law because the plaintiff cannot prove the university took adverse employment action against him, or there is no causal link between his alleged protected activity and adverse actions taken by the university. On April 17, 2025, the court granted summary judgment for the university on the plaintiff’s remaining retaliation claims, concluding that none of the alleged acts by the university constituted adverse employment action.
- Latest update: On May 15, 2025, the plaintiff filed a notice of appeal as to the orders granting the university’s motions for summary judgment.
- Kleinschmit v. University of Illinois Chicago, No. 1:25-cv-01400 (N.D. Ill. 2025): On February 10, 2025, a former professor at the University of Illinois Chicago sued the university, alleging that it unlawfully discriminated against white male faculty candidates and discriminated and retaliated against the plaintiff by firing him after he objected to the school’s “racial hiring programs.” The plaintiff raises claims under Sections 1981 and 1983.
- Latest update: On May 6, 2025, the university filed a motion to dismiss. The motion contends, among other things, that (1) the plaintiff lacks standing because the harms he claims to have experienced, including not having his contract renewed, are not redressable through the injunctive remedies he seeks, (2) the plaintiff cannot maintain his action because the Board of Directors of the University of Illinois enjoys sovereign immunity under the Eleventh Amendment, (3) Sections 1981 and 1983 do not apply to the university, as it is an alter ego of the state and not a “person” under the meaning of the statutes, (4) the Eleventh Amendment bars monetary damages against the individual defendants in their official capacities as employees of the university, and (5) the individual defendants lacked involvement in the alleged adverse employment actions.
4. Title VI Discrimination:
- Do No Harm v. American Chemical Society, No. 1:25-cv-0638 (D.D.C. 2025): On March 5, 2025, Do No Harm filed a suit against The American Chemical Society (“ACS”) in the U.S. District Court for the District of Columbia. The complaint alleges that ACS operates a program for Black, Hispanic, and indigenous applicants (“the ACS Scholars Program”) that excludes white and Asian applicants, thereby violating federal anti-discrimination laws. Do No Harm argues that the program’s racial criteria are not narrowly tailored to serve a compelling interest and that the ACS, as a recipient of federal financial assistance, is subject to Title VI’s prohibition against racial discrimination. Do No Harm seeks declaratory and injunctive relief, as well as nominal damages.
- Latest update: On May 7, 2025, the parties jointly stipulated to dismiss the case, on the grounds that the defendant had terminated the ACS Scholars Program and would replace it with a scholarship program that does not consider race or ethnicity in selecting applicants.
Legislative Updates
On February 4, 2025, U.S. Representative Michael Cloud (R-TX) introduced House Bill 925, the “Dismantle DEI Act of 2025.” If passed, this bill would limit DEI-related initiatives in federal agencies by prohibiting federal funds from being made available to DEI-related activities in any federal agency, closing any agency office related to DEI, prohibiting trainings related to DEI, and repealing or amending various statutes and Executive Orders related to diversity. For example, the bill would repeal 12 U.S.C. § 4520, which established requirements for “minority and women inclusion” in regulated financial entities. The bill would also prohibit federal contracts exceeding $10,000 in value from being executed with any contractor “who is subject to, or required to comply with, a prohibited diversity, equity or inclusion practice.” It would also prohibit federal agencies from providing any grants without an agreement by the recipient that the funds will not be used for any DEI-related purpose. The bill would also amend the Civil Rights Act of 1964 to define “prohibited diversity, equity, or inclusion practice[s]” as including “requiring as a condition of employment, as a condition for promotion or advancement, or as a condition for speaking, making a presentation, or submitting written materials, that an employee undergo training” or sign or otherwise assent to a “statement, code of conduct, work program, or plan, or similar device” that asserts that “a particular race, color, ethnicity, religion, sex, or national origin is inherently or systemically oppressive or oppressive, or privileged or unprivileged.”
On May 8, 2025, the Texas State Senate passed and sent to the state House Senate Bill 2337, a bill that would require shareholder proxy advisors to make certain disclosures if the proxy advisors recommend shareholder votes based “wholly or partly” on factors other than “the financial interest of the shareholders of a company.” Factors defined as outside “the financial interest” include DEI or ESG goals, factors, or investment principles. Proxy advisors whose recommendations incorporate these factors would be required to make, among other disclosures, a “conspicuous disclosure” that the recommendation is “not being provided solely in the financial interest of the company’s shareholders.” The bill would also require certain disclosures if a proxy advisor recommended voting on a shareholder proposal in a way that differs from “the voting recommendation of the board of directors or a board committee composed of a majority of independent directors.” The bill would render violation of the disclosure rules an unlawful deceptive trade practice, and would permit affected parties to seek both declaratory and injunctive relief.
Gibson Dunn’s lawyers are available to assist in addressing any questions you may have regarding these developments. Please contact the Gibson Dunn lawyer with whom you usually work, any member of the firm’s Labor and Employment practice group, or the following practice leaders and authors:
Jason C. Schwartz – Partner & Co-Chair, Labor & Employment Group
Washington, D.C. (+1 202-955-8242, jschwartz@gibsondunn.com)
Katherine V.A. Smith – Partner & Co-Chair, Labor & Employment Group
Los Angeles (+1 213-229-7107, ksmith@gibsondunn.com)
Mylan L. Denerstein – Partner & Co-Chair, Public Policy Group
New York (+1 212-351-3850, mdenerstein@gibsondunn.com)
Zakiyyah T. Salim-Williams – Partner & Chief Diversity Officer
Washington, D.C. (+1 202-955-8503, zswilliams@gibsondunn.com)
Molly T. Senger – Partner, Labor & Employment Group
Washington, D.C. (+1 202-955-8571, msenger@gibsondunn.com)
© 2025 Gibson, Dunn & Crutcher LLP. All rights reserved. For contact and other information, please visit us at www.gibsondunn.com.
Attorney Advertising: These materials were prepared for general informational purposes only based on information available at the time of publication and are not intended as, do not constitute, and should not be relied upon as, legal advice or a legal opinion on any specific facts or circumstances. Gibson Dunn (and its affiliates, attorneys, and employees) shall not have any liability in connection with any use of these materials. The sharing of these materials does not establish an attorney-client relationship with the recipient and should not be relied upon as an alternative for advice from qualified counsel. Please note that facts and circumstances may vary, and prior results do not guarantee a similar outcome.
Gibson Dunn will continue monitoring these developments and reporting to our trusted friends and clients in the days, weeks, and months ahead.
Victim compensation has long been a core consideration for U.S. Department of Justice (DOJ or the “Department”) prosecutors in the context of corporate criminal resolutions. New internal DOJ guidance issued on June 5th by Matthew Galeotti, Head of DOJ’s Criminal Division (the “Guidance”), expands the Criminal Division’s focus on victim compensation when deciding whether and how to credit penalties in multi-agency and multi-jurisdictional resolutions.
Highlights from June 5th Internal Guidance
The Guidance introduces factors that prosecutors in the Criminal Division must consider in determining the appropriate coordination of corporate penalties in parallel proceedings—whether they be criminal, civil, regulatory, or administrative, and whether foreign or domestic. The Guidance does not rescind, and indeed specifically cites, the Policy on Coordination of Corporate Resolution Penalties issued in the first Trump administration (commonly referred to as the “anti-piling on policy” and now incorporated as Sections 1-12.100 of the Justice Manual). Nevertheless, the new Guidance complicates the mechanics of an “anti-piling-on” analysis, and signals that where the objectives of compensating victims and avoiding the stacking of corporate penalties may be in conflict, Criminal Division prosecutors are likely to prioritize victim compensation. Overall, the Guidance indicates that the Criminal Division will be less inclined to credit or offset penalties paid to other regulators, foreign or domestic, if doing so may reduce the overall funds available to compensate victims. In particular, the Guidance instructs Criminal Division prosecutors on the following:
- Crediting Payments Made to Domestic Authorities. The Guidance directs that when considering payments due to other domestic authorities related to the same underlying conduct, prosecutors should not credit those amounts when doing so would reduce the availability of restitution or forfeiture that could be used to compensate victims directly or criminal penalties that could be used for general victim support via the Crime Victims Fund (CVF). This is the directive unless the other authority has a demonstrably effective system to provide such compensation or support to crime victims. The Guidance explicitly discourages prosecutorial approval of crediting monies to be paid into a general state treasury or the U.S. Treasury.
- Crediting Payments Made to Foreign Authorities. The guidance acknowledges that “appropriate crediting” in a resolution with foreign authorities “can . . . serve to effect justice in the United States.” But it also instructs prosecutors to assess whether the foreign agency or regulator involved in a parallel resolution has the means or tools to meaningfully compensate victims before agreeing to offset payments.
Prosecutors are directed not to credit payments that would otherwise support victim compensation “unless the foreign authority has a more effective mechanism [than DOJ] for directly compensating victims of the underlying crime.” Where general victim support (rather than direct victim compensation) is at issue, the Guidance provides prosecutors with a balancing test to consider the appropriate outcome, including the interest in providing general assistance to crime victims, “the interests of jurisdictions where the misconduct occurred, where the effects of the misconduct are most acutely felt, or who have other equities in the investigation” and “the advancement of other critical Department and Division goals.”
- Seven-Factor Test for Assessment. The Guidance emphasizes a careful balance between victim support and international cooperation with DOJ’s foreign counterparts. It encourages prosecutors to make crediting decisions by weighing the following non-exhaustive list of factors:
- The degree of overlap in the conduct under investigation as between the parallel matters;
- The equities of the authorities involved, including how the case originated, which authorities developed key evidence, and the resources expended by the authorities involved;
- Where the misconduct occurred and made an impact, and the seriousness of the harm incurred by the misconduct;
- The relative level and value of cooperation of other authorities;
- The involvement of the company under investigation, and namely the “timeliness and genuine efforts of the company in seeking and advancing a coordinated resolution”;
- The anticipated timing of the parallel resolutions; and
- DOJ’s enforcement practices and priorities.
Importantly, “[i]n all cases,” the Guidance puts the onus on companies to “meaningfully attempt to coordinate resolutions,” noting that Criminal Division prosecutors will not credit resolution payments when companies do not work to coordinate them.
Observations and Questions
The Guidance raises a number of questions, including how widespread its impact will be in practice and how the Department will seek to implement it.
Potentially limited scope of corporate criminal resolutions impacted by the Guidance. The Guidance acknowledges that the assessment is triggered by the identification of “victims of the underlying crime with compensable losses.” As a practical matter, it is unclear how significantly this guidance will impact corporate resolutions going forward, given that the conduct animating many past corporate resolutions historically has not involved identifiable victims. For example, as per Gibson Dunn’s inventory of corporate criminal resolutions, less than 15% of DOJ corporate resolutions since 2016 have involved a provision to compensate victims of the conduct resolved by the action. FCPA resolutions in particular—which often involve coordinated penalties with foreign law enforcement—rarely have victims.
Resolutions may become more expensive because of the Guidance. The Department’s prior emphasis on avoiding piling on seems to have yielded in part (where applicable) to the prioritization of victim compensation, implicitly suggesting that the Department may not credit—and therefore may contribute to—duplicative resolution payments, resulting in companies paying more money to resolve conduct where more than one agency is involved. To avoid or mitigate this result, companies and their corporate counsel will need to effectively advocate that crediting is appropriate in their particular circumstances, including by proactively addressing specific actions that have been or will be taken to compensate victims. Although the Guidance may not be so intended, it could also be read so as to yield higher penalties in other scenarios, in particular in resolutions that include civil penalties under the False Claims Act. On its face, the Guidance would allow the Criminal Division to seek restitution to government agency victims even if the resolution included a civil settlement paid to the Treasury because the Guidance discourages crediting direct-to-Treasury payments as restitution. In addition, the Guidance could encourage Criminal Division prosecutors to be more aggressive in seeking criminal forfeiture—and less willing to credit other parallel penalties against such forfeitures. DOJ’s Whistleblower Program is funded through forfeitures, and the Guidance could encourage prosecutors to decline to credit parallel resolution payments where they would serve to decrease funds flowing to that Program.
Interaction of June 5 Guidance with Corporate Enforcement guidance and coordination with foreign authorities. The practical impact of the Guidance and its intersection with the Criminal Division’s preexisting guidance, including the Corporate Enforcement and Voluntary Self-Disclosure Policy (CEP) and Blanche Memorandum, addressing the Department’s investigation and enforcement of the U.S. Foreign Corrupt Practices Act, remains to be seen. The application of the Guidance in crediting resolution payments due to foreign authorities will be particularly significant where the underlying conduct primarily involves foreign entities, victims, and regulators with limited U.S. touchpoints. The directive that Criminal Division prosecutors should determine as early as possible in their investigation whether a foreign authority has a parallel investigation and whether it is appropriate to defer to foreign enforcement where U.S. interests are not implicated echoes the deference to foreign authorities in primarily foreign cases discussed in our client alert on the Blanche Memorandum.
Alignment with other Trump Administration priorities. There are many ways in which the application of the Guidance will likely be impacted by other Trump Administration policy priorities. As just one example, the Administration’s “America First” ethos may influence the extent to which the Department agrees that conditions have been met to credit resolution payments due to foreign authorities. For example, the Department may be less likely to agree to credit payments due to foreign authorities if the focus of such authorities’ crime victims funds are focused on compensating victims of the crime in that country and/or do not have a mechanism to compensate U.S. victims of the same conduct.
Takeaways
For companies navigating Criminal Division investigations, particularly multinational corporations or companies involved in money laundering, export controls, FCPA, and other or cross-border investigations, the Guidance presents:
- Increased complexity in achieving global settlements, emphasizing the importance of adopting coordinated legal strategies across jurisdictions;
- Reduced flexibility in negotiating resolution payment offsets;
- Opportunities to proactively inform the Criminal Division of any parallel resolutions to maximize potential penalty offsets;
- A potentially higher price to resolve corporate criminal investigations; and
- A greater focus (where applicable) on proactively addressing specific actions that have been or will be taken to compensate victims.
Gibson Dunn’s White Collar Defense and Investigations Practice Group successfully defends corporations and senior corporate executives in a wide range of federal and state investigations and prosecutions, and conducts sensitive internal investigations for leading companies and their boards of directors in almost every business sector. The Group has members across the globe and in every domestic office of the Firm and draws on more than 125 attorneys with deep government experience, including more than 50 former federal and state prosecutors and officials, many of whom served at high levels within the Department of Justice and the Securities and Exchange Commission, as well as former non-U.S. enforcers.
Gibson Dunn’s lawyers are available to assist in addressing any questions you may have regarding these issues. Please contact the Gibson Dunn lawyer with whom you usually work, the authors, or any leader or member of Gibson Dunn’s White Collar Defense and Investigations practice group:
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© 2025 Gibson, Dunn & Crutcher LLP. All rights reserved. For contact and other information, please visit us at www.gibsondunn.com.
Attorney Advertising: These materials were prepared for general informational purposes only based on information available at the time of publication and are not intended as, do not constitute, and should not be relied upon as, legal advice or a legal opinion on any specific facts or circumstances. Gibson Dunn (and its affiliates, attorneys, and employees) shall not have any liability in connection with any use of these materials. The sharing of these materials does not establish an attorney-client relationship with the recipient and should not be relied upon as an alternative for advice from qualified counsel. Please note that facts and circumstances may vary, and prior results do not guarantee a similar outcome.
Europe
28/05/2025
European Data Protection Board | Agenda | GDPR Simplification
The European Data Protection Board (EDPB) has published the agenda of its 106th plenary session, including discussions on a request for a joint opinion with the European Data Protection Supervisor (EDPS) on the European Commission’s draft proposal for the simplification of record-keeping obligations under Article 30(5) of the GDPR.
This follows a letter addressed by the EDPB and the EDPS to the European Commission on the upcoming proposal, expressing preliminary support for the proposed simplification. However, the EDPB and EDPS asked the Commission to better assess the impact on affected organizations and to ensure a fair balance between data protection and business interests.
For more information: Agenda of the 106th EDPB Meeting, Joint Letter
19/05/2025
European Digital Rights | Open Letter | Reopening of GDPR
The European Digital Rights (“EDRi”) and 107 other civil society organisations published an open letter calling on the European Commission not to reopen the GDPR.
The EDRi expresses concerns about ongoing efforts to reopen the GDPR, considering that this could make the regulation more vulnerable to broader deregulatory demands. It also points to the geopolitical context and the influence of foreign commercial and political actors on the EU digital regulatory landscape.
For more information: EDRi Website
16/05/2025
European Data Protection Board | Letter | In-Car Video Cameras and Dashcams
The European Data Protection Board (“EDPB”) published a letter in response to an inquiry from a member of the European Parliament outlining concerns on the growing use of in-car video cameras and dashcams.
The EDPB recalled that it has already issued relevant guidelines, in particular guidelines on processing of personal data through video devices, which are complemented by guidance and communication adopted by national data protection authorities.
For more information: EDPB Website
16/05/2025
European Supervisory Authorities | DORA | Registers of Information
The European Supervisory Authorities (“ESAs”) updated the Observations from reporting of Registers of Information (“ROI”) under the Digital Operational Resilience Act (DORA).
Originally published on April 16, 2025, the observations provide an overview of common issues identified in the reporting of the ROI and provide explanations of the most common errors.
For more information: EBA Website
07/05/2025
European Commission | Formal Requests | NIS 2 Directive
The European Commission has issued formal requests to 19 Member States to fully transpose the NIS2 Directive into national law.
As a reminder, the deadline for transposition was October 17, 2024. Member States – such as France, Germany, the Netherlands – now have two months to take the necessary measures. Failure to comply may result in referral to the Court of Justice of the European Union.
For more information: European Commission Website
06/05/2025
European Data Protection Board | Opinion | UK Adequacy Decisions
The European Data Protection Board (“EDPB”) adopted an opinion on the European Commission’s proposal to extend the validity of the UK adequacy decisions under the GDPR and the Law Enforcement Directive, which will expire on June 27, 2025.
The EDPB opinion acknowledges the need for an extension due to the ongoing data protection reform in the UK. However, it does not address the level of protection in the UK, which will be evaluated by the EDPB if new draft adequacy decisions are proposed.
For more information: EDPB Website
Denmark
15/05/2025
Danish Supervisory Authority | Guidance | Cookies
The Danish Supervisory Authority (“Datatilsynet”) and the Danish Agency for Digital Government have issued joint guidelines on cookies and similar technologies.
The guidelines are intended to help website and app providers comply with both the Danish Cookie Order and the GDPR. They clarify consent requirements, highlight common compliance pitfalls, and provide practical recommendations for implementing compliant practices.
For more information: Datatilsynet Website [DA]
France
22/05/2025
French Supervisory Authority | Fines | Simplified Procedure
The French Supervisory Authority (“CNIL”) announced ten new sanctions issued under its simplified procedure, totaling €104,000.
The majority of the cases involved employee monitoring, specifically through video surveillance and the geolocation of company vehicles. The CNIL found various breaches, including failure to comply with the principles of data minimization and storage limitation. In one instance, a company was fined for insufficient password policy and poor management of access rights to its video surveillance system.
For more information: CNIL Website [FR]
06/05/2025
French Supervisory Authority | Guidance | Augmented Cameras at Self-checkouts
The French Supervisory Authority (“CNIL”) published guidance on the use of augmented cameras at self-checkouts.
The CNIL explains how augmented cameras function, and clarifies that the data processed cannot be considered anonymous since individuals can be re-identified. In addition, it considers that legitimate interest is a possible legal basis, provided that the use of such cameras is necessary for the intended purpose and does not disproportionately infringe on individuals’ rights.
For more information: CNIL Website [FR]
05/05/2025
French Council of State | CJEU Referral | Consent and Direct Marketing
A French media and entertainment company has appealed to the French Council of State (“Conseil d’Etat”) to annul a fine of €60,000 imposed by the French Supervisory Authority (“CNIL”) for conducting marketing campaigns without valid consent.
In 2023, the CNIL found that the company had run marketing campaigns using personal data obtained from internet service providers, which had collected such data via consent forms referring vaguely to “partners” without naming them. The CNIL concluded the company processed this data without obtaining an informed consent, which the company challenged before the Conseil d’Etat. To resolve the dispute, the Council has referred to the Court of Justice of the European Union the question of whether a data subject’s consent – given to a primary collector for use by unnamed “partners” – constitutes valid consent, or whether each recipient, if not identified at the time of collection, must obtain separate consent before using the data for marketing purposes.
For more information: Conseil d’Etat Website [FR]
02/05/2025
French Parliament | Transposition | Representative Actions Directive
France has transposed the EU Directive 2020/1828 on representative actions for the protection of collective interests of consumers through Law No. 2025-391 of 30 April 2025, published in the Official Journal on May 2, 2025.
The new framework strengthens consumers’ ability to seek collective redress by establishing a unified regime for representative actions, replacing the previous sector-specific approach.
For further information: Official Journal [FR]
Germany
05/20/2025
Federal Commissioner for Data Protection and Freedom of Information | AI Questionnaire
The Federal Commissioner for Data Protection and Freedom of Information (BfDI) has published a questionnaire providing guidance on the data protection-compliant implementation of AI.
The questionnaire is intended to help controllers assess data protection-related topics when implementing AI-systems. It includes core questions companies should evaluate when operating AI systems including on the legal basis for data processing, the differentiation between controller and processor, and the general compliance with principles relating to processing of personal data.
For more information: BfDI Website [DE]
05/20/2025
Hesse and Brandenburg Supervisory Authorities | Annual Activity Reports
The Hesse as well as the Brandenburg supervisory authorities (HBDI and LDA) published their annual activity reports.
The reports include assessments regarding the lawfulness of advertising practices, in particular on the practice that web shops send out electronic reminders to consumers whether they would like to finish their purchase. When visitors to a web shop select one or more goods, start the ordering process, including entering their e-mail address, and then cancel the order during the process and leave the web store without concluding a purchase then advertising (such as a reminder about their purchase) may only be sent to these persons under certain conditions. The HBDI concludes that such an electronic reminder constitutes advertising and is generally only permitted with express consent within the meaning of Article 6(1)(a) GDPR in conjunction with Section 7 of the Federal Act against Unfair Competition (UWG).
For more information: HBDI Website [DE]
03/19/2025
Administrative Court of Hannover | Judgement | Cookie Banners
In a recently published decision, the Administrative Court of Hannover (VG Hannover) stated again that a cookie consent banner must contain the option to reject all cookies.
According to the court, websites must include a clearly visible “Reject All” button on the first level of cookie consent banners if they offer an “Accept All” option, reinforcing users’ data protection rights. The court found that manipulative banner designs using misleading labels, and hiding key information, violate the GDPR and the Telecommunications-Digital Services Data Protection Act (TDDDG).
For more information: LfD Website [DE]
Italy
19/05/2025
Italian Supervisory Authorities | Fine | AI Chatbot
The Italian Supervisory Authority (“Garante”) fined a company operating an AI-powered chatbot €5 million for multiple GDPR violations.
The Garante found that the company had not identified a valid legal basis for processing, failed to provide sufficient information in its privacy policy, and did not implement effective age verification mechanisms.
For more information: Garante Website
07/05/2025
Italian Supervisory Authority | Fine | Telemarketing
The Italian Supervisory Authority (“Garante”) imposed a €3 million fine on a gas and electricity provider and €850,000 on other companies for unlawful telemarketing practices.
The Garante noted that the companies operated within a network of procurement of energy supply contracts. It concluded that they engaged in promotional phone calls without individuals’ consent, and did not implement adequate security measures to ensure that such activities complied with data protection regulations.
For more information: Garante Website [IT]
05/05/2025
Italian Supervisory Authority | Public Consultation | Consent or Pay Model
The Italian Supervisory Authority (“Garante”) launched a public consultation to assess the lawfulness of “Consent or Pay” model.
As a reminder, the “Consent or Pay” model requires users whether to consent to the processing of their personal data or to agree to paid subscription in order to access online content, services or features. The consultation more specifically focuses on newspaper publishers. Stakeholders can contribute until June 28, 2025.
For more information: Garante Website [IT]
Spain
26/05/2025
Spanish Supervisory Authority | Annual Report | 2024
The Spanish Supervisory Authority (“AEPD”) published its 2024 annual report.
The AEPD received 18,855 complaints in 2024, primarily concerning video surveillance, online services, commerce, transport and hospitality. The authority issued 281 resolutions, which included administrative fines totaling over €35,5 million. Data breaches accounted for 37% of the total fines (€13.18 million).
For more information: AEPD Website [ES]
07/05/2025
Spanish Supervisory Authority | FAQs | Chatbot
The Spanish Supervisory Authority (“AEPD”) has implemented a virtual assistant on its website to facilitate the quick resolution of common questions related to data protection and privacy.
According to the AEPD, the chatbot handles more than 3,000 questions per month and maintains a user satisfaction rate of nearly 80%.
For more information: AEPD Website [ES]
Sweden
19/05/2025
Swedish Supervisory Authority | Guidance | Customer Data Sharing Between Banks
The Swedish Supervisory Authority (“IMY”) published a report on the sharing of customer data between banks in order to combat money laundering, terrorist financing and fraud.
The report was prepared in collaboration with Swedish banks as part of IMY’s regulatory sandbox initiative. The IMY highlights the need for a legislative change to enable effective data sharing in the sector.
For more information: IMY Website [SW]
United Kingdom
19/05/2025
National Cyber Security Centre | Guidance | Cybersecurity for Organizations
The National Cyber Security Centre (“NCSC”) has released “Top Tips for Staff”, an e-learning package to help organizations address common cybersecurity challenges.
The training covers essential topics such as using strong passwords, securing devices, recognizing phishing attempts, and reporting security incidents. It is particularly aimed at supporting SMEs, charities and the voluntary sector.
For more information: NCSC Website
13/05/2025
Information Commissioner’s Office | Consultation | Encryption
The Information Commissioner’s Office (“ICO”) has opened a consultation on its draft updated guidance on encryption.
The draft guidance focuses on the relationship between encryption and data protection and concentrates on data storage and data transfer as the primary use cases for encryption. The consultation remains open until June 24, 2025.
For more information: ICO Website
07/05/2025
National Cyber Security Centre | Code of Practice | Software Security
The National Cyber Security Centre (“NCSC”) and the Department for Science, Innovation and Technology (“DSIT”) have published the Software Security Code of Practice, a voluntary framework for technology providers.
The code establishes a baseline for cybersecurity expectations across the software industry. It provides a framework to help organizations to measure their progress and includes practical guidance for software vendors.
For more information: NCSC Website
02/05/2025
Information Commissioner’s Office & National Cyber Security Centre | Statement | Cyber Incidents Impacting Retailers
The Information Commissioner’s Office (“ICO”) and the National Cyber Security Centre (“NCSC”) have issued statements on recent cyber incidents impacting retailers.
The ICO confirmed that it has received reports from impacted retailers and sent enquiries to these organizations. Meanwhile, the NSCS stated that it is working closely with them to provide support and mitigate the impact of the incidents.
For more information: ICO Website and NSCS Website
Gibson Dunn lawyers are available to assist in addressing any questions you may have about these developments. Please contact the Gibson Dunn lawyer with whom you usually work, the authors, or any leader or member of the firm’s Privacy, Cybersecurity & Data Innovation practice group:
Privacy, Cybersecurity, and Data Innovation:
United States:
Abbey A. Barrera – San Francisco (+1 415.393.8262, abarrera@gibsondunn.com)
Ashlie Beringer – Palo Alto (+1 650.849.5327, aberinger@gibsondunn.com)
Ryan T. Bergsieker – Denver (+1 303.298.5774, rbergsieker@gibsondunn.com)
Keith Enright – Palo Alto (+1 650.849.5386, kenright@gibsondunn.com)
Gustav W. Eyler – Washington, D.C. (+1 202.955.8610, geyler@gibsondunn.com)
Cassandra L. Gaedt-Sheckter – Palo Alto (+1 650.849.5203, cgaedt-sheckter@gibsondunn.com)
Svetlana S. Gans – Washington, D.C. (+1 202.955.8657, sgans@gibsondunn.com)
Lauren R. Goldman – New York (+1 212.351.2375, lgoldman@gibsondunn.com)
Stephenie Gosnell Handler – Washington, D.C. (+1 202.955.8510, shandler@gibsondunn.com)
Natalie J. Hausknecht – Denver (+1 303.298.5783, nhausknecht@gibsondunn.com)
Jane C. Horvath – Washington, D.C. (+1 202.955.8505, jhorvath@gibsondunn.com)
Martie Kutscher Clark – Palo Alto (+1 650.849.5348, mkutscherclark@gibsondunn.com)
Kristin A. Linsley – San Francisco (+1 415.393.8395, klinsley@gibsondunn.com)
Timothy W. Loose – Los Angeles (+1 213.229.7746, tloose@gibsondunn.com)
Vivek Mohan – Palo Alto (+1 650.849.5345, vmohan@gibsondunn.com)
Rosemarie T. Ring – San Francisco (+1 415.393.8247, rring@gibsondunn.com)
Ashley Rogers – Dallas (+1 214.698.3316, arogers@gibsondunn.com)
Sophie C. Rohnke – Dallas (+1 214.698.3344, srohnke@gibsondunn.com)
Eric D. Vandevelde – Los Angeles (+1 213.229.7186, evandevelde@gibsondunn.com)
Benjamin B. Wagner – Palo Alto (+1 650.849.5395, bwagner@gibsondunn.com)
Frances A. Waldmann – Los Angeles (+1 213.229.7914,fwaldmann@gibsondunn.com)
Debra Wong Yang – Los Angeles (+1 213.229.7472, dwongyang@gibsondunn.com)
Europe:
Ahmed Baladi – Paris (+33 1 56 43 13 00, abaladi@gibsondunn.com)
Patrick Doris – London (+44 20 7071 4276, pdoris@gibsondunn.com)
Kai Gesing – Munich (+49 89 189 33-180, kgesing@gibsondunn.com)
Joel Harrison – London (+44 20 7071 4289, jharrison@gibsondunn.com)
Lore Leitner – London (+44 20 7071 4987, lleitner@gibsondunn.com)
Vera Lukic – Paris (+33 1 56 43 13 00, vlukic@gibsondunn.com)
Lars Petersen – Frankfurt/Riyadh (+49 69 247 411 525, lpetersen@gibsondunn.com)
Christian Riis-Madsen – Brussels (+32 2 554 72 05, criis@gibsondunn.com)
Robert Spano – London/Paris (+44 20 7071 4000, rspano@gibsondunn.com)
Asia:
Connell O’Neill – Hong Kong (+852 2214 3812, coneill@gibsondunn.com)
Jai S. Pathak – Singapore (+65 6507 3683, jpathak@gibsondunn.com)
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