Unsurprisingly, the war in Ukraine had a major impact on the German economic and political landscape which naturally extends into the legal sphere. The impact of the war was and continues to be most severely felt in the energy sector, where the government had to radically rethink its energy policy to reduce its dependence on Russian fossil fuels.
The government’s answer to this crisis is manifold: On one hand, regulation passed in July 2022 put the planned coal exit on hold and allows operators of certain coal-fired power plants to temporarily reactivate their units to help reduce natural gas consumption in the power sector; while, on the other hand, the government approved plans for its Climate and Transformation Fund (CTF) to invest €177.5bn in measures to mitigate climate change over the next four years. These measures include funding for efficient buildings, the decarbonisation of industry, the implementation of a hydrogen strategy, funding for climate-friendly heat supply networks and funding for energy and resource efficiency, among others.
A green agenda is however not only pursued by the government but also in the private sector where ESG (environmental, social and governance) has become a buzzword and consequently an integral part of the financial and transactional world as well as the realm of marketing more generally. As a result of this, law firms have been reporting an uptick in ESG-related work.
This often includes questions concerning the permissibility of advertising based on green claims, or concerning the EU Taxonomy Regulation that came into effect on 1 January 2022 with the aim to direct investments towards sustainable projects and activities. For Germany this means that companies can now use the German Sustainability Code (DNK) to prepare reports that are also in compliance with the taxonomy regulation with the aim of creating security for investors and protect private investors from greenwashing.
However, due to the lack of specifications and guidelines for supervisory and rating authorities to make sustainability criteria measurable, it is becoming increasingly difficult for the European Securities and Markets Authority (ESMA), among other supervisory authorities, to classify ‘green’ products.
Similarly in the spotlight are crypto assets which have been subject to the Markets in Crypto-Assets (MiCA) Regulation since its approval by the European Council in October 2022. It constitutes one of the first attempts globally to regulate crypto currency markets. The regulation covers crypto-asset-related activities carried out in the EU and includes key areas such as transparency, disclosure, authorisation and supervision of transactions.
The transactional sphere more generally saw an uptick in technology and renewable energy sector transactions while the industrial manufacturing and automotive sectors are facing growing uncertainty. This is due to supply chain disruption, commodity price increases, skilled labour shortages and the global semiconductor shortage while, at the same time, Covid-19-related lockdowns in a number of Chinese cities have reduced manufacturing output and disrupted exports from the Asia Pacific region. It goes without saying that all of this is exacerbated by the Russia-Ukraine conflict and related Russia sanctions. In contrast, investments in technology and renewable energy assets are regarded as much safer and are thus becoming increasingly popular. This includes technologies at the intersection between automotive and energy, most notably technologies focused on e-mobility, including electric, hydrogen-powered and autonomous vehicles, batteries and charging stations.
This trend is felt across various practice areas, from project finance to regulatory and procurement to M&A and IT.
Employment law teams on the other hand are kept busy with issues catapulted into the spotlight by Covid-19, such as home office, new work and mobile work, but also with instructions resulting from the Directive on Transparent and Predictable Working Conditions that came into force in August 2022. The aim of the directive is to improve working conditions by supporting transparent and more predictable employment, while a German Federal Labour Court ruling in September 2022 concluded that companies are required to introduce a system to record fully the time worked by their employees.
Last but not least, many companies have taken cost-saving measures such as outsourcing and the deployment of external staff to dampen the effects of a post-Covid world characterised by high inflation rates, supply chain disruptions and the on-going crisis in Ukraine.