New Cybersecurity Law and Strategy Unveiled

The EU is revising and replacing a 2016 regime to govern cybersecurity across the bloc.

The European Union (EU) is floating a proposal to reform its 2016 law on cybersecurity throughout the European Union to address gaps the current regime is not addressing. This proposal was released in concert with a new cybersecurity strategy and a statutory proposal to address physical (i.e. non-cyber) infrastructure. These proposals are the latest in a line of policy changes put forth by the EU’s new leadership to make this decade the EU’s Digital Decade. It may, however, take years for these proposals to become laws. For example, the successor to the ePrivacy Directive has been held up in negotiations for the last few years.

New European Commission (EC) President Ursula von der Leyen spelled out her vision for the EU for the years of 2019 through 2024, including “A Europe fit for the digital age.” In its February 2020 “Communication: Shaping Europe’s digital future,” the EC spelled out more how von der Leyen’s vision would be effectuated:

A European cybersecurity strategy, including the establishment of a joint Cybersecurity Unit, a Review of the Security of Network and Information Systems (NIS) Directive and giving a push to the single market for cybersecurity.

To this end, in mid-December 2020, the EC and the High Representative of the Union for Foreign Affairs and Security Policy unveiled a new EU Cybersecurity Strategy and “proposals to address both cyber and physical resilience of critical entities and networks: a Directive on measures for high common level of cybersecurity across the Union (revised NIS Directive or ‘NIS 2′), and a new Directive on the resilience of critical entities.”

Let us turn to the NIS 2 first. This proposal would replace the 2016 “Directive on security of network and information systems (NIS Directive)” ((EU) 2016/1148) currently in effect throughout the EU. NIS 2 would impose new obligations and responsibilities on EU member states and essential and important entities. The nations of the EU would need to draft and implement cybersecurity frameworks/strategies, which includes setting up vulnerability disclosure programs, voluntary cybersecurity information sharing programs, a policy to address information and communications technology (ICT) supply chain risk, and cybersecurity standards for publicly bought and used ICT. EU nations would also need to name “competent” national authorities to enforce NIS 2, for the EC identified lax or non-existent enforcement of existing cybersecurity laws as a rationale for the new proposal. Consequently, such authorities must be empowered to issue binding directives, if necessary, warnings, or instructions to cease certain conduct. These authorities must also work with data protection authorities in the event of data breaches. NIS 2 also provides for administrative fines and penalties to be established in the laws of EU nations.

Additionally, all EU nations should have computer security incident response teams (CSIRTs). NIS 2 would apply to a number of public and private entities in certain sectors, which are deemed “essential:” energy; transport; banking; financial market infrastructures; health, drinking water; waste water; digital infrastructure; public administration and space. Some public and private entities would be “important” entities and subject to the NIS 2 in these sectors: postal and courier services; waste management; manufacture, production and distribution of chemicals; food production, processing and distribution; manufacturing and digital providers. Micro and small entities would largely not be swept up into NIS 2 even if they are part of one of the aforementioned sectors. However, “providers of electronic communications networks or of publicly available electronic communications services, trust service providers, Top-level domain name (TLD) name registries and public administration, and certain other entities” would be governed by NIS 2 regardless of their size.

The EU would also establish a Cooperation Group that would be tasked with helping EU nations work more harmoniously under the NIS 2. However, this new body, unlike, say the General Data Protection Regulation’s created European Data Protection Board (EDPB), would not have power to compel its members to comply with NIS 2.

Notably, NIS 2 would require that: “Member States shall ensure that essential and important entities shall take appropriate and proportionate technical and organisational measures to manage the risks posed to the security of network and information systems which those entities use in the provision of their services.” The law lists a number of elements that must go into these measures. Moreover, “essential and important entities notify, without undue delay, the competent authorities or the CSIRT…of any incident having a significant impact on the provision of their services.” The NIS 2 lays out broad criteria as to what constitutes a “significant impact:”

  • the incident has caused or has the potential to cause substantial operational disruption or financial losses for the entity concerned;
  • the incident has affected or has the potential to affect other natural or legal persons by causing considerable material or non-material losses.

In order to address ICT supply chain risk, EU countries may elect to “require essential and important entities to certify certain ICT products, ICT services and ICT processes under specific European cybersecurity certification schemes adopted ” under the legislation that created the European Union Agency for Cybersecurity (ENISA).

As noted earlier, EU nations must establish systems for essential and important entities to share information but need not compel them to do so. Article 26 provides that nation “shall ensure that essential and important entities may exchange relevant cybersecurity information among themselves including information relating to cyber threats, vulnerabilities, indicators of compromise, tactics, techniques and procedures, cybersecurity alerts and configuration tools.” EU countries must also have a system for any non-essential, non-important entities or those from sectors not covered by NIS 2 can also voluntarily submit information.

The EC argued that the NIS Directive is now outdated and is in desperate need of revision to reflect current realities:

Notwithstanding its notable achievements, the NIS Directive, which paved the way for a significant change in mind-set, in relation to the institutional and regulatory approach to cybersecurity in many Member States, has also proven its limitations. The digital transformation of society (intensified by the COVID-19 crisis) has expanded the threat landscape and is bringing about new challenges which require adapted and innovative responses. The number of cyber-attacks continues to rise, with increasingly sophisticated attacks coming from a wide range of sources inside and outside the EU.

The EC highlighted some of the limitations in how the NIS Directive has been implemented by EU member states and its failure to drive the adoption of better cyber practices by EU businesses:

The evaluation on the functioning of the NIS Directive, conducted for the purposes of the Impact Assessment, identified the following issues: (1) the low level of cyber resilience of businesses operating in the EU; (2) the inconsistent resilience across Member States and sectors; and (3) the low level of joint situational awareness and lack of joint crisis response. For example, certain major hospitals in a Member State do not fall within the scope of the NIS Directive and hence are not required to implement the resulting security measures, while in another Member State almost every single healthcare provider in the country is covered by the NIS security requirements.

The EC explained how the NIS 2 relates to a proposal released the same day to address physical infrastructure in the EU:

The proposal is therefore closely aligned with the proposal for a Directive on the resilience of critical entities, which aims at enhancing the resilience of critical entities against physical threats in a large number of sectors. The proposal aims to ensure that competent authorities under both legal acts take complementary measures and exchange information as necessary regarding cyber and non-cyber resilience, and that particularly critical operators in the sectors considered to be ‘essential’ per the proposal at hand are also subject to more general resilience-enhancing obligations with an emphasis on non-cyber risks.

The EC’s impact assessment on how well the NIS Directive is working shows limitations in scope and application, some of which may be attributed to changes in the EU and the world:

  • The scope of the NIS Directive is too limited in terms of the sectors covered, mainly due to: (i) increased digitisation in recent years and a higher degree of interconnectedness, (ii) the scope of the NIS Directive no longer reflecting all digitised sectors providing key services to the economy and society as a whole.
  • The NIS Directive is not sufficiently clear when it comes to the scope for operators of essential services and its provisions do not provide sufficient clarity regarding national competence over digital service providers. This has led to a situation in which certain types of entities have not been identified in all Member States and are therefore not required to put in place security measures and report incidents.
  • The NIS Directive allowed wide discretion to the Member States when laying down security and incident reporting requirements for operators of essential services (hereinafter called ‘OES(s)’). The evaluation shows that in some instances Member States have implemented these requirements in significantly different ways, creating additional burden for companies operating in more than one Member State.
  • The supervision and enforcement regime of the NIS Directive is ineffective. For example, Member States have been very reluctant to apply penalties to entities failing to put in place security requirements or report incidents. This can have negative consequences for the cyber resilience of individual entities.
  • The financial and human resources set aside by Member States for fulfilling their tasks (such as OES identification or supervision), and consequently the different levels of maturity in dealing with cybersecurity risks, vary greatly. This further exacerbates the differences in cyber resilience between Member States.
  • Member States do not share information systematically with one another, with negative consequences in particular for the effectiveness of the cybersecurity measures and for the level of joint situational awareness at EU level. This is also the case for information sharing among private entities, and for the engagement between the EU level cooperation structures and private entities.

The EC’s proposal contains a summary of what the new law would do:

  • The Directive, in particular: (a) lays down obligations for the Member States to adopt a national cybersecurity strategy, designate competent national authorities, single points of contact and CSIRTs; (b) provides that Member States shall lay down cybersecurity risk management and reporting obligations for entities referred to as essential entities in Annex I and important entities in Annex II; (c) provides that Member States shall lay down obligations on cybersecurity information sharing.
  • It applies to certain public or private essential entities operating in the sectors listed in Annex I (energy; transport; banking; financial market infrastructures; health, drinking water; waste water; digital infrastructure; public administration and space) and certain important entities operating in the sectors listed in Annex II (postal and courier services; waste management; manufacture, production and distribution of chemicals; food production, processing and distribution; manufacturing and digital providers). Micro and small entities within the meaning of Commission Recommendation 2003/361/EC of 6 May 2003 are excluded from the scope of the Directive, except for providers of electronic communications networks or of publicly available electronic communications services, trust service providers, Top-level domain name (TLD) name registries and public administration, and certain other entities, such as the sole provider of a service in a Member State.

The EC also released “The EU’s Cybersecurity Strategy for the Digital Decade” alongside the NIS 2 “to ensure a global and open Internet with strong guardrails to address the risks to the security and fundamental rights and freedoms of people in Europe.” The EC spelled out its dramatic plan to remake how the bloc regulates, invests in, and structures policies around cybersecurity. The EC claimed “[a]s a key component of Shaping Europe’s Digital Future, the Recovery Plan for Europe  and the EU Security Union Strategy, the Strategy will bolster Europe’s collective resilience against cyber threats and help to ensure that all citizens and businesses can fully benefit from trustworthy and reliable services and digital tools.” If the EU follows through, this strategy may have significant effects in the EU and around the world.

The EC further explained:

  • Following the progress achieved under the previous strategies, it contains concrete proposals for deploying three principal instruments –regulatory, investment and policy instruments – to address three areas of EU action – (1) resilience, technological sovereignty and leadership, (2) building operational capacity to prevent, deter and respond, and (3) advancing a global and open cyberspace. The EU is committed to supporting this strategy through an unprecedented level of investment in the EU’s digital transition over the next seven years – potentially quadrupling previous levels – as part of new technological and industrial policies and the recovery agenda
  • Cybersecurity must be integrated into all these digital investments, particularly key technologies like Artificial Intelligence (AI), encryption and quantum computing, using incentives, obligations and benchmarks. This can stimulate the growth of the European cybersecurity industry and provide the certainty needed to ease the phasing out of legacy systems. The European Defence Fund (EDF) will support European cyber defence solutions, as part of the European defence technological and industrial base. Cybersecurity is included in external financial instruments to support our partners, notably the Neighbourhood, Development and International Cooperation Instrument. Preventing the misuse of technologies, protecting critical infrastructure and ensuring the integrity of supply chains also enables the EU’s adherence to the UN norms, rules and principles of responsible state behavior.

Per the EC’s press release, the ”Directive on the resilience of critical entities” “expands both the scope and depth of the 2008 European Critical Infrastructure directive.” The EC added:

Ten sectors are now covered: energy, transport, banking, financial market infrastructures, health, drinking water, waste water, digital infrastructure, public administration and space. Under the proposed directive, Member States would each adopt a national strategy for ensuring the resilience of critical entities and carry out regular risk assessments. These assessments would also help identify a smaller subset of critical entities that would be subject to obligations intended to enhance their resilience in the face of non-cyber risks, including entity-level risk assessments, taking technical and organisational measures, and incident notification. The Commission, in turn, would provide complementary support to Member States and critical entities, for instance by developing a Union-level overview of cross-border and cross-sectoral risks, best practice, methodologies, cross-border training activities and exercises to test the resilience of critical entities.

© Michael Kans, Michael Kans Blog and, 2019-2021. Unauthorized use and/or duplication of this material without express and written permission from this site’s author and/or owner is strictly prohibited. Excerpts and links may be used, provided that full and clear credit is given to Michael Kans, Michael Kans Blog, and with appropriate and specific direction to the original content.

Image by Prawny from Pixabay

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