Client Alert Archives

On March 5, 2025, the Court of Appeals for the Federal Circuit issued a decision in Lashify, Inc. v. ITC, No. 23-1245 (Fed. Cir. Mar. 5, 2025) that rewrites long-standing ITC precedent concerning what types of domestic industry investments and activities may be considered under the economic prong of the domestic industry analysis. The Lashify decision therefore greatly expands the scope of what activities may qualify a company to bring a Section 337 Investigation before the ITC.

In this case, complainant Lashify sought to bar the importation of eyelash extensions, including cases and applicators, that allegedly infringe a Lashify utility patents and two design patents. While Lashify markets and distributes its products in the United States, all its manufacturing operations occur abroad, and its products are imported. Based on certain findings related to technical domestic industry and, for economic domestic industry, the nature of Lashify’s domestic activities and investments, the ITC concluded that Lashify had not proven a violation of Section 337. As to economic domestic industry, the ITC concluded that Lashify’s investments directed to sales, marketing, warehousing, quality control, and distribution—as opposed to manufacturing—were insufficient to prove the existence of a significant domestic industry.

For a company to bring a patent infringement action before the ITC, it must prove that it has a sufficiently “significant” or “substantial” domestic industry; essentially, a showing that a company’s investments in the United States with respect to a product practicing an asserted patent are sufficiently quantitatively and qualitatively significant. Under 19 U.S.C. § 1337(a)(3), a company may show this, for example, based on “significant employment of labor and capital” in the United States. Historically, the ITC has interpreted this requirement to exclude certain activities on their own (i.e., without corresponding domestic manufacturing) as qualifying as domestic industry; namely, costs associated with selling, advertising, and distributing in the United States.

In Lashify, the Federal Circuit rejected the ITC’s long-standing precedent and interpretation of § 1337(a)(3), holding that the language of the statute is “straightforward,” and does not limit what types of domestic activities may be considered to establish a domestic industry. Writing for the Court, Judge Taranto stated that “there is no carveout of employment of labor or capital for sales, marketing, warehousing, quality control, or distribution,” and that there is no “suggestion [in the statute] that such uses, to count, must be accompanied by significant employment or other functions, such as manufacturing.” Put differently, the Federal Circuit has held that any significant employment of labor and capital may qualify as meeting the economic prong of the domestic industry requirement.

In so ruling, the Federal Circuit has opened the proverbial floodgate for companies seeking to file Section 337 Investigations before the ITC whose only domestic investments and activities in the United States are related to marketing, sales, and distribution—without any corresponding domestic manufacturing. Assuming the Federal Circuit’s decision in Lashify stands, the ITC can expect a wave of investigations to be filed by companies who would otherwise historically would not have been able to satisfy the economic domestic industry prong. Of course, this ruling also leaves unresolved many questions including for example, what would qualify under the statute as “significant” investment in activities such as marketing and distribution of a domestic industry product. The question of significance is a highly litigated and disjointed area of ITC law, and remains ripe for debate and clarification.

Given the gravity of the Federal Circuit’s decision, we expect the ITC to request an en banc appeal of this holding.

The following Gibson Dunn lawyers assisted in preparing this update: Brian Buroker, Kate Dominguez, Benjamin Hershkowitz, Mark Reiter, Brian Rosenthal, Paul Torchia, David Brzozowski, and Nathaniel Scharn.

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, or the following leaders and members of the firm’s Appellate and Constitutional Law or Intellectual Property practice groups:

Brian Buroker – Washington, D.C. (+1 202.955.8541, bburoker@gibsondunn.com)
Kate Dominguez – New York (+1 212.351.2338, kdominguez@gibsondunn.com)
Benjamin Hershkowitz – New York (+1 212.351.2410, bhershkowitz@gibsondunn.com)
Mark Reiter – Dallas (+1 214.698.3360, mreiter@gibsondunn.com)
Brian Rosenthal – New York (+1 212.351.2339, brosenthal@gibsondunn.com)
Paul Torchia – New York (+1 212.351.3953, ptorchia@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)
Julian W. Poon – Los Angeles (+ 213.229.7758, jpoon@gibsondunn.com)

Intellectual Property:
Kate Dominguez – New York (+1 212.351.2338, kdominguez@gibsondunn.com)
Josh Krevitt – New York (+1 212.351.4000, jkrevitt@gibsondunn.com)
Jane M. Love, Ph.D. – New York (+1 212.351.3922, jlove@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.

An overview of certain recent developments and legislative changes that may affect the M&A market and the transaction business in Germany, originally published in M&A Review, 36, Volume 1-2/2025.

Gibson Dunn partner Sonja Ruttmann, of counsel Silke Beiter, and associates Maximilian Schniewind and Yannick Oberacker from our Munich office co-authored In the Play of Regulations: Outlook on Relevant Legislative Changes for the M&A Practice in 2025, originally published in M&A Review on February 13, 2025. The article gives an overview of certain recent developments and legislative changes that may going forward affect the M&A market and the transaction business in Germany.

Please click HERE to view, download or print this article in English language.

Sonja Ruttmann, Silke Beiter, Maximilian Schniewind und Yannick Oberacker aus Gibson Dunns Münchner Büro fassen in ihrem Artikel Im Spiel der Verordnungen: Ein Ausblick auf relevante Gesetzesänderungen für die M&A-Praxis 2025, der am 13. Februar 2025 in der M&A Review erschien, ausgewählte aktuelle Entwicklungen und Gesetzesänderungen mit Blick auf den M&A-Markt und das Transaktionsgeschäft in Deutschland zusammen.

Zum Beitrag in deutscher Sprache (im PDF-Format) gelangen Sie HIER.

The following Gibson Dunn lawyers prepared this article: Sonja Ruttmann, Silke Beiter, Maximilian Schniewind, and Yannick Oberacker.

Gibson Dunn’s lawyers are available to assist in addressing any questions you may have regarding these developments. For further information, please contact the Gibson Dunn lawyer with whom you usually work, any leader or member of the firm’s Mergers and Acquisitions or Private Equity practice groups, or the authors in Munich:

Sonja Ruttmann (+49 89 189 33 256, sruttmann@gibsondunn.com)
Silke Beiter (+49 89 189 33 271, sbeiter@gibsondunn.com)
Maximilian Schniewind (+49 89 189 33 274, mschniewind@gibsondunn.com)
Yannick Oberacker (+49 89 189 33 282, yoberacker@gibsondunn.com)

Europe

02/26/2025

European Parliament | Report | Algorithmic Discrimination

The European Parliament published a report on algorithmic discrimination under the AI Act and the GDPR.

The Parliament underlines the legal uncertainties regarding the interaction between the AI Act and the GDPR. Indeed, the AI Act allows processing of special categories of personal data to detect and correct bias, while the GDPR imposes stricter conditions on such data usage, potentially limiting AI bias mitigation efforts.

For further information: European Parliament Report

02/26/2025

Court of Justice of the European Union | Decision | Automated Decision-making System

The Court of Justice of the European Union (“CJEU”) ruled that when their data is used by automated decision-making systems, data subjects may require the controller to explain the procedure and principles actually applied when processing personal data to obtain a specific result.

The decision stems from a case filed by an Austrian customer who was denied a mobile phone contract based on an automatic decision-making system. The Court highlighted that when asked by data subjects to provide explanations, information should be provided in a “concise, transparent, intelligible and easily accessible form”. This decision also addresses the concept of trade secrets.

For further information: CJEU Decision

02/13/2025

Court of Justice of the European Union | Decision | Calculation of GDPR Fines

The Court of Justice of the European Union (“CJEU”) clarifies the calculation of the fines for undertakings (C-383/23).

The CJEU considers that the maximum amount of the fine that can be imposed on an undertaking must be determined “on the basis of a percentage of the undertaking’s total worldwide annual turnover in the preceding business year”.

For further information: CJEU Decision

02/04/2025

Cyber Solidarity Act | Entry Into Force | High Critical Sectors Concerned

On February 4, 2025, the Cyber Solidarity Act entered into force.

This regulation enhances the EU’s capacity to prepare for, detect, and respond to cybersecurity incidents. Entities operating in highly critical sectors or other critical sectors, as defined by Directive (EU) 2022/2555 (NIS 2), may be required to undergo “coordinated preparedness testing” to verify their compliance with minimum standards and expectations for critical services and infrastructure.

For further information: Commission Website and Cyber Solidarity Act

France

02/26/2025

CNIL | Work Program | Connected Vehicles

The French Supervisory Authority (“CNIL”) published the “compliance comity” work program for 2025 on connected vehicles and location data.

The comity’s work focuses on the use of location data from connected vehicles and will lead to the drafting of a recommendation which will soon be published for public consultation. Because of the lack of legal certainty surrounding the use of dashcams and associated privacy risks, the comity’s work program for 2025 is dedicated to the use of these devices by private individuals.

For further information: CNIL Press release [FR]

02/07/2025

French Supervisory Authority | Recommendations | Artificial Intelligence

On February 7, 2025, the French Supervisory Authority (“CNIL”) published two new recommendations on how AI should be used to comply with GDPR requirements.

The CNIL’s first recommendation focuses on data subject information and essentially provides that companies must ensure individuals are given sufficient information at the appropriate moment and that the processing of their data is entirely transparent. More specifically, it provides examples of information notices to be used in relation to web scraping or development of GPAI model. The second recommendation focuses on data subject rights and provide specific details on how companies can deal with their requests whether they apply to training data or to the model more generally.

For further information: CNIL Recommendations on Right of information, and Data subjects’ rights [FR]

02/05/2025

French Supervisory Authority | GDPR | 2024 Report

The French Supervisory Authority (“CNIL”) has published a 2024 report on sanctions issued during the year.

The report provides that a total of 331 decisions were handed down, including 87 sanctions, for a total of 55,212,400 euros in fines, 180 formal notices and 64 reminders of legal obligations. The recurring breaches found usually concern commercial prospecting and health data.

For further information: CNIL Report [FR]

01/31/2025

French Supervisory Authority | GDPR | Access Right

On January 31, 2025, the French Supervisory Authority (“CNIL”) updated its guidance on employees’ right of access to their work-related data and emails.

In this update, the authority clarifies that if a request involves a very large number of emails (though it did not define what constitutes “very large”), the employer may first provide the employee with a summary table listing the relevant messages. This allows the employee to specify which content they wish to receive. However, given the lack of further clarification, it appears that if the employee does not specify the data he wants, the employer remains obligated to provide all the requested data unless the employer identifies an actual risk for third party rights. Moreover, the French Authority published a case-law summary regarding the GDPR access right.

For further information: CNIL Guidance and Case-law Summary [FR]

Germany

02/14/2025

German Supervisory Authorities | Investigation | AI and Privacy

On February 14, 2025, several German Data Protection Supervisory Authorities announced a coordinated investigation into an AI provider.

Several German state data protection supervisory authorities, including those from Rhineland-Palatinate, Baden-Württemberg, Thuringia, Saxony-Anhalt, Hesse, Bremen, and Berlin, initiated coordinated investigations into the AI provider. This collaborative effort aims to ensure compliance with Article 27(1) of the General Data Protection Regulation (GDPR), which mandates that companies not established in the European Union appoint a representative within the EU. This effort underscores the impact of GDPR enforcement on AI development. In addition to this investigation, the Lower Saxony Supervisory Authority (“LfD Niedersachsen”) published a statement on February 21, 2025, drawing attention to the risks associated with the use of the Chinese AI-powered chatbot. The LfD Niedersachsen pointed out in particular that according to the privacy policy of the company providing the chatbot, user inputs including the uploaded documents are recorded, transmitted, stored and analyzed without any restriction.

For more information: Website of the Baden Württemberg Supervisory Authority [DE] and Website of the Lower Saxony Supervisory Authority [DE]

02/12/2025

Bremen Supervisory Authority | Recommendation | AI and Privacy

On February 12, 2025, the Data Protection Authority of Bremen (LfD Bremen) provided recommendations on the use of AI applications from providers outside the European Union that have not appointed a legal representative in the EU.

The LfD Bremen recommends, in order to ensure compliance with data protection regulations and mitigate risks associated with AI applications, to select AI providers who demonstrate transparency and provide documentation confirming GDPR compliance. Before installing AI models, the user should ensure that no personal data can be leaked, for example through a secure IT environment. According to the LfD Bremen, inputs of personal or confidential data into online interfaces should be avoided unless effective protective measures are in place. Users, especially workers, should be made aware of the risks involved, and AI competence as required by Article 4 of the AI Regulation from February 2, 2025, should be ensured. If the AI provider is based outside the EU, they should appoint a representative under Article 27 GDPR to facilitate the enforcement of data subjects’ rights and failure to do so can result in fines under Article 83(4) GDPR.

For more information: Website of the Bremen Supervisory Authority [DE]

01/29/2025

German Federal Administrative Court | Judgement | Advertisement

On January 29, 2025, the German Federal Administrative Court (BVerwG) ruled on the interplay of data processing under Article 6(1)(f) GDPR and consent for advertisement necessary under German competition law.

The BVerwG ruled that processing the contact data of dental practices taken from publicly accessible sources for the purpose of telephone advertising without at least presumed consent is impermissible. The court held that merely obtaining contact details from publicly accessible directories to conduct phone advertising does not constitute a legitimate interest under Article 6(1)(f) GDPR unless there is at least implied consent from the data subjects per § 7 Sec 2 No 1 UWG. Consequently, the company’s appeal was denied, as the interest in data processing for phone advertising did not outweigh the privacy protection guaranteed by GDPR and national law. The court confirmed that the prohibition on such data processing remains justified under the current legal framework, given its alignment with the need to protect the privacy of individuals from unsolicited advertising.

For more information: Official Court Website [DE]

Sweden

02/18/2025

Swedish Supervisory Authority | GDPR Guidance | Impact Assessment

On February 18, 2025, the Swedish Supervisory Authority (“IMY”) published a guidance on impact assessments.

The guidance consists of a practical guide and an annex with legal interpretative support.

For further information: IMY Website [SV] and Guidance for Impact Assessment [SV]

02/04/2025

Stockholm Administrative Court | Fine | Cookies

In February 2025, the Stockholm Administrative Court upheld a SEK 13 million (approx. €1.16M) fine against a media company for failure to comply with the principle of lawfulness provided under the GDPR.

The company was relying on legitimate interests for the processing of personal data collected via cookies. Such data was combined with purchase history and third-party data for creating profiles, including for marketing purposes. The court ruled that legitimate interest cannot serve as a legal basis and therefore upheld the administrative fine imposed by the Swedish Supervisory Authority (“IMY”). In its decision, the IMY stated that pursuant to Article 5(3) of the ePrivacy Directive, consent was required for the collection of data via cookies. This is the first publicly known case in Sweden where IMY explicitly referenced Article 5(3) of the ePrivacy Directive in its reasoning for a GDPR fine.

For further information: Stockholm Administrative Court Website [SV]

Switzerland

02/03/2025

Federal Data Protection and Information Commissioner | Guidelines | Cookies

The Swiss Supervisory Authority (“FDPIC”) published its guidelines on data processing using cookies and similar technologies.

The FDPIC describes the data protection requirements controllers must abide by when using cookies and similar technologies.

For further information: FDPIC Website

United Kingdom

02/22/2025

Information Commissioner’s Office | Report | Technologies

The Information Commissioner’s Office (“ICO”) published its Tech Horizons report of 2025.

The ICO’s Tech Horizons report examines emerging technologies and the regulatory challenges they face from a privacy perspective. This third edition of the report focuses on four technologies: connected transport; quantum sensing and imaging; digital diagnosis, therapeutics and healthcare infrastructure; and synthetic media and its identification and detection.

For further information: ICO Website

02/10/2025

Information Commissioner’s Office| Response | Data (Use and Access) Bill

The Information Commissioner’s Office (“ICO”) published its updated response to the Data (Use and Access) (DUA) Bill.

The ICO welcomed the recent changes introduced to the Bill and expressed its position on some of the recent amendments, including those related to the protection of children’s data and the expansion of the soft opt-in in direct marketing to cover charities.

For further information: ICO Website

02/06/2025

Information Commissioner’s Office | Guidance | Employment Practices and Data Protection

On February 5, 2025, the Information Commissioner’s Office (“ICO”) issued new guidance for employers on the management of employment records.

The guidance addresses key questions employers may encounter in relation to the collection, retention and use of employment records. For instance, the guidance covers various questions including: what lawful bases might apply to employment records, when employers can share workers’ personal data with other people or organizations, and how employers can handle sickness and injury records.

For further information: ICO Guidance

The following Gibson Dunn lawyers prepared this update: Partners: Ahmed Baladi, Vera Lukic, Joel Harrison, and Kai Gesing; Associates: Thomas Baculard, Billur Cinar, Hermine Hubert, and Christoph Jacob.

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 groups:

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)

While the proposal is in its early stages, companies in the food industry should consider efforts to engage in any forthcoming notice-and-comment regulatory process, including by submitting comments on any proposed regulation and participating in related public meetings.

On March 10, 2025, Robert F. Kennedy, Jr., Secretary of the Department of Health and Human Services (HHS), directed the Food and Drug Administration (FDA) to explore rulemaking to require manufacturers to submit for FDA review notifications demonstrating that new food ingredients are generally recognized as safe (GRAS).[1] Such a change, if finalized, would have a significant impact on the food industry, which has relied in substantial part on manufacturers’ self-affirmations, in some cases based on review of available data by expert panels, that their ingredients are GRAS without FDA notification or review. While this proposal is in its early stages, companies in the food industry should consider efforts to engage in any forthcoming notice-and-comment regulatory process, including by submitting comments on any proposed regulation and participating in related public meetings.

The Current Framework

A food ingredient is considered a “food additive,” unless it is generally recognized to be safe for its intended use by qualified experts based on generally available and accepted scientific data, information, or methods.[2]
A food additive is “unsafe” unless its use is consistent with a food additive regulation.[3] In order to obtain a food additive regulation for a new food additive, a manufacturer must submit a food additive petition to FDA containing scientific data and information on the conditions for its safe use.[4] If FDA grants the petition, it publishes a final rule prescribing the conditions under which the food additive may be used in food.[5]
At present, manufacturers can, but are not required to, notify FDA of new food ingredients they believe to be GRAS by submitting a GRAS notice, which contains, among other things, data on the ingredient’s chemical composition, manufacturing process, specifications, dietary exposure, and supporting data.[6] FDA then responds with one of three type of letters: a “no questions letter” stating that it has no questions at this time relating to the basis for the notifier’s GRAS conclusions, an “insufficient basis letter” stating that the notice does not provide a sufficient basis for a GRAS determination, or a “cease to evaluate letter” noting that FDA has ceased to evaluate the GRAS notice at the submitter’s request.[7]
When it formally adopted the GRAS notification process in 2016, FDA stated explicitly that submission of GRAS notifications is voluntary in nature. The agency noted that the Federal Food, Drug, and Cosmetic Act (FDCA) expressly requires FDA review of food additives, but is silent on any required review for GRAS substances, which fall outside the definition of “food additive.”[8] Accordingly, manufacturers have largely “self affirmed” the GRAS status of food ingredients, maintaining scientific substantiation to support their conclusions without submitting that data and information to FDA.

How the Regulatory Landscape Could Change

Efforts to reshape the GRAS notification process are part of Secretary Kennedy’s position on “radical transparency” regarding food ingredients.[9] President Trump’s nominee for FDA Commissioner, Dr. Marty Makary, has also expressed concerns about health risks with food ingredients and additives.[10]
Submission of a GRAS notice entails substantial time, effort, and resources for manufacturers, as well as uncertainty with respect to FDA’s evaluation of the notice. Accordingly, a shift from voluntary to mandatory GRAS notices likely will have a significant impact on the food industry.
It is unclear how FDA would phase in mandatory GRAS notification requirements, if adopted. For example, the HHS directive does not address whether and how FDA would grandfather in currently marketed ingredients for which manufacturers have self-affirmed GRAS status.
It is also unclear whether any forthcoming FDA regulation would provide a grace period for GRAS notice submissions, and how a potential deluge of notices might impact FDA review timelines or other FDA activities in the foods space. The agency has faced criticism in other areas where it has been slow to act on premarket submissions following a change in the agency’s policy for submissions, such as for new tobacco products.[11] Long review timelines may delay companies’ innovations in food ingredients given the potential enforcement risk if FDA disagrees and determines that an ingredient is not GRAS, and therefore requires food additive review.[12]
Enforcement risk likely also will increase if FDA mandates submission of GRAS notices. GRAS notices provide more touchpoints between FDA and food industry that could result in enforcement action if FDA calls into question the safety or lawful marketing status of an ingredient.

How Companies Should Prepare

Companies that have used the self-affirmation process for food ingredients should ensure that they continue to maintain appropriate documentation of the scientific review conducted to support their conclusions that the ingredients are GRAS.
FDA actions to mandate GRAS notices will require notice-and-comment rulemaking and may include public meetings and other opportunities for engagement before and after the publication of a proposed rule. Companies should consider submitting comments to agency notices and participating in public hearings to both shape the regulatory process and stake their positions in anticipation of potential litigation.
Companies should also be aware that Congress could pursue legislative changes to the regulatory construct for food ingredients if it takes issue with any proposed rulemaking, or if it believes a statutory fix is ideal or required.

Gibson Dunn is closely monitoring developments within the food regulatory landscape and is prepared to help companies consider and address the implications of potential regulatory changes, including through regulatory counseling, agency and legislative engagement, and litigation.

[1] HHS, Press Release, “HHS Secretary Kennedy Directs FDA to Explore Rulemaking to Eliminate Pathway for Companies to Self-Affirm Food Ingredients Are Safe” (Mar. 10, 2025) (“HHS Press Release”).

[2] A food ingredient used in food prior to September 6, 1958, is considered a “food additive” unless it is generally recognized to be safe based on common use in food. Food additives do not include color additives. 21 U.S.C. § 321(s); 21 CFR 170.30, 570.30.

[3] 21 U.S.C. §§ 342(a)(1), (2)(C)(i), 348(a).

[4] See id. § 348(b); 21 CFR 170.39.

[5] See 21 U.S.C. § 348(c); 21 CFR Parts 172-186.

[6] See 21 CFR 170.220-170.255. When a GRAS notice is filed for review, FDA discloses the name and address of the notifier, the name of the notified substance, the intended conditions of use, and the statutory basis of the conclusion of GRAS status on its public GRAS notice database. 81 Fed. Reg. at 55022-23; 21 CFR 170.275(b); see FDA, “GRAS Notices” (last visited Mar. 12, 2025). FDA also publishes its response to a GRAS notification. See, e.g., FDA, Guidance for Industry: Regulatory Framework for Substances Intended for Use in Human Food or Animal Food on the Basis of the Generally Recognized as Safe (GRAS) Provision of the Federal Food, Drug, and Cosmetic Act (Nov. 2017), at 6; 81 Fed. Reg. at 55014-15.

[7] 81 Fed. Reg. at 55015.

[8] Id. at 54970-71.

[9] HHS Press Release.

[10] See, e.g., “Trump’s FDA Pick Made His Name by Bashing the Medical Establishment. Soon He May Be Leading It,” U.S. News & World Report (Mar. 4, 2025).

[11] See, e.g., HHS Office of Inspector General, Rep. No. A-06-22-01002, The Food and Drug Administration Needs to Improve the Premarket Tobacco Application Review Process for Electronic Nicotine Delivery Systems to Protect Public Health (Nov. 2023).

[12] 21 CFR 170.38.

The following Gibson Dunn lawyers prepared this update: Katlin McKelvie, Gustav W. Eyler, and Carlo Felizardo.

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 leader or member of the firm’s Consumer Protection or FDA & Health Care practice groups:

Gustav W. Eyler – Washington, D.C. (+1 202.955.8610, geyler@gibsondunn.com)
Katlin McKelvie – Washington, D.C. (+1 202.955.8526, kmckelvie@gibsondunn.com)
John D. W. Partridge – Denver (+1 303.298.5931, jpartridge@gibsondunn.com)
Jonathan M. Phillips – Washington, D.C. (+1 202.887.3546, jphillips@gibsondunn.com)
Carlo Felizardo – Washington, D.C. (+1 202.955.8278, cfelizardo@gibsondunn.com)

This edition of Gibson Dunn’s Federal Circuit Update for February summarizes the current status of petitions pending before the Supreme Court and recent Federal Circuit decisions concerning exclusion of expert testimony, collateral estoppel, and patent-eligible subject matter under 35 U.S.C. § 101.

Federal Circuit News

Noteworthy Petitions for a Writ of Certiorari:

There were a few potentially impactful petitions filed before the Supreme Court in February 2025:

Koss Corp. v. Bose Corp. (US No. 24-916): The question presented is: “When a district court grants a Rule 12(b)(6) motion to dismiss but does so without prejudice and with leave to amend, may that non-merits determination be given collateral-estoppel effect on the theory that it merged into a later with-prejudice dismissal stipulation?” The respondent waived its right to respond. The Court will consider this petition during its March 21, 2025 conference.

Converter Manufacturing, LLC v. Tekni-Plex, Inc. (US No. 24-866): The questions presented are: “ Whether the patent challenger always has the burden of proving that the disclosures in an asserted prior art patent or printed publication are enabling of the claimed subject matter under Sections 102 and 103 of the Patent Act. 2. Whether the standard for proving a prior art patent or printed publication enables claimed subject matter under Sections 102 and 103 of the Patent Act is the one set forth in this Court’s holding in Seymour v. Osbourn, 11 Wall. 516, 555 (1870). 3. Whether this Court’s Loper Bright Enterprises v. Raimondo decision prohibits the Federal Circuit from deferring to the USPTO’s interpretation of the law of prior art enablement by silently adopting that interpretation using Fed. R. App. P. 36.” A response is due April 16, 2025.

We provide an update below of the petitions pending before the Supreme Court, which were summarized in our January 2025 update:

In Brumfield v. IBG LLC, et al. (US No. 24-764), two amicus curiae briefs have been filed. The response is due March 20, 2025. In Celanese International Corp. v. International Trade Commission (US No. 24-635), one amicus curiae brief has been filed. The response is due March 24, 2025.

In Lighting Defense Group LLC v. SnapRays, LLC (US No. 24-524), after SnapRays waived its right to respond, the Court requested a response, which was filed on February 10, 2025. In Parker Vision, Inc. v. TCL Industries Holdings Co., et al. (US No. 24-518), after the respondents waived their right to respond, the Court requested a response, which was filed February 14, 2025. Nine amicus curiae briefs have been filed. The Court will consider both petitions during its March 21, 2025 conference.

The Court denied the petitions in DISH Network L.L.C. v. Dragon Intellectual Property, LLC, et al. (US No. 24-726) and Provisur Technologies, Inc. v. Weber, Inc. (US No. 24-723).

Upcoming Oral Argument Calendar

The list of upcoming arguments at the Federal Circuit is available on the court’s website.

Key Case Summaries (February 2025)

Trudell Medical International Inc. v. D R Burton Healthcare, LLC, Nos. 23-1777, 23-1779 (Fed. Cir. Feb. 7, 2025): Trudell sued D R Burton alleging infringement of a patent directed to portable devices for performing oscillatory positive expiratory pressure therapy, which loosens secretions from airways to improve respiration. In accordance with the district court’s scheduling order, Trudell submitted expert reports before the discovery deadline, but D R Burton did not. Instead, D R Burton filed an expert declaration on noninfringement with its opposition brief to Trudell’s motion for summary judgment on infringement. Trudell moved to exclude D R Burton’s expert testimony, which the court denied. The jury returned a verdict of no infringement.

The Federal Circuit (Moore, C.J., joined by Chen, J. and Stoll, J.) affirmed-in-part, reversed-in-part and remanded. The Court concluded that the district court abused its discretion in allowing D R Burton’s expert to testify regarding noninfringement at trial, because D R Burton failed to timely disclose its expert’s opinions in an expert report as required by Fed. R. Civ. P. 26 without any explanation for why such failure was either “substantially justified or harmless.” Additionally, the Court determined that to the extent the expert declaration filed with D R Burton’s opposition brief could be considered an expert report, the expert’s trial testimony exceeded the scope of his declaration and was unreliable because it was “untethered” from the district court’s claim constructions. The Court therefore vacated the jury’s verdict and remanded for a new trial.

Kroy IP Holdings, LLC v. Groupon, Inc., No. 23-1359 (Fed. Cir. Feb. 10, 2025): Kroy sued Groupon alleging Groupon infringed certain claims of its patents directed to providing incentive programs over a computer network. Groupon challenged the asserted claims in inter partes review (IPR) proceedings, and the Patent Trial and Appeal Board (Board) determined all the challenged claims were unpatentable. After the IPR filing deadline passed, Kroy amended its complaint to allege infringement of additional claims that were not included in Groupon’s IPR petitions. Groupon moved to dismiss arguing that the Board’s prior unpatentability determinations collaterally estopped Kroy from asserting the additional claims. The district court granted the motion, reasoning in part that the claims challenged in the IPR were not materially different from the newly asserted claims, and thus, the issues were “identical” for purposes of collateral estoppel.

The Federal Circuit (Reyna, J., joined by Prost and Taranto, JJ.) reversed and remanded. The Court held that a prior final written decision of invalidity from the Board reached under a preponderance of the evidence standard could not collaterally estop a patentee from asserting unadjudicated claims of related patents in a parallel district court litigation, where invalidity must be proven under a higher clear and convincing evidence standard.

US Synthetic Corp. v. International Trade Commission, No. 23-1217 (Fed. Cir. Feb. 13, 2025): US Synthetic Corp. (USS) filed a complaint with the ITC alleging that certain companies (the Intervenors) violated 19 U.S.C. § 1337 by importing and selling products that infringed USS’s patents claiming a composition known as a polycrystalline diamond compact (PDC), which is used in oil drilling tools and machinery. The patent specification discloses certain parameters of PDC, including dimensional information, and certain properties of PDC, including coercivity, magnetic saturation, and permeability. The patent claims are directed to the composition of matter as defined by those parameters and properties. After the ITC initiated its investigation, the Intervenors challenged the asserted claims as ineligible under Section 101. The administrative law judge (ALJ) held that the claims were ineligible under Section 101 in part because the claims recited magnetic properties that the ALJ determined were “merely unintended results or effects of the manufacturing process and thus abstract.” USS petitioned for Commission review, and the Commission affirmed.

The Federal Circuit (Chen, J., joined by Dyk and Stoll, JJ.) reversed-in-part, affirmed-in-part, and remanded. The Court held that the claims were patent eligible under Section 101. The Court reasoned that the claims were not directed to an abstract idea; rather, they were directed to a specific composition of matter—a PDC—that is defined by its constituent elements, particular dimensional information, and quantified material properties (such as coercivity, magnetic saturation, and permeability). The Court further explained that the recited magnetic properties, which the ITC concluded made the claims abstract, correlated to structural or physical aspects of the claimed PDC and therefore were not directed to an abstract idea.

The following Gibson Dunn lawyers assisted in preparing this update: Blaine Evanson, Jaysen Chung, Audrey Yang, Hannah Bedard, and Michelle Zhu.

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)

The accommodations provide more flexibility for certain companies to initiate registration of their securities, spin-offs, and other offering processes without making the process initially public.

On March 3, 2025, the Division of Corporation Finance of the Securities and Exchange Commission (SEC) announced that it is further expanding existing accommodations to allow more companies to confidentially submit draft registration statements for nonpublic review. These accommodations provide more flexibility for certain companies to initiate registration of their securities, spin-offs, and other offering processes without making the process initially public.

Expanded Accommodations

As discussed in greater detail below, new accommodations include the following:

Confidential submission is available for initial registration statements under both Section 12(b) of the Exchange Act of 1934, as amended (the Exchange Act), in connection with a spin-off and Section 12(g) of the Exchange Act in connection with securities registrations upon triggering shareholder and asset value thresholds;
Foreign private issuers now have expanded options for submitting draft registration statements, including electing to be treated as an emerging growth company (EGC) if so qualified or following earlier SEC guidance issued in May 2012;
Issuers are able to confidentially submit registration statements regardless of how long they have been public, which would benefit non-WKSIs (well-known seasoned issuers) in the context of follow-on offerings;
Public targets of de-SPAC transactions may now confidentially submit registration statements as if they were conducting an IPO; and
Issuers are permitted to omit underwriter names in the initial submission of the draft registration statements, allowing the SEC review process to begin earlier.

Exchange Act Registrations

The accommodations expand the availability of nonpublic review to classes of securities registered on Forms 10, 20-F, or 40-F under both Section 12(b) and Section 12(g) of the Exchange Act (as opposed to only Section 12(b) of the Exchange Act under the prior accommodation). Section 12(b) registration is used when a company intends to list securities on a national securities exchange, often in connection with a spin-off. In addition, when a company has total assets of more than $10 million and 2,000 record holders of its equity securities (or 500 non-accredited investors) as of the last day of its fiscal year, it must register its securities under Section 12(g) of the Exchange Act.

Issuers registering under Section 12(g) of the Exchange Act should note, however, that submitting a draft for nonpublic review does not satisfy the requirement that a registration statement be filed within 120 days of the end of the issuer’s fiscal year.

In addition, issuers must continue to publicly file the registration statement and draft submissions no later than 15 days prior to a road show or, in the absence of a road show, the requested effective date. Note, however, that issuers will need to publicly file Exchange Act registration statements on Forms 10, 20-F, and 40-F so that the full 30- or 60-day period, as applicable, will run prior to effectiveness.

Foreign Private Issuers

Where desired, instead of submitting draft registration statements under these new accommodations and the prior accommodations in 2017, foreign private issuers may elect to proceed in accordance with the procedures available to EGCs (if they so qualify) or follow the guidance in the SEC’s May 30, 2012 statement (the May 2012 guidance). The May 2012 guidance applies to (a) foreign governments listing their debt securities, (b) foreign private issuers that are already listed on non-U.S. exchanges, (c) foreign private issuers being privatized by foreign governments, or (d) foreign private issuers which can show that a public filing of an initial registration statement would conflict with the law of an applicable foreign jurisdiction.

Follow-on Securities Act Offerings and Exchange Act Registrations

The accommodations also remove the requirement that draft registration statements could only be submitted confidentially within a 12-month period following the date the issuer became subject to the reporting requirements of Section 13(a) or 15(d) of the Exchange Act.

Under the prior accommodation, due to the time limit, companies that were public for more than one year were not eligible to submit draft registration statements for nonpublic review. The new guidance now permits nonpublic review regardless of how long a company has been a public company, which would be particularly useful for non-WKSI issuers. Such issuers (whose registration statements are not automatically effective upon filing) can initially submit their registration statements, including shelf registration statements, for nonpublic review when they conduct follow-on offerings.

The SEC will continue to limit its nonpublic review to the initial submission. Accordingly, amendments to registration statements responding to staff comment must be publicly filed.

An issuer submitting an initial draft registration statement for nonpublic review should confirm in its cover letter that it will file publicly its registration statement and draft submission at least two business days prior to any requested effective time and date, which is a change from the previous 48-hour requirement. The SEC noted that it will consider reasonable requests to expedite this two business-day period and encourages issuers and their advisors to review their transaction timing with the staff of the SEC.

De-SPAC Transactions

The expanded accommodations also apply to de-SPAC transactions. Previously, a SPAC usually had to file its de-SPAC registration statement publicly if the filing occurred more than one year after the SPAC’s IPO. Under the new guidance, the target company of a de-SPAC transaction may confidentially submit a registration statement as if it were conducting an initial public offering, provided that the SPAC survives as the public company and the target company is otherwise independently eligible to submit a draft registration statement. This approach reflects the SEC’s view that a de-SPAC transaction is the functional equivalent of the target company’s IPO.

Certain Omissions and Staff Processing

In a return to a prior accepted practice, the SEC will again permit issuers to omit the names of underwriters from initial draft submissions (despite the requirements under Regulation S-K Items 501 and 508), as long as the underwriters are disclosed in subsequent submissions and public filings, which would enable the registration process to start sooner.

In addition, the SEC has indicated that it will not delay its review process if an issuer omits certain financial information, so long as such issuer reasonably believes that such omitted financial information will not be required at the time the registration statement becomes publicly available.

In any of these circumstances, issuers must continue to take all steps to ensure that their draft registration statements are substantially complete when submitted.

Additional Information

The SEC will address any questions related to the use of such expanded processing procedures sent to CFDraftPolicy@sec.gov.

For additional information, please see the following documents:

Conclusion

The key effect of these accommodations is to expand the pool of issuers that can utilize the nonpublic review process, reflecting the SEC’s willingness to expedite the registration process and facilitate capital formation, as stated in the release.

Please view additional information on Gibson Dunn’s Securities Regulation and Corporate Governance Monitor Blog:

READ MORE

The following Gibson Dunn lawyers prepared this update: Andrew Fabens, Hillary Holmes, Peter Wardle, Harrison Tucker, Marie Kwon, Rodrigo Surcan, Kevin Mills, and Spencer Becerra.

Gibson Dunn’s lawyers are available to assist with any questions you may have regarding these developments. To learn more about these issues, please contact the Gibson Dunn lawyer with whom you usually work in the firm’s Capital Markets or Securities Regulation and Corporate Governance practice groups, or the following practice leaders:

Capital Markets:
Andrew L. Fabens – New York (+1 212.351.4034, afabens@gibsondunn.com)
Hillary H. Holmes – Houston (+1 346.718.6602, hholmes@gibsondunn.com)
Stewart L. McDowell – San Francisco (+1 415.393.8322, smcdowell@gibsondunn.com)
Peter W. Wardle – Los Angeles (+1 213.229.7242, pwardle@gibsondunn.com)

Securities Regulation and Corporate Governance:
Elizabeth Ising – Washington, D.C. (+1 202.955.8287, eising@gibsondunn.com)
Thomas J. Kim – Washington, D.C. (+1 202.887.3550, tkim@gibsondunn.com)
James J. Moloney – Orange County (+1 949.451.4343, jmoloney@gibsondunn.com)
Lori Zyskowski – New York (+1 212.351.2309, lzyskowski@gibsondunn.com)

From the Derivatives Practice Group: The SEC announced that it will host a series of roundtables to discuss key areas of interest in the regulation of crypto assets, beginning on March 21.

New Developments

SEC Crypto Task Force to Host Roundtable on Security Status. On March 3, the SEC announced that its Crypto Task Force will host a series of roundtables to discuss key areas of interest in the regulation of crypto assets. The “Spring Sprint Toward Crypto Clarity” series will begin on March 21 with its inaugural roundtable, “How We Got Here and How We Get Out – Defining Security Status.” The SEC indicated that initial roundtable on March 21 is open to the public, will be held from 1 p.m. to 5 p.m. at the SEC’s headquarters at 100 F Street, N.E., Washington, D.C and that the primary discussion will be streamed live on SEC.gov, and a recording will be posted at a later date. The SEC also noted that information regarding the agenda and roundtable speakers will be posted on the Crypto Task Force webpage. [NEW]
CFTC Commissioner Christy Goldsmith Romero to Step Down from the Commission and Retire from Federal Service. On February 26, Commissioner Christy Goldsmith Romero announced she is stepping down from the Commission and will retire from federal service. Commissioner Romero extended gratitude towards President Biden for her nomination, the U.S. senate for its unanimous confirmation, and her current and former staff and CFTC for their public service.
CFTC Releases Enforcement Advisory on Self-Reporting, Cooperation, and Remediation. On February 25, the CFTC’s Division of Enforcement issued an Advisory on how the Division will evaluate a company’s or individual’s self-reporting, cooperation, and remediation when recommending enforcement actions to the Commission and establishes the factors the Division will consider. This marks the first time the Division will use a matrix to determine the appropriate mitigation credit to apply. Commissioner Kristin N. Johnson released a statement that “any effort to adopt new reporting processes, particularly processes that require inter-division guidelines and infrastructure, must be consistent with the mandates of [the CFTC]” and consequently, that she does not support the Advisory. Additional information regarding the Advisory can be found in our client alert.
SEC Announces Cyber and Emerging Technologies Unit to Protect Retail Investors. On February 20, the SEC announced the creation of the Cyber and Emerging Technologies Unit (“CETU”). According to the SEC, CETU will focus on combatting cyber-related misconduct and is intended to protect retail investors from bad actors in the emerging technologies space. CETU, led by Laura D’Allaird, replaces the Crypto Assets and Cyber Unit and is comprised of approximately 30 fraud specialists and attorneys across multiple SEC offices. The SEC noted that CETU will utilize the staff’s substantial fintech and cyber-related experience to combat misconduct as it relates to securities transactions in the following priority areas: fraud committed using emerging technologies, such as artificial intelligence and machine learning; use of social media, the dark web, or false websites to perpetrate fraud; hacking to obtain material nonpublic information; takeovers of retail brokerage accounts; fraud involving blockchain technology and crypto assets; regulated entities’ compliance with cybersecurity rules and regulations; and public issuer fraudulent disclosure relating to cybersecurity.
Acting Chairman Pham Announces Brian Young as Director of Enforcement. On February 14, the CFTC Acting Chairman Caroline D. Pham today announced Brian Young will serve as the agency’s Director of Enforcement. Young has been serving in an acting capacity since January 22, and previously was the Director of the Whistleblower Office. He is a distinguished federal prosecutor with nearly 20 years of service at the Department of Justice, including Acting Director of Litigation for the Antitrust Division and Chief of the Litigation Unit for the Fraud Section of the Criminal Division, and has successfully tried some of the most high-profile criminal fraud and manipulation cases in the CFTC’s markets.

New Developments Outside the U.S.

The ESAs Acknowledge the European Commission’s Amendments to the Technical Standard on Subcontracting Under the Digital Operational Resilience Act. On March 7, the European Supervisory Authorities (EBA, EIOPA and ESMA – the “ESAs”) issued an opinion on the European Commission’s (“EC”) rejection of the draft Regulatory Technical Standard (“RTS”) on subcontracting. The EC indicated that it rejected the original draft RTS on subcontracting, which specified further elements that financial entities must determine and assess when subcontracting ICT services that support critical or important functions under the Digital Operational Resilience Act (“DORA”), on the grounds that certain elements exceeded the powers given to the ESAs by DORA. The opinion acknowledges the assessment performed by the EC and opines that the amendments proposed ensure that the draft RTS is in line with the mandate set out under DORA. The ESAs said that, for this reason, they do not recommend further amendments to the RTS in addition to the ones proposed by the EC. The ESAs encouraged the EC to finalize the adoption of the RTS without further delay as submitted to the ESAs. [NEW]
EC Publishes Sustainability Omnibus Package. On February 26, the EC published the sustainability omnibus package and accompanying Q&A, alongside the Clean Industrial Deal communication and investment simplification package. ISDA said that the proposals are intended to simplify sustainability reporting and due diligence, as well as reduce administrative burdens on companies. The EC has also launched a consultation until March 26 on draft amendments to the Taxonomy Disclosures delegated act, including, inter alia, the suspension of the Trading Book Key Performance Indicator to 2027. The EC also proposed to delay the Corporate Sustainability Due Diligence Directive (“CSDDD”) transposition deadline and application date by one year to July 26, 2027 and 2028 respectively. Other CSDDD proposals include the removal of the EC review clause to evaluate whether additional due diligence requirements should be imposed on the provision of financial services and investment activities by July 26, 2026, the removal of the EU-wide harmonized civil liability regime and the deletion of the requirement to terminate business relationships. The EC’s proposed changes to the Carbon Border Adjustment Mechanism (“CBAM”) regulation include an exemption for small importers of CBAM goods and a postponement of the obligation for importers to purchase CBAM certificates to February 1, 2027. The Clean Industrial Deal further notes that the EC is working on a CBAM review report that will assess the functioning of the mechanism and potential scope extension to other emissions trading system sectors which will be presented in the autumn, followed by a legislative proposal in early 2026. The proposed amendments to the Corporate Sustainability Reporting Directive, CSDDD and CBAM will now be considered for adoption by the European Parliament and the Council. [NEW]
IOSCO concludes Thematic Review on Technological Challenges to Effective Market Surveillance. On February 19, IOSCO published a Thematic Review on the status of implementation of its recommendations on Technological Challenges to Effective Market Surveillance issued in 2013. The IOSCO Assessment Committee conducted the review and assessed the consistency of outcomes arising from the implementation of its recommendations by market authorities in 34 IOSCO member jurisdictions. According to IOSCO, the review found that most market authorities have implemented the recommendations and have made significant progress in addressing technological challenges to market surveillance, particularly in more complex markets. However, IOSCO noted the following concerns: some regulators lack the necessary organizational and technical capabilities to conduct effective surveillance of their markets in the midst of rapid technological developments; the absence of regular review of the surveillance capabilities of market authorities; difficulties with regard to the collection and comparison of data across venues in markets with multiple trading venues; and the inability of many regulators to map their cross-border surveillance capabilities.
ESMA Proposes Guidelines on Product Supplements. On February 18, ESMA published a Consultation Paper asking for input on Guidelines on supplements that introduce new types of securities to a base prospectus. The aim of the guidelines is to harmonize the supervision of so-called ‘product supplements’ across national competent authorities as approaches to supervision in this area have diverged in the past.
The ESAs Provide a Roadmap Towards the Designation of CTPPs under DORA. On February 18, the European Supervisory Authorities (“ESAs”) announced advancements of the implementation of the pan-European oversight framework of critical Information and Communication Technology (“ICT”) third-party service providers (“CTPPs”) with the objective to designate the CTPPs and to start the oversight engagement this year. The competent authorities are required to submit Registers of Information on ICT third-party arrangements they received from financial entities by April 30, 2025.
ESMA Consults on the Criteria for the Assessment of Knowledge and Competence Under MiCA. On February 17, ESMA launched a consultation on the criteria for the assessment of knowledge and competence of crypto-asset service providers’ (“CASPs”) staff giving information or advice on crypto-assets or crypto-asset services. ESMA is seeking stakeholder inputs about, notably: the minimum requirements regarding knowledge and competence of staff providing information or advice on crypto-assets or crypto-asset services; and organizational requirements of CASPs for the assessment, maintenance and updating of knowledge and competence of the staff providing information or advice. ESMA said that the guidelines aim to ensure staff giving information or advising on crypto-assets or crypto-asset services have a minimum level of knowledge and competence, enhancing investor protection and trust in the crypto-asset markets.  ESMA indicated that it will consider all comments received by April 22, 2025.

New Industry-Led Developments

ISDA Responds to FSB Consultation on Leverage In NBFI. On February 28, ISDA responded to the Financial Stability Board’s (FSB) consultation on leverage in the non-bank financial intermediation (NBFI) sector. ISDA made the following points: overly prescriptive regulatory recommendations for all NBFI-sector firms across all geographies and market sectors could be inappropriate; the ways in which the use of leverage in the NBFI sector would create financial stability risks deserve further examination; ISDA believes the FSB should undertake a deeper analysis of the impact of the proposed measures on the cost of hedging, market liquidity and liquidity needs in times of stress; and the FSB should account for how the use of derivatives and secured financing, which the FSB characterizes as leverage-inducing activities, support key functions performed by financial markets, including: financing, hedging, price discovery, and market stabilization through countercyclical behaviors. [NEW]
ISDA and FIA Response to IOSCO on Pre-Hedging Consultation. On February 21, ISDA and FIA responded to the International Organization of Securities Commissions’ (“IOSCO”) consultation report on pre-hedging. In the response, the associations highlight that an appropriate, consistent and well-understood framework for pre-hedging is important for safe and efficient markets. The associations also noted the importance of not cutting across existing industry codes, including the FX global code, the precious metal code and the Financial Markets Standards Board’s standard for large trades, as market participants already have policies, procedures and institutional frameworks in place to comply with them.
ISDA Responds to BoE Consultation on Fundamental Rules for FMIs. On February 19, ISDA submitted a response to a consultation from the Bank of England (BoE) on a proposal to introduce a set of rules for UK financial market infrastructures (FMIs), including central counterparties (CCPs). In the response, ISDA expresses its support for the proposed fundamental rules (FRs). ISDA said it would encourage further references to transparency throughout the rules and that it believes transparency should be one of the guiding principles that CCPs should follow in the conduct of their business, and this could be reflected under FR 1, 2 and/or 3. ISDA indicated it would also welcome further references to transparency in relation to FR 9, in the context of operational resilience, noting that market participants require adequate information on CCPs’ operational resiliency to perform their third-party risk assessments. ISDA also expressed appreciation for the addition of FR 10, which recognizes the specific nature of CCPs by requiring them to identify, assess and manage the risks that their operations could pose to the stability of the financial system. ISDA said it believes the outcome of the assessment should also be shared with CCPs’ participants, which would then be able to factor this into their own risk management. [NEW]
ISDA and AFME Response to FCA on Transparency of Enforcement Decisions. On February 17, ISDA and the Association for Financial Markets in Europe (“AFME”) responded to the UK Financial Conduct Authority’s (“FCA”) consultation on greater transparency of enforcement decisions. The FCA’s proposal, which gives it the ability to publicly name firms at the start of an investigation, continues to cause trepidation across the industry. In the response, ISDA and AFME highlight concerns that the current proposals are harmful to UK competitiveness and growth and suggest a broader interpretation of the existing exceptional circumstances test could be used to meet the FCA’s objectives.

The following Gibson Dunn attorneys assisted in preparing this update: Jeffrey Steiner, Adam Lapidus, Marc Aaron Takagaki, Hayden McGovern, and Karin Thrasher.

Jeffrey L. Steiner, Washington, D.C. (202.887.3632, jsteiner@gibsondunn.com)

Michael D. Bopp, Washington, D.C. (202.955.8256, mbopp@gibsondunn.com)

Michelle M. Kirschner, London (+44 (0)20 7071.4212, mkirschner@gibsondunn.com)

Darius Mehraban, New York (212.351.2428, dmehraban@gibsondunn.com)

Jason J. Cabral, New York (212.351.6267, jcabral@gibsondunn.com)

Adam Lapidus – New York (212.351.3869, alapidus@gibsondunn.com )

Stephanie L. Brooker, Washington, D.C. (202.887.3502, sbrooker@gibsondunn.com)

William R. Hallatt , Hong Kong (+852 2214 3836, whallatt@gibsondunn.com )

David P. Burns, Washington, D.C. (202.887.3786, dburns@gibsondunn.com)

Marc Aaron Takagaki , New York (212.351.4028, mtakagaki@gibsondunn.com )

Hayden K. McGovern, Dallas (214.698.3142, hmcgovern@gibsondunn.com)

Karin Thrasher, Washington, D.C. (202.887.3712, kthrasher@gibsondunn.com)

There have been several recent significant developments in transnational litigation. This Update breaks down those developments and provides detail into the courts’ analyses in several key areas of transnational litigation, as listed below.

TABLE OF CONTENTS

INTERNATIONAL DEVELOPMENTS

I…Global Climate Change Lawsuits

A…Climate Change Litigation in the United States
B…Climate Change Litigation in Germany and the EU

II…Supply Chain Due Diligence in the European Union

A…EU Corporate Sustainability Due Diligence Directive

1…Scope of application and obligations
2…Enforcement and Sanctions
3…Civil Liability of Companies

B…EU Deforestation Regulation

UNITED STATES

III…Developments in Transnational Jurisdiction: Personal Jurisdiction

A…The Ford Motor Decision and Its Impact on Specific Personal Jurisdiction
B…The Mallory Decision and the Expansion of General Jurisdiction
C…Personal Jurisdiction and Forum Selection Clauses in Subsidiary-Parent Relationships: Binding Non-Signatory Parents or Subsidiaries

IV…The Continued Evolution of Extraterritorial Application of RICO

V…Cross-Border Discovery and Issues Related to Privileges Protections

VI…Supply Chain Litigation Under The Trafficking Victims Protection Reauthorization Act

UNITED KINGDOM

I…Foreign Judgment Recognition and Enforcement in the UK

A…Hague Convention on Recognition and Enforcement of Foreign Judgments to Come into Force in the UK
B…English Court of Appeal judgment on sovereign immunity and ICSID Awards

II…ESG Litigation: Parent Company Liability and Supply Chain Risk

FRANCE

Litigation Regarding the “Corporate Duty of Vigilance Law”

GERMANY

Decision regarding Greenwashing by the German Federal Court of Justice

INTERNATIONAL DEVELOPMENTS

I. Global Climate Change Lawsuits

All over the world, plaintiffs are using courts to try to hold private companies and governments liable for what they allege are the effects of global climate change. These cases underscore the legal pressures on both public and private sectors to adopt and meet stringent climate targets and the potential for significant legal and financial implications. Understanding these developments is crucial for businesses to navigate the evolving regulatory landscape and mitigate risks.

A. Climate Change Litigation in the United States

Since 2017, state and local governments across the United States have filed lawsuits in state courts against private energy companies, alleging that the companies’ worldwide extraction, production, promotion, marketing, and sale of fossil fuels has contributed to global climate change and thereby caused injury. The plaintiffs seek damages and other relief for the alleged impacts of climate change, which they allege has been caused by interstate and international emissions, the cumulative actions of billions of individuals the world over the past century. Dozens of nearly identical actions have been brought under this theory, including in San Francisco, New York City, Baltimore, and Boulder.[1] Additional suits continue to be filed.

Most state courts that have confronted the merits of these claims have concluded that federal law precludes states from using their own law to resolve claims seeking relief for injuries arising from international emissions. Those courts have held that the federal constitutional structure of the United States does not allow state law to resolve claims that are based on such inherently interstate and international phenomena, and also that the Clean Air Act preempts these state-law claims. As the Circuit Court of Maryland, Baltimore City recently held, “the Constitution’s federal structure does not allow the application of state law to” these claims; rather, they “g[o] beyond the limits of … state law.”[2] The Circuit Court for Anne Arundel County, Maryland, too, has held that “federal law precludes and preempts the application of state law” to these types of claims.[3] The Delaware Superior Court has concluded that “[t]he federal Constitution prohibits the State from using its own laws to resolve claims seeking redress for injuries allegedly caused by out-of-state emissions.”[4] And the New Jersey Superior Court came to the same conclusion, explaining that “only federal law can govern Plaintiffs’ interstate and international emissions claims because ‘the basic scheme of the Constitution so demands.’”[5] The Hawaii Supreme Court, by contrast, has held that claims of this sort are not “preempted by federal law.”[6]

The federal courts that have considered the merits, meanwhile, have unanimously held that federal law precludes state-law claims seeking redress of injuries allegedly caused by the effects of interstate and international greenhouse-gas emissions on the global climate. For example, in dismissing New York City’s lawsuit in 2021, the Second Circuit held that “such a sprawling case is simply beyond the limits of state law,” and that “municipalities may [not] utilize state tort law to hold multinational oil companies liable for the damages caused by global greenhouse gas emissions.”[7] Similarly, the U.S. District Court for the Southern District of New York held that claims of this sort “are ultimately based on the ‘transboundary’ emission of greenhouse gases,” so “our federal system does not permit the controversy to be resolved under state law.”[8] And the U.S. District Court for the Northern District of California agreed.[9]

So far, the U.S. Supreme Court has not weighed in to definitively resolve this issue of federal law. Until that Court intervenes, or until the state courts come to a consensus that state law cannot be used to resolve these disputes, States and municipalities likely will continue to bring these cases.

B. Climate Change Litigation in Germany and the EU

In the EU, too, climate-change litigation is becoming increasingly important, both for the public sector and private companies. The claims are based on new environment-related policies and legislation but also fundamental rights such as those enshrined in the European Convention on Human Rights.

The Deutsche Umwelthilfe (DUH), or “German environmental aid,” is an independent non-profit organization that brought several claims against Germany and various private companies in 2023 and 2024. First, the DUH filed two complaints in the Higher Administrative Court Berlin-Brandenburg against Germany’s 2023 Climate Protection Program, arguing that it lacked sufficient measures concerning the energy, industry, buildings, agriculture, transport sectors, and the land use sector.[10] On May 16, 2024, the Court ruled in favor of the DUH, finding that the program had failed to meet the 2030 climate target pursuant to Section 3 (1) No. 1 of the Climate Protection Act. In September 2024, the Ministry of the Environment appealed the ruling, and the case is currently pending before the Federal Administrative Court. Additionally, on July 17, 2023, the DUH filed a constitutional complaint after the German Parliament approved changes to the Climate Protection Act.[11] The DUH argued that the amendment reduces the responsibility of sectors like transport and buildings for greenhouse gas emissions. Instead of sector-specific reduction targets, the law introduces a holistic approach focusing on savings where the greatest potential exists. That case is pending.[12]

With respect to the private sector, DUH filed lawsuits i.a., against Mercedes-Benz Group AG (“Mercedes”) and BMW AG (BMW). The plaintiffs, managing directors of DUH, are claiming violations of their personal rights due to the continued production and sale of combustion engines, and are requesting that the companies produce only electric vehicles beginning in 2030. These lawsuits are based on the Federal Constitutional Court’s climate ruling from 2021, which states that the responsibility for reducing emissions must not be postponed at the expense of future generations.[13] The Stuttgart Regional Court ruled in favor of Mercedes,[14] and that decision has been affirmed by the Stuttgart Higher Regional Court.[15] The judges held that the determination of emission values or reduction targets is the task of the legislator, not the courts. The case is currently pending on appeal before the German Federal Court of Justice. Similarly, DUH failed in its climate action against BMW before the Munich Higher Regional Court: the court dismissed the claim and found that BMW was acting in accordance with applicable laws.[16] In addition, DUH has filed but meanwhile withdrawn a lawsuit against the oil and gas company Wintershall Dea—which sought to order the company to tighten its carbon-emissions target and to cease the extraction of natural gas and crude oil nationally and internationally by 2025.[17]

Additionally, Milieudefensie, a Dutch environmental organization, sued Royal Dutch Shell, alleging that Shell is at odds with global climate targets, violating its duty of care under Article 6:162 of the Dutch Civil Code—which is based on Articles 2 and 8 of the European Convention on Human Rights (ECHR) that guarantee the right to life (Article 2) and the right to private and family life, home, and correspondence (Article 8)—and failing to comply with the goals of the Paris Agreement. The first instance ruling required Shell to reduce its total CO₂ emissions by 45% by the end of 2030 compared to 2019.[18] The court identified a duty of care under Dutch law arising from the “unwritten standard of care.” The court also ruled that Shell can also be held responsible for emissions of its suppliers and end customers. In November 2024, the Court of Appeals in The Hague confirmed that Shell has a duty of care under Dutch tort law, in line with international human rights law as well as EU and international climate regulations, to take action to prevent dangerous climate change. However, the court overturned the judgment by rejecting the imposition of a specific emission reduction target for Shell, as there was not enough scientific consensus to define a precise reduction percentage, and such decisions should be made by politicians, not by courts.[19]

II. Supply Chain Due Diligence in the European Union

A. EU Corporate Sustainability Due Diligence Directive

On July 25, 2024, the Directive on Corporate Sustainability Due Diligence, EU Directive 2020/1760 (CSDDD) entered into force.[20] The CSDDD establishes far-reaching mandatory human-rights and environmental obligations on both EU and non-EU companies meeting certain turnover thresholds. Those obligations apply with respect to a company’s own operations and those of its subsidiaries—but also to those carried out by a company’s “business partners” in the company’s “chain of activities.”[21] The EU member states are required to transpose the CSDDD into national law by July 26, 2026. However, the European Commission has presented its proposal for an “First Omnibus Package” that shall simplify and streamline reporting requirements across multiple EU sustainability laws such as the CSDDD and the Corporate Sustainability Reporting Directive (the CSRD). The First Omnibus Package is split into two separate proposals: (i) a Postponement Directive[23] to delay certain reporting obligations for two years and due diligence obligations until 2028, and (ii) an Amendment Directive[24] to revise key elements of the EU’s sustainability reporting and due diligence frameworks, including changes to the scope of the CSDDD. Since the Amendment Directive will most likely cause lengthy negotiations, we proceed below on the basis of the initial text and highlight key considerations of the First Omnibus Package.

1. Scope of application and obligations

The CSDDD will apply to EU companies that have more than 1,000 employees on average and a net worldwide turnover of more than EUR 450 million;[25] and also will apply to non-EU companies that have generated a net turnover in the EU of more than EUR 450 million.

Notably, the scope of application of the CSDDD is more limited than that of the CSRD,[26] which (save with respect to franchisors or licensors) applies lower employee and turnover thresholds. While the CSDDD is expected to apply to around 5,500 companies, the CSRD covers approximately 50,000 companies. However, with the First Omnibus Package the European Commission proposes to align the scope of the CSRD more closely with the CSDDD.

Generally, the CSDDD, one of the most debated pieces of European legislation of recent times, establishes an obligation on in-scope companies to: (a) identify (due diligence) adverse human-rights and environmental impacts; (b) prevent, mitigate, and bring to an end/minimise such adverse impacts; and (c) adopt and put into effect a transition plan for climate-change mitigation which aims to ensure—through best efforts—compatibility of the company’s business model and strategy with limiting global warming to 1.5°C in line with the Paris Agreement.

The CSDDD also sets out minimum requirements (including the ability for claims to be made by trade unions or civil society organisations) of a liability regime to be implemented by members states of the EU for violation of the obligation to prevent, mitigate and bring to an end or at least minimise adverse impacts.

2. Enforcement and Sanctions

The Directive requires EU member states to designate independent “Supervisory Authorities” to supervise compliance.[27] A Supervisory Authority must have adequate powers and resources, including the power to require companies to provide information and carry out investigations. Investigations may be initiated by the Supervisory Authorities’ own motion or as a result of substantiated concerns raised by third parties. Sanctions regimes adopted by EU member states must be effective, proportionate and dissuasive.

3. Civil Liability of Companies

Members States must establish a civil liability regime for companies which intentionally or negligently fail to comply with the CSDDD’s obligations and where damage has been caused to a person’s legal interest (as protected under national law) as a result of that failure.[28]

EU member states must provide for “reasonable conditions” under which any alleged injured party may authorize a trade union, non-governmental human rights or environmental organization or other NGO or national human rights’ institution, to bring actions to enforce the rights of the alleged injured party.[29]

The Directive requires a limitation period for bringing actions for damages of at least five years and, in any case, not shorter than the limitation period laid down under general civil liability national regimes.

Regarding compensation, the Directive requires Members States to lay down rules that fully compensate victims for the damage they have suffered as a direct result of the company’s failure to comply with the Directive. However, the Directive states that deterrence through damages (i.e., punitive damages) or any other form of overcompensation should be prohibited.

The CSDDD’s potential civil liability exceeds that of existing supply chain legislation in Member States, such as the German Supply Chain Due Diligence Act. However, the European Commission proposes with the First Omnibus to defer the civil liability regime to the EU Member States who shall ensure that, if companies are held liable in case of non-compliance with the due diligence requirements under the CSDDD, the injured parties will have a right to full compensation.

While the full impact of the civil liability regime linked to the CSDDD is still uncertain and it remains to be seen how the Member States transpose the CSDDD, for businesses, this new regime underscores the importance of robust due diligence and risk management practices as well as compliance with the CSDDD.

B. EU Deforestation Regulation

On June 29, 2023, the EU’s Deforestation Regulation (EUDR)—which restricts the sale in the EU of products that may cause deforestation or the degradation of forests—entered into force.[30] The EUDR prevents certain commodities and products linked to deforestation or forest degradation from entering the European market or being exported. Accordingly, EUDR imposes on operators and traders the obligation to maintain a due-diligence system to avoid sourcing materials that are connected to deforestation or forest degradation. The Regulation therefore requires geolocational data for all forest products imported into the EU. Other countries, such as the United States and China, have objected to the EUDR as imposing impossible standards and acting as a trade barrier.[31]

In response to these criticisms, the EU Council has extended the application timeline for the EUDR until December 30, 2025 for large- and medium-sized companies, and until June 30, 2026 for micro and small companies, and the EU Parliament has confirmed the postponement.[32]

UNITED STATES

III. Developments in Transnational Jurisdiction: Personal Jurisdiction

In the past few years, the U.S. Supreme Court has issued two significant personal-jurisdiction decisions: Ford Motor Co. v. Montana[33] and Mallory v. Norfolk Southern Railway.[34] In the wake of these decisions, many lower courts have expanded the circumstances that justify the exercise of specific personal jurisdiction.

A. The Ford Motor Decision and Its Impact on Specific Personal
Jurisdiction

In Ford Motor, the Supreme Court clarified that, in certain circumstances, a claim may “arise out of or relate to” the forum state for purposes of personal jurisdiction even in the absence of direct causation. Ford Motor involved product-liability lawsuits related to accidents involving Ford vehicles that took place in the State where the lawsuits were filed, and the plaintiffs were residents of those States. Ford had significant business operations in each State, including advertising, selling, and servicing the specific vehicle models involved in the accidents. The vehicles, however, were designed, manufactured, and sold outside the State.

The Court rejected Ford’s argument that the fact that the cars involved in the accidents were not purchased or manufactured in the forum states should be dispositive as to jurisdiction. As the Court explained, “some relationships will support jurisdiction without a causal showing.”[35] While the Court was careful to caution “[t]hat does not mean anything goes,”[36] it emphasized that “[w]hen a company like Ford serves a market for a product in a State and that product causes injury in the State to one of its residents, the State’s courts may entertain the resulting suit.”[37]

In the wake of Ford Motor, federal courts of appeals have expanded the reach of specific personal jurisdiction to include numerous international corporations that hitherto may not have been subject to the personal jurisdiction of U.S. courts. For example, in Hardy v. Scandinavian Airlines System, Hardy, a U.S. citizen was injured stepping off a plane in Oslo and sued the foreign airline company.[38] The district court held that the airline’s selling the ticket to Hardy was not causally connected with her injury, but the Fifth Circuit reversed, noting that, under Ford Motor, “some relationships will support jurisdiction without a causal showing,” and holding that the airline’s “advertising in the United States and its operation of a flight out of Newark. … combined to create an unbroken causal chain that ends with Hardy’s injury.”[39]

The Sixth Circuit came to a similar conclusion in Sullivan v. LG Chem, Ltd.[40] There, a consumer sued LG, a South Korean company, in Michigan for injuries sustained when LG’s batteries exploded. LG objected to personal jurisdiction on the basis that it never sold the batteries for consumer use in Michigan. The Sixth Circuit, however, held that this argument was simply “disguising” the causation analysis that Ford Motor “rejected”; the court accordingly held that personal jurisdiction was proper because LG conducted business with Michigan companies and had shipped the batteries into Michigan.[41]

Other courts, however, have recognized the limits of Ford. In Estados Unidos Mexicanos v. Smith & Wesson,[42] the Mexican government filed a lawsuit in the District of Massachusetts against seven U.S. gun manufacturers, accusing them of designing, marketing, and selling firearms in ways that they knew facilitated arming Mexican drug cartels. The court declined to assert specific jurisdiction over the manufacturers, distinguishing the case from Ford on the grounds that none of the alleged injuries took place in Massachusetts, nor did any of the plaintiffs have a connection to that State.[43]

The Northern District of California also distinguished Ford Motor in dismissing a case against the German airline Lufthansa. In Doe v. Deutsche Lufthansa Aktiengesellschaft,[44] the plaintiffs alleged that they suffered harm because the way Lufthansa agents treated them in Riyadh revealed their sexual orientation to the Saudi Arabian government. The plaintiffs, both California residents, brought suit in California. The court recognized that Lufthansa had clearly availed itself of the privileges of conducting business in California, “regularly operat[ing] flights between Saudi Arabia and California, and regularly operat[ing] flights to and from San Francisco, Los Angeles, and San Diego.”[45] Additionally, the airline is registered to operate in California, maintains an agent for service of process in the state, employs 41 staff members there, and operates offices at the San Francisco and Los Angeles airports.[46] However, because the flights were booked in Saudi Arabia, the claims stemmed from events at the Riyadh airport, and the disclosure of their personal information occurred outside the United States, the court determined that the plaintiffs’ claims did not arise out of or relate to Lufthansa’s contacts with the state.[47] Some commentators have criticized this holding, arguing that, as in Ford Motor, Lufthansa “deliberately cultivated a market in California,” the plaintiff “was induced by Lufthansa’s market presence in California to purchase Lufthansa tickets to fly to California,” and the plaintiff’s cause of action “derive[s] from their flights bound for the state.”[48] The court, however, despite declaring it a “close call,” found this line of argument “too speculative” to support specific personal jurisdiction.[49]

Nevertheless, in the wake of Ford Motor, firms should be aware that many courts have interpreted Ford Motor’s rejection of a causation requirement in the specific-personal-jurisdiction analysis as broadly expanding personal jurisdiction, even for foreign companies.

B. The Mallory Decision and the Expansion of General Jurisdiction

The Court’s 2023 decision in Mallory v. Norfolk Southern Railway, meanwhile, expanded the grounds for the exercise of general personal jurisdiction over foreign defendants. In Mallory, the Supreme Court upheld as constitutional Pennsylvania’s corporate-registration statute, which provides that all out-of-state corporations that register to do business within the State consent to general personal jurisdiction. The plaintiff, a Virginia resident, sued his previous employer, incorporated and based in Virginia, in Pennsylvania, arguing that, by registering to do business in Pennsylvania, the defendant had consented to general jurisdiction.[50] The Supreme Court agreed that, because Pennsylvania’s law “is explicit” that registration is a basis for general jurisdiction[51] and because the defendant had a substantial in-state presence,[52] the requisite “fair notice” was provided under the Due Process Clause, the statute was constitutional, and jurisdiction could be asserted. Because the defendant had registered to do business in Pennsylvania, it could be sued for any claims in that State, even if they had nothing to do with the forum.

So far, the functional consequences of the Mallory decision have been fairly limited. The majority holding of Mallory was narrow, finding only that Pennsylvania’s consent-by-registration statute did not violate due process. Whether such a statute might violate other constitutional clauses was a question expressly reserved by the Court.[53] Moreover, the holding of Mallory was limited to its facts: the majority expressly refused to opine on “whether any other statutory scheme and set of facts would suffice to establish consent to suit.”[54]

Indeed, Pennsylvania’s statute appears to be the only statute that expressly provides for consent-by-registration under the standards set forth in Mallory. Thus far, courts have largely avoided reading other statutes as providing similar jurisdiction-by-registration. As one court has explained, “[t]o read Mallory more broadly would not only go beyond the decision’s scope but would also subject every registered foreign corporation, without regard to its place of incorporation, its principal place of business, or the extent of its contacts within the state, to general personal jurisdiction in almost every single state. Nothing in Mallory suggests that the Court was announcing such a sweeping sea change in personal jurisdiction.”[55] Numerous other courts have similarly declined to find Mallory’s test satisfied.[56] Thus, at least for now, the impact of Mallory may be limited to Pennsylvania, but firms should examine States’ registration statutes to see if they are distinguishable from Pennsylvania’s regime.

C. Personal Jurisdiction and Forum Selection Clauses in Subsidiary-
Parent Relationships: Binding Non-Signatory Parents or Subsidiaries

Registration to do business is not the only way that a company might consent to jurisdiction; another way is via forum-selection clauses in contracts. Under the “closely related” doctrine, courts determine whether a non-signatory can be bound by a forum-selection clause when it is so “closely related” to a contracting party or dispute that it was “foreseeable” it would be subject to the clause. The Sixth Circuit recently grappled with applying this doctrine to a non-signatory subsidiary and came out staunchly in opposition.[57]

In Firexo, a subsidiary incorporated in Florida sued its parent company, based in the United Kingdom, for breach of contract in Ohio. The parent company argued that the suit had to be litigated in England per the forum-selection clause in an unrelated Joint Venture Agreement (JVA) the parent had entered into with a resident of Ohio, even though the subsidiary was not a signatory to the JVA.

The Sixth Circuit reversed the district court’s decision that the subsidiary was so “closely related” to the JVA that it was “foreseeable” that the clause would be applied to it. After first determining under an Erie analysis that federal common law (and thus, the “closely related” doctrine) did not apply to the dispute,[58] the court went on to challenge the validity of the “closely related” test itself. Per the majority, “[i]t is not entirely apparent [that the] benefits [of the doctrine] outweigh its concerns, especially the absence of consideration under the objective theory of contracts or the absence of ‘minimum contacts’ under the constitutional personal-jurisdiction analysis.”[59] In so holding, the opinion reflected concerns that binding an unwilling non-signatory to an agreement on this basis conflicts with fundamental principles of contractual consent.[60]

Firexo represents a decisive step in the direction of preserving the contractual agency of non-signatory parents and subsidiaries.

IV. The Continued Evolution of Extraterritorial Application of RICO

Whether and when federal law can be applied extraterritorially (and the implications of such extraterritorial application) continues to be the focus of significant litigation regarding the Racketeer Influenced and Corrupt Organizations Act (RICO), 18 U.S.C. §§ 1961-1968.

In 2016, the Supreme Court in RJR Nabisco had held that RICO’s private right of action does not apply extraterritorially unless the plaintiff alleges and proves a domestic injury to its business or property as a result of a RICO violation.[61] The Court noted that, generally, the presumption against extraterritoriality can be rebutted only if (1) the statute gives a clear indication that it applies extraterritorially, or, (2) the case involves a domestic application of the statute.[62] The Court held that RICO’s private right of action did not provide a clear indication of extraterritorial application, so for RICO suits, the presumption can be rebutted only by satisfying the domestic-injury requirement.[63]

RJR Nabisco had no occasion to explain what constitutes a domestic injury, but the Court recently addressed that question in Yegiazaryan v. Smagin.[64] There, the Supreme Court ruled that, for the purposes of a domestic-injury analysis under RICO, it is not the foreign plaintiff’s place of residence that matters, but rather where the plaintiff experienced the injury. Both parties in that case were Russian citizens, and the dispute involved a real-estate deal in Moscow. The plaintiff, who remained in Russia, obtained an arbitral award in London against the defendant, who was residing in California. The plaintiff then sued in California federal court to enforce the arbitral award. After the defendant attempted to avoid enforcement through fraudulent transactions in California, the plaintiff filed a civil RICO claim against him. The Court held in the plaintiff’s favor, adopting a “context-specific inquiry” for determining whether the alleged injury “arose in the United States.”[65] As the Court explained, the inquiry involves “looking to the nature of the alleged injury, the racketeering activity that directly caused it, and the injurious aims and effects of that activity.”[66] On the facts of the case, the Court held that the plaintiff had suffered a domestic injury, given that he was “injured in his ability to enforce a California judgment, against a California resident, through racketeering acts that were largely ‘designed and carried out in California’ and were ‘targeted at California.’”[67]

Lower courts have expanded on the contextual approach adopted in Yegiazaryan in a variety of contexts involving tangible property. The Ninth Circuit was the first lower court to apply the Yegiazaryan Court’s approach to the domestic-injury requirement. In Global Master International Group, Inc. v. Esmond Natural, Inc.,[68] a Chinese firm sued its American supplier for fraudulently providing a product different from what the plaintiff had contracted to purchase. The purchase orders between the two firms provided that title to the products would pass to the Chinese firm in California before they were exported to China. On this basis, the Ninth Circuit held that there was a domestic injury. The fact that the Chinese firm “owned its injured property in the United States establishes that its injury was domestic.”[69] In the Ninth Circuit’s view, this factor outweighed the fact that the goods were later exported to China and that the plaintiff itself was located in China.[70]

In the same way, the Fourth Circuit, applying Yegiazaryan, recently held that just because a defendant’s racketeering activity took place primarily in the United States does not necessarily mean that a “domestic injury” has occurred. In Percival Partners Ltd. v. Nduom,[71] the court ruled that Ghanaian investors who transferred their money to a Ghanaian company with the intention of investing in Africa could not have reasonably anticipated or expected that their funds would later be sent to the United States. The plaintiffs thus felt their injury in Ghana, not in Virginia, where the embezzling company was located. While acknowledging that “the RICO case law, Yegiazaryan prominently included, instructs that the place of racketeering conduct may be relevant to whether an injury is domestic or foreign,” the court clarified that relying solely on the location of the conduct would contradict the essence of Nabisco, whose “whole point . . . was to separate out conduct from injury when it comes to extraterritoriality.”[72] The court further emphasized that such an approach would disregard “the Supreme Court’s instruction that ‘no set of factors can capture the relevant considerations for all cases.’”[73] Thus, the court held that the plaintiff’s injury occurred abroad and was not domestic.

These decisions demonstrate that courts will focus holistically on all the facts surrounding an alleged injury to determine its location, and will not apply a residency requirement or other bright-line rule.

V. Cross-Border Discovery and Issues Related to Privileges Protections

28 U.S.C. § 1782 enables litigants to seek discovery through federal district courts for use in “foreign or international tribunal[s]” where the target of the discovery is located in that federal district. Section 1782 has become an essential tool in transnational litigation. In recent years, courts have issued rulings refining the scope of allowable discovery under that provision.

One question courts have been considering is under what circumstances Section 1782 can apply to foreign arbitral tribunals. The Supreme Court ruled in 2022 that Section 1782 applies only to foreign tribunals that are imbued with governmental authority.[74] Under that standard, the Court held, a United Nations Commission on International Trade Law (UNCITRAL) arbitral panel did not qualify because the panel was not created by a governmental action such as a treaty, the members of the panel were not affiliated with any governmental entity, the panel received no funding from a government, and the panel had no coercive power.[75] Applying this standard, the U.S. Court of Appeals for the Second Circuit recently ruled that an International Centre for Settlement of Investment Disputes (ICSID) arbitral panel is not a governmental tribunal subject to Section 1782.[76] Even though ICSID itself is established and funded by sovereign states, the court noted, the authority of the panel derives solely from party agreement.[77] And even though there are situations in which the ICSID Chairman could appoint panel members, the court stated, those situations did not arise in that case.[78] The Second Circuit ultimately held that the ICSID panel was sufficiently similar to the UNCITRAL panel in ZF Automotive and denied the 1782 application.

The Second Circuit’s decision suggests that, in the wake of ZF Automotive, courts may interpret Section 1782 narrowly, applying it only to tribunals that are clearly governmental. It also suggests that courts likely will not apply a bright-line test to determine whether Section 1782 applies to a particular foreign or international arbitral panel, but instead will consider holistically whether the relevant nations intended “to imbue to body in question with governmental authority.”[79] Finally, as the Second Circuit did here, courts may focus on the details of the particular ad hoc panel in the context of the dispute before it, and decline to develop broadly applicable rules.

Courts have also been grappling with when district courts, in their discretion, should grant 1782 applications. The Supreme Court has explained that district courts should exercise their discretion by considering four factors: (1) whether the applicant is a participant in the foreign proceeding; (2) the character of the foreign proceeding, in particular its receptivity to foreign assistance; (3) whether the application seeks to circumvent foreign restrictions; and (4) whether the request is unduly intrusive or burdensome.[80]

Recently, the Seventh Circuit, in upholding a denial of a Section 1782 application, demonstrated the deference that courts of appeal give district courts’ 1782 application of these factors.[81] Venequip, a Venezuelan heavy-equipment supplier, applied for 1782 discovery from Caterpillar, an Illinois-based machinery manufacturer, for use in breach-of-contract litigation in Switzerland.[82] The district court denied the application, noting that the third factor was particularly relevant, since the parties had contractually agreed to Swiss law, which has more circumscribed discovery procedures than U.S. law, so Venequip should not be allowed to use Section 1782 to circumvent those foreign restrictions.[83] The district court specifically noted, however, that it was open to considering a renewed 1782 application if Caterpillar was not cooperating with the discovery allowed by the Swiss tribunal.[84] The Seventh Circuit affirmed, deferring to the district court’s analysis and applauding its “wait-and-see” approach.[85]

This ruling underscores the deference accorded to district court decisions, and the importance to federal courts of respecting foreign legal systems. Litigants in Section 1782 disputes should keep in mind the importance of international comity, as well as the possibility that Section 1782 applications could be renewed based on developments in the foreign proceedings.

VI. Supply Chain Litigation Under The Trafficking Victims Protection Reauthorization Act

The Trafficking Victims Protection Reauthorization Act (TVPRA) allows victims of forced labor and other forms of trafficking to sue the perpetrators and, more generally, those who “knowingly benefit[]” from “participation in a venture” that they knew or should know engaged in conduct violating the TVPRA. In recent years, individuals who were alleged forced to work in commodities production abroad have attempted to sue multi-national corporations on the theory that those corporations participated in a venture with their suppliers or other in their extended supply chains. Courts have considered a series of questions about the meaning and scope of the TVPRA, including whether plaintiffs have standing to sue mere participants in a supply-chain venture, how to interpret key statutory language, and whether the TVPRA permits civil suits based on trafficking that occurred outside the United States.

On March 5, 2024, the U.S. Court of Appeals for the D.C. Circuit issued a significant decision rejecting a “supply-chain” venture theory of liability.[86] Plaintiffs were a group of children who alleged they were forced to work in cobalt mines in the Democratic Republic of the Congo. Their suit alleged that Apple, Alphabet, Dell Technologies, Microsoft, and Tesla “violated the TVPRA by participating in the global supply chain—a ‘venture’ that depends on forced labor.”[87] The district court had dismissed on numerous grounds, holding (among other things) that plaintiffs lacked Article III standing, that they failed to state a claim on the merits, and that the TVPRA’s civil remedies provision does not apply extraterritorially.

The D.C. Circuit affirmed dismissal. It first concluded that plaintiffs had standing to sue, holding that plaintiffs satisfied the minimal requirements to plead that their injuries were “fairly traceable” to Defendants’ alleged conduct because those Defendants were alleged to be “in a ‘venture’—as the plaintiffs understand the TVPRA—with” the entities whose were purportedly “responsible for the forced labor.”[88] But those same allegations were not sufficient to state a claim on the merits. Adopting a plain meaning interpretation of “participation in a venture,” the court reasoned that the TVPRA requires “taking part or sharing in an enterprise or undertaking that involves danger, uncertainty, or risk, and potential gain.”[89] Plaintiffs did not satisfy that definition because Defendants did not own any “interest in their suppliers” or “share in their suppliers’ profit and risks” but merely engaged “on opposite sides of an arms-length transaction” to buy and sell cobalt.[90] In short, “purchasing a commodity, without more, is not ‘participation in a venture’ with the seller” under the meaning of the TVPRA.[91]

The D.C. Circuit’s ruling is a significant limitation on “supply-chain” liability under the TVPRA. It confirms that simply purchasing a commodity that was produced using forced labor or trafficking should not be enough to subject the purchaser to liability under the TVPRA. That said, the D.C. Circuit’s opinion also leaves significant questions unresolved. For example, the court did not decide whether the district court was correct in concluding that the TVPRA’s civil remedies provision does not allow suits based on overseas trafficking.[92] With respect to standing, the court did not resolve whether plaintiffs always have constitutional standing whenever they allege a claim under the TVPRA, even if the direct perpetrators are not alleged to be part of the “venture.” And with respect to the merits, the court left the precise boundaries of supply-chain liability unresolved where purchasers have more control or involvement with their suppliers than simply an arm-length transactional relationship.

UNITED KINGDOM

I. Foreign Judgment Recognition and Enforcement in the UK

A. Hague Convention on Recognition and Enforcement of Foreign
Judgments to Come into Force in the UK

On June 27, 2024, the UK Government ratified the Hague Convention on Recognition and Enforcement of Foreign Judgments, which is set to come into force for the UK on July 1, 2025.[93]

The Hague Convention is a multilateral convention, which provides a set of common rules for recognizing and enforcing judgments issued in civil and commercial matters, between Contracting Parties (including all EU member states (except Denmark), as well as Ukraine and Uruguay). The merits of a judgment cannot be reviewed, and recognition and enforcement can be refused only on specific grounds. While most national laws provide for the enforcement of foreign judgments, those laws differ between jurisdictions. This can make the enforcement of foreign judgments unpredictable, lengthy, and costly. By establishing common rules, the Hague Convention hopes to provide greater certainty and to reduce the complexity of that process.

This is a particularly important development for the UK because, following the UK’s departure from the European Union (Brexit), parties wishing to have UK judgments recognised and enforced in other jurisdictions could not rely on the broad-EU enforcement regimes.[94]

B. English Court of Appeal judgment on sovereign immunity and
ICSID Awards

As referenced in a recent client alert, the English Court of Appeal has confirmed that sovereign immunity does not bar the enforcement of International Centre for Settlement of Investment Disputes (ICSID) awards.[95]

On October 22, 2024, the Court of Appeal issued an important judgment in relation to arbitral award enforcement in the combined appeals of Infrastructure Services Luxembourg S.À.R.L. v. Kingdom of Spain and Border Timbers Limited v. Republic of Zimbabwe.[96] The court decided that, when the contracting states agreed to Article 54 of the ICSID Convention—which requires that an ICSID award must be enforced by a national court—this was a “written agreement” waiving State immunity and submitting to jurisdiction under the UK’s State Immunity Act 1978 (1978 Act). Section 2 of the 1978 Act provides that a State may waive its immunity by a “prior written agreement” (read together with s. 17(2) of the 1978 Act, which provides that a “prior written agreement” includes references to a “treaty, convention or other international agreement”). The Court of Appeal affirmed that such prior written agreement is found in Art. 54 of the ICSID Convention.

The decision is positive news for parties looking to enforce ICSID awards in the UK, as it re-affirms the UK’s pro-enforcement stance in relation to investor-State awards.

II. ESG Litigation: Parent Company Liability and Supply Chain Risk

In December 2024, the English Court of Appeal in Limbu v Dyson[97] held that England is the appropriate forum to determine claims brought by migrant workers in Malaysia against companies within the Dyson corporate group.

The claims—which relate to alleged abusive labor practices while manufacturing components for a third-party supplier in Malaysia—were brought by a set of migrant workers that had been employed by a Malaysian third-party supplier of components for Dyson-branded products. The claimants argued that they had been subjected to abusive and exploitative working and living conditions while working for the Malaysian supplier, and alleged that the relevant Dyson entities were liable in negligence and unjust enrichment. Two of the defendants were domiciled in England, and one was domiciled in Malaysia.

The High Court refused jurisdiction under forum non conveniens, finding that England was not the natural or appropriate forum for the dispute.[98] The High Court concluded that Malaysia was “clearly and distinctly more appropriate” as a forum because the dispute was governed by Malaysian law and the country represented the “centre of gravity” of the case due to the alleged harm occurring in Malaysia.[99]

The claimants appealed to the Court of Appeal, which reversed the first-instance decision. The Court of Appeal held that England was “clearly and distinctly the appropriate forum,” particularly in light of the claimants’ inability to secure funding for a claim in Malaysia, as well as other potential procedural difficulties and potential access-to-justice concerns in Malaysia. The Court found that Dyson’s UK domiciled corporate entity was “the principal protagonist” in the alleged breaches.

Subject to any further appeal to the UK Supreme Court, the matter will now return to the High Court to proceed on the merits, with decisions on liability, quantum of damages, and potential additional jurisdictional challenges yet to come.

Although the question of potential tortious liability for UK-domiciled parent companies for the operations of their foreign subsidiaries has previously been considered by the UK Supreme Court, those cases concerned the applicable EU jurisdiction rules.[100] Following the end of the Brexit transition period, this is the first time the Court has accepted jurisdiction when applying the English common law rules.

While it remains to be seen whether any clear jurisprudential patterns emerge following the renewed application of English common law rules on jurisdiction, parties to similar transnational disputes ought to be aware of the possibility of proceeding in UK courts. The London Bullion Market Association (LBMA), an independent association which provides accreditation to certain metal refiners, is facing a similar tortious claim in the UK for alleged human rights failings at a third-party owned Tanzanian gold mine from which an LBMA accredited refiner had sourced gold. After initially disputing the English Courts’ jurisdiction to hear the case, the LBMA withdrew its challenge in June 2024 and the trial has recently been scheduled to proceed during the summer of 2026.

FRANCE

Litigation Regarding the “Corporate Duty of Vigilance Law”

The Corporate Duty of Vigilance Law (2017) requires companies (i) headquartered in France with more than 5,000 employees in France or (ii) headquartered in France with 10,000 employees in France and/or abroad to establish a corporate sustainability due diligence plan.[101] This plan must include measures to identify risks and prevent serious harm to (i) human rights and fundamental freedoms, (ii) individuals’ health and safety, and (iii) the safety environment that may result from the company’s own activities or those of its subsidiaries, subcontractors or suppliers.[102] Any third party may issue a “formal notice” to any company covered by the law if they consider its corporate sustainability due diligence plan to be incomplete or insufficient.[103] The French courts may compel these companies to (i) modify their plans and/or (ii) pay damages to indemnify any harm resulting from the alleged insufficiency of the plans.[104]

In the past few years, this law has been used as a tool of transnational litigation, with third parties from within and outside of France bringing suit against France-based international corporations.

A. Notre Affaire à Tous TotalEnergies SE

On January 28, 2020, several non-governmental organizations, some French local authorities (including the city of Paris), and the city of New York subpoenaed TotalEnergies, a leading French oil company, regarding the alleged insufficiency of its corporate sustainability due diligence plan. The First Instance Tribunal dismissed the plaintiffs’ demands because the basis of the subpoena was different from the one in the formal notice they had previously issued to TotalEnergies. The plaintiffs appealed this decision to the Court of Appeal of Paris.

On June 18, 2024, the Court of Appeal deemed that the parts of the appeal brought by the NGOs and the city of Paris were admissible.[105] It dismissed the appeal by the other local authorities and the city of New York as it considered they did not demonstrate a sufficient “local public interest” to be deemed admissible.

The Court of Appeal of Paris also clarified several procedural rules: (i) a sufficiently clear formal notice must be issued prior to the subpoena; (ii) the formal notice and the subpoena do not need to include identical demands; and (iii) the formal notice and the subpoena do not need to concern the identical corporate sustainability due diligence plan if a further one is subsequently issued.

The case is now before the Judicial Tribunal of Paris which will rule on the substantive merits of the case.

B. European Center for Constitutional and Human Rights v. EDF

On October 13, 2020, two non-governmental organizations—including one from Germany—and local Mexican organizations subpoenaed EDF, the main French electricity provider, regarding an alleged failure to respect the right of the local Mexican community to consent to a wind farm project on indigenous lands in Union Hidalgo, Mexico.

On November 30, 2021, the Judicial Tribunal of Paris refused to suspend the wind farm project and declared that the request that EDF be ordered to publish a new corporate sustainability due diligence plan was inadmissible.[106]

The plaintiffs appealed this decision to the Court of Appeal of Paris. On June 18, 2024, the Court of Appeal deemed the appeal admissible and ruled on several procedural aspects.[107]

The case is now before the Judicial Tribunal of Paris which will rule on the substantive merits of the case.

C. French Human Rights League v. Suez

On June 11, 2021, two human rights organizations and two Chilean organizations subpoenaed Suez, a large French water and waste management company, regarding alleged negligence and failures in water management in Osorno, Chile in 2019. The plaintiffs claimed that some 2,000 liters of oil had spilled into a drinking water plant, owned by a 53.5% subsidiary of Suez, which led to a state of emergency for over a month.

On June 1, 2023, the Judicial Tribunal of Paris declared the case to be inadmissible as the plaintiffs had not proved that Suez was the correct defendant and the author of the corporate sustainability due diligence plan on which the claims were based.[108] The Tribunal also added that there was no evidence that the corporate sustainability due diligence plan mentioned in the formal notice was the same as the one referred to in the subpoena.

The plaintiffs appealed this decision to the Court of Appeal of Paris. On June 18, 2024, the Court of Appeal upheld the decision of the first instance tribunal and deemed the appeal inadmissible.[109]

Foreign investors seeking to invest in a French company meeting the thresholds should take into consideration these additional due diligence requirements and the judicial consequences of violating the Corporate Duty of Vigilance Law. In addition, since France was the first European country to introduce the concept of corporate due diligence, other European countries now subject to the new CSDD Directive may look to France to interpret and implement their own national law.

GERMANY

Decision regarding Greenwashing by the German Federal Court of Justice

In 2024, the German Federal Court of Justice (FCJ) rendered its first decision on the term “climate neutral” in connection with misleading advertising.[110] A German competition organization brought suit against the fruit gum manufacturer Katjes, arguing that the use of the term “climate neutral” in Katjes’s advertisements was misleading because it gave the impression that Katjes’s products were emission-free.

The FCJ held that the use of the term “climate neutral” is misleading because it can be understood both in the sense of a reduction of CO2 in the production process and in the sense of a mere compensation of CO2. Therefore, the court held, to prevent deception, the advertising itself must explain which specific meaning is relevant. In addition, the FCJ clarified that the risk of deception is particularly high in the area of environment-related advertising, so the strict requirements for health-related advertising—which require that the underlying meaning be “clear and unambiguous”—also apply to environment-related advertising.

The decision highlights the potential exposure of companies to environment-related claims regarding advertisements. It establishes a benchmark for communicating sustainability efforts, requiring clear distinction in consumer-facing advertising on whether climate neutrality is achieved through offsetting, reductions, or a combination of both. The ruling also underscores the growing debate that compensation for CO2 emissions is less effective than actual emission reduction, as it merely offsets emissions rather than preventing them.

[1] See, e.g., Cnty. of San Mateo v. Chevron, No. 17-3222 (Cal. Super. Ct. San Mateo Cnty.); City of Imperial Beach v. Chevron, No. 17-1227 (Cal. Super. Ct. Contra Costa Cnty.); Cnty. of Marin v. Chevron, No. 17-2586 (Cal. Super. Ct. Marin Cnty.); City of Richmond v. Chevron, No. 18-55 (Cal. Super. Ct. Contra Costa Cnty.); Cnty. of Santa Cruz v. Chevron, No. 17-3242 (Cal. Super. Ct., Santa Cruz Cnty.); City of Santa Cruz v. Chevron, No. 17-3243 (Cal. Super. Ct. Santa Cruz Cnty.); City of Oakland v. BP P.L.C., No. RG17875889 (Cal. Super. Ct. Alameda Cnty.); City & Cnty. of San Francisco v. B.P. P.L.C., No. CGC-17-561370 (Cal. Super. Ct. S.F. Cnty.); Mayor & City Council of Baltimore v. BP P.L.C., No. 18-4219 (Balt. Cir. Ct.); Pac. Coast Fed’n of Fishermen’s Ass’ns, Inc. v. Chevron, No. CGC-18-571285 (Cal. Super. Ct. S.F. Cnty.); King Cnty. v. BP P.L.C., No. 18-2-11859-0 (Wash. Super. Ct. King Cnty.); State v. Chevron, No. PC-2018-4716 (R.I. Super. Ct.); Bd. of Cnty. Comm’rs of Boulder v. Suncor Energy (U.S.A.), No. 2018-CV-030349 (Colo. Dist. Ct.); City & Cnty. of Honolulu v. Sunoco, No. 20-380 (1st Cir. Haw.); District of Columbia v. Exxon, No. 2020 CA 002892 B (D.C. Super. Ct.); Cnty. of Maui v. Sunoco LP, No. 2CCV-20-0000283 (2d Cir. Haw.); City of Charleston v. Brabham Oil Co., No. 2020-CP-10 (S.C. Ct. Com. Pl.); City of Annapolis v. BP P.L.C., No. C-02-CV-21-000250 (Md. Cir. Ct. Anne Arundel Cnty.); Anne Arundel Cnty. v. BP P.L.C., No. C-02-CV-21-000565 (Md. Cir. Ct. Anne Arundel Cnty.); State v. Exxon Mobil Corp., No. MER-L-001797-22 (N.J. Super. Ct. Mercer Cnty.). Gibson, Dunn & Crutcher LLP represents Chevron Corp. and Chevron U.S.A., Inc. in these cases.

[2] Mayor and City Council of Baltimore v. BP P.L.C., 2024 WL 3678699, at *6-7 (Md. Cir. Ct. July 10, 2024).

[3] City of Annapolis v. BP plc, No. C-02-CV-21-000250 (Md. Cir. Ct. Jan. 23, 2025); Anne Arundel County v. BP plc, No. C-02-CV-21-000565 (Md. Cir. Ct. Jan. 23, 2025), https://marylandmatters.org/wp-content/uploads/2025/01/Memorandum-Opinion-and-Order-of-Court.pdf.

[4] State ex rel. Jennings v. BP Am. Inc., 2024 WL 98888, at *8 (Del. Super. Ct. Jan. 9, 2024).

[5] Platkin v. Exxon Mobil Corp., No. MER-L-001797-22 (N.J. Super. Ct. Law Div. Feb. 5, 2025), https://climatecasechart.com/wp-content/uploads/case-documents/2025/20250205_docket-MER-L-001797-22_opinion-and-order-1.pdf.

[6] City & Cnty. of Honolulu v. Sunoco LP, 153 Haw. 326, 356 (2023).

[7] City of New York v. Chevron Corp., 993 F.3d 81, 85, 92 (2d Cir. 2021).

[8] City of New York v. Chevron Corp., 325 F. Supp. 3d 466, 471-72, 476 (S.D.N.Y. 2018), aff’d, 993 F.3d 81.

[9] City of Oakland v. BP P.L.C., 325 F. Supp. 3d 1017 (N.D. Cal. 2018), vacated on other grounds, 960 F.3d 570 (9th Cir. 2020).

[10] Press release from May 16, 2024, Judgment from May 16, 2024 -Higher Administrative Court Berlin-Brandenburg 11th Senate, 11 A 22/21, 11 A 31/22.

[11] Press release from DUH, July 16, 2024; Federal Constitutional Court 1 BvR 1699/24.

[12] German Federal Constitutional Court 1 BvR 1699/24.

[13] German Federal Constitutional Court, Judgment from March 24, 2021, 1 BvR 2656/18, 1 BvR 78/20, 1 BvR 96/20, 1 BvR 288/20); Press release, April 29, 2021.

[14] Regional Court of Stuttgart, Judgment from September 13, 2022 – 17 O 789/21. Gibson, Dunn & Crutcher LLP represented Mercedes.

[15] Higher Regional Court of Stuttgart, Judgment from November 9, 2023 – 12 U 170/22.

[16] Higher Regional Court of Munich, Judgment from October 12, 2023 – 32 U 936/23.

[17]Press release from DUH, October 5, 2021, Press release from Wintershall Dea, November 26, 2024.

[18]Vereniging Milieudefensie v. Royal Dutch Shell plc, District Court (“Rechtbank”) The Hague, Judgment of 26. May 2021 – C/09/571932 /HA ZA 19-379 (EWeRK 2021, 163).

[19]Milieudefensie et al. v. Royal Dutch Shell plc., https://climatecasechart.com/non-us-case/milieudefensie-et-al-v-royal-dutch-shell-plc/.

[20] https://www.gibsondunn.com/landmark-eu-corporate-sustainability-due-diligence-directive-imposing-human-rights-and-environmental-due-diligence-obligations-on-eu-and-non-eu-companies-approved-by-european-parliament/.

[21] Art. 1(a) of the Directive.

[22] See our client alert addressing the First Omnibus Package.

[23] 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.

[24] 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.

[25] Turnover of branches of the relevant entity are also to be taken into account when calculating whether a threshold has been reached.

[26] See our previous client alert addressing the CSRD.

[27] Art. 24(1) of the Directive. For France and Germany, we expect the “Supervisory Authority” to be the same authority as is currently overseeing compliance with their analogous due diligence regimes.

[28] Art. 29 of the Directive.

[29] Art. 29(3)(d) of the Directive.

[30] (EU) 2023/1115.

[31] https://www.gibsondunn.com/gibson-dunn-esg-monthly-update-summer-2024/.

[32] https://www.gibsondunn.com/gibson-dunn-esg-monthly-update-december-2024/.

[33] Ford Motor Co. v. Mont. Eighth Jud. Dist. Ct., 592 U.S. 351 (2021).

[34] Mallory v. Norfolk S. Ry. Co., 600 U.S. 122 (2023).

[35] Ford, 592 U.S. at 361.

[36] Id. at 362.

[37] Id. at 355 (emphasis added).

[38] 117 F.4th 252 (5th Cir. 2024).

[39] Id. at 266.

[40] 79 F.4th 651 (6th Cir. 2023).

[41] Id. at 673-74.

[42] Estados Unidos Mexicanos v. Smith & Wesson Brands, Inc., 2024 WL 3696388 (D. Mass. Aug. 7, 2024).

[43] Id. at *11-14.

[44] Doe v. Deutsche Lufthansa Aktiengesellschaft, 2024 WL 1354523 (N.D. Cal. Mar. 29, 2024).

[45] Id. at *4.

[46] Id.

[47] Id. at *7-*8.

[48] Maggie Gardner, Saying Yes to the World, But No to Personal Jurisdiction, Transnational Litigation Blog (April 18, 2024), https://tlblog.org/saying-yes-to-the-world-but-no-to-personal-jurisdiction/.

[49] Lufthansa, 2024 WL 1354523 at *7.

[50] Mallory, 600 U.S. at 127.

[51] Id. at 134.

[52] Id. at 150 (Alito, J., concurring).

[53] Id. at 154-63 (Alito, J., concurring).

[54] Id. at 135.

[55] Madsen v. Sidwell Air Freight, 2024 WL 1160204 at *15 (D. Utah Mar. 18, 2024).

[56] See, e.g., Sahm v. Avco Corp., 2023 WL 8433158, at *4 (E.D. Mo. Dec. 5, 2023) (“absent a [state] statute providing an explicit grant of general jurisdiction over registered foreign corporations, the holding in Mallory is not applicable”); Pace v. Cirrus Design Corp., 93 F.4th 879, 899 (5th Cir. 2024) (“Mallory analyzes what a state may require; we still must examine the state law to find what it does require.”); AssetWorks USA, Inc. v. Battelle Mem’l Inst., 2023 WL 7106878, at *2 (W.D. Tex. Oct. 23, 2023) (“the holding of Mallory is narrow, and given that the Texas statute concerning registration of nonresident corporations neither mentions general jurisdiction nor mirrors the structure of the Pennsylvania statute, this Court sees no need to abandon established Fifth Circuit precedent”); Rosenwald v. Kimberly Clark Corp., 2023 WL 5211625, at *6 (N.D. Cal. Aug. 14, 2023) (Mallory “is not relevant to courts in California, because California does not require corporations to consent to general personal jurisdiction in that state when they designate an agent for service of process or register to do business”); Castillero v. Xtend Healthcare, LLC, 2023 WL 8253049, at *5 n.8 (D.N.J. Nov. 29, 2023) (“New Jersey’s registered agent statutes, unlike Pennsylvania’s, do not explicitly require a corporation to consent to personal jurisdiction”); Estate of Caviness v. Atlas Air, Inc., 693 F. Supp. 3d 1271, 1279 (S.D. Fla. Sept. 20, 2023) (“Florida law does not establish that a foreign corporation’s registration to do business in Florida amounts to consenting to general jurisdiction in Florida courts. Thus, Mallory does not apply here.”); Endo Ventures Unlimited Co. v. Nexus Pharms., Inc., 2024 WL 1254358, at *4 (E.D. Wis. March 25, 2024) (citation omitted) (“Mallory involved a consent to jurisdiction scheme that does not exist under Wisconsin’s statutes.”).

[57] Firexo, Inc. v. Firexo Grp. Ltd., 99 F.4th 304 (6th Cir. 2024)

[58] Id. at 321.

[59] Id.

[60] John F. Coyle & Robin J. Effron, Forum Selection Clauses, Non-Signatories, and Personal Jurisdiction, 97 NOTRE DAME L. REV. 187 (2021).

[61] RJR Nabisco v. Eur. Cmty., 579 U.S. 325, 346 (2016).

[62] Id. at 337.

[63] Id. at 346-50.

[64] Yegiazaryan v. Smagin, 599 U.S. 533, 536 (2023).

[65] Id. at 543-44.

[66] Id. at 544.

[67] Id. at 543.

[68] Glob. Master Int’l Grp., Inc. v. Esmond Nat., Inc., 76 F.4th 1266 (9th Cir. 2023).

[69] Id. at 1276.

[70] Id.

[71] Percival Partners Ltd. v. Nduom, 99 F.4th 696 (4th Cir. 2024).

[72] Id. at 702.

[73] Id. at 703.

[74] ZF Auto. US, Inc. v. Luxshare, Ltd., 596 U.S. 619, 632 (2022).

[75] Id. at 634-36.

[76] Webuild S.P.A. v. WSP USA Inc., 108 F.4th 138, 144 (2d Cir. 2024) (per curiam).

[77] Id. at 143.

[78] Id.at 144.

[79] ZF Automotive, 596 U.S.at 637.

[80] Intel Corp. v. Advanced Micro Devices, Inc., 542 U.S. 241, 264–65 (2004).

[81] In re Application of Venequip, S.A. v. Caterpillar Inc., 83 F.4th 1048 (7th Cir. 2023).

[82] Id. at 1052-53.

[83] Id. at 1057.

[84] Id. at 1053.

[85] Id. at 1058.

[86] Doe 1 v. Apple Inc., 96 F.4th 403 (D.C. Cir. 2024).

[87] Id. at 406.

[88] Id. at 411.

[89] Id. at 415.

[90] Id.

[91] Id. at 416.

[92] See id. at 414 n.4.

[93] https://www.hcch.net/en/news-archive/details/?varevent=985.

[94] These regimes are the Recast Brussels Regulation (Regulation (EU) No 1215/2012 of the European Parliament and of the Council of 12 December 2012 on jurisdiction and the recognition and enforcement of judgments in civil and commercial matters (recast)) and the Lugano Convention (the Convention on jurisdiction and the enforcement of judgments in civil and commercial matters (2007)).

[95] https://www.gibsondunn.com/uk-court-of-appeal-confirms-sovereign-states-are-not-immune-from-enforcement-proceedings-for-icsid-awards/.

[96] Infrastructure Services Luxembourg SARL v. Kingdom of Spain and Border Timbers Ltd v Republic of Zimbabwe [2024] EWCA Civ 1257 (Sir Julian Flaux Chancellor of the High Court, Newey LJ, Phillips LJ).

[97] Limbu & Ors v. Dyson Technology Ltd & Ors [2023] EWHC 2592 (KB); [2024] EWCA Civ 1564.

[98] See Limbu & Ors v. Dyson Technology Ltd & Ors [2023] EWHC 2592 (KB), at [27]; see also Spiliada Maritime Corporation v. Cansulex Ltd. [1987] 1 AC 460.

[99] Limbu & Ors v. Dyson Technology Ltd & Ors [2023] EWHC 2592 (KB), at [102], [122] and [124] (emphases added).

[100] Okpabi & Ors v. Royal Dutch Shell Plc & another [2021] UKSC 3; Vedanta Resources PLC and another v. Lungowe and others [2019] UKSC 20; see also https://www.gibsondunn.com/okpabi-v-shell-clarification-from-the-english-supreme-court-on-jurisdiction-and-parent-company-liability/.

[101] Law No. 2017-399 (Mar. 27, 2017).

[102] Article L. 225-102-4, I. of the French Code of commerce.

[103] Article L. 225-102-4, II. of the French Code of commerce.

[104] Article L. 225-102-5 of the French Code of commerce.

[105] Paris Court of Appeal, No. 23/14348 (June 18, 2024).

[106] Paris Judicial Tribunal, No. 20/10246 (Nov. 30, 2021).

[107] Paris Court of Appeal, No. 21/22319 (June 18, 2024).

[108] Paris Judicial Tribunal, No. 22/07100 (June 11, 2023).

[109] Paris Court of Appeal, No. 23/10583 (June 18, 2024).

[110] German Federal Court of Justice, Judgment from June 27, 2024 – I ZR 98/23.

The following Gibson Dunn lawyers prepared this update: William Thomson, Susy Bullock, Perlette Jura, Markus Rieder, and Andrea Smith, with Lochlan Shelfer, Dillon Westfall, Anna Statz, Morgan Carter, Elizabeth Dabanka, and Nicole Martinez in the US; Will Lord and Horatiu Dumitru in the UK; and Friedrich Wagner, Marc Kanzler, Simon Reibel, and Mélanie Gerrer in Europe.

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 Gibson Dunn’s Transnational Litigation, International Arbitration, or Judgment and Arbitral Award Enforcement practice groups, or the following:

Transnational Litigation:
William E. Thomson – Los Angeles (+1 213-229-7891, wthomson@gibsondunn.com)
Susy Bullock – London (+44 20 7071 4283, sbullock@gibsondunn.com)
Perlette Michèle Jura – Los Angeles (+1 213-229-7121, pjura@gibsondunn.com)
Markus S. Rieder – Munich (+49 89 189 33-260, mrieder@gibsondunn.com)
Andrea E. Smith – New York ( +1 212.351.3883, aesmith@gibsondunn.com)

International Arbitration:
Penny Madden KC – London (+44 20 7071 4226, pmadden@gibsondunn.com)
Rahim Moloo – New York (+1 212.351.2413, rmoloo@gibsondunn.com)

Judgment and Arbitral Award Enforcement:
Matthew D. McGill – Washington, D.C. (+1 202.887.3680, mmcgill@gibsondunn.com)
Robert L. Weigel – New York (+1 212.351.3845, rweigel@gibsondunn.com)

Gibson Dunn’s Workplace DEI Task Force aims to help our clients develop creative, practical, and lawful approaches to accomplish their DEI objectives following 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 February 27, the Federal Communications Commission (FCC) opened an investigation into corporate diversity practices at Verizon. In a letter to Verizon’s CEO Hans Vestberg, FCC Chairman Brendan Carr wrote that he “expected” all companies regulated by the FCC “to end invidious forms of DEI discrimination,” and he was “concerned by the apparent lack of progress” at Verizon to end its DEI programs. In the letter, Carr cited to Verizon’s public facing materials that “show the company’s continued promotion of DEI,” including a company statement regarding its commitment to diversity. Carr also cited materials allegedly obtained by a whistleblower. In a similar letter to Comcast’s CEO, Brian Roberts, Carr wrote “[t]he FCC will be taking fresh action to ensure that every entity the FCC regulates complies with the civil rights protections enshrined in the Communications Act . . . including by shutting down any programs that promote invidious forms of DEI discrimination.”

On February 21, the United States District Court for the District of Maryland preliminarily enjoined enforcement of key aspects of EO 14151 (“Ending Radical and Wasteful Government DEI Programs and Preferencing”) and EO 14173 (“Ending Illegal Discrimination and Restoring Merit-Based Opportunity”). The case is Nat’l Ass’n of Diversity Officers in Higher Educ., et al., v. Donald J. Trump, et al., No. 1:25-cv-00333-ABA, Dkt. 44–45 (D. Md. 2025). Specifically, the court halted enforcement of EO 14173’s requirement that federal contractors and grant recipients certify they do not “operate any programs promoting DEI that violate any applicable Federal anti-discrimination laws” and “agree that [their] compliance in all respects with all applicable federal anti-discrimination laws is material” for purposes of the False Claims Act. The court also enjoined the government from freezing or terminating existing “equity-related” contracts and grants under EO 14151. And while the court did not enjoin the Attorney General from “engaging in investigation” of DEI programs, it enjoined the enforcement provision of EO 14173, including the requirement that the Attorney General take “appropriate measures to encourage the private sector to end illegal discrimination and preferences.”

The injunction only applies to the ten agencies identified as defendants in this complaint, as well as “other persons who are in active concert or participation with Defendants.” On February 27, the plaintiffs filed a motion for clarification as to whether “other persons who are in active concert or participation with Defendants” extends to other non-defendant agencies. The government filed a motion to stay the ruling on February 27, which the court rejected on March 3. The government has also filed a notice of appeal with the Court of Appeals for the Fourth Circuit, and on March 4 filed a motion for stay pending appeal. For more information on this case, please see our February 24, 2025 client alert.

On February 14, America First Legal (AFL) sent a letter to Acting Secretary of Labor Vince Micone and Acting Director of the OFCCP Michael Schloss to “encourage” the U.S. Department of Labor to “immediately exercise” authority to “enforce nondiscrimination provisions of federal regulations” in light of EO 14173, which rescinded prior Executive Order 11246 and takes the position that “race- and sex-based employment practices” including those “under the guise of” DEI, “can violate the civil-rights laws of this Nation.” AFL’s letter states that Acting Secretary Micone has already directed the Department to “[c]ease and desist all investigative and enforcement activity” under the rescinded order, but urges the Department to “go further,” and enforce the “equal opportunity clause” contained in all federal government contracts. AFL urged the Department to use these equal opportunity clauses to initiate enforcement actions against contractors AFL has “identified” as engaged in “prohibited discrimination” based largely on the “contractors’ own public statements.” In an appendix and exhibits attached to the letter, AFL identifies Lyft, Mars, PricewaterhouseCoopers LLP, Twilio Inc., CBS Broadcasting, Meta Platforms, and Northwestern University as entities purportedly engaged in “prohibited discrimination.”

On February 28, the Department of Education published guidance entitled “Frequently Asked Questions About Racial Preferences and Stereotypes Under Title VI of the Civil Rights Act.” The guidance includes fifteen questions and answers addressing a range of issues relating to DEI initiatives in educational institutions. Among other things, the guidance notes that “a school’s responsibility not to discriminate against students applies to the conduct of everyone over whom the school exercises some control,” including third party contractors. It explains that Title VI extends to school procurement policies, including hiring substitute teachers, special education providers, and cafeteria services. It states that application essay prompts that “require applicants to disclose their race” are illegal. And it sets forth a “non-exhaustive list” of evidence that may raise an inference of discriminatory intent, including “(1) whether members of a particular race were treated differently than similarly situated students of other races; (2) the historical background or administrative history of the policy or decision; (3) whether there was a departure from normal procedures in making the policy or decision; (4) whether there was a pattern regarding policies or decisions towards members of a particular race; (5) statistics demonstrating a pattern of the policy or decision having a greater impact on members of a particular race; and (6) whether the school was aware of or could foresee the effect of the policy or decision on members of a particular race.” In response to another frequently asked question on whether Title VI permits schools to teach about race or DEI, the document says that the Department “enforces federal civil rights law consistent with the First Amendment,” and that federal statutes independently “prohibit the Department from exercising control over the content of school curricula.” But the document adds that schools are still prohibited from creating a “racially hostile environment” through the materials they teach, which depends on “the facts and circumstances” of individual cases. The guidance describes materials that characterize students of a certain group as “oppressors” or “deliberately assign[s] them intrinsic guilt based on the actions of their presumed ancestors” as potentially creating a hostile environment if those materials were used at an elementary school, but would be “less likely to create a racially hostile environment” “in a class discussion at a university.” The guidance also described “more extreme practices at a university,” including “privilege walks,” segregated “presentations and discussions with guest speakers,” and “mandating courses, orientation programs, or trainings that are designed to emphasize and focus on racial stereotypes” as “forms of school-on-student harassment that could create a hostile environment under Title VI.”

Media Coverage and Commentary:

Below is a selection of recent media coverage and commentary on these issues:

Wall Street Journal, “Supreme Court Signals Minority Groups Get No Edge in Bias Suits” (February 26): Wall Street Journal’s Erin Mulvaney and Jess Bravin report on the Supreme Court’s recent oral argument in Ames v. Ohio Department of Youth Services, a case that could make it easier for plaintiffs to bring reverse-discrimination lawsuits. In that case, plaintiff Marlean Ames claims she was denied a promotion and demoted at the Ohio Department of Youth Services because she is heterosexual, while gay employees were promoted to the positions she sought. A federal appeals court in Cincinnati dismissed her lawsuit, finding that she had failed to prove the existence of “background circumstances” suggesting that the employer was hostile towards heterosexual employees, a test not typically applied in cases filed by plaintiffs from underrepresented groups. Federal appeals courts are divided on the question of whether this additional “background circumstances” showing is required in reverse-discrimination cases, with five courts imposing the test and three courts rejecting it. This case is part of a broader debate over reverse discrimination, fueled by growing challenges to DEI programs. In their article, Bravin and Mulvaney cited to research by Gibson Dunn to note that “[l]awsuits alleging that DEI programs discriminate against white people and other members of majority groups are mushrooming.” The authors note that Gibson Dunn’s survey found that 40 such cases were filed between October 2019 and the Supreme Court’s decision in SFFA v. Harvard, but that nearly 100 lawsuits have been filed since, with 60 in 2024 alone. Bravin and Mulvaney further cite legal experts who predict that a ruling in favor of Ames could lead to a further surge in similar claims, intensifying the debate over DEI initiatives in the workplace.
Reuters, “JPMorgan CEO Jamie Dimon reaffirms DEI commitment despite industry shift, CNBC reports” (February 24): Reuters’ Niket Nishant reports that JPMorgan Chase CEO Jamie Dimon reaffirmed the bank’s commitment to DEI efforts, despite a growing trend of corporate retreat from such initiatives. Dimon confirmed that the bank will continue its outreach to Black, Hispanic, LGBT, veteran, and disabled communities. Nishant reports that, earlier this month, the bank said it expects “to be criticized by activists, politicians and other members of the public” concerning the positions it takes regarding DEI and other public policy issues.
CNN, “Target is getting hit from all sides on DEI” (February 21): CNN’s Nathaniel Meyersohn reports that Target faces a lawsuit filed by Florida Attorney General James Uthmeier and America First Legal, alleging that the company concealed the financial risks of its DEI initiatives, including its 2023 Pride Month merchandise collection. The lawsuit follows Target’s decision to scale back its DEI policies in response to conservative activist pressure and backlash against its Pride-themed products, particularly “tuck-friendly” swimsuits for transgender customers. Gibson Dunn partner Jason Schwartz commented on the “new and growing trend of using securities lawsuits to attack corporate DEI programs” by “challenging whether risk disclosures were adequate.” Although these lawsuits are difficult to prove, according to Schwartz, “[t]his kind of public-private partnership with state attorneys general will likely pave the way for others to follow.” Meanwhile, Meyersohn reports, Target also has been subjected to “fierce . . . blowback from DEI supporters” and has seen decreased foot traffic in its stores.

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:

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 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.
- Latest update: On February 21, the court granted a motion to extend the time to file an answer. PayPal is represented by Gibson Dunn in this matter.
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: The docket does not yet reflect that the defendants have been served.
Landscape Consultants of Texas, Inc. et al. v. City of Houston, Texas et al., No. 4:23-cv-03516-DH (S.D. Tex. 2023): White-owned landscaping companies challenged the City of Houston’s government contracting set-aside program for “minority business enterprises” under the Fourteenth Amendment and Section 1981. On November 29, 2024, plaintiffs and defendant Midtown Management District filed cross-motions for summary judgment. Midtown Management argued that the plaintiffs failed to show the unconstitutionality of the programs. The City of Houston filed its own motion for summary judgment on November 30, contending that the plaintiffs lack standing and that the programs satisfy the requirements of the Equal Protection Clause.
- Latest update: On February 11, 2025, the court denied all motions for summary judgment in a single page order. Trial is scheduled to commence April 21, 2025.
Strickland et al. v. United States Department of Agriculture et a.l, No. 2:24-cv-00060-Z (N.D. Tex. 2024): On March 3, 2024, 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 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 February 10, 2025, the parties requested a 30-day stay of proceedings to discuss a resolution following the USDA’s determination to “no longer employ the race- and sex-based ‘socially disadvantaged’ designation” in light of recent Executive Orders. The court granted the request on February 11, 2025.

2. Employment discrimination and related claims:

Diemert v. City of Seattle, et al., No. 2:22-cv-01640 (W.D. Wash. 2022): On November 16, 2022, the plaintiff, a white male, sued his former employer, the City of Seattle. The plaintiff alleged that the City’s diversity initiatives, which allegedly included mandatory diversity trainings involving critical race theory and encouraging participation in “race-based affinity groups, caucuses, and employee resource groups,” amounted to racial discrimination in violation of Title VII and the Fourteenth Amendment. The plaintiff also alleged that he had been subjected to a hostile work environment. On August 16, 2024, the City filed a motion for summary judgment, arguing that the plaintiff had “resigned voluntarily because he had already moved to Texas and did not wish to return to in-person work.” The City further argued that while it required employees to complete two diversity activities per year, it did not penalize employees who did not fulfill the requirement. On September 7, 2024, the plaintiff filed his opposition to the motion for summary judgment, arguing that he experienced discrimination that the City failed to remediate.
- Latest update: On February 10, 2025, the court granted the City’s motion for summary judgment, holding that a reasonable juror could not find the City’s diversity initiatives created a hostile work environment or that the plaintiff experienced discrimination or retaliation. On February 24, 2025, the plaintiff filed a notice of appeal to the Ninth Circuit.

EEOC v. Battleground Restaurants, No. 1:24-cv-00792 (M.D.N.C. 2024): On September 25, 2024, the U.S. Equal Employment Opportunity Commission (EEOC) filed a lawsuit against a sports bar chain, Battleground Restaurants, in federal district court in North Carolina. The lawsuit alleges that the chain refused to hire men for its front-of-house positions, such as server or bartender jobs, in violation of Title VII. On November 25, 2024, Battleground Restaurants moved to dismiss or strike an improperly named defendant. Battleground Restaurants argued that the EEOC’s pattern or practice claims are “insufficiently pled, conclusory, and not plausible on their face,” and that the EEOC failed to conduct a “reasonable investigation” or give “adequate notice” to Battleground Restaurants.
- Latest update: On February 24, 2025, the court denied the defendant’s motion to dismiss, finding the EEOC complied with notice requirements, plausibly alleged a pattern or practice of disparate sex discrimination, and can properly include Battleground Restaurants as a defendant.

3. Challenges to statutes, agency rules, and regulatory decisions:

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 Executive Order 14151, “Ending Radical and Wasteful Government DEI Programs and Preferencing,” and Executive Order 14173, “Ending Illegal Discrimination and Restoring Merit-Based Opportunity.” CWIT alleges that, because of the orders, its federal grant funding was frozen and although the funding was restored following a temporary restraining order issued in another proceeding, “CWIT’s grants remain under threat of termination.” CWIT claims that these executive orders violate principles of separation of powers, the First and Fifth Amendments, and the Spending Clause of the U.S. Constitution.
- Latest update: The docket does not yet reflect that the defendants have been served.

Do No Harm v. Edwards, No. 5:24-cv-16-JE-MLH (W.D. La. 2024): On January 4, 2024, Do No Harm sued then-Governor Edwards of Louisiana over a 2018 law requiring a certain number of “minority appointee[s]” to be appointed to the State Board of Medical Examiners. Do No Harm brought the challenge under the Equal Protection Clause and requested a permanent injunction. On February 28, 2024, Governor Edwards answered the complaint, denying all allegations including allegations related to Do No Harm’s standing. On December 20, 2024, Governor Jeff Landry—who replaced Governor Edwards—moved to dismiss for lack of subject matter jurisdiction. He contended that, because he signed a declaration indicating that he does not intend to enforce the challenged law, the plaintiff’s claims are moot. Governor Landry also argued that the suit is barred by sovereign immunity. On January 10, 2025, Do No Harm filed an opposition to the motion to dismiss, asserting that Governor Landry’s declaration did not moot the case because the statute remains on the books and a “future governor will be bound to enforce the racially discriminatory aspects of [the law] regardless of Governor Landry’s declaration.” On January 30, 2025, Do No Harm filed a motion for summary judgment, arguing: (1) Do No Harm has organizational standing, (2) the claim is not moot because all future governors are bound to enforce the law, and (3) the law does not satisfy strict scrutiny.
- Latest update: On February 20, 2025, Governor Landry filed an opposition to the motion for summary judgment, asserting again this his declaration mooted Do No Harm’s claims, and that the suit is barred by sovereign immunity because Governor Landry “lacks a sufficient enforcement connection by reason of his vow to withhold enforcement.”

Do No Harm v. Cunningham, No. 25-cv-00287 (D. Minn. 2025): On January 24, 2025, Do No Harm sued Brooke Cunningham, Commissioner of the Minnesota Department of Health, challenging a state law that requires the Commissioner to consider race in appointing members to the Minnesota Health Equity Advisory and Leadership Council. Do No Harm alleges that state law requiring that the board include representatives from either “African American and African heritage communities,” “Asian American and Pacific Islander communities,” “Latina/o/x communities,” and “American Indian communities and Tribal governments and nations,” violates the Fourteenth Amendment. Plaintiffs seek a permanent injunction and declaratory relief.
- Latest update: On February 20, 2025, Cunningham answered the complaint, denying all allegations related to the violation of the plaintiff’s constitutional rights. She asserted five affirmative defenses: (1) the complaint fails to state a claim; (2) the plaintiff lacks standing; (3) the claims are unripe, (4) the plaintiff has suffered no harm or damages as a result of the Defendant, and (5) the claims are barred by sovereign immunity.

Doe 1 v. Office of the Director of Nat’l Intel., No. 1:25-cv-00300 (E.D. Va. 2025): On February 17, eleven unnamed employees of the Office of the Director of National Intelligence and the Central Intelligence Agency sued their employers after they were put on administrative leave from their DEI-related positions. They assert that the decision to put and leave 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, plaintiffs moved for a temporary restraining order on February 17. The court then entered an administrative stay to allow additional briefing on the motion. On February 24, plaintiffs filed an amended complaint adding eight new unnamed plaintiffs to the case.
- Latest update: The court held a hearing on plaintiffs’ motion for a temporary restraining order on February 27. That same day, the court denied the motion in a single page order and lifted the administrative stay.

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, the National Urban League, the National Fair Housing Alliance, and the AIDS Foundation of Chicago filed a complaint against the Trump Administration, alleging that the President’s recent Executive Orders targeting DEI (EO 14151, EO 14168, and EO 14173) infringe on the organizations’ rights to free speech and due process by penalizing them for “expressing viewpoints in support of DEIA and transgender people.” The organizations allege that orders are “extraordinarily vague” because they “equate banned ‘DEIA’ with any equity-related work,” which could include work authorized by civil rights law. The plaintiffs allege that the Executive Orders attempt to “chill and censor their speech,” as well as “intimidate, threaten, and ultimately stop Plaintiffs from performing services central to their missions.” The complaint also alleges that the Executive Orders have a clear discriminatory purpose: “to malign the targeted communities,” including people of color, LGBTQ people, and people with disabilities. Plaintiffs seek declaratory relief and a permanent injunction barring enforcement and implementation, including a court order that all agency-wide directives implementing the Executive Orders be permanently rescinded. Plaintiffs filed a motion for a preliminary injunction on February 28.
- Latest update: Defendants’ opposition to the preliminary injunction order is due March 12.

San Francisco AIDS Foundation et al. v. Donald J. Trump et al., No. 3:25-cv-01824 (N.D. Cal. 2025): On February 20, several LGBTQ+ groups filed suit against President Trump, Attorney General Pam Bondi, and several other government agencies and actors, challenging the President’s recent Executive Orders targeting DEI (EO 14151, EO 14168, and EO 14173). The complaint alleges that these EOs are unconstitutional on several grounds, including the Equal Protection Clause of the Fifth Amendment, the Due Process Clause of the Fifth Amendment, and the Free Speech Clause of the First Amendment. It also argues the EOs are ultra vires and exceed the authority of the presidency. Plaintiffs seek preliminary and permanent injunctive relief.
- Latest update: On March 3, plaintiffs filed a motion for preliminary injunction.

4. Board of director or stockholder actions:

Craig v. Target Corp., No. 2:23-cv-00599-JLB-KCD (M.D. Fla. 2023): America First Legal sued Target and certain Target officers on behalf of a shareholder, claiming the board falsely represented that it monitored social and political risk, when instead it allegedly focused only on risks associated with not achieving ESG and DEI goals. The plaintiffs allege that Target’s statements violated Sections 10(b) and 14(a) of the Securities Exchange Act of 1934 and that Target’s May 2023 Pride Month campaign triggered customer backlash and a boycott that depressed Target’s stock price. On December 4, 2024, the district court denied defendant’s motion to dismiss, concluding that the plaintiffs sufficiently pleaded both their Section 10(b) and Section 14(b) claims. On January 6, 2025, the court entered a stay pending mediation between the parties. On January 17, 2025, Target filed a status update regarding the parties’ proposed mediation, asserting that plaintiffs “would only provide dates of availability to mediate if [Target] agreed to do so on a class-wide basis.” In its filing, Target argued that the case is not a class action, the Private Securities Litigation Reform Act prohibits plaintiffs from “purporting to act on behalf of a hypothetical class,” and the law requires “shareholders who file a class action complaint to provide notice to other shareholders” which plaintiffs have not done. Target asked the court to “direct Plaintiffs to provide their availability to mediate” on an individual basis. On January 21, 2025, plaintiffs filed a Response to Target’s Status Update and a Motion to Lift the Stay. Plaintiffs asserted that Target “misrepresent[ed] the dialogue between the parties,” and moved to lift the stay to “enable Plaintiffs to pursue, among other things, (1) amending the complaint to add class allegations; and (2) determining the lead plaintiff under 15 U.S.C. § 78u-4(a)(3).” Plaintiffs asked the court to reopen the action, lift the stay, and cancel the mediation conference. On January 31, 2025, Target filed an opposition to plaintiffs’ motion to lift the stay, asserting that plaintiffs failed to “satisfy the applicable good cause standard for canceling a court-ordered mediation.”
- Latest update: On February 11, 2025, the court denied the motion to lift the stay, stating that it “will entertain briefing on Plaintiffs’ request to amend their Complaint before ruling on whether to lift the stay.”
State Board of Administration of Florida v. Target, No. 2:25-cv-00135 (M.D. Fla. 2025): On February 20, 2025 the State Board of Administration of Florida sued Target and certain Target officers on behalf of a class of Target stockholders, claiming the Target board of directors represented that it monitored social and political risk, when instead it allegedly focused only on risks associated with not achieving ESG and DEI goals. The plaintiff alleges that Target’s statements violated Sections 10(b),14(a), and 20(a) of the Securities Exchange Act of 1934 and that Target’s May 2023 Pride Month campaign triggered customer backlash and a boycott that depressed Target’s stock price. This suit relates to, and arises out of the same operative facts as, Craig v. Target Corp., No. 2:23-cv-00599-JLB-KCD (M.D. Fla. 2023).
- Latest update: As of this update, the defendant has not yet been served.

The following Gibson Dunn attorneys assisted in preparing this client update: Jason Schwartz, Mylan Denerstein, Zakiyyah Salim-Williams, Cynthia Chen McTernan, Zoë Klein, Cate McCaffrey, Jenna Voronov, Emma Eisendrath, Felicia Reyes, Allonna Nordhavn, Janice Jiang, Laura Wang, Maya Jeyendran, Kristen Durkan, Ashley Wilson, Lauren Meyer, Kameron Mitchell, Chelsea Clayton, Albert Le, Heather Skrabak, and Godard Solomon.

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)

Class and collective actions are expanding globally. Our “International Class Action Update” highlights recent developments in the EU and UK.

In this edition we discuss new developments on the EU level which will incentivize future class actions. The new EU Product Liability Directive expands strict liability to software and AI products and will lend itself to private enforcement through class actions. A recent trend to allow lump-sum damages for data privacy violations will also attract class action plaintiffs.

Additionally, we update you on the status of collective redress in the UK and selected EU jurisdictions (Germany, France, Italy, Belgium, Spain).

I. New Class Action Incentives in EU Law

The EU’s Directive (EU) 2020/1828 on Representative Actions mandates collective redress in all member states. Even though not all states have implemented compliant regimes yet, the EU continues to expand the substantive basis for class actions. We also note a trend towards using lump-sum damages, facilitating class actions for plaintiffs.

A. New EU Product Liability Directive

The new Product Liability Directive (EU 2024/2853) incentivizes class actions by easing the burden of proof, reducing liability limits, and including software and AI under the strict liability regime. The Directive also introduces a discovery mechanism, allowing both parties to demand evidence from each other that is relevant to their case. Member States must implement the Directive by December 9, 2026.

B. Non-material Damages in Data Privacy Litigation

On January 8, 2025, the General Court of the European Union ruled that the EU Commission must compensate an individual EUR 400 for non-material damage after personal data was transferred to the US upon visiting an EU webpage (Case T-354/22). The court assessed the compensation solely based on equity.

This decision, which can still be appealed, will further encourage class actions in the data privacy sector. If plaintiffs do not need to demonstrate individual material damages, class actions for widespread breaches become more attractive to qualified entities and litigation funders. In Germany, the Federal Court of Justice recently issued a similar decision, setting the amount for non-material damages after a data breach at EUR 100 (see below).

II. Germany

A. New “Leading Case Procedure”

In late 2024, Germany introduced a “Leading Case Procedure” at the Federal Court of Justice to clarify legal issues in mass proceedings. The court can designate a case as a “Leading Case” and decide it even if parties settle or withdraw their appeal. This non-binding decision guides lower courts on similar legal questions.

Immediately after the new procedure was in effect, the Federal Court of Justice selected its first “Leading Case” out of a swath of consumer claims alleging illegal data scraping from a social media website. On November 18, 2024, the Federal Court of Justice ruled that the consumer was entitled to a lump sum of EUR 100 without having to show actual harm (the decision is published under docket number VI ZR 10/24).

Shortly after the Federal Court of Justice’s decision, Germany’s best known consumer protection agency filed a Representative Action against the social media website, inviting all potentially affected consumers to join. This showcases the future interplay between representative actions and the new “Leading Case Procedure”: When the Federal Court of Justice issues a Leading Case Decision in favor of consumers, qualified entities will be quick to file new Representative Actions, compelling companies to defend against both individual mass claims and the Representative Action simultaneously.

B. Status of Representative Actions

Implemented in 2023, the German Representative Action allows Qualified Entities to seek damages for consumers or small businesses (for an in-depth discussion see our previous alert). Since 2023, seven new Representative Actions have been filed, adding to the approximately 30 collective actions already pending under the previous procedural regime introduced in 2018. Almost all cases under the new regime concern unilateral customer price increases in video streaming, telecommunications, energy, and insurance contracts.

III. France

France is currently broadening its class action regime. On December 15, 2022, a bill (“Proposition de loi relative au régime juridique des actions de groupe”, no. 639) was submitted and subsequently amended several times. It was debated in public session on February 6, 2024. The latest version (Text no.°154, transmitted to the Assemblée Nationale on July 23, 2024) is currently undergoing its second reading in the Assemblée Nationale.

The bill, while complying with European law, aims to encourage class actions and unify applicable legal procedures:

Class actions may seek the cessation of a failure or compensation for damages in any matter, with exceptions for health and work.
While the current legislation provides for compensation for specific damages, the bill would allow for all damages to be compensated.
The bill introduces the possibility of cross-border class actions.

Meanwhile, several class actions are pending under the existing regime. Google, involved in a class action launched by UFC-Que-Choisir in June 2019, ultimately avoided a potential EUR 27 billion penalty due to the inadmissibility of the class action.

IV. Italy

Italy transposed the EU Collective Redress Directive through Decree No. 28 on March 23, 2023. This Decree complements Italy’s pre-existing class action system, resulting in a dual-track approach to collective redress.

The first mechanism, the “Azione di Classe”––which is governed by Law 31/2019––has been in force since 2021 and applies to claims based on homogeneous individual rights. The second, the Representative Action, was introduced by Decree as a direct transposition of the EU Directive. Notably, the new framework expands consumer protection beyond homogeneous individual rights, allowing for a broader range of claims. It also enables qualified entities from other Member States to initiate proceedings in Italy, strengthening cross-border collective redress.

The impact of this reform is already evident in recent legal actions. Consumer associations, such as Movimento Consumatori, have used the Representative Action to challenge abusive clauses in rental agreements. Cases against Goldcar, Sicily by Car, and Sixt targeted excessive penalties and unfair fees imposed on consumers. Italian courts ruled in favor of the claimants, ordering the removal of unlawful clauses and requiring companies to notify affected customers and publicize the rulings.

These cases highlight how Italy’s dual-track system provides distinct but complementary tools to challenge allegedly unfair business practices. The Class Action allows individuals with similar claims to seek collective redress, while the Representative Action broadens the scope by enabling consumer organizations to act on behalf of a wider range of affected parties.

V. Belgium

Belgium transposed the EU Directive on Representative Actions effective June 10, 2024. It expanded the scope of its pre-existing class action system to include all consumer protection provisions required under the Directive on Representative Actions.

Consumers now have to opt-in to participate in Representative Actions. Before implementing the EU Directive, Belgian judges had to decide between an opt-in or opt-out system on a case-by-case basis.

Eleven class action cases have been filed to date in Belgium, most led by Test-Achat/Test-Aankoop, the main consumer protection organization. These actions were brought in various sectors (e.g., transportation, telecom, culture, energy, electronic goods), usually against large Belgian or globally operating companies.

All these eleven cases were still filed under the pre-existing procedural regime.

VI. Spain

Spain has not yet transposed the EU Collective Redress Directive on representative actions into its national legal framework, despite the deadline expired in December 2022.

This delay has drawn criticism from consumer organizations. For example, in December 2024, the Financial Users Association, supported by European Consumer Organization, filed a complaint against Spain before the European authorities for failing to transpose the directive within the established timeframe. It remains to be seen how and when Spain will fully transpose the Directive.

VIII. United Kingdom

The United Kingdom continues to see a huge growth in collective litigation even though it does not have a fully-fledged US-style class action regime. In particular and most akin to US-style class actions, there is currently a large number of (mostly) opt-out antitrust class actions at various stages before the UK’s specialist competition tribunal (the Competition Appeal Tribunal) across a wide range of sectors (particularly the technology sector) that are increasingly testing the boundaries of competition law. The actions have a combined alleged value of between £100 – £200 billion.

However, two recent developments suggest that these claims may face increased scrutiny going forward:

First, in December 2024, the Competition Appeal Tribunal dismissed the first antitrust class action to proceed to full trial in Le Patourel v BT Group (docket number 1381/7/7/21). The Class Representative had sought damages of over £1.1 billion arguing that BT’s prices for telephony services were excessive and unfair. The Competition Appeal Tribunal ruled that BT’s prices were not unfair and, in doing so, made it clear the difficulties class representatives may face in proving unfairness in these types of cases.

Second, in January 2025 in Christine Riefa Class Representative Limited v Apple Inc. & others (docket number 1602/7/7/23), the Competition Appeal Tribunal refused, for the first time, the certification of a class action, on the basis that the class representative was unsuitable. This was because the Competition Appeal Tribunal found that the class representative did not understand her own funding arrangements and there were questions about her ability to act independently and in the interests of the class members. The decision makes it clear that class representatives “cannot be, merely a figurehead for a set of proceedings being conducted by their legal representatives” and that future class representatives, and their funding arrangements, will face greater scrutiny going forward.

Whilst these two developments are not expected to dampen activity, 2025 will be a key year for the regime given that trials and judgments in a number of class actions are expected to provide further insight into the Competition Appeal Tribunal’s operation of its class action regime.

There is a growing body of examples of class settlements in connection with the Competition Appeal Tribunal’s antitrust class actions regime, most notably the approval by the Competition Appeal Tribunal on February 21, 2025 of a £200 million settlement of the largest class action claim to date, brought in respect of a class of 44 million UK consumers in relation to Mastercard’s interchange fees.

In addition, there are outstanding appeals in the Court of Appeal and Supreme Court relating to the certification test and enforceability of litigation funding that will be heard this year that are likely to further shape the regime.

Beyond class actions stricto sensu, the UK remains relatively fertile ground for collective actions generally, with an active slate of cases currently before the High Court under Group Litigation Orders, a case-management device allowing large numbers of similar claims to be heard together, in relation to matters involving financial sector wrongdoing, diesel emissions cases, product liability claims, environmental breaches (in the UK and overseas), industrial and transportation accidents, misfeasance by public officials, etc.

The following Gibson Dunn lawyers prepared this update: Alexander Horn, Eric Bouffard, Patrick Doris, Markus Rieder, Friedrich Wagner, Yannis Ioannidis, Dan Warner, Kahn Scolnick, and Chris Chorba.

Gibson Dunn attorneys 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 in the firm’s Class Actions, Litigation, or Appellate and Constitutional Law practice groups, or any of the following lawyers:

Frankfurt:
Alexander Horn (+49 69 247 411 537, ahorn@gibsondunn.com)

Munich:
Markus Rieder – Munich (+49 89 189 33-260, mrieder@gibsondunn.com)
Friedrich A. Wagner (+49 89 189 33-262, fwagner@gibsondunn.com)

Paris:
Eric Bouffard (+33 1 56 43 13 00), ebouffard@gibsondunn.com)

Brussels:
Yannis Ioannidis – (+32 2 554 72 08, yioannidis@gibsondunn.com)

London:
Patrick Doris (+44 20 7071 4276, pdoris@gibsondunn.com)
Dan Warner (+44 20 7071 4213, dwarner@gibsondunn.com)

United States:
Theodore J. Boutrous, Jr. – Los Angeles (+1 213.229.7000, tboutrous@gibsondunn.com)

Christopher Chorba – Co-Chair, Class Actions Group, Los Angeles (+1 213.229.7396, cchorba@gibsondunn.com)

Theane Evangelis – Co-Chair, Litigation Group, Los Angeles (+1 213.229.7726, tevangelis@gibsondunn.com)

Lauren R. Goldman – Co-Chair, Technology Litigation Group, New York (+1 212.351.2375, lgoldman@gibsondunn.com)

Kahn A. Scolnick – Co-Chair, Class Actions Group, Los Angeles (+1 213.229.7656, kscolnick@gibsondunn.com)

Bradley J. Hamburger – Los Angeles (+1 213.229.7658, bhamburger@gibsondunn.com)

Michael Holecek – Los Angeles (+1 213.229.7018, mholecek@gibsondunn.com)

Lauren M. Blas – Los Angeles (+1 213.229.7503, lblas@gibsondunn.com)

We are pleased to provide you with the February edition of Gibson Dunn’s digital assets regular update. This update covers recent legal news regarding all types of digital assets, including cryptocurrencies, stablecoins, CBDCs, and NFTs, as well as other blockchain and Web3 technologies. Thank you for your interest.

ENFORCEMENT ACTIONS

UNITED STATES

SEC Dismisses Crypto Enforcement Actions
The SEC has agreed to dismiss several crypto enforcement actions, including those against Coinbase, Consensys, and Cumberland DRW. These requested pauses on crypto litigation under acting SEC Chairman Mark Uyeda signals a potential shift in enforcement priorities. Coinbase; Coindesk; The Block.
SEC Closes Investigations into OpenSea, Robinhood Crypto, Uniswap Labs, and Gemini
On February 21, OpenSea announced that the SEC officially closed its investigation into the non-fungible token marketplace without pursuing enforcement action. According to OpenSea, the SEC Staff had issued it a Wells notice in August 2024, in which the SEC Staff stated that the SEC was planning to pursue an enforcement action against the platform, alleging OpenSea may have been operating as an unregistered securities marketplace. On February 24 and February 26, Robinhood, Uniswap, and Gemini made similar announcements that the SEC had closed investigations into their platforms. X (OpenSea); Robinhood; Uniswap; X (Gemini).
HashFlare Operators Plead Guilty to Crypto Fraud
On February 12, two operators of HashFlare, a defunct cryptocurrency mining service, pleaded guilty to charges of conspiracy to commit wire fraud, in the U.S. District Court for the Western District of Washington, in connection with their operation of a crypto Ponzi scheme affecting hundreds of thousands of individuals globally. From 2015 to 2019, HashFlare allegedly sold more than $577 million in mining contracts despite not possessing the required computing capacity to perform the mining it purported to perform. The two operators agreed to forfeit assets worth more than $400 million. Sentencing is scheduled for May 8. DOJ; The Block.
Las Vegas Business Owner Indicted for Alleged Crypto Ponzi Scheme
On February 14, Brent Kovar, owner of Profit Connect, was arrested pursuant to an indictment charging him with wire fraud, mail fraud, and money laundering, between 2017 and 2021. Kovar allegedly misrepresented that Profit Connect used artificial intelligence powered by a supercomputer to mine cryptocurrency, paid a fixed rate of return, and provided a 100% money-back guarantee while, in reality, Kovar allegedly used investor funds for his personal benefit, to operate Profit Connect, and to repay other investors as if such proceeds came from crypto mining. DOJ; The Block.
Canadian Man Indicted for Alleged $65 Million Fraudulent Scheme
On February 3, a criminal indictment was unsealed in the U.S. District Court for the Eastern District of New York, charging Andean Madjedovic with, among other things, wire fraud and money laundering. Madjedovic allegedly exploited vulnerabilities in two decentralized finance protocols to obtain approximately $65 million in digital assets from investors in the protocols between 2021 and 2023. According to the indictment, Madjedovic borrowed hundreds of millions of dollars in tokens to engage in deceptive trading that he knew would cause the smart contracts underlying the protocols to falsely calculate key variables, which allowed Madjedovic to withdraw millions of dollars of investor funds at artificial prices. According to the government, Madjedovic is currently at large. DOJ; Indictment.
Market Maker CLS Global Agrees to Plead Guilty to Charges Relating to Cryptocurrency “Wash Trading”
On January 21, DOJ announced that CLS Global, a financial services firm that functioned as a market maker, agreed to resolve criminal charges in the U.S. District Court for the District of Massachusetts relating to its fraudulent manipulation of cryptocurrency trading volume. According to the terms of the plea, which was accepted by a judge on February 7, 2025, CLS Global will pay $428,059 to the government, and will be prohibited from participating in U.S. cryptocurrency markets. On January 21, CLS Global also agreed to resolve parallel claims brought by the SEC. DOJ.
U.S. Attorney’s Office for the District of Massachusetts Files Civil Forfeiture Action to Recover Proceeds of Cryptocurrency Fraud Scheme
On February 19, the U.S. Attorney’s Office for the District of Massachusetts filed a civil forfeiture action to recover various cryptocurrencies, with an estimated value of more than $1 million, which are alleged to be proceeds of an online investment fraud scheme, sometimes called a “pig-butchering” scheme. According to DOJ, the civil forfeiture action stems from an investigation into a social media group called “Financial Independence Forum,” that instructed victims to transfer funds to an allegedly fraudulent trading platform. DOJ; Complaint.

REGULATION AND LEGISLATION

UNITED STATES

Senate Votes to Repeal IRS DeFi Broker Rule
In a major bipartisan win for the crypto industry, the Senate voted 70-27 to pass a joint resolution under the Congressional Review Act that would repeal a Biden-era rule requiring DeFi platforms to report user transactions to the IRS. The resolution is expected to pass in the House and be signed by the President. Once enacted into law, the resolution will not only effectively repeal the DeFi broker rule but also will prohibit the IRS from issuing a new rule that is “substantially the same” as the repealed rule absent new legislation. The resolution will not repeal the IRS’s July 2024 broker rule applicable to custodial digital asset trading platforms. Coindesk.
Former CTFC Commissioner Brian Quintenz Nominated to Lead the CFTC
On February 12, Brian Quintenz was nominated as Chairman of the Commodity Futures Trading Commission (CFTC). Quintenz previously served as a CFTC Commissioner between 2017 and 2021 and most recently worked as head of policy for the cryptocurrency arm of venture-capital firm a16z. Known as a crypto advocate, Quintenz stated in his announcement on X that the CFTC is “well poised to ensure the USA leads the world in blockchain technology and innovation.” On February 25, the CFTC announced that Democratic Commissioner Christy Goldsmith Romero will step down upon Quintenz’s confirmation, after which the Commission will be comprised of three Republicans and one Democrat. X; CoinDesk; Cointelegraph; CFTC Press Release.
SEC Guidance Says Meme Coin Transactions Generally Do Not Implicate Federal Securities Laws
On February 27, the SEC’s Division of Corporation Finance published a staff statement stating its “view that transactions in the types of meme coins described in this statement, do not involve the offer and sale of securities under the federal securities laws.” The SEC defined meme coins as “a type of crypto asset inspired by internet memes, characters, current events, or trends for which the promoter seeks to attract an enthusiastic online community to purchase the meme coin and engage in its trading.” As defined in the guidance, meme coins “typically share certain characteristics,” including that they “typically are purchased for entertainment, social interaction, and cultural purposes,” and “typically have limited or no use or functionality.” “In this regard, meme coins are akin to collectibles.” Based on these characteristics, the guidance concludes that transactions in meme coins do not involve “investment contracts” under the Howey test. Among other reasons, the guidance says, “meme coin purchasers are not making an investment in an enterprise” because “their funds are not pooled together to be deployed by promoters or other third parties for developing the coin or a related enterprise.” In addition, “any expectation of profits that meme coin purchasers have is not derived from the efforts of others,” but rather “from speculative trading and the collective sentiment of the market, like a collectible.” The guidance does “not extend to the offer and sale of meme coins that are inconsistent with the descriptions set forth above, or products that are labeled ‘meme coins’ in an effort to evade the application of the federal securities laws by disguising a product that otherwise would constitute a security.” SEC Guidance.
New Proposed Legislation Would Establish Stablecoin Regulatory Framework
On February 4, Chairman Tim Scott (R-S.C.) joined Senate Banking Committee members Senators Bill Hagerty (R-Tenn.) and Cynthia Lummis (R-Wyo.), as well as Senator Kirsten Gillibrand (D-N.Y.), in introducing the Guiding and Establishing National Innovation for U.S. Stablecoins (GENIUS) Act. This legislation seeks to establish a clear regulatory framework for payment stablecoins by defining “payment stablecoins and set[ting] up the procedures for issuing them, including establishing the Federal Reserve as watchdog for the big bank issuers and the Officer of the Comptroller of the Currency as regulator for nonbank issuers of more than $10 billion.”“Passing clear and sensible regulations for stablecoins is critical to maintaining U.S. dollar dominance, promoting responsible innovation, and protecting consumers,” said Senator Gillibrand. Senate; CoinDesk.
Jonathan Gould, Former Bitfury Executive, Nominated to Lead the OCC
On February 11, President Trump nominated Jonathan Gould, former chief legal officer of Bitfury (a blockchain technology company), to head the Office of the Comptroller of the Currency (OCC), which regulates U.S. national banks and federal savings associations. If confirmed by the Senate, Gould would lead the OCC for a five-year term. The Block; Cointelegraph.
SEC Commissioner Peirce Sets Out Plans for New Crypto Task Force
On February 4, SEC Commissioner Hester Peirce, head of the SEC’s new Crypto Task Force, issued a release that sets out priorities and plans for the newly established Crypto Task Force. The Task Force will focus on registered offerings, custody solutions for investment advisers, security status, crypto lending and staking, crypto exchange-traded products, cross-border experimentation, clearing agencies and transfer agents, and special purpose broker dealers. Peirce also urged crypto companies to be patient as the SEC decides how to “disentangle” itself from the litigation initiated under former Chair Gary Gensler. SEC Release; Thomson Reuters; CoinDesk.
The SEC Announces Creation of the Cyber Fraud Unit
On February 20, the SEC announced the creation of the Cyber and Emerging Technologies Unit (CETU), which will focus on combatting cyber-related misconduct and fraud. The CETU will replace the Crypto Assets and Cyber Unit and will be led by Laura D’Allaird, who was the co-chief of the Crypto Assets and Cyber Unit. The CETU will consist of fraud specialists and attorneys who will focus on, among other things, fraud involving blockchain technology and digital assets. SEC Press Release; The Block.
State Legislatures Continue to Propose State-Level Strategic Crypto Reserve Bills
During the month of February, at least 14 states introduced bills to establish frameworks for investing in digital assets within their respective state treasuries. While no such bill has been enacted, it has been proposed to the state legislature in a total of at least 26 states. Many bills include the stipulations that the amount of crypto investments by the state may not exceed a certain percentage of the total size of public funds and that the state may invest only in digital assets with a minimum market cap ($500 billion in Utah, for example). Bills in some states (such as Ohio) aim to establish a strategic reserve for bitcoin specifically. The Block.

INTERNATIONAL

Czech Republic Attempting to Eliminate Long-Term Crypto Gains Taxes
On February 7, Czech President Petr Pavel signed a bill exempting crypto users from paying taxes on digital assets that are held for three years. Additionally, transactions up to CZK 100,000 ($4,136) do not need to be reported to Czech taxing authorities. This bill was not well received by the President of the European Central Bank, Christine Lagarde. Lagarde said that she is confident that bitcoin won’t be entering the reserves of any of the EU central banks. CoinDesk.
Hong Kong’s SFC Proposes Expanding Crypto Regulatory Staff
On February 3, Hong Kong’s Securities and Futures Commission (SFC) proposed hiring eight new staff members as part of its budget for the next fiscal year. These hires are to focus on crypto regulatory regimes, market surveillance, and enforcement investigations. Hong Kong has opened its doors to crypto firms, and it appears to be continuing its drive to become a crypto hub. The Block ; CoinDesk .
Hong Kong SFC Sets Out New Roadmap to Develop Hong Kong as a Global Virtual Assets Hub
On February 19, Hong Kong’s SFC published its five-pillar “ASPIREe” roadmap that outlines 12 major initiatives to enhance the security, innovation and growth of Hong Kong’s virtual asset market. The 12 initiatives include establishing licensing regimes for virtual asset OTC trading and virtual asset custody services, exploring changes to the custody requirements for licensed virtual asset trading platforms, exploring a regulatory framework for professional investor-exclusive token listings and virtual asset derivative trading, and considering allowing staking and borrowing/lending services, among many other initiatives. The roadmap represents a welcome, forward-looking commitment to addressing the virtual asset market’s most pressing challenges in Hong Kong, thus encouraging digital-asset firms to set up or expand in Hong Kong. SFC.
U.S., UK, and Australia Jointly Sanction Zservers
On February 11, the U.S. Department of Treasury’s Office of Foreign Assets Control, Australia’s Department of Foreign Affairs and Trade, and the UK’s Foreign Commonwealth and Development Office jointly sanctioned Zservers, a Russia-based bulletproof hosting (BPH) provider, for its involvement with ransomware attackers, including LockBit, which notably extracted $120 million in Bitcoin from victims. BPH providers are known to sell tools to mask locations, identities, and activities online. Department of Treasury Press Release ; Cointelegraph ; Decrypt.
Dubai Virtual Assets Regulatory Authority Warns of Meme Coin Risks and Market Manipulation
On February 13, Dubai’s Virtual Assets Regulatory Authority (VARA) issued a consumer alert on the risks of investing in meme coins, citing their speculative nature, volatility, and susceptibility to market manipulation. All virtual asset activities in Dubai must comply with VARA regulations, and unauthorized promotions may face enforcement action. VARA; Cointelegraph.
Dubai Financial Services Authority Adds USDC and EURC to List of Recognized Crypto Tokens
On February 17, the Dubai’s Financial Services Authority (DFSA) expanded its list of Recognized Crypto Tokens—which currently includes Bitcoin, Ethereum, Litecoin, Toncoin and Ripple—to include the stablecoins USDC and EURC. Recognized Crypto Tokens are digital assets which can be used or transacted in the Dubai International Financial Centre. DFSA.
The UAE’s Securities and Commodities Authority Seeks Feedback on Draft Regulations for Security and Commodity Tokens
On January 22, the UAE’s Securities and Commodities Authority (SCA) published a draft regulation on security tokens and commodity tokens, inviting industry stakeholders to provide feedback. This marks a milestone in the country’s capital markets, integrating securities and commodities with modern financial technologies. The draft, which includes 18 articles, outlines issuance, trading, settlement, and compliance obligations for these tokens. SCA.

CIVIL LITIGATION

UNITED STATES

The SEC Files a Motion to Voluntarily Dismiss Dealer Rule Appeal
On February 19, the SEC filed an unopposed motion to voluntarily dismiss its appeal in the Fifth Circuit in the “Dealer Rule” case. The SEC had appealed two rulings in related cases by Judge Reed O’Connor that vacated the SEC’s Dealer Rule on the ground that the rule improperly expanded the definition of “dealer” under the Exchange Act. One of the cases was brought by the Crypto Freedom Alliance of Texas and Blockchain Association; the other was brought by the National Association of Private Fund Managers, Alternative Investment Management Association, Ltd., and Managed Funds Association. Motion to Dismiss Appeal; Crypto Freedom Alliance District Court Opinion; National Association of Private Fund Managers District Court Opinion; CoinDesk.
The FDIC Releases Documents in Response to Coinbase FOIA Request Showing FDIC Debanking of Crypto
On February 5 and February 21, in response to a FOIA lawsuit directed by Coinbase, the FDIC released 183 documents spanning hundreds of pages revealing the agency’s systematic attempts during the prior Administration to pressure banks into debanking digital-asset firms. In a statement, Acting Chairman Travis Hill stated that the documents show that banks’ requests to engage in crypto-related activities “were almost universally met with resistance, ranging from repeated requests for further information, to multi-month periods of silence…, to directives from supervisors to pause, suspend, or refrain from expanding all crypto- or blockchain-related activity.” Hill explained that “these and other actions [by the FDIC] sent the message to banks that it would be extraordinarily difficult—if not impossible—to move forward. As a result, the vast majority of banks simply stopped trying.” Hill additionally noted that the FDIC is actively reevaluating its supervisory approach to provide a pathway for institutions to engage in such activities while still adhering to safety principles. FDIC.
The Second Circuit Rules for Uniswap in Securities Class Action Appeal
On February 26, the Second Circuit affirmed the dismissal of federal securities law claims brought against Uniswap Labs, a decentralized cryptocurrency exchange, in an April 2022 class-action lawsuit. The Second Circuit affirmed the district court’s ruling that Uniswap was not a statutory seller under Section 5 of the Securities Act because it does “not hold title to the tokens placed in the liquidity pool by third party users of the platform.” In rejecting claims under Section 29(b) of the Exchange Act, the Second Circuit said that “it ‘defies logic’ that a drafter of a smart contract, a computer code, could be held liable under the Exchange Act for a third-party user’s misuse of the platform.” The Second Circuit also remanded for the district court to consider the plaintiffs’ state-law securities claims, which Uniswap did not contest. Summary Order.

INTERNATIONAL

Ex-CEO of Crypto Exchange Wins Wrongful Dismissal Claim Against Crypto Exchange Three Fins
On February 19, the General Division of the High Court of Singapore ruled in favor of Georg Höptner, the former CEO of crypto exchange Three Fins, in a wrongful-dismissal lawsuit. Höptner was awarded nearly $2.5 million after alleging his termination was orchestrated to avoid fulfilling contractual bonus obligations. His contract stipulated a significant bonus upon completing two years or a termination bonus if dismissed without cause before that period. In October 2022, he was summarily dismissed for alleged unauthorized relocations and fund misappropriation. Judge Chua Lee Ming determined the dismissal was unjustified, noting Höptner had informed relevant parties about his relocations without objections. The court concluded the termination aimed to evade substantial bonus payments and awarded Höptner damages covering unpaid salary, allowances, notice period compensation, and the termination bonus. ICLG; Court Judgment.
Singapore Court Recognizes Terraform Labs’ Chapter 11 Liquidation Plan
On February 21, the Singapore International Commercial Court (SICC) issued a written judgment granting Terraform Labs’ application for recognition of its U.S. Chapter 11 liquidation plan and a U.S. court order confirming the plan. In reaching its decision, the SICC held that the chapeau of Art 21(1) of the UNCITRAL Model Law on Cross-Border Insolvency as adopted in Singapore gives the court an expansive and open-ended discretion to grant appropriate relief and allows the court to be guided by principles of comity and a spirit of cooperation with foreign courts. Court Judgment.
Robinhood to Launch Crypto Offerings in Singapore
Robinhood Markets Inc. plans to introduce cryptocurrency trading services in Singapore later this year, following the anticipated completion of its $200 million acquisition of European digital-assets exchange Bitstamp Ltd. The acquisition is expected to conclude in the first half of 2025, with the rollout of crypto offerings commencing shortly thereafter. Bitstamp had previously secured in-principle approval (IPA) from the Monetary Authority of Singapore to provide digital asset-related services in the country. This strategic move aims to leverage Bitstamp’s IPA, allowing Robinhood to provide a regulated crypto offering in the country and facilitating Robinhood’s broader expansion into the Asian market. Blockhead; Coindesk.

SPEAKER’S CORNER

UNITED STATES

Federal Reserve Chair Confirms the Fed Will Not Issue a CBDC
At the February 11 Senate Banking Committee meeting, Federal Reserve Chair Jerome Powell confirmed that the Fed would not issue a Central Bank Digital Currency (CBDC) during his tenure, which is scheduled to end in May 2026. This follows opposition to a CBDC from President Trump and current lawmakers due to privacy and other concerns. Cointelegraph; Senate Banking Committee.

INTERNATIONAL

Bank of England Governor: Bitcoin and Stablecoins Require Different Regulatory Approaches and UK exploring CDCS
In a Q&A session following a speech delivered on February 11 at the University of Chicago Booth School of Business, the Governor of the Bank of England, Andrew Bailey, stated that Bitcoin and stablecoins require different approaches to regulation. According to Bailey, stablecoins in particular should be regulated more stringently because they are primarily used for payments and users expect them to function like money. Governor Bailey also confirmed a central bank digital currency was still also being considered by the UK. Bank of England.

OTHER NOTABLE NEWS

CFPB Directed to Suspend Supervision Activity and Declines Future Funding
On February 9, Russell Vought, the acting head of the Consumer Financial Protection Bureau (CFPB) announced that the bureau will not be taking its next draw of funding from the Federal Reserve, signaling a wind down of CFPB operations. The CFPB was directed by Vought to stop work on proposed rules, to suspend effective dates on any rules finalized but not yet effective, and to cease all supervision and examination activity. Cointelegraph; The Associated Press; NPR.
Hackers Steal $1.5 Billion in Digital Assets from Cryptocurrency Exchange Bybit
On February 21, hackers stole approximately $1.5 billion in digital assets from Bybit’s Ethereum “cold wallet,” an offline storage system. The attackers gained control of the cold wallet and transferred over 400,000 ETH and stETH to an unidentified address. Bybit assured users that all other cold wallets are secure, that withdrawals are functioning normally, and that Bybit has more than enough assets to cover the loss and will use a bridge loan to ensure availability of user funds, if necessary. It is suspected that the hackers are connected to North Korea’s Lazarus Group. Bybit.
Standard Chartered Bank, Animoca Brands and Hong Kong Telecom Establish Joint Venture to Issue Hong Kong Dollar-Backed Stablecoin
On February 17, Standard Chartered Bank announced that it, Animoca Brands and Hong Kong Telecom have agreed to establish a joint venture with the intention to apply for a license from the Hong Kong Monetary Authority to issue an Hong Kong Dollar-backed stablecoin after the passage of the Stablecoins Bill. The Stablecoins Bill was introduced by the Hong Kong government on December 6, 2024, and proposes to introduce a licensing regime applicable to persons who issue fiat-referenced stablecoins in Hong Kong, or who issue fiat-referenced stablecoins that purport to maintain a stable value with reference to Hong Kong Dollar, or who actively market their issuance of fiat-referenced stablecoins to the Hong Kong public. Standard Chartered; Hong Kong government.

The following Gibson Dunn lawyers contributed to this issue: Jason Cabral, Kendall Day, Jeff Steiner, Sara Weed, Sam Raymond, Nick Harper, Amanda Goetz, Nicholas Tok, Cody Wong, and Chad Kang.

FinTech and Digital Assets Group Leaders / Members:

Ashlie Beringer, Palo Alto (+1 650.849.5327, aberinger@gibsondunn.com)

Michael D. Bopp, Washington, D.C. (+1 202.955.8256, mbopp@gibsondunn.com

Stephanie L. Brooker, Washington, D.C. (+1 202.887.3502, sbrooker@gibsondunn.com)

Jason J. Cabral, New York (+1 212.351.6267, jcabral@gibsondunn.com)

Ella Alves Capone, Washington, D.C. (+1 202.887.3511, ecapone@gibsondunn.com)

M. Kendall Day, Washington, D.C. (+1 202.955.8220, kday@gibsondunn.com)

Sébastien Evrard, Hong Kong (+852 2214 3798, sevrard@gibsondunn.com)

William R. Hallatt, Hong Kong (+852 2214 3836, whallatt@gibsondunn.com)

Martin A. Hewett, Washington, D.C. (+1 202.955.8207, mhewett@gibsondunn.com)

Sameera Kimatrai, Dubai (+971 4 318 4616, skimatrai@gibsondunn.com)

Michelle M. Kirschner, London (+44 (0)20 7071.4212, mkirschner@gibsondunn.com)

Stewart McDowell, San Francisco (+1 415.393.8322, smcdowell@gibsondunn.com)

Hagen H. Rooke, Singapore (+65 6507 3620, hhrooke@gibsondunn.com)

Mark K. Schonfeld, New York (+1 212.351.2433, mschonfeld@gibsondunn.com)

Orin Snyder, New York (+1 212.351.2400, osnyder@gibsondunn.com)

Ro Spaziani, New York (+1 212.351.6255, rspaziani@gibsondunn.com)

Jeffrey L. Steiner, Washington, D.C. (+1 202.887.3632, jsteiner@gibsondunn.com)

Eric D. Vandevelde, Los Angeles (+1 213.229.7186, evandevelde@gibsondunn.com)

Benjamin Wagner, Palo Alto (+1 650.849.5395, bwagner@gibsondunn.com)

Sara K. Weed, Washington, D.C. (+1 202.955.8507, sweed@gibsondunn.com)

This alert provides a high-level summary of the Advisory and related considerations for participants facing potential enforcement actions.

On February 25, 2025, the Commodity Futures Trading Commission’s (the “CFTC”) Division of Enforcement (the “Division”) issued an enforcement advisory (the “Advisory”) regarding the evaluation of a company’s or an individual’s (a “Person”) self-reporting, cooperation, and remediation when recommending enforcement actions to the CFTC and setting forth the factors the Division will consider in determining proposed penalty reductions in cases involving self-reporting, cooperation, and remediation.[1] The Advisory sets out a credit-based system that the Division will use to determine appropriate penalty reductions based on a Person’s self-reporting, cooperation, and remediation in enforcement actions and investigations.[2] The Advisory replaces prior policies, including the Division’s May 2020 Enforcement Manual, and is now the sole policy of the Division.

Overview

The Advisory provides a mechanism for achieving the Division’s goals of promoting compliance with the law and ensuring accountability for those who violate the law by attempting to incentivize self-reporting, cooperation, and remediation.

Regulatory Consistency. The Advisory indicates that it is consistent with the CFTC’s broader regulatory scheme. Thus, the Division will recognize self-reports made to the pre-existing operating division, such as the Division of Clearing and Risk, the Division of Market Oversight, and the Market Participants Division, as applicable (the “Operating Division”).
Transparency. The Advisory contains tiered scales to evaluate self-reporting and cooperation (including remediation) and provides examples and explanations of activities that would fall into each tier.
Clarity. The Advisory aims to provide those who might seek a reduced penalty based on their self-reporting, cooperation, and remediation (“Mitigation Credit”) a clear understanding of the potential benefits of such activities by providing a matrix outlining the credit that may be applied to reduce a civil monetary penalty and details factors that may contribute to the recommendation of a public declination.

Self–Reporting

The Advisory indicates that Mitigation Credit may be awarded when a Person self-reports a potential violation and that the Division will apply a three-tier scale in evaluating such reporting. The factors that underlie the tier system are discussed below.

Voluntariness. The self-report must be a voluntary disclosure, rather than made on account of an imminent threat of negative enforcement action or exposure. The Division will consider the likelihood that it could have learned of the violation independently of the self-report.
Made to the CFTC. The self-report must be made to an appropriate division of the CFTC. A division will be considered appropriate if it is the primary division that is responsible for the potentially violated regulation. The Division of Enforcement is considered an appropriate division for all reports. If a potential violation relates to multiple divisions, a report to a single appropriate division will suffice. The Advisory notes that “[t]he Division, together with the Operating Divisions, will be developing a future public enforcement advisory to set forth transparent and consistent criteria for enforcement referrals by an Operating Division to the Division of Enforcement.”

Timeliness. The self-report must be prompt, considering the facts and circumstances of the potential violation.
Completeness. The disclosure must include all material information known to the Person at the time the report is made. To encourage early disclosure, the Division will consider a report to be complete if the Person made best efforts to determine relevant facts before reporting, continued to investigate, and disclosed additional relevant facts as they were identified.
Safe Harbor for Good Faith. The Division will provide a safe harbor for good-faith self-reporting if a Person voluntarily self-reports, the report is later found to be inaccurate after further investigation by the Person, the report was made in good faith, and the inaccurate information is promptly supplemented and corrected.

The Advisory contained the following chart, setting forth the self-reporting tiers and a non-exhaustive description of the self-reporting that exemplifies each tier.

Tier	Self-Reporting
Tier 1: No Self-Report	No timely self-report Self-report was information already known from other sources Self-report that was not reasonably related to the potential violation or not reasonably designed to notify the CFTC of the potential violation
Tier 2: Satisfactory Self-Report	Self-report to an appropriate division Notified the CFTC of the potential violation Did not include all material information reasonably related to the potential violation that the reporting party knew at the time of the self-report
Tier 3: Exemplary Self-Report	Self-report to an appropriate division Notified the CFTC of the potential violation Included all material information reasonably related to the potential violation that the reporting party knew at the time of the self-report Included additional information that assisted the Division with conserving resources in the Division’s investigation

Cooperation

The Advisory indicates that Mitigation Credit may be awarded for cooperation in the Division’s investigation and that the Division will apply a four-tier scale in evaluating such cooperation. In determining which tier to apply, the Division noted that it will consider all relevant facts and circumstances, including whether the cooperation materially assisted the investigation, whether the cooperation conserved the Division’s resources, the timeliness of the cooperation, and the quality and extent of cooperation. Other factors that the Division said that it will consider include truthfulness, specificity, credibility, completeness, reliability, and voluntariness.

However, even if a Person has cooperated with the Division, uncooperative action may offset the Mitigation Credit awarded. The Division said that it will employ a standard of objective reasonableness in evaluating whether conduct is uncooperative. Examples of conduct that may be considered uncooperative include impeding the Division’s investigation in bad faith, untimely subpoena compliance, failure to preserve material information after its discovery, and bad faith attempts to shape the testimony of a Person’s agent. Failure to self-report a violation that involves willful misconduct or abuse of a party, harm to a client, counterparty, or customer, or significant financial losses will be deemed uncooperative. Significantly, the Division indicated that the discovery of a material violation without subsequent corrective action or a self-report, as appropriate, may suggest the absence of acceptance of responsibility and could be deemed uncooperative.

The Advisory contained the following chart, setting forth the cooperation tiers and a non-exhaustive description of the cooperation that exemplifies each tier.

Tier	Cooperation
Tier 1: No Cooperation	No substantial assistance beyond required legal obligations
Tier 2: Satisfactory Cooperation	Provided substantial assistance Voluntary production of documents and information Arranging for voluntary witness interviews Basic presentations on legal and factual issues
Tier 3: Excellent Cooperation	Meet the expectations for Satisfactory Cooperation Consistently provided substantial assistance Internal investigations or reviews Thorough analysis of potential violation, root cause, and corrective action for remediation Use of internal or external expert resources and consultants as appropriate
Tier 4: Exemplary Cooperation	Meet the expectations for Excellent Cooperation Consistently provided material assistance Proactive engagement and use of significant resources Significant completion of remediation Use of accountability measures, as appropriate

Remediation

The Division will only recommend Mitigation Credit where the Operating Division, in consultation with the Division, has concluded that the potential violation and its root cause have either been remediated or that there is a remediation plan in place that is appropriate given the facts and circumstances.

In evaluating remediation, the Division will consider whether a Person has engaged in substantial efforts to prevent a future violation. Actions that will positively impact this analysis include performing a gap analysis to identify similar violations in the future, implementing an appropriate remediation plan that prevents future violation through procedural changes, personnel accountability measures, and providing the Division with an explanation as to how the remediation plan is reasonably designed to prevent a future violation.

Mitigation Credit

If a matter is eligible for Mitigation Credit for self-reporting and/or cooperation, the Advisory indicates that the Division will presumptively recommend a discount from its initial civil monetary penalty calculation based on the following matrix:

	Tier 1: No Cooperation	Tier 2: Satisfactory Cooperation	Tier 3: Excellent Cooperation	Tier 4: Exemplary Cooperation
Tier 1: No Self- Report	0%	10%	20%	35%
Tier 2: Satisfactory Self-Report	10%	20%	30%	45%
Tier 3: Exemplary Self Report	20%	30%	40%	55%

Departure from Previous Policy.

The Advisory represents a significant shift in the Division’s approach to enforcement. Previous guidance, as articulated in the Division’s 2023 Advisory Regarding Penalties, Monitors and Consultants, and Admissions in CFTC Enforcement Actions (the “2023 Advisory”) emphasized imposing penalties that would serve as strong deterrents to future violations.[3] In the 2023 Advisory, the Division expressed the view that civil monetary penalties would be seen as the rational cost of doing business if not severe enough to outweigh the potential benefit of misconduct, providing guidance on determining whether such penalties are sufficient and emphasizing the importance of admissions of fault in deterring future violations.

The Advisory evinces a departure from the adversarial approach of the 2023 Advisory in favor of a collaborative process, a shift that some in the industry have characterized as a change from “stick to carrot.”[4]

CFTC Comments

Acting Chairman Caroline D. Pham praised the policy changes, stating that the clear expectations described in the Advisory will incentivize firms to self-report and resolve cases faster with reasonable penalties and emphasized that this approach will enable the CFTC to “do more with less.”[5] However, Commissioner Kristin N. Johnson released a statement announcing her lack of support for the Advisory, expressing trepidation with respect to the departure from prior guidance and emphasizing that such changes must be consistent with the CFTC’s mandates.[6]

Conclusion

The Advisory marks a significant shift in the CFTC’s enforcement policy and provides market participants with clear information on the potential benefits of proactive self-reporting, cooperation and remediation in CFTC investigations.

[1] CFTC Press Release, CFTC Releases Enforcement Advisory on Self-Reporting, Cooperation, and Remediation (Feb. 25, 2025), available at https://www.cftc.gov/PressRoom/PressReleases/9054-25.

[2] The Advisory notes that it provides only internal guidance regarding the Division’s recommendations to the CFTC and does not bind the CFTC.

[3] CFTC Press Release, CFTC Releases Enforcement Advisory on Penalties, Monitors and Admissions (Oct. 17, 2023), available here.

[4] Jessica Corso, Trump CFTC Shifts Enforcement Stance From Stick to Carrot, Law360.com (Feb. 26, 2025, 90:08 PM) available here.

[5] CFTC Press Release, CFTC Releases Enforcement Advisory on Self-Reporting, Cooperation, and Remediation (Feb. 25, 2025), available at https://www.cftc.gov/PressRoom/PressReleases/9054-25.

[6] Statement of Commissioner Kristin N. Johnson on the Enforcement Advisory on Self-Reporting, Cooperation and Remediation (Feb. 25, 2025), available here.

The following Gibson Dunn lawyers prepared this update: Jeffrey Steiner, David Burns, Amy Feagles, Adam Lapidus, Hayden McGovern, and Marie Baldwin.

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, any member of the firm’s Derivatives practice group, or any of the following:

Jeffrey L. Steiner, Washington, D.C. (+1 202.887.3632, jsteiner@gibsondunn.com)

David P. Burns, Washington, D.C. (+1 202.887.3786, dburns@gibsondunn.com)

Amy Feagles, Washington, D.C. (+1 202.887.3699, afeagles@gibsondunn.com)

Adam Lapidus, New York (+1 212.351.3869, alapidus@gibsondunn.com)

Gibson Dunn is available to help Japanese clients understand what this and other possible policy changes will mean for them and how to navigate the shifting regulatory environment.

Navigate to the English version here

トランプ大統領による中国原産輸入品への関税賦課に関する大統領令：米国による執行が日本の製造業者および輸出業者に与える影響

ギブソン・ダン法律事務所は、この大統領令およびその他の可能性のある政策変更が日本のクライアントにどのような影響を与えるか、また、変化する規制環境をどのように乗り切るかについて、日本のクライアントの皆様をサポートいたします。

2025年2月1日、トランプ大統領は「中華人民共和国における合成オピオイドのサプライチェーンに対処するための関税賦課に関する大統領令」を発令しました。この大統領令は、今後連邦官報で発表される予定の「中華人民共和国の製品であるすべての物品」に対して、10%の従価税関税を課すものです。発表された関税は、国際緊急経済権限法（IEEPA）に基づき、トランプ大統領が裁量で判断する「国家緊急事態」が終息するまで継続されます。

関税は、2024年2月4日午前12時1分（東部時間）以降、「消費を目的として輸入された、または消費を目的として倉庫から出荷された」すべての物品に適用されます。また、この関税は、トランプ政権発足時に中国からの輸入品4つのカテゴリーリストに対して課された最大50%の関税を含む、既存のすべての関税に上乗せされます。これらの関税は現在も有効であり、バイデン政権下で延長および追加され、バッテリー部品、電気自動車、半導体、鉄鋼およびアルミニウム製品など、他の分野にも適用されています。

大統領令には、具体的に対象となる品目のリストは含まれていません。詳細は、政府が連邦官報に命令を掲載するか、またはその後の連邦官報通知を掲載する際に、技術的な付属文書に記載される可能性が高いと思われます。

大統領令では、中国が独自の報復関税を課した場合、トランプ大統領は「本命令に基づき課された関税を増額または範囲を拡大することができる」と規定されています。2025年2月2日、中国の商務省はWTOに提訴し、それに対応する「対抗措置」を実施すると発表しました。これを受けて、2025年2月4日、中国財務省は、2025年2月10日より、米国からの石炭および液化天然ガスの輸入品に15%、原油、農業用機器、および特定の車両に10%の追加関税を課すことを発表しました。

さらに、2025年2月27日、トランプ大統領は、中国からの輸入品すべてに10%の追加関税を課す意向を発表しました。追加関税は、カナダとメキシコからの輸入品に予定されている25%の関税とともに、3月4日火曜日に発効する予定です。これを受けて、ワシントンD.C.の中国大使館は、中国はトランプ大統領の懸念に対処するために米国と協力していると発表しました。

関税回避に対する米国の調査環境の強化—偽証罪法

新たな関税の直接的な影響として、中国で製造または組み立てを行っている企業、あるいは中国を拠点とするサプライチェーンを持つ企業に対する規制当局の監視が強化されることが挙げられます。また、このコスト増の環境下で関税回避の疑いがある企業に対しては、米国当局が偽証法（False Claims Act、FCA）を主な執行手段として用いることになります。FCAは、虚偽の情報を提示することによる米国政府に対する金銭的義務の回避を禁じています。

また、米国司法省（DOJ）は、今後も継続してFCAの厳格な執行が期待できることを示唆しています。DOJ民事部の商業訴訟部門の副次官補であるマイケル・グランストン氏は最近、「司法省は、新政権が掲げる政府の効率化と無駄、不正、乱用の根絶という方針に沿って、今後も引き続き積極的に偽請求取締法を執行していく方針であることを明確にしたい」と述べています。グランストン氏は特に、FCAは「違法な外国貿易慣行」に対抗する「強力なツール」であると指摘し、これにはトランプ政権が発表している拡大関税体制の違反も含まれると予想しています。さらに、、FCA違反の疑いを報告した個人（現従業員および元従業員を含む）には、「キー・タム」（ラテン語の法律用語）または内部告発者による訴訟を通じて、相当額の金銭的インセンティブが提供されます。

製造、調達、または組み立ての関係の一部が中国と結びついている企業にとって、法執行措置のリスクは特に深刻です。これは、問題となる原材料、部品、および製品の仕上げに応じて、製品の原産地を決定するルールが異なるためです。例えば、日本企業が日本で完成品とみなしている商品であっても、一部に中国から調達した部品が組み込まれている場合、米国当局は、新たな執行や規制の解釈、アプローチ、優先順位を考慮して、関税目的で中国原産と判断することがあります。第三国における「実質的変更」が商品の原産地を変える可能性があることは事実ですが、米国当局は、単なる「粉飾」を目的とした積み替えに対して、ますます疑いの目を向けるようになっています。

この分野における現在進行中の積極的な調査について、私たちは認識しています。また、中国のサプライチェーンの問題が関わる数百万ドル規模のFCA和解の最近の例としては、以下が挙げられます。
1. ニュージャージー州の化学品輸入業者と中国のサプライヤーの間で関税回避の共謀があったとされる事件について、2024年3月に米国司法省が調査を行い、310万ドルの和解が成立しました。
2. 2024年1月の米国司法省による調査と300万ドルの和解金支払い。中国製自動車部品メーカーが関税を故意に支払わないようにしていたという疑惑の解決。

カナダとメキシコへの関税を同時に課す大統領令

さらに、これまで多くの日本企業を含む一部の企業が、北米自由貿易協定（NAFTA）および2020年に発効する後継協定である米国・メキシコ・カナダ協定（USMCA）を活用し、米国での立ち上げコストと比較して両国でのコスト削減を最大限に図ることを目的として、カナダやメキシコでの製造業務を推進してきましたが、2月1日付の大統領令の一環として、トランプ大統領は同時にカナダおよびメキシコ原産の製品に25%の関税を課すことを発表しました。2月4日時点で、これらの関税は30日間保留されていますが、この地域的なコスト軽減戦略は結局は阻止されるか、あるいは執行当局により厳しく精査される可能性があります。

リスクの軽減

このような新たな貿易環境を踏まえ、日本企業は関税回避に対する米国の調査環境が厳しくなっていることに留意し、バリューチェーン全体における原産地関連のコンプライアンスや記録管理プロセスを監査するなど、適切な予防措置を講じる必要があります。

それでもなお、関税回避を理由にFCA違反の可能性があるとして米当局による強制調査の対象となった場合、あるいは内部告発者からそのような不正行為を告発された場合、企業はFCA違反弁護の経験を持つ米国弁護士の支援を求めることをお勧めします。

ギブソン・ダンのFalse Claims Act / Qui Tam Defense（偽請求防止法／クイ・タム弁護）およびSanctions and Export Enforcement（制裁および輸出執行）の各業務グループは、この分野の動向を常に注視しており、日本語でのサポートを含め、FCA（偽請求防止法）および貿易関連の調査および執行措置について、日本企業の皆様に理解していただき、対応していただくためのサポートを提供しています

Winston Y. Chan – Global Co-Chair, False Claims Act / Qui Tam Defense and White Collar Defense and Investigations Practice Groups, based in our San Francisco office
(+1 415.393.8362, wchan@gibsondunn.com)

Eli M. Lazarus – Of Counsel, White Collar Defense and Investigations Practice Group, based in our San Francisco office
(+1 415.393.8340, elazarus@gibsondunn.com)

Justin Lin – Associate Attorney, False Claims Act / Qui Tam Defense and White Collar Defense and Investigations Practice Group, based in our San Francisco office
(+1 415.393.4653, jolin@gibsondunn.com)

Gabriela Li – Associate Attorney, False Claims Act / Qui Tam Defense and Securities Regulation and Corporate Governance Practice Groups, based in our San Francisco office
(+1 415.393.4602, gli@gibsondunn.com)

English:

On February 1, 2025, President Trump issued an Executive Order Imposing Duties to Address the Synthetic Opioid Supply Chain in the People’s Republic of China. The Executive Order imposes a 10% ad valorem tariff on “all articles that are products of the PRC,” to be defined in a forthcoming Federal Register notice. The announced tariff is to stay in place until President Trump determines the “national emergency,” as assessed in his discretion under the International Emergency Economic Powers Act (IEEPA), is over.

The tariff applies to all “goods entered for consumption, or withdrawn from warehouse for consumption,” on or after 12:01 a.m. Eastern Time on February 4, 2024. And the tariff is cumulative to all existing tariffs, including the up to 50% tariffs imposed during the first Trump administration on four category lists of Chinese imports. Those tariffs remain in effect and were extended and supplemented under the Biden administration, including (among other sectors) to battery parts, electric vehicles, semiconductors, and steel and aluminum products.

The Executive Order does not include a list of specifically covered goods. The full details are likely to be included in a technical annex when the government publishes the order to the Federal Register or publishes a follow-up Federal Register notice.

The Executive Order states that if China imposes its own retaliatory tariffs, President Trump “may increase or expand in scope the duties imposed under this order.” On February 2, 2025, China’s Ministry of Commerce announced it would file a complaint to the WTO and implement corresponding “countermeasures.” Accordingly, on February 4, 2025, China’s Ministry of Finance announced, starting February 10, 2025, the imposition of additional tariffs of 15% on coal and liquified natural gas imports from the United States and a 10% tariff on crude oil, agricultural equipment, and certain vehicles.

Additionally, on February 27, 2025, President Trump announced that he intended to add an additional 10% tariff on all Chinese imports—with the additional levy to go into effect on Tuesday, March 4, alongside scheduled 25% tariffs on imports from Canada and Mexico. The Chinese Embassy in Washington, D.C. announced in response that China was working with the United States to address President Trump’s concerns.

Heightened U.S. Investigatory Environment for Tariffs Evasion—False Claims Act

One direct consequence of the new tariffs will be increased regulatory scrutiny of companies with manufacturing or assembly operations in China, or who have a China-based supply chain. And for those companies suspected of evading tariffs in this higher-cost environment, the False Claims Act (FCA) is a primary enforcement tool wielded by U.S. authorities. The FCA prohibits the avoidance of monetary obligations to the U.S. government by the presentation of false information.

And the U.S. Department of Justice (DOJ) has indicated that continued robust FCA enforcement can be expected in the years ahead. Michael Granston, Deputy Assistant Attorney General in the Commercial Litigation Branch of DOJ’s Civil Division, stated recently that “[t]he department wants to make clear—consistent with the new administration’s stated focus on achieving governmental efficiency and rooting out waste, fraud and abuse—that the department plans to continue to aggressively enforce the False Claims Act.” Granston noted in particular that the FCA is a “powerful tool” in combating “illegal foreign trade practices,” which can be expected to include violations of the expanded tariff regime announced by the Trump administration. Additionally, the FCA provides substantial monetary incentives to private individuals—including current and former employees—who report suspected FCA violations, through “qui tam” or whistleblower lawsuits.

The risk of enforcement action is particularly acute for companies with some but not all of their manufacturing, sourcing, or assembly relationships tied to China. This is because different rules for determining product origin apply depending on the raw materials, components, and product finishing in question. For example, goods that a Japanese company may consider as finished in Japan but that partially incorporate China-sourced components may be determined by U.S. authorities to have Chinese-origin for tariff purposes in light of new enforcement and regulatory interpretations, approaches, and priorities. And while it is true that “substantial transformation” in a third country can alter the origin of products, U.S. authorities have grown increasingly suspicious of transshipment undertaken merely as “window dressing.”

We are aware of ongoing active investigations in this area, and examples of recent multi-million-dollar FCA settlements involving Chinese supply chain issues include:

A March 2024 U.S. Department of Justice investigation and settlement of $3.1 million for an alleged conspiracy to avoid customs duties between a New Jersey chemicals importer and Chinese suppliers.
A January 2024 U.S. Department of Justice investigation and settlement of $3 million to resolve allegations that an automobile parts manufacturer intentionally failed to pay tariffs on Chinese-manufactured products.

Simultaneous Executive Orders Imposing Canada and Mexico Tariffs

In addition, whereas some companies—including many Japanese companies—had previously pursued manufacturing operations in Canada and Mexico, in part to leverage the North American Free Trade Agreement (NAFTA) and its 2020 successor, the United States-Mexico-Canada Agreement (USMCA), and to maximize cost savings in both countries relative to startup costs in the United States, as part of the February 1 Executive Order, President Trump simultaneously announced 25% tariffs on Canada- and Mexico-origin goods. Although these tariffs have been paused for 30 days as of February 4, this regional cost-mitigation strategy may end up being foreclosed, or otherwise highly scrutinized by enforcement authorities.

Mitigating Risk

Given this new trade environment, Japanese companies should be attuned to the heightened U.S. investigatory environment for tariff evasion and take appropriate precautions, such as auditing origin-related compliance and recordkeeping processes throughout their value chains.

In the event that companies nevertheless become the subject of enforcement investigations by U.S. authorities for tariff evasion-based potential violations of the FCA or are accused of such misconduct by a purported whistleblower, companies are advised to seek the assistance of U.S. counsel with FCA defense experience.

The following Gibson Dunn lawyers prepared this update: Winston Chan, Eli Lazarus, Justin Lin, and Gabriela Li.

With its market-leading False Claims Act / Qui Tam Defense and Sanctions and Export Enforcement Practice Groups, Gibson Dunn continues to monitor developments in this area and is available to help Japanese clients understand and navigate FCA and trade-related investigative and enforcement actions, including with support in Japanese language.

Eli M. Lazarus – Of Counsel, White Collar Defense and Investigations Practice Group, based in our San Francisco office
(+1 415.393.8340, elazarus@gibsondunn.com)

False Claims Act/Qui Tam Defense Practice Group:

Washington, D.C.
Jonathan M. Phillips – Co-Chair (+1 202.887.3546, jphillips@gibsondunn.com)
Stuart F. Delery (+1 202.955.8515,sdelery@gibsondunn.com)
F. Joseph Warin (+1 202.887.3609, fwarin@gibsondunn.com)
Jake M. Shields (+1 202.955.8201, jmshields@gibsondunn.com)
Gustav W. Eyler (+1 202.955.8610, geyler@gibsondunn.com)
Lindsay M. Paulin (+1 202.887.3701, lpaulin@gibsondunn.com)
Geoffrey M. Sigler (+1 202.887.3752, gsigler@gibsondunn.com)
Joseph D. West (+1 202.955.8658, jwest@gibsondunn.com)

San Francisco
Winston Y. Chan – Co-Chair (+1 415.393.8362, wchan@gibsondunn.com)
Charles J. Stevens (+1 415.393.8391, cstevens@gibsondunn.com)

New York
Reed Brodsky (+1 212.351.5334, rbrodsky@gibsondunn.com)
Mylan Denerstein (+1 212.351.3850, mdenerstein@gibsondunn.com)

Denver
John D.W. Partridge (+1 303.298.5931, jpartridge@gibsondunn.com)
Ryan T. Bergsieker (+1 303.298.5774, rbergsieker@gibsondunn.com)
Monica K. Loseman (+1 303.298.5784, mloseman@gibsondunn.com)

Dallas
Andrew LeGrand (+1 214.698.3405, alegrand@gibsondunn.com)

Los Angeles
James L. Zelenay Jr. (+1 213.229.7449, jzelenay@gibsondunn.com)
Nicola T. Hanna (+1 213.229.7269, nhanna@gibsondunn.com)
Jeremy S. Smith (+1 213.229.7973, jssmith@gibsondunn.com)
Deborah L. Stein (+1 213.229.7164, dstein@gibsondunn.com)
Dhananjay S. Manthripragada (+1 213.229.7366, dmanthripragada@gibsondunn.com)

Palo Alto
Benjamin Wagner (+1 650.849.5395, bwagner@gibsondunn.com)

Sanctions and Export Enforcement Practice Group:

United States:
Matthew S. Axelrod – Co-Chair, Washington, D.C. (+1 202.955.8517, maxelrod@gibsondunn.com)
Adam M. Smith – Co-Chair, Washington, D.C. (+1 202.887.3547, asmith@gibsondunn.com)
Ronald Kirk – Dallas (+1 214.698.3295, rkirk@gibsondunn.com)
Stephenie Gosnell Handler – Washington, D.C. (+1 202.955.8510, shandler@gibsondunn.com)
Donald Harrison – Washington, D.C. (+1 202.955.8560, dharrison@gibsondunn.com)
Christopher T. Timura – Washington, D.C. (+1 202.887.3690, ctimura@gibsondunn.com)
David P. Burns – Washington, D.C. (+1 202.887.3786, dburns@gibsondunn.com)
Nicola T. Hanna – Los Angeles (+1 213.229.7269, nhanna@gibsondunn.com)
Courtney M. Brown – Washington, D.C. (+1 202.955.8685, cmbrown@gibsondunn.com)

Asia:
Kelly Austin – Denver/Hong Kong (+1 303.298.5980, kaustin@gibsondunn.com)
David A. Wolber – Hong Kong (+852 2214 3764, dwolber@gibsondunn.com)
Fang Xue – Beijing (+86 10 6502 8687, fxue@gibsondunn.com)
Qi Yue – Beijing (+86 10 6502 8534, qyue@gibsondunn.com)

Europe:
Attila Borsos – Brussels (+32 2 554 72 10, aborsos@gibsondunn.com)
Patrick Doris – London (+44 207 071 4276, pdoris@gibsondunn.com)
Michelle M. Kirschner – London (+44 20 7071 4212, mkirschner@gibsondunn.com)
Penny Madden KC – London (+44 20 7071 4226, pmadden@gibsondunn.com)
Benno Schwarz – Munich (+49 89 189 33 110, bschwarz@gibsondunn.com)

On March 2, 2025, the Department of the Treasury issued guidance announcing that it will not enforce any penalties or fines against U.S. citizens or domestic reporting companies or their beneficial owners pursuant to the Corporate Transparency Act (CTA). This guidance also announces that when the Department of the Treasury issues a proposed rulemaking regarding the CTA in the future, the rulemaking “will narrow the scope of the rule to foreign reporting companies only.”[1]

Entities that may be subject to the CTA that have not filed BOI reports should consult with their CTA advisors as necessary, now that the Department of the Treasury has announced it will suspend enforcement of the penalty provisions of the CTA and will propose amendments to the reporting rule providing that it will apply only against “foreign reporting companies.”

During litigation that temporarily enjoined enforcement of the CTA from December 2024 until February 18, 2025, the Financial Crimes Enforcement Network (FinCEN) issued guidance extending the required deadlines for companies subject to the CTA to deadline to March 21, 2025 or later.[2] On February 27, 2025, FinCEN then suspended the March 21, 2025 deadline, instead stating its intention to issue an interim final rule before March 21, 2025 that will extend beneficial ownership information (BOI) reporting deadlines for those companies required to submit such information.[3] Under the 2022 Reporting Rule that instituted the CTA, “each reporting company” – both domestic and foreign – was required to file BOI information by certain deadlines.[4]

The Department of the Treasury’s latest statement on March 2 announces that the Department will propose revisions to the reporting rule “that will narrow the scope of the rule to foreign reporting companies only.”[5] As currently defined, a “foreign reporting company” is “any entity” that is “[f]ormed under the law of a foreign country”; and “[r]egistered to do business in any State or tribal jurisdiction by the filing of a document with a secretary of state or any similar office under the law of a State or Indian tribe.”[6]

For additional background information, please refer to our Client Alerts issued on December 5, December 9, December 16, December 24, and December 27, 2024, January 24, 2025 February 19, and February 28, 2025.

[1] https://home.treasury.gov/news/press-releases/sb0038.

[2] https://fincen.gov/sites/default/files/shared/FinCEN-BOI-Notice-Deadline-Extension-508FINAL.pdf.

[3] https://www.fincen.gov/news/news-releases/fincen-not-issuing-fines-or-penalties-connection-beneficial-ownership.

[4] 31 C.F.R. § 1010.380(a).

[5] https://home.treasury.gov/news/press-releases/sb0038.

[6] 31 C.F.R. 1010.380(c)(ii); see also 31 U.S.C. 5336(a)(11)(A)(ii).

The following Gibson Dunn lawyers assisted in preparing this update: Kevin Bettsteller, Stephanie Brooker, Matt Gregory, Justin Newman, Dave Ware, Shannon Errico, Sam Raymond, and Connor Mui.

Gibson Dunn has deep experience with issues relating to the Bank Secrecy Act, the Corporate Transparency Act, other AML and sanctions laws and regulations, and challenges to Congressional statutes and administrative regulations.

For assistance navigating white collar or regulatory enforcement issues, please contact the authors, the Gibson Dunn lawyer with whom you usually work, or any leader or member of the firm’s Anti-Money Laundering, Administrative Law & Regulatory, Investment Funds, Real Estate, or White Collar Defense & Investigations practice groups.

Please also feel free to contact any of the following practice group leaders and members and key CTA contacts:

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White Collar Defense and Investigations:
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F. Joseph Warin – Washington, D.C. (+1 202.887.3609, fwarin@gibsondunn.com)

Gibson Dunn lawyers are available to assist in addressing any questions you may have about executive orders and their implications for institutions of higher education. Please contact the Gibson Dunn lawyer with whom you usually work or the authors of this client alert for more information.

Introduction

New Trump administration policies require colleges and universities to take careful stock of a large swath of their operations ranging from diversity, equity, and inclusion (DEI) policies and activities, to programs for which they receive federal funding, to immigration policies, to government contracts, to how they are combatting antisemitism, to their involvement with China. Here we briefly summarize the executive actions likely to most significantly affect higher education. These issues will continue to develop as the President and executive agencies implement the articulated policy agendas, and we will provide updates as warranted.

You can find more information on recent administrative actions on our Presidential Transition Hub, here.

Diversity, Equity & Inclusion

In his inauguration address, President Trump vowed to “forge a society that is colorblind and merit based” and “end the government policy of trying to socially engineer race and gender into every aspect of public and private life.” His administration has taken numerous actions since then to curb government contractors’ and grantees’ DEI programs. Colleges and universities that receive federal grant funding or that serve as government contractors should review their programs to determine any risk exposure related to DEI programs in light of the executive orders described below. They also should consider coordinating closely with their contracting and grant officers to prevent any misunderstandings. Relevant executive actions include:

Executive Order 14173, “Ending Illegal Discrimination and Restoring Merit-Based Opportunity,” rescinded several executive orders, including Executive Order 11246, which imposed affirmative action obligations on federal contractors in addition to non-discrimination requirements. In place of the prior affirmative action requirements, federal contracts and grants now will be required to include (1) a clause requiring the recipient to agree that compliance “with applicable Federal anti-discrimination laws” is a “material” term of the contract or grant, and (2) a certification that the contractor or grant recipient “does not operate any programs promoting DEI that violate any applicable Federal anti-discrimination laws.” Failure to comply with these new obligations may trigger False Claims Act liability, which can come with substantial penalties. The order also requires the Office of Federal Contract Compliance Programs to “immediately cease” “[a]llowing or encouraging Federal contractors” to engage in “workforce balancing based on race, color, sex, sexual preference, religion, or national origin.” Finally, the order directs the Attorney General to develop a report identifying up to nine civil compliance investigations of higher education endowments over $1 billion, among other entities, and to issue guidance to “all institutions of higher education that receive Federal grants or participate in the Federal student loan assistance program … regarding the measures and practices required to comply with Students for Fair Admissions, Inc. v. President and Fellows of Harvard College.”

Executive Order 14151, “Ending Radical and Wasteful Government DEI Programs and Preferencing,” directs agencies to review federal grantees who received funding since January 20, 2021 to advance DEI or environmental justice programs. Colleges and universities should review any programs funded by government grants to determine if any of them may be perceived as advancing DEI or environmental justice goals, including research grants.

Note that a group of higher education officials, including university diversity officers, recently sued the Trump administration to challenge these executive orders, and the U.S. District Court for the District of Maryland has preliminarily enjoined the implementation of specific provisions within these executive orders.[1]

Federal agencies have begun taking steps to implement these directives.

The Attorney General issued a memorandum stating that “the Department of Justice’s Civil Rights Division will investigate, eliminate, and penalize illegal DEI and DEIA preferences, mandates, policies, programs, and activities in the private sector and in educational institutions that receive federal funds.” It clarifies in a footnote that the memorandum addresses programs that “discriminate, exclude, or divide individuals based on race or sex.” On the other hand, it does not prohibit observances that “celebrate diversity, recognize historical contributions, and promote awareness without engaging in exclusion or discrimination,” citing Black History Month and International Holocaust Remembrance Day as examples.

The Department of Education published a letter clarifying the nondiscrimination obligations of schools and other entities that receive federal funding from the Department. It criticized admissions and financial aid policies based on race, as well as programming, such as race-based graduation ceremonies and facilities. The letter states that the SFFA v. Harvard, which related to admissions decisions, applies more broadly to “prohibit[] covered entities from using race in decisions pertaining to admissions, hiring, promotion, compensation, financial aid, scholarships, prizes, administrative support, discipline, housing, graduation ceremonies, and all other aspects of student, academic, and campus life.” In particular, it cautions against using students’ personal essays and extracurriculars as a “means of determining or predicting a student’s race and favoring or disfavoring such students.” It encourages reporting of any use of race by educational institutions to the Department’s Office of Civil Rights. Colleges and universities have 14 days—until February 28, 2025—to comply with the Department’s understanding of the law as described in the letter.

For more information on these and other executive actions related to DEI issues, you can find analysis by Gibson Dunn’s DEI Task Force here.

Anti-Semitism on Campus

President Trump campaigned on a promise to address antisemitism on college campuses. His administration acted upon that promise beginning with an executive order signed on Day One and followed by a host of actions taken by the White House and various agencies. Relevant executive branch actions include:

Executive Order 14188, “Additional Measures to Combat Anti-Semitism,” directs executive branch agencies to identify all civil and criminal authorities under their jurisdiction to combat anti-Semitism and encourages the Attorney General to pursue cases through the Department’s civil-rights enforcement authorities. It also directs the secretaries of State, Education, and Homeland Security to recommend ways to familiarize higher education institutions with the grounds for inadmissibility so institutions can “monitor for and report activities by alien students and staff relevant to those grounds” so that those reports lead “to investigations, and, if warranted, actions to remove such aliens.”

To advance the executive order’s purposes, on February 5, the Department of Justice released a memorandum establishing a joint task force to combat “antisemitic acts of terrorism and civil rights violations in the homeland.” The memorandum notes that the task force’s priorities include “investigating and prosecuting acts of terrorism, antisemitic civil rights violations, and other federal crimes committed by Hamas supporters in the United States, including on college campuses.”

Pursuant to the executive order, the Department of Education already has launched investigations into five universities for tolerating “widespread anti-Semitic harassment” in violation of Title XI.

In addition to these executive branch actions, Gibson Dunn expects the House Committee on Education and Workforce’s new chairman, Tim Walberg (R-MI-5), to continue to focus on college and university responses to the antisemitism on campus. On February 13, Chairman Walberg sent a letter to Columbia University requesting disciplinary records for antisemitic incidents on campus, writing, “Columbia’s continued failure to address the pervasive antisemitism that persists on campus is untenable, particularly given that the university receives billions in federal funding.”

Gender-Related Issues & Title IX

President Trump has issued several executive orders regarding gender, some of which will affect how colleges and universities are evaluated for compliance with civil rights law, including Title IX. Relevant executive actions include:

Executive Order 14168, “Defending Women from Gender Ideology Extremism and Restoring Biological Truth to the Federal Government,” defines “sex” as “an individual’s immutable biological classification as either male or female.” The order has two main effects: (1) it directs federal agencies to enforce “the freedom to express the binary nature of sex and the right to single-sex spaces in workplaces and federally funded entities” which may lead to enforcement actions against entities that do not provide “single-sex spaces” such as bathrooms or if they take disciplinary action against employees for “express[ing] the binary nature of sex”; and (2) it directs federal agencies to ensure that funds awarded via federal grants do not promote “gender ideology.”

Executive Order 14201, “Keeping Men Out of Women’s Sports,” which directs the Secretary of Education to “prioritize Title IX enforcement actions against educational institutions [] that deny female students an equal opportunity to participate in sports and athletic events by requiring them, in the women’s category, to compete with or against or to appear unclothed before males.” The Department of Education is expected to provide guidance on how schools must alter their sports programs.

Federal Grants and Contracts

Institutions of higher education that receive federal funding should monitor Trump administration actions that may delay the release of those funds. Government delays in fulfilling funding obligations may impede institutions’ ability to operate programs that rely on federal funding.

In late January, the Office of Management and Budget issued a memorandum (before rescinding it) that some interpreted as freezing funding for all “financial assistance programs and supporting activities,” but OMB then clarified that the freeze applied only to discretionary payments for specific programs involving immigration, foreign aid, DEI programs, and gender issues that were already ordered paused via executive orders. Days after the memorandum was rescinded, a federal district judge in Washington, DC granted a temporary restraining order on behalf of the plaintiffs and ordered that the White House is “enjoined from implementing, giving effect to, or reinstating under a different name the directives in [the memorandum] with respect to the disbursement of Federal funds under all open awards” and that the White House “must provide written notice of the court’s temporary restraining order to all agencies to which [the memorandum] was addressed.”[2]

Institutions also may find that competition process for new contracts also is on hold, which may affect institutions that provide services to the federal government. The General Services Administration, the Department of Energy, and likely other executive branch agencies have halted all new contracting awards with certain exceptions.

Immigration

Recent executive orders regarding immigration policy may affect institutions of higher learning. There has been concern that such orders may lead to immigration enforcement on campuses and legal action against institutions with undocumented students or staff. The orders may also affect the ability of students and staff to enter or remain in the United States. Relevant executive actions include:

Executive Order 14159, “Protecting the American People Against Invasion,” directs the Attorney General and Secretary of Homeland Security to set immigration enforcement priorities based on public safety. The order also authorizes state and local law enforcement to perform immigration functions and to take lawful actions to ensure “sanctuary” jurisdictions do not receive federal funds.

Acting Secretary of DHS Bejamine Huffman issued a directive advancing this EO, rescinding the Biden Administration’s guidelines for immigration enforcement actions near “sensitive” areas, including schools. It is possible that immigration enforcement actions will take place on college campuses.

Executive Order 14161, “Protecting the United States from Foreign Terrorists and Other National Security and Public Safety Threats,” directs the Secretary of State to ensure that all aliens seeking admission to, or already present in, the United States are “vetted and screened to the maximum degree possible” to ensure they “do not bear hostile attitudes towards [the U.S.’s] citizens, culture, government, institution, or founding principles” or “advocate for, aid, or support designated foreign terrorists or other threats to our national security.”

For more information on these and other Executive Orders related to immigration, you can find analysis by Gibson Dunn’s Immigration Task Force here.

Vaccines

Executive Order 14214

Conclusion

The issues discussed in this client alert are rapidly evolving. Gibson Dunn’s Executive Order Tracker analyzes executive orders in real time as they are announced. Gibson Dunn lawyers are available to assist in addressing any questions you may have about executive orders and their implications for institutions of higher education. Please contact the Gibson Dunn lawyer with whom you usually work or the authors of this client alert for more information.

[1] National Association of Diversity Officers in Higher Education v. Trump, Case 1:25-cv-00333-ABA (D. Md. Feb. 3, 2025).

[2] See National Council of Nonprofits v. Office of Management and Budget, No. 1:25-cv-00239 (D. D.C. Feb. 5, 2022).

The following Gibson Dunn lawyers prepared this update: Michael Bopp, Amanda Neely, Allonna Nordhavn, and Samantha Yi.

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 leader or member of the firm’s Congressional Investigations, Public Policy, Administrative Law & Regulatory, Energy Regulation & Litigation, Labor & Employment, or Government Contracts practice groups, or any of the following:

Michael D. Bopp – Chair, Congressional Investigations Practice Group,
Washington, D.C. (+1 202.955.8256, mbopp@gibsondunn.com)

Stuart F. Delery – Co-Chair, Administrative Law & Regulatory Practice Group,
Washington, D.C. (+1 202.955.8515, sdelery@gibsondunn.com)

Eugene Scalia – Co-Chair, Administrative Law & Regulatory Practice Group,
Washington, D.C. (+1 202.955.8673, dforrester@gibsondunn.com)

Helgi C. Walker – Co-Chair, Administrative Law & Regulatory Practice Group,
Washington, D.C. (+1 202.887.3599, hwalker@gibsondunn.com)

Matt Gregory – Partner, Administrative Law & Regulatory Practice Group,
Washington, D.C. (+1 202.887.3635, mgregory@gibsondunn.com)

Andrew G.I. Kilberg – Partner, Administrative Law & Regulatory Practice Group,
Washington, D.C. (+1 202.887.3759, akilberg@gibsondunn.com)

Tory Lauterbach – Partner, Energy Regulation & Litigation Practice Group,
Washington, D.C. (+1 202.955.8519, tlauterbach@gibsondunn.com)

Amanda H. Neely – Of Counsel, Public Policy Practice Group,
Washington, D.C. (+1 202.777.9566, aneely@gibsondunn.com)

Jason C. Schwartz – Co-Chair, Labor & Employment Group,
Washington, D.C. (+1 202.955.8242, jschwartz@gibsondunn.com)

Katherine V.A. Smith – Co-Chair, Labor & Employment Group,
Los Angeles (+1 213.229.7107, ksmith@gibsondunn.com)

Mylan L. Denerstein – 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)

Blaine H. Evanson – Partner, Appellate & Constitutional Law Group,
Orange County (+1 949.451.3805, bevanson@gibsondunn.com)

Gibson Dunn is a leader in royalty finance, including royalty monetizations and synthetic royalty financing transactions. With an interdisciplinary team bringing together expertise in M&A, licensing, finance, intellectual property, FDA regulatory matters and tax matters, Gibson Dunn has extensive experience representing buyers and sellers of royalty entitlements, including academic institutions, biotechnology and pharmaceutical companies and royalty acquisition funds. This breadth of experience provides valuable insight and commercial perspective that can be critical to an efficient and successful royalty financing transaction.

The Gibson Dunn team has represented clients in royalty finance transactions with a total aggregate value of approximately $8 Billion. Since 2020, Gibson Dunn has completed (representing either company/seller or fund/buyer) nearly 30% of the royalty finance transactions entered into by the most active funds in the space.

As a leading firm in the royalty finance space, we are using our resources and market knowledge to compile and curate all royalty finance transactions that have occurred since January 1, 2020. If you are aware of a transaction that is not appropriately reflected below, please email GibsonDunnRoyaltyTracker@gibsondunn.com with the applicable details.

Date	Company/Seller	Fund/Buyer	Product Name	Aggregate Value	Upfront Payment
12/2/2024	Pulmokine Inc.	XOMA Royalty	Seralutinib	$20,000,000	$20,000,000
11/4/2024	KalVista Pharmaceuticals	DRI Capital	Sebetralstat	$179,000,000	$100,000,000
11/4/2024	Syndax Pharmaceuticals, Inc.	Royalty Pharma	Niktimvo (axatilimab-csfr)	$350,000,000	$350,000,000
11/1/2024	Geron Corporation	Royalty Pharma	RYTELO (imetelstat)	$125,000,000	$125,000,000
10/21/2024	Twist Bioscience Corporation	XOMA Royalty	Various early-stage programs (60+) across Twist’s Biopharma Solutions business unit	$15,000,000	$15,000,000
10/3/2024	Editas Medicine, Inc.	DRI Capital	CASGEVY	$57,000,000	$57,000,000
9/20/2024	BRAIN Biotech AG	Royalty Pharma	Deucrictibant	$140,000,000	$20,000,000
9/3/2024	Ascendis Pharma Bone Diseases A/S	Royalty Pharma	Yorvipath (palopegteriparatide)	$150,000,000	$150,000,000
7/22/2024	Valinor Pharma	Grunenthal	Movantik	$250,000,000	$250,000,000
7/17/2024	OPKO Health	HCRx	NGENLA	$250,000,000	$250,000,000
7/16/2024	Aclaris Therapeutics	OMERS	OLUMIANT (baricitinib)	$31,500,000	$26,500,000
6/28/2024	HLS Therapeutics Inc.	DRI Capital	Xenpozyme (olipudase alfa)	$45,750,000	$13,250,000
6/27/2024	Esperion Therapeutics, Inc.	OMERS	Bempedoic Acid Products, including Nilemdo® (bempedoic acid) and Nustendi® (bempedoic acid and ezetimibe)	$304,656,180	$304,656,180
5/24/2024	Agios Pharmaceuticals	Royalty Pharma	Vorasidenib	$905,000,000	$905,000,000
5/22/2024	Cytokinetics	Royalty Pharma	Omecamtiv mecarbil; CK-586	$400,000,000	$150,000,000
5/9/2024	Verona Pharma	OMERS	ensifentrine	$250,000,000	$100,000,000
5/9/2024	ImmuNext, Inc.	Royalty Pharma	Frexalimab	$525,000,000	$525,000,000
5/8/2024	Karyopharm Therapeutics Inc.	HCRx	XPOVIO (selinexor) and other future products	$49,494,864	$49,494,864
4/29/2024	Dare Bioscience	XOMA Royalty	XACIATO Ovaprene; Sildenafil	$33,000,000	$22,000,000
3/27/2024	Moderna	Blackstone	Moderna influenza Flu Products	$750,000,000	Undisclosed
3/4/2024	Heidelberg Pharma	HCRx	Zircaix (TLX250-CDx)	$115,000,000	$25,000,000
2/1/2024	Omeros	DRI Capital	Omidria	$170,000,000	$115,000,000
1/17/2024	BridgeBio Pharma	CPPIB	Acoramidis	$200,000,000	$200,000,000
1/12/2024	Talphera	XOMA Royalty	DSUVIA	$8,000,000	$8,000,000

Date	Company/Seller	Fund/Buyer	Product Name	Aggregate Value	Upfront Payment
12/29/2023	ImmunityBio	Oberland Capital	Anktiva (N-803)	$300,000,000	$200,000,000
12/15/2023	XOMA Royalty	Blue Owl Capital Corporation	Vabysmo (faricimab)	$140,000,000	$130,000,000
11/9/2023	Teva Pharmaceuticals International GmbH	Royalty Pharma	Olanzapine (including TEV-447479)	$125,000,000	$100,000,000
11/3/2023	Xencor	OMERS	Ultomiris (ravulizumab-cwvz) Monjuvi (tafasitamab-cxix)	$227,000,000	$215,000,000
10/19/2023	PTC Therapuetics	Royalty Pharma	Evrysdi	$1,500,000,000	$1,000,000,000
9/5/2023	Ascendis Pharma A/S	Royalty Pharma	Skytrofa	$150,000,000	$150,000,000
8/24/2023	Ferring Pharmaceuticals	Royalty Pharma	Adstiladrin (nadofaragene firadenovec-vncg)	$500,000,000	$300,000,000
8/22/2023	TheracosBio	HCRx	veterinary product (Bexacat™ (bexagliflozin tablets))	Undisclosed	Undisclosed
8/14/2023	Radius Pharmaceuticals, Inc.	DRI Capital	Orserdu (elacestrant)	$140,000,000	$130,000,000
8/2/2023	Lantheus Holdings, Inc.	HCRx	RELISTOR (methylnaltrexone bromide)	$103,000,000	$98,000,000
7/7/2023	S*Bio Pte Ltd	DRI Capital	VONJO (Pacritinib)	$66,000,000	$66,000,000
6/30/2023	Eisai Co., Ltd.	DRI Capital	Orserdu (elacestrant)	$85,000,000	$85,000,000
6/21/2023	LadRx Corporation	XOMA Royalty	aldoxorubicin, arimoclomol	$11,000,000	$5,000,000
6/21/2023	Sutro Biopharma, Inc.	Blackstone	Vaxcyte Inc.’s products, including VAX-24 and VAX-31	$390,000,000	$140,000,000
6/5/2023	UCLA	Royalty Pharma	Erleada	$59,000,000	$59,000,000
5/12/2023	Humacyte, Inc.	Oberland Capital	Humacyte’s Human Acellular Vessel (HAV)	$150,000,000	$40,000,000
5/12/2023	uniQure N.V.	HCRx	HEMGENIX	$400,000,000	$375,000,000
4/27/2023	DRI Capital	Sanofi	TZIELD (teplizumab-mzwv)	$310,000,000	$210,000,000
4/25/2023	Enanta Pharmaceuticals, Inc.	OMERS	MAVYRET (glecaprevir/pibrentasvir)/MAVIRET (glecaprevir/pibrentasvir)	$200,000,000	$200,000,000
3/30/2023	Aptevo Therapeutics Inc.	XOMA Royalty	IXINITY (coagulation factor IX (recombinant))	$9,650,000	$9,600,000
3/22/2023	PureTech	Royalty Pharma	KarXT	$500,000,000	$100,000,000
3/8/2023	MacroGenics, Inc.	DRI Capital	TZIELD (teplizumab-mzwv)	$200,000,000	$100,000,000
1/9/2023	Liquidia Technologies, Inc.	HCRx	YUTREPIA™ (treprostinil) other products marketed by Liquidia	$100,000,000	$32,500,000
1/9/2023	Ionis Pharmaceuticals, Inc.	Royalty Pharma	SPINRAZA® BIIB-115 Pelacarsen	$1,125,000,000	$500,000,000

Date	Company/Seller	Fund/Buyer	Product Name	Aggregate Value	Upfront Payment
12/20/2022	Atara Biotherapeutics	HCRx	Ebvallo (tabelecleucel)	$31,000,000	$31,000,000
11/28/2022	Sanofi S.A.	DRI Capital	Xenpozyme (olipudase alfa)	$56,500,000	$30,000,000
11/9/2022	Arrowhead Pharmaceuticals	Royalty Pharma	Olpasiran	$410,000,000	$250,000,000
9/30/2022	Omeros Corporation	DRI Capital	Omidria	$125,000,000	$125,000,000
9/9/2022	AnaptysBio, Inc.	DRI Capital	Zejula	$45,000,000	$35,000,000
8/8/2022	Clearside Biomedical, Inc.	HCRx	XIPERE (approved), SCS Microinjector	$65,000,000	$32,500,000
7/21/2022	Undisclosed	DRI Capital	Pegcetacoplan including EMPAVELI® /ASPAVELI®)	$24,500,000	$24,500,000
7/14/2022	Ultragenyx Pharmaceutical	OMERS	Crysvita	$500,000,000	$500,000,000
7/13/2022	Theravance Biopharma, Inc. Innoviva, Inc.	Royalty Pharma	TRELEGY ELLIPTA (Trelegy) ampreloxetine	$1,610,000,000	$1,310,000,000
6/30/2022	Blueprint Medicines	Royalty Pharma	Gavreto (pralsetinib)	$340,000,000	$175,000,000
6/29/2022	Ardelyx, Inc.	HCRx	tenapanor	$20,000,000	$10,000,000
6/16/2022	Rhythm Pharmaceuticals	HCRx	IMCIVREE® (setmelanotide)	$100,000,000	$37,500,000
5/10/2022	Zealand Pharma	Oberland Capital	Glepaglutid; and any other products of Zealand (e.g., dasiglucagon, and BI 456906)	15,000,000	(60,000,000)
3/15/2022	Eye Therapies, LLC	HCRx	Lumify	$71,000,000	Undisclosed
3/15/2022	Sanofi	Blackstone	Sarclisa (isatuximab) (subcutaneous formulation and delivery)	$300,000,000	N/A
1/7/2022	Cytokinetics Inc.	Royalty Pharma	aficamten (royalties)	$150,000,000	$50,000,000

Date	Company/Seller	Fund/Buyer	Product Name	Aggregate Value	Upfront Payment
12/31/2021	Tafamidis Holdings, LLC (a Blackstone Life Science’s portfolio company)	CPPIB	Vyndaqel and Vyndamax (Tafamidis)	$221,000,000	Undisclosed
12/13/2021	Zealand Pharma	Oberland Capital	Glepaglutid; and any other products of Zealand (e.g., dasiglucagon, and BI 456906)	$200,000,000	$100,000,000
11/19/2021	BioCryst Pharmaceuticals, Inc.	Royalty Pharma	ORLADEYO™ (berotralstat) BCX9930	$150,000,000	$150,000,000
11/19/2021	BioCryst Pharmaceuticals, Inc.	OMERS	ORLADEYO	$150,000,000	$150,000,000
9/30/2021	Galderma Laboratories, Inc.	DRI Capital	Oracea (doxycycline) Two additional undisclosed products	$46,400,000	$46,400,000
9/29/2021	Spero Therapeutics	HCRx	Tebipenem HBr (Tebi); and SPR720, SPR206 and any other products marketed by Spero	$125,000,000	$50,000,000
8/25/2021	CTI BioPharma Corp.	DRI Capital	VONJO (Pacritinib)	$85,000,000	$60,000,000
8/25/2021	ADC Therapeutics SA	HCRx	Zynlonta (loncastuximab tesirine), Cami (camidanlumab tesirine)	$325,000,000	$225,000,000
7/15/2021	Kuros Biosciences	XOMA Royalty	vidutolimod (CMP-001) (Fast Track and Orphan Drug)	$149,500,000	$7,000,000
6/23/2021	Karyopharm Therapeutics Inc.	HCRx	XPOVIO (selinexor) other Karyopharm programs, including eltanexor	$25,000,000	$60,000,000
6/15/2021	Inventor of Botox	HCRx	Botox	$40,000,000	$40,000,000
6/2/2021	MorphoSys	Royalty Pharma	Tremfya, Gantenerumab, Otilimab (Phase 3), Pelabresib, CPI-0209	$1,575,000,000	$1,425,000,000
4/8/2021	Dicerna Pharmaceuticals, Inc.	Royalty Pharma	OXLUMO (lumasiran)	$240,000,000	$180,000,000
4/1/2021	GlaxoSmithKline (GSK)	Royalty Pharma	Cabometyx, Cometriq	$392,000,000	$342,000,000
3/30/2021	Aptevo Therapeutics Inc.	HCRx	Ruxience	$67,500,000	$35,000,000
3/23/2021	Viracta Therapeutics	XOMA Royalty	DAY101 (pan-RAF kinase inhibitor) vosaroxin (topoisomerase II inhibitor)	$33,500,000	$13,500,000
2/25/2021	Akebia Therapeutics	HCRx	Vafseo (vadadustat)	$60,000,000	$45,000,000
2/15/2021	Co-Inventor of Krystexxa	HCRx	Krystexxa (pegloticase injection)	Undisclosed	Undisclosed
1/15/2021	Minerva Neurosciences, Inc.	Royalty Pharma	Seltorexant	$155,000,000	$60,000,000

Date	Company/Seller	Fund/Buyer	Product Name	Aggregate Value	Upfront Payment
12/22/2020	REGENXBIO Inc.	HCRx	Zolgensma	$200,000,000	$200,000,000
12/16/2020	Nektar Therapeutics	HCRx	ADYNOVATE, MOVANTIK, Rebinyn, and certain licensed products	$150,000,000	$150,000,000
12/8/2020	Mirum Pharmaceuticals, Inc.	Oberland Capital	Maralixibat	$200,000,000	$50,000,000
12/7/2020	BioCryst Pharmaceuticals, Inc.	Royalty Pharma	ORLADEYO™ (berotralstat), BCX9930	$125,000,000	$125,000,000
11/2/2020	Cystic Fibrosis Foundation Therapeutics	Royalty Pharma	Cystic fibrosis franchise (a collection of drugs) including Kalydeco (ivacaftor), Orkambi (lumacaftor and ivacaftor), Symdeko/Symkevi (tezacaftor and ivacaftor) and Trikafta/Kaftrio (elexacaftor, tezacaftor and ivacaftor)	$650,000,000	$575,000,000
11/2/2020	Bioasis Technologies Inc.	XOMA Royalty	four lysosomal storage disorder enzymes	$1,200,000	$1,200,000
8/15/2020	An inventor of VIMPAT	HCRx	Vimpat (lacosamide)	$308,000,000	$308,000,000
8/7/2020	Biohaven Pharmaceutical Holding Company Ltd.	Royalty Pharma	zavegepant (formerly known as vazegepant; Nurtec ODT	$250,000,000	$150,000,000
7/17/2020	PTC Therapeutics, Inc.	Royalty Pharma	Risdiplam	$650,000,000	$650,000,000
6/30/2020	Axogen, Inc.	Oberland Capital	Any products, e.g., Axogen Nerve Graft	$75,000,000	$35,000,000
6/12/2020	Medtronic plc	Blackstone	Various Insulin Delivery and Sensory Medical Devices (four undisclosed type 1 diabetes programs)	$337,000,000	N/A
6/11/2020	Agios Pharmaceuticals, Inc.	Royalty Pharma	IDHIFA (enasidenib)	$255,000,000	$255,000,000
6/10/2020	Reata Pharamaceuticals, Inc.	Blackstone	bardoxolone methyl (bardoxolone)	$300,000,000	$300,000,000
6/9/2020	AiCuris Anti-infective Cures GmbH	Royalty Pharma	Prevymis (letermovir)	$220,000,000	$220,000,000
4/10/2020	Alnylam Pharmaceuticals	Blackstone	Inclisiran	$1,000,000,000	$500,000,000
4/7/2020	Chiasma, Inc.	HCRx	Mycapssa (octreotide) and any other future products	$75,000,000	$25,000,000
3/5/2020	Massachusetts General Hospital	Royalty Pharma	Entyvio (vedolizumab)	$94,000,000	$94,000,000
2/23/2020	RedHill Biopharma	HCRx	Products (any current or future products)– e.g., Talicia, Aemcolo	$115,000,000	$30,000,000
2/21/2020	Theravance Biopharma, Inc.	HCRx	Trelegy Ellipta	$200,000,000	$200,000,000

We are pleased to provide you with the February edition of Gibson Dunn’s monthly U.S. bank regulatory update. Please feel free to reach out to us to discuss any of the below topics further.

KEY TAKEAWAYS

On February 18, 2025, President Trump signed Executive Order 14215 titled, “Ensuring Accountability for All Agencies,” in an effort to subject independent agencies, including the federal financial services regulatory agencies, to significant political control across activities including rulemaking, legal interpretations, enforcement priorities and expenditures. See our Client Alert on the Executive Order here.
Acting Chairman Hill announced that the FDIC is “actively reevaluating [its] supervisory approach to crypto-related activities,” including replacing Financial Institution Letter (FIL) 16-2022 requiring FDIC-supervised institutions to notify the FDIC prior to engaging in any crypto-related activities and “providing a pathway for institutions to engage in crypto- and blockchain-related activities.”
The federal financial services regulatory agencies’ leadership, agendas and regulatory priorities under the new administration remain in flux as leadership teams continue to take shape.
- Russell Vought, the Director of the Office of Management and Budget, was named Acting Director of the Consumer Financial Protection Bureau (CFPB) pending the confirmation of former director of the Federal Deposit Insurance Corporation (FDIC) Board, Jonathan McKernan. Almost immediately, Acting Director Vought directed CFPB staff to “stand-down.”
- Treasury Secretary Scott Bessent designated Rodney Hood, former Chairman of the National Credit Union Administration Board, as the Acting Comptroller of the Currency, pending the confirmation of Jonathan Gould. Gould was previously the Senior Deputy Comptroller and Chief Counsel of the Office of the Comptroller of the Currency (OCC).
- Acting Comptroller Hood and Acting Director Vought join Acting Chairman Travis Hill as directors of the FDIC Board, which has reached its statutory limit of three directors from the same political party. The two remaining FDIC Board seats remain vacant. Matthew Reed was promoted to Acting General Counsel of the FDIC.
- President Trump announced Brian Quintenz as his nominee for Chairman of the Commodity Futures Trading Commission (CFTC). Quintenz is a former CFTC Commissioner during the first Trump administration. Quintenz was also nominated to take the seat of Commissioner Christy Goldsmith Romero, who announced she would step down from the CFTC upon Quintenz’s confirmation, leaving Commissioner Kristin Johnson as the only Democrat on the CFTC’s five-person Commission.
- The administration has not yet announced an intent to designate anyone to the role of Vice Chair for Supervision of the Federal Reserve Board following the Federal Reserve Board’s January 6, 2025 announcement that Vice Chair for Supervision Michael Barr will step down from the position effective February 28, 2025. Recall the Federal Reserve Board’s announcement indicated that it did “not intend to take up any major rulemakings until a vice chair for supervision successor is confirmed.”

DEEPER DIVES

Russell Vought Directs CFPB Employees to “stand-down.” Russell Vought assumed the role as Acting Director of the CFPB only days after President Trump fired former CFPB Director Rohit Chopra and designated Treasury Secretary Bessent as Acting Director. As Acting Director, Bessent directed staff to halt most work and suspended the effective date of all final rules that had not taken effect, consistent with President Trump’s January 20, 2025 executive memorandum ordering “all executive departments and agencies” to implement a regulatory freeze. Upon assuming the Acting Director role, Vought expanded the freeze to cover supervision and examination activities and cut the CFPB’s next funding request to zero. In a court filing on February 24, 2025, the Justice Department stated that Vought had “made no ‘decision to eliminate the CFPB.’” On February 11, 2025, President Trump announced Jonathan McKernan as his nominee for CFPB Director.

Insights. Among the federal financial services regulatory agencies, it seems that the CFPB has been an epicenter of change during President Trump’s first month—with three different agency heads in as many weeks and two separate stop-work orders—reflecting a shift in the CFPB’s priorities. In his February 27, 2025 nomination hearing before the Senate Banking Committee, McKernan was critical of the CFPB, stating that the agency “suffers from a crisis of legitimacy” that “must be corrected.” McKernan committed to taking “all steps necessary to implement and enforce the federal consumer financial laws” by centering the CFPB’s “regulation on real risks to consumers and by focusing its enforcement on bad actors.” McKernan’s nomination as CFPB Director also clears a path for his return to the FDIC Board, where he had served as a director since January 5, 2023—McKernan would have been unable to continue to serve as a member of the FDIC Board if a member of the same political party were confirmed as CFPB Director.

President Trump Seeks to Expand Oversight of Independent Financial Regulatory Agencies. On February 18, 2025, President Trump signed Executive Order 14215 titled, “Ensuring Accountability for All Agencies.” The Executive Order (EO) requires independent regulatory agencies to “submit for review all proposed and final significant regulatory actions to the Office of Information and Regulatory Affairs (OIRA) within the Executive Office of the President before publication in the Federal Register,” as traditional executive branch agencies have done for decades. The EO also directs the Office of Management and Budget (OMB) to review agencies’ obligations for alignment with presidential priorities and “adjust such agencies’ apportionments,” requires agencies to establish a White House Liaison and regularly consult and coordinate with the White House, and provides that the President and Attorney General will provide authoritative legal interpretations for the entire executive branch. Although the EO exempts the Board of Governors of the Federal Reserve System’s (Federal Reserve) “conduct of monetary policy,” it expressly applies to the Federal Reserve’s “conduct and authorities directly related to its supervision and regulation of financial institutions.” The EO also applies to other federal financial services regulatory agencies by reference to 44 U.S.C. § 3502(5), which includes the Federal Reserve, CFTC, FDIC, the Federal Housing Finance Agency, the Securities and Exchange Commission, CFPB and the OCC. (For up-to-date information on executive orders and other significant announcements made by the new administration, please visit our Executive Order Tracker. For additional insights, please visit our resource center, Presidential Transition: Legal Perspectives and Industry Trends.)

Insights. The EO indicates that the White House intends to play an increased role in shaping financial regulatory policy by subjecting the federal financial services regulatory agencies to significant political control across activities including rulemaking, legal interpretations, enforcement priorities and expenditures. The EO’s requirement that the Attorney General interpret the law for the executive branch implies that independent agencies may need to consult with the Justice Department before issuing regulations or guidance, and potentially before taking enforcement action, which may slow the pace of agency action in both the regulatory and enforcement space. Additionally, the OMB Director’s (Russell Vought) authority to shape independent agency expenditures could allow him to order nonenforcement of regulations or defunding programs that are inconsistent with the President’s policy preferences, and shift the focus of financial regulators toward the administration’s political priorities.

Federal Bank Regulatory Agencies Revisit Crypto-Related Activities. On February 5, 2025, in conjunction with the FDIC’s announcement that it was making additional disclosure of FDIC correspondence with banks and noting “that requests from … banks [to pursue crypto- or blockchain-related activities] were [previously] almost universally met with resistance,” Acting Chairman Hill made clear that the FDIC is “actively reevaluating [its] supervisory approach to crypto-related activities,” including replacing Financial Institution Letter (FIL) 16-2022 and “providing a pathway for institutions to engage in crypto- and blockchain-related activities.” On February 12, 2025, Federal Reserve Board Governor Waller gave a speech illustrating an openness to increased bank participation in the crypto industry. In his speech, Governor Waller called for a “regulatory and supervisory framework that addresses stablecoin risks directly, fully, and narrowly” so that banks and non-banks alike can issue regulated stablecoins. He also addressed the impact of fragmentation—from a technical perspective, in use cases, and in regulatory approach—on the potential growth of stablecoins.

Insights. The federal banking agencies, with the support of Congress, have been very clearly signaling they will revisit their approach to crypto-related activities, potentially starting with addressing the permissibility of at least some of the five crypto-asset activities highlighted in the interagency policy sprint, in particular crypto custody activities; activities involving payments, including stablecoins; and the facilitation of customer purchases and sales of crypto-assets (perhaps using finder authority). The federal banking agencies also seem poised to continue to support tokenization of traditional financial assets. Increased acceptance of more forms of digital assets, blockchain-related activities and tokenization into the banking system should be met with the requisite evolution of BSA/AML programs. In addition, the historic web of U.S. federal and state (as well as non-U.S.) regulatory requirements will necessitate careful consideration to minimize friction. In that regard, this is an area where global coordination will be critical for industry participants.

OTHER NOTABLE ITEMS

Speech by Governor Bowman on Changes to Federal Reserve Supervision. On February 17, 2025, Federal Reserve Board Governor Bowman gave remarks before the ABA’s Conference for Community Bankers. In her remarks, Governor Bowman reiterated consistent themes of greater accountability and transparency in bank supervision; increased focus on safety and soundness, as opposed to operational risk; streamlined de novo banking applications; and a comprehensive review and modernization of banking laws. Specifically, she noted that “non-core and non-financial risks” like information technology, operational risk, internal controls and governance have been “over-emphasized” and, while important, “should not drive the overall assessment of a firm’s condition,” particularly “at the expense of more material financial risks.” According to Governor Bowman, where those non-core non-financial risks are over-emphasized, it creates an “odd mismatch between financial condition and overall supervisory condition.”

Speech by Vice Chair for Supervision Barr on Risks and Challenges for Bank Regulation and Supervision. On February 20, 2025, Vice Chair for Supervision Barr gave a speech titled “Risks and Challenges for Bank Regulation and Supervision.” In somewhat contrasting remarks to those of Governor Bowman, Vice Chair for Supervision Barr outlined seven specific risks that he foresees ahead: “(1) maintaining and finishing post-financial crisis reforms; (2) maintaining the credibility of the stress test; (3) maintaining credible, consistent supervision; (4) encouraging responsible innovation; (5) addressing cyber and third-party risk; (6) risks in the nonbank sector; and (7) climate risk.”

Federal Reserve and OCC Release 2025 Stress Test Scenarios. On February 5, 2025, the Federal Reserve released its 2025 stress test scenarios. Consistent with its December 23, 2024 announcement and the December 24, 2024 suit challenging the legality of the current the stress testing framework, the Federal Reserve indicated in its announcement that it plans intends to “take steps soon to reduce the volatility of stress test results and begin to improve model transparency in the 2025 stress test” and “begin the public comment process on its comprehensive changes to the stress test this year.” The Federal Reserve also released two hypothetical elements to explore “how banks would react to credit and liquidity shocks in the non-bank financial institution sector during a severe global recession.” On February 13, 2025, the OCC announced the release of economic and financial market scenarios for use in the upcoming stress tests for covered institutions. This year’s baseline scenario features moderate economic growth; the severely adverse scenario considers the impact of an increase in “the U.S. unemployment rate [of] nearly 5.9 percentage points, to a peak of 10 percent,” accompanied by severe market volatility and a collapse in asset prices, including a 33% decline in home prices and a 30% decline in commercial real estate prices.

FDIC Abandons Defense of Administrative Law Judges. On February 24, 2025, the FDIC filed a notice in the United States District Court for the District of Kansas stating that the FDIC will not continue to defend the use of administrative law judges under 5 U.S.C. § 7521 in that case. CBW Bank (CBW) had sought declaratory and injunctive relief from the FDIC on the basis that the FDIC’s administrative proceeding against CBW was unlawful. In its notice, the FDIC stated that the decision was based on the Acting Solicitor General’s decision that “the multiple layers of removal restrictions for administrative law judges in 5 U.S.C. § 7521 do not comport with the separation of powers and Article II.” The FDIC is still seeking dismissal of the case on other grounds. The case is CBW Bank v. FDIC, 2:24-cv-02535.

FDIC Seeks to Modernize Customer Identification Program (CIP) Requirements. On February 7, 2025, Acting Chairman Hill sent a letter to FinCEN urging FinCEN to “align” CIP requirements “with modern financial services practices.” Acting Chairman Hill’s letter notes that fintechs often collect only the last four digits of a customer’s social security or tax identification number from the customer while requesting the rest of the identifiers from a trusted third party, and proposes that banks should be able to onboard customers in a similar fashion.

Chair Powell Addresses Basel III During Semiannual Monetary Policy Report. On February 11, 2025, Chair Powell testified before the Senate Banking Committee. Responding to questions from the Committee, Chair Powell reiterated the Federal Reserve’s commitment to working with new FDIC and OCC leadership towards “completing Basel III Endgame” “fairly quickly,” noting that he expects that the final rule’s top-line number will be “somewhere in [the] area” of capital neutral because “Basel III was not supposed to be an exercise in raising capital in U.S. banks.” In his testimony, Chair Powell revealed that the Federal Reserve is removing the concept of “reputational risk” as a factor in the manual utilized by the Federal Reserve for account access for master accounts.

Speeches by Governor Bowman on Bank Regulation and Supervision. On February 5, 2025 and February 11, 2025, Federal Reserve Board Governor Bowman gave a speech titled “Bank Regulation in 2025 and Beyond.” In her speech, Governor Bowman outlined her views of bank regulation and supervision in 2025. She emphasized the importance of (1) tailoring both a regulatory and supervisory approach based on a firm’s size, business model, risk profile and complexity, (2) a “problem-focused approach” to regulation and (3) innovation in the bank system. As examples of “problems” warranting regulatory changes, Bowman cited the erosion of U.S. Treasury market liquidity, the lack of transparency in stress testing and an increase in check fraud.

Speech by Vice Chair for Supervision Barr on Crisis Management. On February 25, 2025, Vice Chair for Supervision Barr gave a speech titled “Managing Financial Crises.” In his speech, Barr reflected on strategies employed in the spring of 2023 when SVB and Signature Bank failed and outlined five key principles for managing a financial crisis: (1) the response must be forceful enough to convince the market and public of the will to overcome the crisis; (2) a response must be proportionate so that it does not suggest conditions are worse than perceived; (3) leaders need to made decisions despite high levels of uncertainty; (4) the response must be clearly communicated, both internally and to the public; and (5) crisis responders must remain accountable for their decisions.

Speech by Governor Bowman on Community Banking. On February 27, 2025, Federal Reserve Board Governor Bowman gave a speech titled “Community Banking.” In her speech, Governor Bowman touched on familiar themes affecting community banks, among others that “overregulation and unnecessary rules and guidance imposed on smaller and community banks create disproportionate burdens on these banks, eventually eroding the viability of the community banking model.”

Speech by Governor Barr on Artificial Intelligence. On February 18, 2025, Vice Chair for Supervision Barr gave a speech titled “Artificial Intelligence: Hypothetical Scenarios for the Future.” In his speech, Vice Chair for Supervision Barr addressed how banks and bank regulators can best harness the benefits of AI while minimizing the risks and highlighted the importance of (1) institutions and regulators understanding AI, (2) remaining agile and flexible, (3) monitoring any concentration in economic and political power that results from the development of AI, (4) deliberately setting up AI governance, (5) monitoring the risk introduced in finance, and (6) monitoring how AI, and its adoption at nonbanks and banks, alters the banking landscape.

Congress Continues to Investigate Debanking. On February 5 and 6, 2025, the Senate Banking Committee and House Financial Services Subcommittee on Oversight and Investigations held further hearings on debanking.

FDIC Updates Public Report of PPE Notices. On February 19, 2025, the FDIC updated the public list of companies that have submitted notices for a primary purpose exception under the FDIC’s brokered deposit rule. Although the FDIC had originally committed to updating the public list, it had done so only rarely since it was created in 2022.

OCC Announces Withdrawal from Global Regulatory Climate Change Group. On February 11, 2025, the OCC announced its withdrawal from the Network of Central Banks and Supervisors for Greening the Financial System, stating that its participation “extends well beyond the OCC’s statutory responsibilities and does not align with [its] regulatory mandate.” The OCC announcement follows similar announcements by the Federal Reserve on January 17, 2025 and the FDIC on January 21, 2025.

The following Gibson Dunn lawyers contributed to this issue: Jason Cabral, Ro Spaziani, and Rachel Jackson.

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 or any of the member of the Financial Institutions practice group:

Jason J. Cabral, New York (212.351.6267, jcabral@gibsondunn.com)

Ro Spaziani, New York (212.351.6255, rspaziani@gibsondunn.com)

Stephanie L. Brooker, Washington, D.C. (202.887.3502, sbrooker@gibsondunn.com)

M. Kendall Day, Washington, D.C. (202.955.8220, kday@gibsondunn.com)

Jeffrey L. Steiner, Washington, D.C. (202.887.3632, jsteiner@gibsondunn.com)

Sara K. Weed, Washington, D.C. (202.955.8507, sweed@gibsondunn.com)

Ella Capone, Washington, D.C. (202.887.3511, ecapone@gibsondunn.com)

Sam Raymond, New York (212.351.2499, sraymond@gibsondunn.com)

Rachel Jackson, New York (212.351.6260, rjackson@gibsondunn.com)

Zack Silvers, Washington, D.C. (202.887.3774, zsilvers@gibsondunn.com)

Karin Thrasher, Washington, D.C. (202.887.3712, kthrasher@gibsondunn.com)

Nathan Marak, Washington, D.C. (202.777.9428, nmarak@gibsondunn.com)

From the Derivatives Practice Group: The CFTC Division of Enforcement has issued an advisory opinion that explains how the Division will evaluate a company’s or individual’s self-reporting, cooperation, and remediation when recommending enforcement actions to the Commission.

New Developments

CFTC Commissioner Christy Goldsmith Romero to Step Down from the Commission and Retire from Federal Service. On February 26, Commissioner Christy Goldsmith Romero announced she is stepping down from the Commission and will retire from federal service. Commissioner Romero extended gratitude towards President Biden for her nomination, the U.S. senate for its unanimous confirmation, and her current and former staff and CFTC for their public service. [NEW]
CFTC Releases Enforcement Advisory on Self-Reporting, Cooperation, and Remediation. On February 25, the CFTC’s Division of Enforcement issued an Advisory on how the Division will evaluate a company’s or individual’s self-reporting, cooperation, and remediation when recommending enforcement actions to the Commission and establishes the factors the Division will consider. This marks the first time the Division will use a matrix to determine the appropriate mitigation credit to apply. Commissioner Kristin N. Johnson released a statement that “any effort to adopt new reporting processes, particularly processes that require inter-division guidelines and infrastructure, must be consistent with the mandates of [the CFTC]” and consequently, that she does not support the Advisory. [NEW]
SEC Announces Cyber and Emerging Technologies Unit to Protect Retail Investors. On February 20, the SEC announced the creation of the Cyber and Emerging Technologies Unit (“CETU”). According to the SEC, CETU will focus on combatting cyber-related misconduct and is intended to protect retail investors from bad actors in the emerging technologies space. CETU, led by Laura D’Allaird, replaces the Crypto Assets and Cyber Unit and is comprised of approximately 30 fraud specialists and attorneys across multiple SEC offices. The SEC noted that CETU will utilize the staff’s substantial fintech and cyber-related experience to combat misconduct as it relates to securities transactions in the following priority areas: fraud committed using emerging technologies, such as artificial intelligence and machine learning; use of social media, the dark web, or false websites to perpetrate fraud; hacking to obtain material nonpublic information; takeovers of retail brokerage accounts; fraud involving blockchain technology and crypto assets; regulated entities’ compliance with cybersecurity rules and regulations; and public issuer fraudulent disclosure relating to cybersecurity.
Acting Chairman Pham Announces Brian Young as Director of Enforcement. On February 14, the CFTC Acting Chairman Caroline D. Pham today announced Brian Young will serve as the agency’s Director of Enforcement. Young has been serving in an acting capacity since January 22, and previously was the Director of the Whistleblower Office. He is a distinguished federal prosecutor with nearly 20 years of service at the Department of Justice, including Acting Director of Litigation for the Antitrust Division and Chief of the Litigation Unit for the Fraud Section of the Criminal Division, and has successfully tried some of the most high-profile criminal fraud and manipulation cases in the CFTC’s markets.
Trump Plans to Pick Brian Quintenz to Lead CFTC. On February 11, several mainstream news sources began to report that U.S. President Donald Trump plans to nominate Brian Quintenz, the head of policy at Andreessen Horowitz’s a16z crypto arm, as Chairman of the CFTC. Quintenz previously served as a commissioner for the CFTC during the first Trump administration.

New Developments Outside the U.S.

IOSCO concludes Thematic Review on Technological Challenges to Effective Market Surveillance. On February 19, IOSCO published a Thematic Review on the status of implementation of its recommendations on Technological Challenges to Effective Market Surveillance issued in 2013. The IOSCO Assessment Committee conducted the review and assessed the consistency of outcomes arising from the implementation of its recommendations by market authorities in 34 IOSCO member jurisdictions. According to IOSCO, the review found that most market authorities have implemented the recommendations and have made significant progress in addressing technological challenges to market surveillance, particularly in more complex markets. However, IOSCO noted the following concerns: some regulators lack the necessary organizational and technical capabilities to conduct effective surveillance of their markets in the midst of rapid technological developments; the absence of regular review of the surveillance capabilities of market authorities; difficulties with regard to the collection and comparison of data across venues in markets with multiple trading venues; and the inability of many regulators to map their cross-border surveillance capabilities.
ESMA Proposes Guidelines on Product Supplements. On February 18, ESMA published a Consultation Paper (“CP”)asking for input on Guidelines on supplements that introduce new types of securities to a base prospectus. The aim of the guidelines is to harmonize the supervision of so-called ‘product supplements’ across national competent authorities as approaches to supervision in this area have diverged in the past. [NEW]
The ESAs Provide a Roadmap Towards the Designation of CTPPs under DORA. On February 18, the European Supervisory Authorities (“ESAs”) announced advancements of the implementation of the pan-European oversight framework of critical Information and Communication Technology (“ICT”) third-party service providers (“CTPPs”) with the objective to designate the CTPPs and to start the oversight engagement this year. The competent authorities are required to submit Registers of Information on ICT third-party arrangements they received from financial entities by April 30, 2025. [NEW]
ESMA Consults on the Criteria for the Assessment of Knowledge and Competence Under MiCA. On February 17, ESMA launched a consultation on the criteria for the assessment of knowledge and competence of crypto-asset service providers’ (“CASPs”) staff giving information or advice on crypto-assets or crypto-asset services. ESMA is seeking stakeholder inputs about, notably: the minimum requirements regarding knowledge and competence of staff providing information or advice on crypto-assets or crypto-asset services; and organizational requirements of CASPs for the assessment, maintenance and updating of knowledge and competence of the staff providing information or advice. ESMA said that the guidelines aim to ensure staff giving information or advising on crypto-assets or crypto-asset services have a minimum level of knowledge and competence, enhancing investor protection and trust in the crypto-asset markets.  ESMA indicated that it will consider all comments received by April 22, 2025.
ASIC Updates Technical Guidance on OTC Derivative Transaction Reporting. The Australian Securities and Investments Commission (“ASIC”) has updated its technical guidance on OTC derivatives reporting under ASIC Derivative Transaction Rules (Reporting) 2024. The guidance includes ASIC’s observations on, and the industry’s experience with, reporting under the 2024 rules since their commencement on October 21, 2024. It also responds to the industry’s requests for additional clarifications. The key updates include: emphasizing reporting entities’ responsibilities to create unique product identifier codes for accurate reporting; recognizing circumstances when ‘effective date’ and ‘event timestamp’ are reported on a back-dated basis; and clarifying certain aspects of ‘block trade’ reporting. The updated technical guidance is available on ASIC’s derivative transaction reporting webpage.
ESMA Launches a Common Supervisory Action with NCAs on Compliance and Internal Audit Functions. On February 14, ESMA launched a Common Supervisory Action (“CSA”) with National Competent Authorities (“NCAs”) on compliance and internal audit functions of undertaking for collective investment in transferable securities (“UCITS”) management companies and Alternative Investment Fund Managers (“AIFMs”) across the EU. The CSA will be conducted throughout 2025 and aims to assess to what extent UCITS management companies and AIFMs have established effective compliance and internal audit functions with the adequate staffing, authority, knowledge, and expertise to perform their duties under the AIFM and UCITS Directives.
ESMA Consults on Amendments to Settlement Discipline. On February 13, ESMA launched a consultation on settlement discipline, with the objective of improving settlement efficiency across various areas. ESMA is consulting on a set of proposals to amend the technical standards on settlement discipline that include: reduced timeframes for allocations and confirmations, the use of electronic, machine-readable allocations and confirmations according to international standards, and the implementation of hold & release and partial settlement by all central securities depositories.
ESMA Consults on Revised Disclosure Requirements for Private Securitizations. On February 13, ESMA launched a consultation on revising the disclosure framework for private securitizations under the Securitization Regulation (“SECR”). The consultation proposes a simplified disclosure template for private securitizations designed to improve proportionality in information-sharing processes while ensuring that supervisory authorities retain access to the essential data for effective oversight. The new template introduces aggregate-level reporting and streamlined requirements for transaction-specific data, reflecting the operational realities of private securitizations.
Geopolitical and Macroeconomic Developments Driving Market Uncertainty. On February 13, ESMA published its first risk monitoring report of 2025, setting out the key risk drivers currently facing EU financial markets. ESMA finds that overall risks in EU securities markets are high, and market participants should be wary of potential market corrections.
ESMA Appoints Birgit Puck as new Chair of the Markets Standing Committee. On February 11, ESMA appointed Birgit Puck, Finanzmarktaufsicht, as a new Chair of the Markets Standing Committee.

New Industry-Led Developments

ISDA and FIA Response to IOSCO on Pre-Hedging Consultation. On February 21, ISDA and FIA responded to the International Organization of Securities Commissions (“IOSCO”)’s consultation report on pre-hedging. In the response, the associations highlight that an appropriate, consistent and well-understood framework for pre-hedging is important for safe and efficient markets. The associations also noted the importance of not cutting across existing industry codes, including the FX global code, the precious metal code and the Financial Markets Standards Board’s standard for large trades, as market participants already have policies, procedures and institutional frameworks in place to comply with them. [NEW]
ISDA and AFME Response to FCA on Transparency of Enforcement Decisions. On February 17, ISDA and the Association for Financial Markets in Europe (“AFME”) responded to the UK Financial Conduct Authority’s (“FCA”) consultation on greater transparency of enforcement decisions. The FCA’s proposal, which gives it the ability to publicly name firms at the start of an investigation, continues to cause trepidation across the industry. In the response, ISDA and AFME highlight concerns that the current proposals are harmful to UK competitiveness and growth and suggest a broader interpretation of the existing exceptional circumstances test could be used to meet the FCA’s objectives. [NEW]
ISDA Responds to FCA on Improving the UK Transaction Reporting Regime. On February 14, ISDA submitted a response to the FCA’s discussion paper (DP) 24/2 on improving the UK transaction reporting regime. In the response, ISDA indicated its support for the use of the unique product identifier in place of the international securities identification numbering system. ISDA also highlighted its opinion on the importance of aligning to global standards and similar reporting regimes, reducing duplicative reporting and using existing technology and data standards, such as the Common Domain Model and ISDA’s Digital Regulatory Reporting initiative.

The following Gibson Dunn attorneys assisted in preparing this update: Jeffrey Steiner, Adam Lapidus, Marc Aaron Takagaki, Hayden McGovern, and Karin Thrasher.

Jeffrey L. Steiner, Washington, D.C. (202.887.3632, jsteiner@gibsondunn.com)

Michael D. Bopp, Washington, D.C. (202.955.8256, mbopp@gibsondunn.com)

Michelle M. Kirschner, London (+44 (0)20 7071.4212, mkirschner@gibsondunn.com)

Darius Mehraban, New York (212.351.2428, dmehraban@gibsondunn.com)

Jason J. Cabral, New York (212.351.6267, jcabral@gibsondunn.com)

Adam Lapidus – New York (212.351.3869, alapidus@gibsondunn.com )

Stephanie L. Brooker, Washington, D.C. (202.887.3502, sbrooker@gibsondunn.com)

William R. Hallatt , Hong Kong (+852 2214 3836, whallatt@gibsondunn.com )

David P. Burns, Washington, D.C. (202.887.3786, dburns@gibsondunn.com)

Marc Aaron Takagaki , New York (212.351.4028, mtakagaki@gibsondunn.com )

Hayden K. McGovern, Dallas (214.698.3142, hmcgovern@gibsondunn.com)

Karin Thrasher, Washington, D.C. (202.887.3712, kthrasher@gibsondunn.com)

The First Omnibus Package proposes to scale back sustainability reporting obligations under the CSRD as well as due diligence obligations under the CSDDD. According to the European Commission, it aims to prevent regulatory uncertainty, avoid unnecessary compliance costs, and provide companies with a clear, realistic and manageable path towards transition, which meets their sustainability obligations.

Since the announcement by the President of the European Commission, Ursula von der Leyen, on November 8, 2024, of a “drasti[c] reduc[tion] [of] administrative, regulatory and reporting burdens” in the EU, there has existed persistent speculation about a potential reform. In particular, there have been questions as to what proposals the European Commission might make to amend two of the European Union’s flagship Sustainability Directives: the Corporate Sustainability Reporting Directive (CSRD)[1] and the Corporate Sustainability Due Diligence Directive (CSDDD)[2], both of which we have previously reported on here and here, as well as here. This week, on February 26, 2025, the European Commission presented its proposal in the form of the “First Omnibus Package”.[3]

In this client alert, we set out our initial analysis of the proposed amendments in the First Omnibus Package and the implications for in-scope businesses. We consider proposed amendments to (i) CSRD Reporting; and (ii) to the CSDDD obligations and enforcement regime.

As the legislative process unfolds, we will continue to monitor and report on any new developments.

1. Executive Summary

The First Omnibus Package is split into two separate proposals: (i) a Postponement Directive[4] to delay certain reporting obligations and due diligence obligations, and (ii) an Amendment Directive[5] to revise key elements of the EU’s sustainability reporting and due diligence frameworks.

The European Commission’s proposals must still be submitted to the European Parliament and the Council as part of the ordinary legislative process (Level 1 legislation).

It is expected that the Postponement Directive is less controversial and, therefore, likely to be adopted faster to ensure that companies are not required to implement reporting or due diligence obligations that may potentially soon be revised or lifted. This is highlighted in Article 3 of the Postponement Directive which requires the Member States to adopt laws implementing the Directive into force by December 31, 2025.

The Amendment Directive, in contrast, will most likely cause lengthy negotiations. It seeks to adjust the CSRD’s scope, reporting requirements, and assurance obligations and narrows the due diligence measures required under the CSDDD to reduce complexity and improve consistency with other EU legislation.

Overall, the most significant changes proposed by the First Omnibus Package, compared with the original texts, are as follows:

CSRD Reporting

For the CSRD, entry into application is generally postponed by two years (except for public interest entities to which it already applies for financial year 2024), i.e. applying first to reporting on financial years 2027 (in 2028) onwards. Furthermore, an additional requirement of 1,000 employees is supposed to reduce the in-scope undertakings by approx. 80 %. The threshold for reporting on non-EU parent companies is increased to a net turnover of EUR 450 million of these non-EU companies in the EU.
It is further proposed to significantly reduce the data points under the EU Sustainability Reporting Standards (ESRS). Also, no additional sector-specific reporting standards shall be adopted.
Taxonomy reporting is limited to undertakings with an EU net turnover exceeding EUR 450 million and more than 1,000 employees, also expected to result in a reduction of in-scope undertakings by approximately 80 %. Also, the reporting templates shall be drastically simplified, leading to a reduction of data points by almost 70 %.

CSDDD

For the CSDDD, entry into application will be postponed by one year, i.e. it shall apply to the first group of companies mid-2028. The in-scope companies remain unchanged.
With explicit reference to the German Supply Chain Due Diligence Act (SCDDA) as an example, due diligence obligations are significantly reduced. In particular, they will generally be limited to companies’ own operations and direct business partners, unless there is “plausible information” suggesting adverse impacts by indirect business partners.
There is no longer a (harmonized) requirement that a company can be held liable for damages in case of non-compliance with the CSDDD, but the various national civil liability regimes shall apply.
Also, the original obligation for EU Member States regarding representative actions by trade unions or NGOs is revoked.
Obligations regarding Climate Transition Plans will be limited to an adoption; to “put into effect” is no longer required.

The proposed amendments in the First Omnibus Package first and foremost will most probably give enterprises more time to prepare for CSRD reporting and CSDDD compliance. It is, however, too early to rely on the proposed amendments in substance. Generally, it can be expected that CSRD and taxonomy reporting requirements will be substantially reduced. While it will make sense to monitor the new definition of in-scope entities, the substantive reporting requirements are still subject of further discussion. Regarding CSDDD, companies should not overlook the fact that the remaining obligations will still involve considerable effort and require thorough preparation until the implementation of the CSDDD. Companies subject to already existing supply chain laws in countries such as Germany and France, can attest to the extensive demands these obligations impose.

2. CSRD Reporting

The proposed amendments in the First Omnibus Package will significantly change when and to what extent companies need to disclose information in the context of the CSRD, including which companies will be required to report. In the following, we (a) will discuss changes in the area of sustainability reporting; (b) changes regarding taxonomy disclosures; and (c) will address the implications of conflicts between the suggested amendments and already transposed legislation in the EU Member States.

(a) Proposed Amendments relating to Sustainability Reporting

The First Omnibus Package proposes amendments to the CSRD, the Directive on the Annual Financial Statements, Consolidated Financial Statements and Related Reports of Certain Types of Undertakings (Accounting Directive)[6], and the Directive on Statutory Audits of Annual Accounts and Consolidated Accounts (Audit Directive)[7]. These amendments will significantly change the requirements for sustainability reporting companies have to adhere to.

Two-Year Delay for Companies to Start Reporting, No Retroactive Effect for PIEs Reporting in 2025

The Commission’s Postponement Directive proposes a two-year delay for companies that are not yet obliged to report under the CSRD.

This affects large undertakings and parent undertakings of a large group not classified as public interest entities (PIEs) which would have reported for the first time in 2026 for the financial year 2025. Under the Postponement Directive, their reporting obligation will not start until 2028 for financial years beginning on or after January 1, 2027 (“second wave entities”).
It also applies to listed small and medium-sized enterprises (SMEs), originally set to report for the financial year 2026, whose reporting will be deferred to financial years starting in 2028 (“third wave entities”).
Notably, however, this delay does not affect companies already subject to CSRD reporting obligations, such as public interest entities reporting for the first time this year for financial years starting in 2024 (“first wave entities”).
Furthermore, the European Commission has not proposed delaying reporting obligations regarding non-EU ultimate parent undertakings under Article 40a Accounting Directive.

Significant Reduction of Scope of Application

As part of its Amendment Directive, the Commission proposes to significantly narrow the scope of the CSRD. The reporting obligation is now limited to large companies or the parent company 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. As a result, around 80 % of companies previously expected to be in scope will no longer be subject to mandatory sustainability reporting. This major shift excludes large undertakings with up to 1,000 employees (including PIEs from the first wave and large companies from the second wave) as well as all listed SMEs (previously part of the third wave). By eliminating the distinction between listed and non-listed undertakings, the proposal aligns with the Capital Markets Union’s goal of enhancing the attractiveness of EU-regulated markets as a financing source. Notably, the exclusion of large PIEs is part of the Amendment Directive and not the Postponement Directive, thus unlikely creating a retroactive effect for companies already reporting this year (namely large undertaking public interest entities with more than 500 employees).

With regard to reporting on non-EU ultimate parent companies, the new Article 40a of the Accounting Directive raises the net turnover threshold for non-EU undertakings from EUR 150 million to EUR 450 million, increases the EU branch threshold from EUR 40 million to EUR 50 million, and limits the requirement to report on their ultimate non-EU parent to large subsidiary undertakings as defined in the Amendment Directive.

The previously leaked proposal to raise the net turnover threshold for EU undertakings to EUR 450 million was scrapped in the official draft. Instead, the revised scope locks in the existing thresholds, while adding a 1,000-employee requirement. As the Commission states, “this revised threshold would align the CSRD more closely with the CSDDD“, signaling a decisive move toward streamlining EU sustainability regulations and drastically narrowing the number of affected companies.

Voluntary Reporting Standards and Strengthened Value-Chain Cap

As part of its Amendment Directive, the Commission introduces a new voluntary reporting standard for companies no longer subject to mandatory CSRD reporting. Based on the voluntary sustainability reporting standard for non-listed micro, small and medium enterprises (VSME) by EFRAG, these new standards will be adopted as a delegated act, with a Commission recommendation to follow soon.

The Commission also envisioned the new standards to act as a shield for companies no longer in scope of the CSRD (e.g. companies with up to 1,000 employees) that are part of the value chain of a reporting entity. When reporting on their value chain, companies may not request information beyond that described in the new voluntary reporting standards. This way, the European Commission hopes to substantially reduce the trickle-down effect.

It should be noted, however, that the Delegated Act to provide for these standards will not be adopted until after the Amendment Directive enters into force. Drafting the VSME, for example, took about two years due to public consultation. Therefore, while a delegated act as a non-legislative level 2 instrument is not as time-consuming as a Level 1 legislative act, there is a possibility that the new standards will not enter into force until 2028. By then, large in-scope companies are already required to publish their sustainability statements.

Further Simplifications and Cost Reductions

The Amendment Directive introduces several additional measures to ease reporting burdens under the current legal regimes. One important measure is the planned revision of the European Reporting Standards (ESRS) to substantially reduce the number of required data points and improve consistency across EU legislation, at the latest six months after the entry into force of the Amendment Directive. While a revision is likely less time-consuming than a new draft, it can be expected that the European Commission will need at least 1.5 years to finalize the legislative process for the respective delegated act. Nevertheless, we expect the revision to significantly limit the reporting burden on companies.

Additionally, the Amendment Directive eliminates the Commission’s empowerment to adopt sector-specific reporting standards, preventing an increase in prescribed data points for reporting undertakings and ending a state of uncertainty as these standards were meanwhile delayed.

Another significant simplification with a crucial impact on reporting costs is the removal of the reasonable assurance standard whose adoption was initially envisaged for 2028. In addition, instead of a binding obligation to adopt sustainability assurance standards by 2026, the European Commission will issue targeted assurance guidelines, allowing for a more flexible response to emerging issues and avoiding unnecessary compliance burdens.

(b) Proposed Amendments to Taxonomy Reporting

While the proposed directives do not provide for explicit changes to the EU Taxonomy Directive, the Omnibus proposal does provide for changes to the Accounting Directive and the Taxonomy Delegated Regulations which will affect the EU Taxonomy reporting requirements.

Mandatory Taxonomy Reporting Thresholds

The proposal introduces a new threshold for mandatory taxonomy reporting. Only large undertakings with an EU net turnover exceeding EUR 450 million and more than 1,000 employees will be required to report their alignment with the EU Taxonomy. This change is expected to result in approximately 80 % of companies no longer being required to report their alignment against the EU Taxonomy. The significant reduction in the number of companies subject to mandatory reporting aims to alleviate the compliance burden on smaller and mid-sized enterprises.

Simplification of the Reporting Templates

The European Commission plans to amend the Taxonomy Disclosures Delegated Act and the Taxonomy Climate and Environmental Delegated Acts to drastically simplify the reporting templates. This simplification will lead to a reduction of data points by almost 70 %, significantly easing the reporting burden for companies. Furthermore, companies will be exempt from assessing the taxonomy-eligibility and alignment of their economic activities that are not financially material for their business, such as those not exceeding 10 % of their total EU turnover, capital expenditure, or total assets. This targeted materiality approach – similar to the reporting approach under the ESRS – ensures that companies focus their reporting efforts on the most relevant and impactful areas of their business.

Voluntary Taxonomy Reporting for large Companies below Threshold

For large companies that have more than 1,000 employees but an EU net turnover below EUR 450 million, the proposal prescribes voluntary taxonomy reporting. These companies will not be obligated to report their alignment with the EU Taxonomy but may choose to do so if they find it beneficial. This voluntary approach allows companies to communicate their sustainability efforts without the pressure of mandatory disclosures, potentially attracting investments by showcasing their progress towards sustainability goals.

Partial Taxonomy-Alignment Reporting

The proposal also introduces the option for companies that have made progress towards sustainability targets but only meet certain EU Taxonomy requirements to voluntarily report on their partial taxonomy-alignment. This flexibility is designed to encourage companies to disclose their sustainability efforts even if they do not fully meet all the criteria of the EU Taxonomy. The Omnibus proposal mandates the European Commission to develop delegated acts to ensure standardization in terms of the content and presentation of this partial alignment reporting, providing clear guidelines for companies to follow.

Simplification of the “Do No Significant Harm” Criteria

Lastly, the Commission seeks to simplify the most complex “Do No Significant Harm” (DNSH) criteria for pollution prevention and control related to the use and presence of chemicals. These criteria apply horizontally to all economic sectors under the EU Taxonomy. The proposed simplifications aim to make it easier for companies to comply with the DNSH requirements without compromising environmental standards. The public consultation invites stakeholders to provide feedback on two alternative options for simplifying these criteria, ensuring that the final amendments reflect the needs and concerns of the business community.

(c) Conflict with Already Transposed Member States Legislation

Certain EU Member States (Belgium, Bulgaria, Croatia, Czech Republic, Denmark, Estonia, Finland, France, Greece, Hungary, Ireland, Italy, Latvia, Lithuania, Poland, Romania, Slovakia, Slovenia, Sweden) have already transposed the current version of the CSRD, thereby implementing the “old” thresholds, reporting requirements and timelines. We provide regular updates on the status of transposition of the CSRD in our monthly ESG Updates. This raises the question whether companies in these jurisdictions have to comply with the current version of CSRD legislation. Technically, these laws apply, and Member States are, in principle, not prevented from introducing stricter requirements than those provided for by an EU Directive.

However, we would expect that, as a first step, the reporting obligations for all entities other than public interest entities will be suspended before they come into effect under the Postponement Directive. As stated above, we expect that the Postponement Directive will be adopted rather quickly. Article 3 of that Directive requires Member States to implement laws necessary to comply with the two-year delay before December 31, 2025, i.e., before the reporting obligations for any undertakings and groups other than public interest entities apply. Even if national legislators fail to transpose the Postponement Directive in time, we would expect that national authorities will refrain from enforcing the requirements under the current CSRD laws against such entities with a view to the discussion on the Omnibus proposal.

Regarding the scope of sustainability reporting for already in-scope public interest entities, the assessment is less straight forward. The proposed changes to the scope of application, the reporting requirements and other substantial issues are covered in the Amendment Directive which is expected to take more time until it enters into force. There is no clear answer as to how EU Member States will handle this issue. While they could decide to refrain from enforcing reporting obligations until the Amendment Directive has been approved, it is also possible for them to insist on compliance with their national laws until that date.

In this context, it should also be noted that some EU Member States already have imposed more strict reporting requirements, opting for so-called “gold-plating” in the area of sustainability reporting. Therefore, it is possible that after the Amendment Directive enters into force, some EU Member States will require more detailed reporting than stipulated at EU level. However, we consider this risk to be low in light of the strong resistance from EU Member States, e.g. Germany, France and others who have warned of too much bureaucracy and an unreasonable reporting burden on companies and explicitly supported the European Commission’s plan to simplify sustainability reporting.

3. The CSDDD

While there are many proposed changes with respect to the CSDDD, as outlined below, the companies defined as “in scope” have remained the same, i.e. there have been no changes to the thresholds. We note, however, that it is proposed to delete the review clause on inclusion of financial services in the scope of the CSDDD.

CSDDD’s extraterritorial reach to U.S. based companies has recently been challenged in a letter signed by several members of the U.S. House of Representatives to the U.S. Treasury Secretary and Director of the National Economic Council and may become a negotiating topic in U.S.-EU trade negotiations.

(a) Proposed Amendments to the CSDDD

Postponement of Application for One Year

According to the proposed Postponement Directive the deadline for EU Member States to transpose the CSDDD into national law will be postponed by one year to July 26, 2027. Consequently, the first entry into application of the CSDDD obligations will also start one year later, on July 26, 2028. In other words, there will no longer be a separate timeline for entry into application for the largest EU and non-EU companies as originally foreseen:

Narrowing the Scope in Companies’ Supply Chains

Explicitly inspired by the German SCDDA, obligations in the supply chain will be narrowed, to companies’ own operations and direct business partners. Companies will only be required to assess adverse impacts of indirect business partners if there is “plausible information” suggesting that adverse impacts have arisen or may arise there. Without such knowledge, an in-scope company will not be obliged to proactively review the supply chain further downstream. The European Commission explains that this change “[r]eliev[es] companies from the obligation to systematically conduct in-depth assessments of adverse impacts that occur or may occur in often complex value chains at the level of indirect business partners …”.[8]

In connection with limited obligations in the supply chain, the Amendment Directive also proposes to limit the information that in-scope companies may request from their SME and small midcap business partners (i.e. companies with less than 500 employees) to the information specified in the CSRD voluntary sustainability reporting standards.

Further, the reduction of obligations within the supply chain is also reflected in the proposed amendments to stakeholder engagement. Companies will be able to limit their engagement to “relevant” stakeholders in certain areas of the due diligence process, i.e. with workers, their representatives and individuals and communities whose rights or interests are or could be directly affected by the products, services and operations of the company, its subsidiaries and its business partners, and that have a link to the specific stage of the due diligence process being carried out.

Companies shall ensure compliance with due diligence standards focusing on human rights and the environment further down supply chains through their codes of conduct (“contractual cascading”).

Private and Public Enforcement

In terms of private and public enforcement, the Amendment Directive provides for three notable proposed changes:

Firstly, in terms of private enforcement, it is significant that the requirement for harmonized EU-wide civil liability regime for damages will be abolished. Thus, private enforcement is deferred to the civil liability regime of each EU Member State, which need to ensure that, if companies are held liable in case of non-compliance with the due diligence requirements under the CSDDD, the injured parties will have a right to full compensation. Further, national law is left to define whether its civil liability provisions override otherwise applicable rules of the third country where any harm occurs.

Secondly, it is also highly notable that the obligations for EU Member States regarding representative actions by trade unions or NGOs are revoked. National law will be able to support both actions brought directly by injured parties or representative actions to reflect different rules and traditions in EU Member States.

Lastly, regarding public enforcement, penalties for violations, which could be imposed by national “Supervisory Authorities” in EU Member States, will no longer be linked to 5 % of the in-scope company’s global net turnover.

Climate Transition Plans aligned with CSRD

Concerning the much-discussed requirement under the existing CSDDD to “put into effect” a Paris Agreement-aligned Climate Transition Plan, this obligation has been softened so that requirements for climate mitigation are now aligned with the CSRD. Whilst the “put into effect” part is dropped, the adoption of a Climate Transition Plan would still be required.

Remedial Measures and Periodic Assessments

The Omnibus Package also proposes to remove the obligation to be imposed on a company to terminate the business relationship as a last resort measure. Additionally, the interval between periodic assessments will be prolonged, extending the period from one year to five years.

(b) Key CSDDD Implications for In-Scope Companies

In summary, the proposed amendments in the First Omnibus Package are helpful for companies in terms of deregulating obligations and reducing complexity in their supply chains.

Nevertheless, companies should not overlook the fact that the remaining obligations will still involve considerable effort and require thorough preparation until the actual implementation of the CSDDD. Companies subject to already existing supply chain laws in countries such as Germany and France, can attest to the extensive demands these obligations impose.

Considering the strong alignment and similarity in many parts with the German SCDDA, especially after removing the main differences in scope and civil liability regime, two years of experience with the German law should and can be utilized by companies to leverage valuable insights gained from the enforcement of the German SCDDA.

To assist in-scope companies with preparations, the European Commission has committed to providing guidelines a year earlier, in July 2026, which provides more valuable time for companies to get aligned with the CSDDD.

[1] Directive (EU) 2022/2464.

[2] Directive (EU) 2024/1760.

[3] 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 February 28, 2025.

[4] 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.

[5] 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.

[6] Directive (EU) 2013/34.

[7] Directive (EU) 2006/43.

[8] See EC link here.

The following Gibson Dunn lawyers prepared this update: Ferdinand Fromholzer, Robert Spano, Susy Bullock, Stephanie Collins, Vanessa Ludwig, Carla Baum, Johannes Reul, and Babette Milz.

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, Transnational Litigation, or International Arbitration practice groups, or the authors:

Ferdinand Fromholzer – Partner, ESG Group,
Munich (+49 89 189 33-270, ffromholzer@gibsondunn.com)

Robert Spano – Co-Chair, ESG Group,
London/Paris (+33 1 56 43 13 00, rspano@gibsondunn.com)

Susy Bullock – Co-Chair, ESG Group,
London (+44 20 7071 4283, sbullock@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)

On February 27, 2025, the Financial Crimes Enforcement Network (FinCEN) issued guidance announcing that it will not issue fines or penalties to, or take any enforcement action against, entities that fail to file or update beneficial ownership information (BOI) reports pursuant to the Corporate Transparency Act (CTA) by the current deadline, which for most reporting entities is March 21, 2025.[1] FinCEN also announced that it intends to issue an interim final rule by March 21, 2025 to formally extend the reporting deadline. “[L]ater this year,” FinCEN plans to issue a notice of proposed rulemaking and solicit public comment on a new rule permanently revising the existing BOI reporting requirements.

Entities that may be subject to the CTA and its associated Reporting Rule that have not filed BOI reports should consult with their CTA advisors as necessary, now that FinCEN has suspended enforcement of the filing deadlines.

Prior to yesterday’s announcement, and after litigation that temporarily enjoined enforcement of the CTA from December 2024 until February 18, 2025, FinCEN had issued guidance extending the reporting deadline to March 21, 2025 or later.[2] In that same guidance, FinCEN previewed that it intended to take further steps to modify deadlines. On February 27, 2025, FinCEN issued the additional guidance described above, which has the effect of suspending the March 21, 2025 deadline.[3] Instead, FinCEN intends to issue an interim final rule before March 21, 2025, extending BOI reporting deadlines.[4]

FinCEN also announced it will issue a notice of proposed rulemaking, anticipated to be issued later this year, to adopt permanent changes to the reporting requirements to minimize the burden on small businesses while ensuring that BOI is highly useful to important national security, intelligence, and law enforcement activities.[5] As part of that rulemaking, FinCEN may also further modify applicable deadlines, and the agency intends to solicit public comment on potential revisions to existing reporting requirements.[6] The public comment period will be an important opportunity for companies to provide input to FinCEN and build a record supporting changes to the existing reporting requirements, including the burden the requirements impose on businesses, and will allow companies to preserve and highlight for FinCEN any potential legal challenges to the new proposed reporting requirements.

[1] https://www.fincen.gov/news/news-releases/fincen-not-issuing-fines-or-penalties-connection-beneficial-ownership.

[2] https://fincen.gov/sites/default/files/shared/FinCEN-BOI-Notice-Deadline-Extension-508FINAL.pdf.

[3] https://www.fincen.gov/news/news-releases/fincen-not-issuing-fines-or-penalties-connection-beneficial-ownership.

[4] Id.

[5] Id.

[6] Id.

For assistance navigating white collar or regulatory enforcement issues, please contact the authors, the Gibson Dunn lawyer with whom you usually work, or any leader or member of the firm’s Anti-Money Laundering, Administrative Law & Regulatory, Investment Funds, Real Estate, or White Collar Defense & Investigations practice groups.

Please also feel free to contact any of the following practice group leaders and members and key CTA contacts:

Anti-Money Laundering:
Stephanie Brooker – Washington, D.C. (+1 202.887.3502, sbrooker@gibsondunn.com)
M. Kendall Day – Washington, D.C. (+1 202.955.8220, kday@gibsondunn.com)
David Ware – Washington, D.C. (+1 202.887.3652, dware@gibsondunn.com)
Ella Capone – Washington, D.C. (+1 202.887.3511, ecapone@gibsondunn.com)
Sam Raymond – New York (+1 212.351.2499, sraymond@gibsondunn.com)

Administrative Law and Regulatory:
Stuart F. Delery – Washington, D.C. (+1 202.955.8515, sdelery@gibsondunn.com)
Eugene Scalia – Washington, D.C. (+1 202.955.8673, dforrester@gibsondunn.com)
Helgi C. Walker – Washington, D.C. (+1 202.887.3599, hwalker@gibsondunn.com)
Matt Gregory – Washington, D.C. (+1 202.887.3635, mgregory@gibsondunn.com)

Investment Funds:
Kevin Bettsteller – Los Angeles (+1 310.552.8566, kbettsteller@gibsondunn.com)
Shannon Errico – New York (+1 212.351.2448, serrico@gibsondunn.com)
Greg Merz – Washington, D.C. (+1 202.887.3637, gmerz@gibsondunn.com)

Real Estate:
Eric M. Feuerstein – New York (+1 212.351.2323, efeuerstein@gibsondunn.com)
Jesse Sharf – Los Angeles (+1 310.552.8512, jsharf@gibsondunn.com)
Lesley V. Davis – Orange County (+1 949.451.3848, ldavis@gibsondunn.com)
Anna Korbakis – Orange County (+1 949.451.3808, akorbakis@gibsondunn.com)

White Collar Defense and Investigations:
Stephanie Brooker – Washington, D.C. (+1 202.887.3502, sbrooker@gibsondunn.com)
Winston Y. Chan – San Francisco (+1 415.393.8362, wchan@gibsondunn.com)
Nicola T. Hanna – Los Angeles (+1 213.229.7269, nhanna@gibsondunn.com)
F. Joseph Warin – Washington, D.C. (+1 202.887.3609, fwarin@gibsondunn.com)