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During the week of May 19, 2025, the Texas Legislature passed two sets of amendments to the Texas Business Organizations Code through SB 1057 and SB 2411. These amendments allow certain corporations to impose higher thresholds for shareholder proposals, expand exculpation to officers of the corporation and streamline the approval and administration of major business transactions. These changes will become effective on September 1, 2025.

Overview

During the week of May 19, 2025, two sets of amendments to the Texas Business Organizations Code (TBOC) passed the Texas Legislature. These amendments are in addition to the significant changes made by SB 29 that became effective on May 14, 2025. (See Gibson Dunn’s client alert summarizing SB 29 here.) On May 19, 2025, the Governor of Texas signed into law SB 1057, which allows certain publicly traded corporations to implement limitations on shareholder proposals. On May 27, 2025, the Governor of Texas signed into law SB 2411, which expands exculpation to include officers and streamlines the approval and administration of business transactions such as mergers and conversions.

SB 1057’s Key Changes to the TBOC

Limitations on Shareholder Proposals

SB 1057 allows certain corporations to implement significantly higher requirements for shareholder proposals. The amended provisions of the TBOC are available to any “nationally listed corporation,” which is defined as a corporation that has equity securities registered under Section 12(b) of the Securities Exchange Act of 1934; and that either

a. is admitted to listing on a national securities exchange and has its principal office in the State of Texas; or

b. is admitted to listing on a national securities exchange and is admitted to listing on a stock exchange that (i) has its principal office in the State of Texas and (b) has received certain approval from the Texas Securities Commissioner under a specified provision of the Government Code.

A corporation does not have to be incorporated in the State of Texas to take advantage of this new TBOC provision. Under Texas case law, the principal place of business of a corporation is the location where the corporation’s officers direct, control and coordinate the corporation’s activities.

To adopt these provisions, a nationally listed corporation must make an affirmative election by an amendment to one of the corporation’s governing documents. Under Texas law, governing documents include the certificate of formation and the bylaws. The corporation must provide notice to its shareholders of the proposed amendment to the governing documents in any proxy statement provided to shareholders in advance of adopting the amendment. The corporation must include in any proxy statement provided to shareholders specific information regarding how shareholders may submit a proposal on a matter requiring shareholder approval, including information about how the shareholders may contact one another for the purpose of satisfying the ownership requirements.

If a nationally listed corporation elects to adopt the new requirements, then, in order to submit a proposal requiring shareholder approval, a shareholder or a group of shareholders must hold a number of shares equal to at least $1 million in market value or 3% of the corporation’s voting shares. Voting shares of the corporation are defined as “shares that entitle the holders of the shares to vote on a proposal.” Ownership of the shares is determined as of the date the proposal is submitted, and the shareholders must hold such voting shares (i) for at least 6 months prior to the shareholder meeting and (ii) throughout the duration of the shareholder meeting. In addition, the shareholders must solicit holders of shares representing at least 67% of the voting power of shares entitled to vote on the proposal.

These provisions apply to any proposal on a matter to be submitted to shareholders for approval at a meeting of shareholders, other than director nominations and procedural resolutions that are “ancillary to the conduct of the meeting” (the scope of which is not defined). As such, the provisions apply not only to shareholder proposals under Rule 14a-8 under the Securities Exchange Act of 1934, as amended (Rule 14a-8), but also to “floor” proposals submitted pursuant to a corporation’s advance notice provisions unless the proposal’s topic is “ancillary to the conduct of the meeting.”

Corporations evaluating adoption of SB 1057’s provisions should carefully evaluate views of their shareholders, enforceability under state corporate law for companies not incorporated in Texas, likely reactions by the proxy advisory firms, and how to implement the provisions, including whether to address procedural or interpretive aspects of the provisions.

Effective Date

These amendments will be effective on September 1, 2025.

SB 2411’s Key Changes to the TBOC

Expanded Exculpation of Officers

SB 2411 permits entities organized under the TBOC to limit or eliminate the liability of officers for monetary damages for an act or omission taken by the officer in his or her capacity as an officer of the entity, except that exculpation cannot be provided for breaches of loyalty, intentional misconduct, transactions in which the officer received an improper benefit, or statutory violations. SB 2411 provides exculpation to officers of the corporation to the same extent already permitted for directors. To adopt such exculpation provisions, an entity must make an affirmative election in their certificate of formation.

Streamlined Approval of Mergers, Major Transactions and Related Actions

SB 2411 expressly provides that the governing authority of an entity (e.g., board of directors of a corporation) may approve corporate documents such as plans, agreements and instruments in final or “substantially final form.” The amendments also provide that disclosure letters, schedules and other such similar documents to be delivered in connection with a plan of merger are not considered a part of the plan of merger unless expressly stated.

Under the amendments, a plan of merger may include provisions for appointing representatives to act on behalf of owners or members, with the sole exclusive authority to enforce or settle post-transaction rights. The appointment of such a representative may be made irrevocable and binding on the parties to such plan of merger upon approval of the plan.

In addition, the amendments provide that a plan of conversion can authorize any additional actions taken by the converted entity in connection with the plan of conversion without any approvals by the governing authority, owners or members of the converted entity other than approval of the plan of conversion itself.

Other

Among other things, SB 2411 also updates references in the TBOC to the new Texas Business Courts, includes certificate of formation content modernizations, and clarifies the use of ratifications and validations.

Effective Date

These amendments will be effective on September 1, 2025.

Conclusion

In summary, the recent amendments introduced by SB 1057 and SB 2411 represent the continual evolution of the TBOC. Collectively, these changes demonstrate the responsiveness and innovative approach Texas is taking to enhance the attractiveness of Texas as a jurisdiction for business formation and operation, while balancing the interests of boards of directors, managerial officials and shareholders. Gibson Dunn will continue to monitor and provide updates on any significant additional legal developments approved during the 89th Legislature’s regular session (which concludes on June 2, 2025) or that otherwise emerge.

Texas entities and publicly traded companies in Texas should review their board training presentations and organizational documents and any other applicable compliance policies against these changes and consider whether any updates may be appropriate. Gibson Dunn’s Texas lawyers are available to assist with any questions you may have regarding these developments.

The following Gibson Dunn lawyers prepared this update: Hillary Holmes, Gerry Spedale, Julia Lapitskaya, Ronald Mueller, and Jason Ferrari.

Gibson Dunn’s lawyers are available to assist with any questions you may have regarding these developments. To learn more, please contact the Gibson Dunn lawyer with whom you usually work in the firm’s Securities Regulation & Corporate Governance practice group, or the authors:

Hillary H. Holmes – Houston (+1 346.718.6602, hholmes@gibsondunn.com)

Gerry Spedale – Houston (+1 346.718.6888, gspedale@gibsondunn.com)

Julia Lapitskaya – New York (+1 212.351.2354, jlapitskaya@gibsondunn.com)

Ronald O. Mueller – Washington, D.C. (+1 202.955.8671, rmueller@gibsondunn.com)

Jason Ferrari – Houston (+1 346.718.6736, jferrari@gibsondunn.com)

Attorney Advertising: These materials were prepared for general informational purposes only based on information available at the time of publication and are not intended as, do not constitute, and should not be relied upon as, legal advice or a legal opinion on any specific facts or circumstances. Gibson Dunn (and its affiliates, attorneys, and employees) shall not have any liability in connection with any use of these materials. The sharing of these materials does not establish an attorney-client relationship with the recipient and should not be relied upon as an alternative for advice from qualified counsel. Please note that facts and circumstances may vary, and prior results do not guarantee a similar outcome.

The do-over followed the Court’s separate conclusion that the board’s decision to reduce its size while in the shadow of a proxy fight was a breach of fiduciary duty.

The Delaware Court of Chancery recently concluded that a board properly rejected activists’ non-compliant director nomination notice, but nevertheless permitted the activists a rare second attempt at complying with the company’s advance notice bylaw. Applying Unocal and Blasius in a post-trial memorandum opinion, the do-over followed the Court’s separate conclusion that the board’s decision to reduce its size while in the shadow of a proxy fight was a breach of fiduciary duty.

Background

On May 21, 2025, Vice Chancellor Bonnie W. David issued a decision in Vejseli v. Duffy, 2025 WL 1452842 (Del. Ch. May 21, 2025), invalidating a board resolution that reduced the size of the board and permitting activists a second attempt at complying with an advance notice bylaw in nominating two new directors. The Court in this decision reaffirmed the enforcement of advance notice bylaws but, using its discretion as a court of equity, nevertheless provided a second chance at complying with the advance notice bylaw here due to the board’s own actions, which were not taken on a “clear day” and thus were a breach of the board’s fiduciary duties.

The opinion describes the facts as follows. In January 2024, digital currency mining assets of a company in Chapter 11 proceedings were spun off to a newly formed entity, Ionic Digital, Inc. (the “Company”), and many creditors became stockholders of the Company. The Company experienced significant management and director turnover, and a subset of stockholders became frustrated with the Company’s failure to publicly list its shares and what they considered other management failures. These activists aligned themselves with non-stockholder third parties whom the Company had previously passed over for arguably lucrative business opportunities. Those activists and third-party entities attempted to initiate a proxy contest at the Company’s first annual meeting of stockholders and install two new directors.

The Company’s board consisted of six seats (four directors and two vacancies), divided into three even classes, each standing for election every three years. Class I, consisting of one director and one vacancy, was up for re-election at the upcoming annual meeting of stockholders. In advance of the annual meeting, however, the Company’s board reduced its size from six directors to five, and, as a result, eliminated one of the two seats (which was vacant up until this point) that otherwise was going to be up for election. Without disclosing the board size reduction, the board announced the annual meeting date, triggering a 10-day window for submissions of nominations or other proposals of business under the company’s advance notice bylaw. The activists submitted nominations for the two board seats they believed were still up for election. In their nomination notice, however, the activists failed to disclose all existing agreements between them and the third-party entities with which they had partnered. After the nomination deadline passed, the board disclosed the board reduction and rejected the nomination notice based on the activists’ failure to include these agreements. The activists filed suit, alleging, among other things, that the directors had breached their fiduciary duties by reducing the board size and rejecting the nomination notice. In the meantime, the company postponed its annual meeting of stockholders until thirty days after the Court ruled in this action.

The Board Reduction

The Court first concluded that the board’s decision to reduce the board size was a breach of the board’s fiduciary duties. In reaching its decision, the Court considered the board’s actions under the enhanced scrutiny standard of review under Unocal, with a focus on election interference under Blasius, which considers whether (1) the board faced a “real and not pretextual” threat “to an important corporate interest or to the achievement of a significant corporate benefit,” and (2) the board’s response to the threat was reasonable in relation to the threat posed and was not preclusive or coercive to the stockholder franchise. The Court applied enhanced scrutiny because the resolution “interfere[d] with the election of directors,” and because the resolution was not adopted “on a ‘clear day,’” but rather as a defensive measure against the impending proxy contest.

In doing so, the Court noted that the most credible explanation offered at trial for the board reduction was that the board sought to ensure that “the Board, rather than the stockholders, could later identify better candidates,” which was “not a legitimate corporate purpose.” The Court also found that (1) the resolution was not necessary to accomplish the objectives of “cost savings and avoiding deadlock” that the board asserted post hoc as the reasons for the resolution, and (2) the board reduction was preclusive, because by eliminating a seat, the board made it impossible for stockholders to elect directors to that position, and therefore imposed its own favored outcome on the stockholders.

The Advance Notice Bylaw

The Court also held that the board properly rejected the nomination notice. First, the Court found that the activists failed to comply with the advance notice bylaw provision requiring “copies of all written agreements, contracts, arrangements, understanding, plans or proposals relating to” “[a]ny change in the present board of directors or management . . . , including any plans or proposals to change the number or term of directors or to fill any existing vacancies on the board” by not attaching the agreements between the activists and third-party entities and, more importantly, not even disclosing the existence of some of those agreements. The agreements included, among others, a solicitation agreement—described by but not attached to the nomination notice—for “the purpose of (i) supporting the [n]ominating [s]tockholders in their efforts to achieve the election of the persons they have nominated (at the [n]ominating [s]tockholders’ sole discretion) to the Board . . . at the 2025 [A]nnual [M]eeting . . . of [the Company.]” The Court concluded there are legitimate reasons why a board would want to know whether a nomination was part of a broader scheme relating to the governance, management, or control of the Company and such information was important to stockholders in deciding which director candidates to support. While the Court cited precedent suggesting that information regarding terminated agreements could be important, the Court did not definitively resolve whether such agreements needed to be disclosed because some provisions in the activists’ arrangements survived termination.

Second, the Court concluded the directors did not breach their fiduciary duties by rejecting the nomination notice. The Court analyzed the fairness of their decision under the enhanced scrutiny standard of review. The Court determined that the board rejected the notice to advance the “important corporate interest[]” of “preserving an informed stockholder vote,” and that the board’s enforcement of the advance notice bylaw was both reasonable and not preclusive because “[e]nforcing the Advance Notice Bylaw is a reasonable means of ensuring that stockholders receive material information about director nominees” and “did not preclude [the activists] from submitting a compliant Nomination Notice.” The Court also rejected the activists’ argument that the board’s failure to provide an opportunity to supplement the nomination notice before the nomination window closed was inequitable and found that such action did not amount to “manipulative conduct,” given that the window closed only two days after the activists submitted the nomination notice, noting that “Plaintiffs could have complied with the Advance Notice Bylaw’s disclosure requirements, but they did not.”

Despite concluding the board properly and fairly rejected the activists’ nomination notice, as a consequence of the board’s breach of fiduciary duty in reducing the board size, the Court issued an injunction “directing the Board to reopen the nomination window under the Advance Notice Bylaw to allow the Board, Plaintiffs, and any other the Company stockholder to submit director nominations.” In doing so, the Court stated that “[a] remedy that would permit the directors who breached their fiduciary duties to choose who will serve on the Board is no remedy at all.” The Court also noted that the “unusual facts of this case” necessitated this remedy because it was the board’s own wrongful conduct that required re-opening the nomination window, and the record did not support the board’s position that the activists intentionally concealed material information.

Takeaways

This decision reaffirms that the Delaware Court of Chancery applies enhanced scrutiny under Unocal with a focus on stockholder franchise concerns articulated in Blasius when evaluating claims that a board breached its fiduciary duties by taking defensive action that impacts the election of directors.
The Court reinforced that Delaware law permits a company to reject a non-complying nomination notice after the close of the nomination window where the activists’ submission did not provide the company sufficient time to do so before the deadline. If such rejection is challenged, however, a court may still examine a board’s motives in rejecting even a non-complying notice.
To avoid triggering enhanced scrutiny review, directors and advisors should ensure that any adjustment to board size is done on a clear day and for legitimate corporate interests, as documented by the record. This supports the notion that any board size decrease should (ideally) be done in connection with any director departure and that leaving a vacancy open for a period of time could lead to scrutiny if circumstances change in the future.
This case is a reminder that the Delaware Court of Chancery, as a court of equity, has broad discretion to fashion a remedy for breach of fiduciary duty. That principle is difficult to predict and plan around. It manifested here when, despite achieving practically complete victory with respect to the advance notice bylaw, the Company was compelled to give the activists another chance.
While the Court seemed to suggest that disclosure of recently terminated agreements would be appropriate, it also expressly acknowledged that it remains an open question whether an activists’ failure to disclose such agreements is sufficient to establish a violation of the advance notice bylaw at issue in this case. At minimum, disclosure is required where a material provision of such an agreement expressly survives termination.

The following Gibson Dunn lawyers prepared this update: Andrew Kaplan, Mark Mixon, and Justine Drohan.

Gibson Dunn lawyers are available to assist in addressing any questions you may have regarding these developments. Please contact the Gibson Dunn lawyer with whom you usually work, the authors, or any of the following Securities Litigation, Mergers and Acquisitions, Private Equity, or Securities Regulation and Corporate Governance practice group leaders and members:

Securities Litigation:
Monica K. Loseman – Denver (+1 303.298.5784, mloseman@gibsondunn.com)
Brian M. Lutz – San Francisco (+1 415.393.8379, blutz@gibsondunn.com)
Jason J. Mendro – Washington, D.C. (+1 202.887.3726, jmendro@gibsondunn.com)
Mark H. Mixon, Jr. – New York (+1 212.351.2394, mmixon@gibsondunn.com)
Craig Varnen – Los Angeles (+1 213.229.7922, cvarnen@gibsondunn.com)

Mergers and Acquisitions:
Andrew Kaplan – New York (+1 212.351.4064, akaplan@gibsondunn.com)
Robert B. Little – Dallas (+1 214.698.3260, rlittle@gibsondunn.com)
Saee Muzumdar – New York (+1 212.351.3966, smuzumdar@gibsondunn.com)
George Sampas – New York (+1 212.351.6300, gsampas@gibsondunn.com)

Private Equity:
Richard J. Birns – New York (+1 212.351.4032, rbirns@gibsondunn.com)
Ari Lanin – Los Angeles (+1 310.552.8581, alanin@gibsondunn.com)
Michael Piazza – Houston (+1 346.718.6670, mpiazza@gibsondunn.com)
John M. Pollack – New York (+1 212.351.3903, jpollack@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)
Julia Lapitskaya – New York (+1 212.351.2354, jlapitskaya@gibsondunn.com)
James J. Moloney – Orange County (+1 949.451.4343, jmoloney@gibsondunn.com)
Ronald O. Mueller – Washington, D.C. (+1 202.955.8671, rmueller@gibsondunn.com)
Lori Zyskowski – New York (+1 212.351.2309, lzyskowski@gibsondunn.com)

From the Derivatives Practice Group: This week, both the CFTC and SEC were very active in issuing guidance and advisories and Commissioner Kristin N. Johnson announced that she intends to step down from the CFTC.

New Developments

CFTC Staff Issues Advisory on Market Volatility Controls. On May 22, the CFTC issued a staff advisory reminding designated contract markets and derivatives clearing organizations of certain core principles and regulatory obligations under the Commodity Exchange Act and CFTC regulations related to controls designed to address market volatility. [NEW]
Commissioner Kristin N. Johnson Makes Statement on Departure from CFTC. On May 21, Commissioner Kristin N. Johnson announced that she intends to step down from the Commission later this year. [NEW]
CFTC Staff Issues Interpretation Regarding Certain Cross-Border Definitions. On May 21, the CFTC issued an interpretative letter confirming the application of certain cross-border definitions. The letter pertains to SCB Limited, an offshore crypto proprietary trading entity affiliated with Susquehanna, and confirms that SCB is not and will not qualify as a US person for the purposes of CFTC regulations concerning FCMs, FBOTs, and SEFs even if it were to (1) rely on US-located persons for trading/algorithm development, (2) license technology from a US-based affiliate, and (3) use US servers for its trading. Specifically, the interpretative letter confirms that SCB Limited is not a “person located in the United States” for purposes of the “foreign futures or foreign options customer” definition in Commission regulation 30.1(c); is not a “participant located in the United States” for purposes of Commission regulation 48.2(c); is a “foreign located person” for purposes of Commission regulation 3.10(c)(1)(ii); and is not a “U.S. person” as defined by Commission regulation 23.23(a) and the Commission’s 2013 Interpretive Guidance and Policy Statement Regarding Compliance With Certain Swap Regulations. [NEW]
CFTC Releases Procedures on Registered Non-U.S. Swap Entities Using Substituted Compliance. On May 20, the CFTC released procedures regarding CFTC-registered non-U.S. swap dealers or major swap participants relying on substituted compliance. The procedures establish how CFTC Divisions will address potential non-compliance with foreign law that has been found by the CFTC to be comparable in outcome to the Commodity Exchange Act or CFTC regulations pursuant to a substituted compliance order. [NEW]
SEC Names Katherine Reilly as Acting Inspector General. On May 19, the SEC announced the appointment of Katherine Reilly as the agency’s Acting Inspector General. Ms. Reilly is currently serving as a Deputy Inspector General at the SEC. She replaces Deborah Jeffrey, who has served as the SEC’s Inspector General since 2023 and is retiring. [NEW]
SEC’s Division of Trading and Markets Releases FAQ Relating to Crypto Asset Activities and Distributed Ledger Technology. On May 15, the SEC prepared responses to frequently asked questions relating to crypto asset activities and distributed ledger technology. The responses cover topics relating to broker-dealer financial responsibility and transfer agents. These responses represent the views of the staff of the Division of Trading and Markets. They are not a rule, regulation, or statement of the SEC. [NEW]
Commissioner Christy Goldsmith Romero Makes Statement on Departure from CFTC. On May 16, Commissioner Christy Goldsmith Romero announced that she intends to step down from the Commission and retire from federal service. Her final day at the Commission will be May 31.
Commissioner Summer K. Mersinger Makes Statement on Departure from CFTC. On May 14, Commissioner Mersinger announced that she intends to step down from her position as Commissioner at the CFTC at the end of the month, to pursue new opportunities.
CFTC Warns Public of Imposter Scam Targeting Fraud Victims. On May 14, the CFTC warned the public about a growing imposter scam involving individuals falsely claiming to represent the agency. According to the CFTC, scammers are contacting members of the public and claiming to represent the CFTC Office of Inspector General and promise to help financial fraud victims recover lost funds from foreign bank accounts. The CFTC Office of Inspector General stated that it will never contact individuals with offers to recover money lost to investment scams.
Acting Chairman Pham Makes Statement on Court Sanctions Against CFTC. On May 13, CFTC Acting Chairman Caroline D. Pham made a statement regarding the Federal District Court report and recommendations for sanctions against the CFTC for misconduct in CFTC v. Traders Global Group Inc, highlighting proactive efforts to overhaul the CFTC’s Division of Enforcement and reform culture and conduct, develop staff, and leverage expertise and reduce siloing.
CFTC Staff on Leave Pending Investigation. On May 5, pursuant to the President’s executive orders on lawful governance and accountability, the CFTC placed certain staff on administrative leave for potential violations of laws, government ethics requirements and professional rules of conduct. The CFTC stated it is committed to holding employees to the highest standards, as expected by American taxpayers. Investigations are currently ongoing into these matters and the CFTC has committed to provide updates as appropriate.

New Developments Outside the U.S.

ESMA Asks for Input on the Retail Investor Journey as Part of Simplification and Burden Reduction Efforts. On May 21, ESMA launched a Call for Evidence (“CfE”) on the retail investor journey under the Markets in Financial Instruments Directive 2014. The purpose of this CfE is to gather feedback from stakeholders to better understand how retail investors engage with investment services, and whether regulatory or non-regulatory barriers may be discouraging participation in capital markets. [NEW]
ESMA Delivers Technical Advice on Market Abuse and SME Growth Markets as Part of the Listing Act. On May 7, ESMA published its advice to the European Commission to support the Listing Act’s goals to simplify listing requirements, enhance access to public capital markets for EU companies, and improve market integrity. In relation to Market Abuse Regulation (“MAR”), the advice covers: protracted processes, identifying key moments for public disclosure; delayed public disclosure, listing situations where delays are not allowed; and Cross-Market Order Book Mechanism, indicating the methodology for the identification of trading venues with significant cross-border activity.
ESMA Consults on Rules for ESG Rating Providers. On May 2, ESMA published a Consultation Paper on draft Regulatory Technical Standards (“RTS”) under the Environmental, Social, and Governance (“ESG”) Rating Regulation. The draft RTS cover the following aspects that apply to ESG rating providers: the information that should be provided in the applications for authorization and recognition; the measures and safeguards that should be put in place to mitigate risks of conflicts of interest within ESG rating providers who carry out activities other than the provision of ESG ratings; the information that they should disclose to the public, rated items and issuers of rated items, as well as users of ESG ratings.

New Industry-Led Developments

ISDA Publishes ISDA SIMM® Methodology, Version 2.7+2412. On May 22, ISDA published updates to its Standard Initial Margin Model (“SIMM”) methodology that are based on the full recalibration of the model and marked the first SIMM version publication of the new semiannual calibration cycle in 2025. The effective date of July 12, 2025 means that ISDA SIMM users should use SIMM version 2.7+2412 to calculate the initial margin for close of business on Friday July 11, 2025 onwards. This means that the first day for exchange of initial margin calculated using SIMM version 2.7+2412 would be on Monday July 14, 2025. [NEW]
ISDA/SIFMA/SIFMA AMG Publish Joint Response to CFTC Request for Comment on 24-7 Trading. On May 21, ISDA, the Securities Industry and Financial Markets Association (“SIFMA”), and the SIFMA Asset Management Group (“SIFMA AMG”) jointly filed a comment letter in response to the CFTC’s request for comment on 24/7 trading and clearing. ISDA, SIFMA, and SIFMA AMG believe that the feasibility of both 24/7 trading and clearing needs to be evaluated holistically with an understanding of the interdependencies between market participants, trading venues, middleware and software providers, clearing systems, margining frameworks, payments systems, default mechanisms and adjacent markets. [NEW]
IOSCO Makes Statement on Combatting Online Harm and the Role of Platform Providers. On May 21, IOSCO reiterated its concern about risks associated with investment fraud orchestrated through online paid-for advertisements and user-generated content. IOSCO stated that regulators and platforms providers are strategically positioned to mitigate the potential investor harm arising from these risks and asks platform providers to enhance efforts, consistent with local law, aimed at reducing risk of pecuniary harm to investors, which also threatens public trust in the services provided by platform providers. [NEW]
IOSCO Releases Sustainable Bonds Report. On May 21, IOSCO published its Sustainable Bonds Report which identifies the key characteristics and trends tied to the sustainable bond market. IOSCO’s Report includes five key considerations which are designed to address market challenges, including enhancing investor protection, ensuring sustainable bond markets are operating in a fair and efficient way, and improving accessibility. [NEW]
IOSCO Publishes Final Reports on Finfluencers, Online Imitative Trading Practices and Digital Engagement Practices. On May 19, IOSCO published the Final Reports on Finfluencers, Online Imitative Trading Practices and Digital Engagement Practices, as part of the third wave of its Roadmap for Retail Investor Online Safety. The Finfluencers Final Report explores the evolving landscape of finfluencers, the associated potential benefits and risks, and the current regulatory responses across jurisdictions. [NEW]
IOSCO Concludes its 50th Annual Meeting. On May 15, IOSCO concluded its 50th Annual Meeting, which was hosted by the Qatar Financial Markets Authority (“QFMA”) in Doha. IOSCO welcomed near 500 participants over the course of three days, followed by the QFMA public conference. The IOSCO Annual Meeting brings all 130 member jurisdictions together to discuss the most relevant issues and risks with regard to global financial markets, and how to assist regulators in implementing standards through capacity building.
ISDA Publishes Paper Exploring Use of Generative AI to Extract and Digitize CSA Clauses. On May 15, ISDA published a whitepaper that shows generative artificial intelligence can be used to accurately and reliably extract, interpret and digitize key legal clauses from ISDA’s credit support annexes, showing how this technology could increase efficiency, cut costs and reduce risks in derivatives processes that have traditionally been highly manual and resource intensive.
ISDA Margin Survey Shows Leading Derivatives Firms Collected $1.5 Trillion of Margin at Year-end 2024. On May 14, ISDA published its latest annual margin survey, which shows that initial margin (“IM”) and variation margin collected by leading derivatives market participants for their non-cleared derivatives exposures increased by 6.4% to $1.5 trillion at the end of 2024. The 32 responding firms included all 20 phase-one entities (the largest derivatives dealers subject to regulatory IM requirements in the first implementation phase), five of the six phase-two firms and seven of the eight phase-three entities.
ISDA Extends Digital Regulatory Reporting to Support Revised Canadian Reporting Rules. On May 13, ISDA extended its Digital Regulatory Reporting solution to cover new reporting rules in Canada and has made it compatible with a trade reporting messaging format used for North America reporting to maximize the benefit of adoption by those firms subject to the rules. The revisions are being implemented by the Canadian Securities Administrators and are scheduled for implementation on July 25, 2025.
ISDA Publishes Governance Committee Proposal for CDS Determinations Committees. On May 8, ISDA published a proposal for a new governance committee for the CDS Determinations Committees (“DCs”), the first in a series of amendments to improve the structure of the DCs and maintain their integrity in changing economic and market conditions. The governance committee would be responsible for taking market feedback and adopting rule changes affecting the structure and operations of the DCs to ensure their long-term viability and meet market expectations for efficiency and transparency in credit event determinations.
ISDA Presents Proposed Charter for the Credit Derivatives Governance Committee. On May 8, ISDA presented the proposed Charter for the Credit Derivatives Governance Committee and accompanying DC Rule changes to implement. Pursuant to the announcement made in 2024, an ISDA working group formed from ISDA’s Credit Steering Committee has worked on producing the Governance Committee solution. ISDA views the Governance Committee as the first step in implementing the other recommended changes from the Linklaters’ report as part of an independent review on the composition, functioning, governance and membership of the DCs.

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

Gibson Dunn’s lawyers are available to assist in addressing any questions you may have regarding these developments. Please contact the Gibson Dunn lawyer with whom you usually work, any member of the firm’s Derivatives practice group, or the following practice leaders and authors:

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)

This edition of Gibson Dunn’s Federal Circuit Update for April summarizes the current status of petitions pending before the Supreme Court and recent Federal Circuit decisions concerning provisional rights under 35 U.S.C. § 154(d), the Board’s findings regarding knowledge of a person of ordinary skill in the art, patent ineligibility under 35 U.S.C. § 101, and means-plus-function terms under 35 U.S.C. § 112 ¶ 6.

Federal Circuit News

Noteworthy Petitions for a Writ of Certiorari:

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

NexStep, Inc. v. Comcast Cable Communications, LLC (US No. 24-1137): The question presented is “Whether a patentee must in every case present ‘particularized testimony and linking argument’ to establish infringement under the doctrine of equivalents.” The response is due June 5, 2025.
Purdue Pharma L.P. v. Accord Healthcare, Inc. (US No. 24-1132): The question presented is “Whether, as this Court has held, the objective indicia of non-obviousness should be analyzed flexibly to combat hindsight bias or instead subject to the Federal Circuit’s rigid rules restricting the inquiry.” The response is due June 2, 2025.

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

The Court will consider the petition in Converter Manufacturing, LLC v. Tekni-Plex, Inc. (US No. 24-866) at its May 22, 2025 conference.
The Court denied the petitions in Brumfield v. IBG LLC, et al. (US No. 24-764) and Celanese International Corp. v. International Trade Commission (US No. 24-635).

Upcoming Oral Argument Calendar

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

Key Case Summaries (April 2025)

In re Forest, No. 23-1178 (Fed. Cir. April 3, 2025): Mr. Forest submitted a patent application titled “Apparatus for Selecting from a Touch Screen” on December 27, 2016. The application was rejected by the examiner in part under obviousness and nonstatutory double patenting grounds and affirmed by the Patent Trial and Appeal Board (Board), which Mr. Forest now appeals. The application claims priority to another application filed on March 27, 1995, meaning that if the 2016 application were to issue as a patent, it would have an expiration date in 2015. The United States Patent and Trademark Office (PTO) therefore contends that Mr. Forest has no personal stake in the appeal because he cannot be granted any enforceable rights by a patent grant with zero term. Mr. Forest argues that he would acquire “provisional rights” under 35 U.S.C. § 154(d) if the PTO issues him an expired patent.

The Federal Circuit (Chen, J., joined by Taranto and Schall, JJ.) dismissed the appeal. The Federal Circuit held that provisional rights, which are “provisional,” means they are “temporary” and must be replaced by the statutory exclusionary rights, which runs from the date of issuance to 20 years after the priority date. Thus, a patent is only granted exclusionary rights if it issues before its expiration date. Based on this, the Court reasoned that provisional rights must therefore precede exclusionary rights, which means that provisional rights can only be granted to a patent that issues with exclusionary rights. As a result, even if Mr. Forest were granted a patent on the 2016 application, it would not lead to a conferral of provisional rights, because the patent would have expired before it issued, meaning Mr. Forest would receive no exclusionary rights.

Sage Products, LLC v. Stewart, No. 23-1603, 23-1604 (Fed. Cir. Apr. 15, 2025): Sage owns two patents directed to a sterilized chlorhexidine product in a package, such as an applicator filled with an antiseptic composition for disinfecting skin. Becton, Dickinson and Co. (BD) petitioned for inter partes review (IPR) of certain claims of Sage’s patents and the Board concluded that the challenged claims were unpatentable in part because a person of skilled in the art would have found the prior art’s disclosure of “sterile applicators” taught the “sterilized chlorhexidine product” claimed.

The Federal Circuit (Stark, J., joined by Reyna, J. and Cunningham, J.) affirmed. The Court held that the Board’s finding that a person of skill in the art would have understood the term “sterile” as used in the prior art (a publication from the United Kingdom’s (UK) health agency) to meet the claim term “sterilized” under the Board’s construction was supported by substantial evidence. The Court found no reversible error in the Board’s finding that a skilled artisan would know about the differing regulatory requirements in the United States and the UK, including recognizing that satisfying the UK regulatory standards for “sterile” would satisfy the challenged claims’ requirements for “sterilized” items.

Recentive Analytics, Inc. v. Fox Corp., No. 23-2437 (Fed. Cir. April 18, 2025): Recentive owns several patents directed to methods for generating optimized television broadcast schedules and network maps using machine learning. Specifically, the patents aimed to improve television scheduling for live events and to allocate network content across different geographic areas. The claims described the use of machine learning to dynamically predict optimal scheduling and map allocation, allegedly proposing an innovative use of artificial intelligence (AI) in the broadcasting industry. Fox moved to dismiss on the grounds that the patent claims were ineligible under 35 U.S.C. §101, and the district court granted the motion. The court held that the claims were directed to abstract ideas of producing network maps and event schedules using generic mathematical techniques, and the claims lacked an inventive concept because they involved only routine applications of machine learning technology using generic and conventional computing devices.

The Federal Circuit (Dyk, J., joined by Prost and Goldberg (district judge sitting by designation), JJ.) affirmed. At Alice Step One, the Court held that the claims were directed to abstract ideas—specifically, the use of machine learning to television broadcast scheduling and network map allocation. At Alice Step Two, the Court held that the claims merely applied generic machine learning techniques to a new field, and that the use of conventional technology did not somehow transform the claimed abstract idea into a patent-eligible invention. The Court also noted that although machine learning is a rapidly advancing field, simply applying machine learning to specific tasks, without further innovation, does not satisfy the statutory requirements for patent eligibility.

Fintiv, Inc. v. PayPal Holdings, Inc., No. 23-2312 (Fed. Cir. Apr. 30, 2025): Fintiv sued PayPal for infringement of patents related to a cloud-based transaction system. During claim construction proceedings before the district court, PayPal argued that the term “payment handler” is a means-plus-function term subject to 35 U.S.C. § 112 ¶ 6 and was indefinite for failing to disclose adequate corresponding structure.

The Federal Circuit (Prost, J., joined by Taranto and Stark, JJ.) affirmed. The Court first determined that while the payment-handler terms did not use the word “means,” PayPal overcame the presumption that § 112 ¶ 6 does not apply because the payment-handler terms recite function without reciting sufficient structure for performing that function. The Court also agreed with the district court that “handler” alone did not provide sufficient structure. The Court then looked to whether there was corresponding structure disclosed in the specification or an algorithm to achieve the functionalities performed and concluded that there was not. The Court thus concluded the term was indefinite.

The following Gibson Dunn lawyers assisted in preparing this update: Blaine Evanson, Jaysen Chung, Audrey Yang, Al Suarez, 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)

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)

Gibson Dunn announces release of the International Comparative Legal Guide – Anti- Money Laundering 2025

Gibson Dunn is pleased to announce with Global Legal Group the release of the International Comparative Legal Guide – Anti-Money Laundering 2025. Gibson Dunn partners Stephanie L. Brooker and M. Kendall Day are the Contributing Editors of the publication, which covers issues including criminal enforcement, regulatory and administrative enforcement, and requirements for financial institutions and other designated businesses. The Guide, comprised of 4 expert analysis chapters and 15 jurisdictions, is live and FREE to access HERE.

Ms. Brooker, Mr. Day, and of counsel Ella Capone and Sam Raymond jointly authored “Anti-Money Laundering Laws and Regulations Top Developments in Anti-Money Laundering Enforcement in 2024.”

In addition, Ms. Brooker, Mr. Day, Ms. Capone, and Mr. Raymond co-authored the jurisdiction chapter on “USA: Anti-Money Laundering 2025.”

You can view these informative and comprehensive chapters via the links below:

CLICK HERE to view Anti-Money Laundering Laws and Regulations Top Developments in Anti-Money Laundering Enforcement in 2024

CLICK HERE to view Anti-Money Laundering Laws and Regulations USA 2025

The following Gibson Dunn lawyers contributed to this publication: Stephanie Brooker, M. Kendall Day, Ella Capone, and Sam Raymond.

Gibson Dunn has deep experience with enforcement defense and compliance issues regarding the Bank Secrecy Act, AML laws, and sanctions laws and regulations.

About the Authors:

Stephanie Brooker, a partner in the Washington, D.C. office of Gibson Dunn, is Co-Chair of the firm’s Global White Collar Defense and Investigations, Anti-Money Laundering, and Financial Institutions Practice Groups. Stephanie served as a prosecutor at DOJ, including serving as Chief of the Asset Forfeiture and Money Laundering Section, investigating a broad range of white-collar and other federal criminal matters, and trying 32 criminal trials. She also served as the Director of the Enforcement Division and Chief of Staff at FinCEN, the lead U.S. anti-money laundering regulator and enforcement agency. Stephanie has been consistently recognized by Chambers USA for enforcement defense and BSA/AML compliance as an “excellent attorney,” who clients rely on for “important and complex” matters, and for providing “excellent service and terrific lawyering.” She has also been named a National Law Journal White Collar Trailblazer and a Global Investigations Review Top 100 Women in Investigations.

Kendall Day is a nationally recognized white-collar partner in the Washington, D.C. office of Gibson Dunn, where he is Co-Chair of Gibson Dunn’s Global Fintech and Digital Assets Practice Group, Co-Chair of the firm’s Financial Institutions Practice Group, co-leads the firm’s Anti-Money Laundering practice, and is a member of the White Collar Defense and Investigations and Crisis Management Practice Groups. Kendall is recognized as a leading White Collar Attorney in the District of Columbia by Chambers USA – America’s Leading Business Lawyers. Most recently, Kendall was recognized in Best Lawyers 2024 for white-collar criminal defense. Prior to joining Gibson Dunn, Kendall had a distinguished 15-year career as a white-collar prosecutor with DOJ, rising to the highest career position in DOJ’s Criminal Division as an Acting Deputy Assistant Attorney General (“DAAG”). As a DAAG, Kendall had responsibility for approximately 200 prosecutors and other professionals. Kendall also previously served as Chief and Principal Deputy Chief of the Money Laundering and Asset Recovery Section. In these various leadership positions, from 2013 until 2018, Kendall supervised investigations and prosecutions of many of the country’s most significant and high-profile cases involving allegations of corporate and financial misconduct. He also exercised nationwide supervisory authority over DOJ’s money laundering program, particularly any BSA and money-laundering charges, DPAs and non-prosecution agreements involving financial institutions.

Ella Alves Capone is Of Counsel in the Washington, D.C. office of Gibson Dunn, where she is a member of the White Collar Defense and Investigations, Fintech and Digital Assets, Financial Regulatory, International Trade Advisory and Enforcement, and Anti-Money Laundering practice groups. Her practice focuses on representing and advising multinational corporations and financial institutions in government and internal investigations and regulatory compliance matters involving Bank Secrecy Act, money laundering, sanctions, consumer protection, anti-corruption, fraud, and payments issues. She also regularly advises clients on the development and implementation of compliance programs and internal controls. Ella has been featured as a fintech “Rising Star” by Law360 and recognized for her White Collar Litigation and Investigations work in Lawdragon’s 500 X – The Next Generation publications. She has also been recognized by Super Lawyers as a White Collar Defense “Rising Star.”

Sam Raymond is Of Counsel in the New York office of Gibson Dunn and a member of the White Collar Defense and Investigations, Litigation, Anti-Money Laundering, Fintech and Digital Assets, and National Security Groups. As a former federal prosecutor, Sam has a broad-based government enforcement and investigations practice, with a specific focus on investigations and counseling related to anti-money laundering, the Bank Secrecy Act, and sanctions. Sam is an experienced investigator and trial lawyer. He served as an Assistant United States Attorney in the U.S. Attorney’s Office for the Southern District of New York from 2017 to 2024. In that role, he tried multiple cases to verdict and prosecuted a broad range of federal criminal violations, including as a lead prosecutor in one of the first cases ever charging individuals with violations of the Bank Secrecy Act.

Contact Information:

For assistance navigating these issues, please contact the the Gibson Dunn lawyer with whom you usually work, the leaders or members of the firm’s Anti-Money Laundering practice group, or the authors:

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)
Ella Alves Capone – Washington, D.C. (+1 202.887.3511, ecapone@gibsondunn.com)
Sam Raymond – New York (+1 212.351.2499, sraymond@gibsondunn.com)

Frame-Wilson v. Amazon.com, Inc., No. 2:20-cv-00424 (W.D. Wa.) – Decided April 29, 2025

A court in the Western District of Washington has held that human error in coding a privileged document as non-privileged does not qualify as inadvertent production of privileged documents under Federal Rule of Evidence 502(b).

Background

Amazon.com, Inc. is the defendant in three putative antitrust class actions. Amazon has produced almost 14 million documents, with the help of some 160 document reviewers. After a dispute arose over Amazon’s privilege log, Amazon conducted a privilege re-review of over 100,000 documents. During the course of that review, a reviewer designated three documents as not privileged or neglected to redact privileged information.

The plaintiffs then moved for class certification. In their motion, they cited the three documents that had been marked not privileged or had been inadequately redacted. Amazon quickly sought to claw back the documents, asking the plaintiffs to destroy them and to refile the class-certification motion without citing them. The plaintiffs refused, arguing that Amazon had waived any claim of privilege by virtue of producing the documents.

Issue Presented

Is a waiver of privilege “intentional” under Federal Rule of Evidence 502 when a reviewer mistakenly codes a privileged document as not privileged?

Court’s Holding

Yes. Absent extenuating circumstances, such as a technical glitch, the production of a privileged document is necessarily deliberate, and privilege is therefore waived, whenever a document was reviewed and designated “not privileged,” even if the document was initially designated privileged and was downgraded by mistake. The Court reached this conclusion after determining that the parties’ standard discovery agreements were inadequate to trigger the benefits of Federal Rule of Evidence 502(d), which permit no-fault clawbacks and limit the scope of any waivers to one particular lawsuit.

What It Means

In complex cases, litigants often accidentally produce a handful of privileged documents and seek to claw them back. Because cases routinely involve millions of documents, mistakes are inevitable, and litigants generally rely on the protections afforded by discovery agreements based on Rule 502. But the court here rejected the possibility of human error, holding that the production of a document marked as non-privileged must mean that the party producing it intentionally waived any claim of privilege.
The district court’s rule would leave very little that would satisfy the “inadvertence” standard for avoiding a privilege waiver under Federal Rule of Evidence 502(b). The court limited the standard to cover little more than technical glitches and freak accidents, rather than simple human error.
Other courts might conclude that a litigant’s reaction to the use of privileged information has some bearing on whether the disclosure of that information was inadvertent. Here, Amazon immediately took steps to claw back its documents and has continued to pursue the issue even after the district court’s decision. On May 14, Amazon challenged that decision by filing a petition for a writ of mandamus from the Ninth Circuit, and on May 19, the U.S. Chamber of Commerce filed an amicus brief in support of Amazon’s position.
If the Ninth Circuit declines to review the district court’s decision, litigants would be well advised to devote even more resources to ensuring that no privileged documents are produced. It may not be enough, as it was not in this case, to rely on standard language invoking the protections of Federal Rule of Evidence 502(d), or on Federal Rule of Evidence 502(b)’s default protections against inadvertent disclosure.

The following Gibson Dunn lawyers prepared this update: Samuel Liversidge, Julian W. Poon, Daniel R. Adler, Matthew C. Parrott, and Brian W. Anderson.

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 member of the firm’s Litigation practice group, or the following authors:

Samuel Liversidge – Los Angeles (+1 213.229.7420, sliversidge@gibsondunn.com)

Julian W. Poon – Los Angeles (+1 213.229.7758, jpoon@gibsondunn.com)

The Bureau of Industry and Security has initiated the rescission of the AI Diffusion Framework and announced additional guidance, policies, and plans to introduce a replacement set of rules regulating AI models and advanced computing technologies, with a continued focus on China.

The U.S. Department of Commerce’s Bureau of Industry and Security (BIS) ofﬁcially announced last week that it is rescinding the AI Diffusion Framework (the Framework) issued in the closing days of the Biden administration,[1] and will be replacing the rule with a “stronger but simpler” framework in the future.[2]

At the same time, BIS released a trio of guidance and policy statements which significantly expand the risks for companies using products made with advanced chips made by companies physically present in, headquartered in, or that are a subsidiary of a parent located in, China (including Hong Kong and Macau), with a specific notice regarding certain advanced chips produced by Huawei. The releases also heighten diligence expectations for any company exporting, reexporting or transferring U.S. controlled advanced integrated circuits (ICs), including to or by Infrastructure as a Service (IaaS) providers, particularly to parties headquartered in countries subject to U.S. arms embargoes such as China (including Hong Kong and Macau).

Rescission of the Framework

As discussed in a prior client alert, the Framework, through a multi-part control structure, would have created additional rules to restrict “countries of concern” (i.e., countries listed in BIS Country Group D:5 as subject to a U.S. arms embargo, which include, among many others, Russian, Iran, Venezuela, and China (including Hong Kong and Macau)) from obtaining advanced U.S. and allied closed-weight AI models by broadly:

Expanding licensing requirements for the export of advanced ICs;
Imposing controls on frontier AI models; and
Closing a loophole that previously allowed persons in countries of concern rent access to computing power outside their countries.

A key aspect of the Framework was to create a three-tiered licensing policy with a more permissive structure allowing exports to and among countries whose export controls are aligned with the U.S., imposing an effective embargo against countries the U.S. perceives as threats, and detailing a conditional policy for all other countries yet to adopt certain safeguards against exports supporting the unchecked development of frontier AI models.

The rescission of the Framework now means that, until a new regulation is issued, there are no express controls on general purpose AI models, whether proprietary, published, or otherwise. Questions remain, however, as to whether AI models that are specially trained to provide users with design, development, or other kinds of controlled technology are subject to export controls (and if so, how export controls apply to their development, deployment, and use).

AI Diffusion Replacement Rule

In its press release announcing the rescission of the Framework, BIS stated that it “will issue a replacement rule in the future.” Among other potential changes, the Trump administration has signaled an interest in reworking the tiered system of access to U.S. AI chips. Potential options include replacing the tiered system with bilateral agreements reached with counterparts on a country-by-country basis.[3]

While the Trump administration has explained that it is going back to the drawing board to replace the Framework, the national security drivers for the Framework controls remain, and we assess that any new regulations would retain some version of the following Framework elements:

License exceptions to support use and production by countries who adopt parallel export controls on AI chips and AI models to certain end uses and end users;
A validated end user (VEU) authorization system for data centers to facilitate the supply of advanced ICs to end users in destinations that do not raise national security or foreign policy concerns. (While the Universal VEU / National VEU categories no longer apply, the data-center focused VEU regulation from October 2024 remains intact);[4]
Enhanced customer diligence and reporting requirements for recipients of large quantities of AI chips; and
Controls on at least some proprietary AI models.

As such, we advise companies to prepare for such features when designing compliance systems and entering into new contract arrangements for counterparties that will entail the use of AI chips and AI-optimized data centers for the support of AI model training and inference.

Guidance and Policy Statements

BIS’s publication of three advisories on the same day it rescinded the Framework indicate that the Trump administration will continue an aggressive approach towards China-related export controls.

Heightened Risk of Export Control Violations from use of Advanced-Computing Integrated Circuits Designed or Made by Chinese Companies

In its Guidance on Application of General Prohibition 10 to People’s Republic of China Advanced-Computing Integrated Circuits (the IC Guidance), BIS substantially increases its compliance expectations for industry actors that use China-linked advanced-computing ICs meeting the parameters for control under Export Control Classification Number (ECCN) 3A090 by creating a presumption that such dealings violate U.S. export controls. While the warning extends to cover chips that have been developed or produced by companies located in, headquartered in, or whose ultimate parent company is headquartered in any country included in BIS Country Group D:5, BIS focuses its guidance primarily on China and specifically calls out specific Huawei-made chips, namely the Huawei Ascend 910B, Huawei Ascend 910C, and Huawei Ascend 910D.

BIS explains that its reference to Huawei chips is only illustrative, however, and states that there is a high probability that all chips meeting the parameters of 3A090 were likely designed or produced with U.S. software, technology, or equipment, and that a license therefore would have been required for various activities connected to companies in China or specifically restricted on the Entity List. Because BIS has not granted such licenses, BIS notes that there is a high probability that any such chips designed or produced by companies located in, headquartered in, or with an ultimate parent company headquartered in China were manufactured in violation of the EAR, and puts companies on notice that it will presume that General Prohibition 10 liability will extend to any further activity involving these chips.

General Prohibition 10 is a broad and temporally and geographically unbounded regulation that prohibits dealings on an item subject to the EAR “with knowledge [including a reason to know] that a violation of the EAR has occurred, is about to occur, or is intended to occur in connection with the item.” For example, in 2022, BIS listed 73 aircraft that had flown into Russia in violation of the EAR and noted that “any subsequent actions taken with regard to any of the listed aircraft, including, but not limited to, refueling, maintenance, repair, or the provision of spare parts or services,” are subject to General Prohibition 10.[5] In its press release, BIS then emphasized that any form of service to the listed aircraft likely constitutes a violation of U.S. export controls, and the potential for General Prohibition 10 liability created waves that hit not only direct service providers of aircraft – including aftermarket part manufacturers and distributors, maintenance organizations, airport operators, and refuelers – but also aircraft finance sector players such as insurers, lenders, and underwriters.

BIS’s IC Guidance goes a step beyond this precedent by creating a presumption that General Prohibition 10 restrictions apply to all China-linked ICs, and stating that the mere use of these chips could make one subject to enforcement actions. BIS stops short, at least for now, of stating that the use of AI models that were trained by China-linked companies using such ICs could be a General Prohibition 10 issue.

Heightened Risk of Export Control Violations from AI Chips and AI Models

BIS also used the occasion of its recission of the AI Framework recission to remind data center operators and IaaS service providers, among others that there are certain “catch-all” prohibitions on the use of AI chips for certain end uses and by certain end users. In its Policy Statement on Controls that May Apply to Advanced Computing Integrated Circuits and Other Commodities Used to Train AI Models (the Policy Statement), BIS warns of the heightened risk of prohibited transactions arising from dealings that involve WMD or military-intelligence end users and advanced ICs and related commodities (e.g., those classified under ECCNs 3A090.a, 4A090.a, as well as .z items in Categories 3, 4, and 5).

Specifically, (i) exports, re-exports, or transfers (in-country) of advanced computing ICs and commodities or (ii) providing “support” (as defined in 15 C.F.R. § 744.6(b)(6)) or performing any contract, service, or employment to assist the training of AI models may trigger a license requirement if the exporter, re-exporter, transferer, or service provider:

Has “knowledge” or a “reason to know” that the advanced computing ICs and commodities, support, or services will be used to conduct or assist the training of AI models for or on behalf of parties headquartered in D:5 countries (including China) or Macau, and
Has “knowledge” or a “reason to know” that the AI model will be used for WMD or military-intelligence use/user.

When read together with its Red Flag Guidance, discussed below, the BIS Policy Statement notifies exporters of its heightened end use and end user diligence expectations, both for companies supplying the IaaS providers with controlled ICs and for the IaaS providers themselves.

Red Flags and Diligence Actions

Finally, in its Industry Guidance to Prevent Diversion of Advanced Computing Integrated Circuits (the Red Flag Guidance), BIS provides exporters with transactional and behavioral red flags and suggested due diligence actions that are specific to exporters of advanced computing ICs.[6] The IC-related red flags focus on various suspicious behaviors concerning the customer’s address or business activities that are not consistent with the need for advanced computing ICs.

Notable, however, is BIS’s focus on IaaS providers and the diligence required to both supply IaaS providers with controlled ICs and for IaaS providers to use controlled ICs. To that end, the Red Flags Guidance provided:

Data Center /IaaS Red Flags:
- The data center to which the advanced ICs and/or commodities containing such ICs are being exported does not or cannot affirm it has the infrastructure (e.g., power/energy, cooling capacity, or physical space needed to run servers containing advanced ICs) to operate the advanced computing ICs and/or commodities that contain such ICs.
- The customer providing IaaS does not or cannot affirm that users of its services are not headquartered in the PRC, whether or not such customer is located inside or outside of China and Macau.
Data Center / IaaS Diligence Actions:
- The data center to which the advanced ICs and/or commodities containing such ICs are being exported does not or cannot affirm it has the infrastructure (e.g., power/energy, cooling capacity, or physical space needed to run servers containing advanced ICs) to operate the advanced computing ICs and/or commodities that contain such ICs.
- The customer providing IaaS does not or cannot affirm that users of its services are not headquartered in the PRC, whether or not such customer is located inside or outside of China and Macau.

Key Takeaways

Together with BIS’s intent to replace the AI Diffusion Framework with a “stronger but simpler” version, the three advisories make clear that despite the shift in political winds in D.C., the U.S. Government continues to remain concerned about the diversion of advanced ICs to Chinese end users and to certain kinds of end users and end uses. While BIS’s rescission of the Framework may appear at first to provide temporary relief for AI chip suppliers, distributors, and customers, BIS’s precedent-setting guidance on the use of Chinese AI Chips, and its heightened and elaborated due diligence expectations, especially for IaaS and associated service providers, are regulatory in effect and lay the groundwork for aggressive BIS enforcement premised on General Prohibition 10 theories of liability.

Our team works daily with clients to develop the kinds of due diligence frameworks, contractual protections, and other compliance system tools to reflect BIS’s rapidly evolving guidance on AI chip exports, AI model development, and AI model use, and to advise on the kinds of safeguards investors, data center developers, and others should be looking to put place while the Trump administration works to replace the Framework with its own.

[1] U.S. Dep’t of Commerce, Press Release, Department of Commerce Announces Recission of Biden-Era Artificial Intelligence Diffusion Rule, Strengthens Chip-Related Export Controls (May 13, 2025), https://media.bis.gov/press-release/department-commerce-rescinds-biden-era-artificial-intelligence-diffusion-rule-strengthens-chip-related.

[2] Karen Freifeld, Trump Officials Eye Changes to Biden’s AI Chip Export Rule, Sources Say, Reuters (Apr. 29, 2025), https://www.reuters.com/world/china/trump-officials-eye-changes-bidens-ai-chip-export-rule-sources-say-2025-04-29.

[3] For example, the recent announcement of a “US-UAE AI Acceleration Partnership” framework and agreements to expand the UAE’s access to U.S. AI chips may reflect President Trump’s preference for bilateral agreements in the AI sector. See Gram Slattery, et. al., Trump Announces $200 Billion in Deals During UAE Visit, AI Agreement Signed, Reuters (May 15, 2025), https://www.reuters.com/world/middle-east/trump-heads-uae-it-hopes-advance-ai-ambitions-2025-05-15.

[4] BIS, Expansion of Validated End User Authorization: Data Center Validated End User Authorization, 89 Fed. Reg. 80080 (Oct. 2, 2024) (to be codified at 15 C.F.R. pt. 748), https://www.govinfo.gov/content/pkg/FR-2024-10-02/pdf/2024-22587.pdf.

[5] BIS, Commerce Department Updates List of Aircraft Exported to Russia in Apparent Violation of U.S. Export Controls (Mar. 30, 2022), https://www.bis.doc.gov/index.php/documents/about-bis/newsroom/press-releases/2942-2022-03-30-bis-list-of-aircraft-violating-the-ear-press-release-final/file.

[6] See also Supplement No. 3 to Part 732, Title 15 (providing sector non-specific red flags).

The following Gibson Dunn lawyers prepared this update: David Wolber, Christopher T. Timura, Matthew S. Axelrod, Dharak Bhavsar, Mason Gauch, and Zach Kosbie.

Gibson Dunn’s lawyers are available to assist in addressing any questions you may have regarding these issues. For additional information about how we may assist you, please contact the Gibson Dunn lawyer with whom you usually work, the authors, or the following leaders and members of the firm’s Sanctions & Export Enforcement, International Trade Advisory & Enforcement, and National Security practice groups:

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)
Amanda H. Neely – Washington, D.C. (+1 202.777.9566, aneely@gibsondunn.com)
Samantha Sewall – Washington, D.C. (+1 202.887.3509, ssewall@gibsondunn.com)
Michelle A. Weinbaum – Washington, D.C. (+1 202.955.8274, mweinbaum@gibsondunn.com)
Roxana Akbari – Orange County (+1 949.451.3850, rakbari@gibsondunn.com)
Karsten Ball – Washington, D.C. (+1 202.777.9341, kball@gibsondunn.com)
Hugh N. Danilack – Washington, D.C. (+1 202.777.9536, hdanilack@gibsondunn.com)
Mason Gauch – Houston (+1 346.718.6723, mgauch@gibsondunn.com)
Chris R. Mullen – Washington, D.C. (+1 202.955.8250, cmullen@gibsondunn.com)
Sarah L. Pongrace – New York (+1 212.351.3972, spongrace@gibsondunn.com)
Anna Searcey – Washington, D.C. (+1 202.887.3655, asearcey@gibsondunn.com)
Audi K. Syarief – Washington, D.C. (+1 202.955.8266, asyarief@gibsondunn.com)
Scott R. Toussaint – Washington, D.C. (+1 202.887.3588, stoussaint@gibsondunn.com)
Lindsay Bernsen Wardlaw – Washington, D.C. (+1 202.777.9475, lwardlaw@gibsondunn.com)
Shuo (Josh) Zhang – Washington, D.C. (+1 202.955.8270, szhang@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)
Dharak Bhavsar – Hong Kong (+852 2214 3755, dbhavsar@gibsondunn.com)
Arnold Pun – Hong Kong (+852 2214 3838, apun@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)
Irene Polieri – London (+44 20 7071 4199, ipolieri@gibsondunn.com)
Benno Schwarz – Munich (+49 89 189 33 110, bschwarz@gibsondunn.com)
Nikita Malevanny – Munich (+49 89 189 33 224, nmalevanny@gibsondunn.com)
Melina Kronester – Munich (+49 89 189 33 225, mkronester@gibsondunn.com)
Vanessa Ludwig – Frankfurt (+49 69 247 411 531, vludwig@gibsondunn.com)

We are pleased to provide you with Gibson Dunn’s ESG update covering the following key developments during April 2025. Please click on the links below for further details.

I. GLOBAL

International Maritime Organization (IMO) announces deal to decarbonize global shipping

On April 11, 2025, the IMO, the United Nations agency responsible for developing global shipping standards, announced its approval of draft regulations setting a global fuel standard to reduce annual greenhouse gas (GHG) emissions and establishing a pricing system for above-threshold emitters. Sixty-three nations approved the framework, including EU member states, China, and the United Kingdom, while 16 nations opposed, 25 nations abstained, and the United States leaving negotiations prior to the vote. The United States subsequently warned of “reciprocal measures” to compensate for fees charged to U.S. ships and “other economic harm” resulting from the new regulations. The regulations are expected to be formally adopted in October 2025 and effective in 2027 and will apply to large ocean-going ships over 5,000 gross tonnage.

Institutional Shareholders Services (ISS) launches new sustainability bond rating

On April 3, 2025, ISS ESG launched a new sustainability bond rating to provide investors with a sustainability impact and risk assessment for bonds issued labeled as green, social, sustainability, or sustainability-linked. These new ratings will assess bonds in three categories: how they align with international standards and guidelines, an environmental and social impact assessment, and the issuer’s sustainable strategy.

Other highlights:

On April 28, 2025, the International Sustainability Standards Board (ISSB) published draft amendments to the IFRS S2 Climate-related Disclosures standard that would ease certain requirements related to the reporting of GHG emissions.
The Net Zero Banking Alliance provided new guidance to align all sector financing with a goal to limit global warming to well below 2°C above pre-industrial levels, up from the prior target of 1.5°C.
T. Rowe Price and T. Rowe Price Investment Management have both issued updated proxy voting guidelines for 2025 that soften their approach to director votes, disclosure of GHG emissions, dual-class stock, and shareholder proposals on political spending and lobbying.

II. UNITED KINGDOM

Prudential Regulatory Authority (PRA) publishes consultation on managing climate-related risk

On April 30, 2025, the PRA issued Consultation Paper CP10/25, proposing to replace Supervisory Statement 3/19 with an updated and more granular statement on managing climate-related financial risk. The draft statement would apply to UK banks, building societies, PRA-designated investment firms and insurers (but not branches). The draft statement sets outcome-focused expectations structured around five themes: (i) governance – boards will be expected to set firm-wide risk appetite for each material climate exposure, translating it into quantitative limits for every business line, and periodically reassessing it in light of evolving regulatory, technological, or scientific standards; (ii) risk management – firms should conduct periodic materiality assessments, develop quantitative metrics and integrate climate considerations into operational resilience frameworks; (iii) climate scenario analysis – models must cover all material risks, inform capital planning and be refreshed; (iv) data – firms should have strategic plans to close data gaps, deploy conservative proxies where needed and oversee external providers while building in-house capability; and (v) disclosure – alignment will shift from Taskforce for Climate-related Financial Disclosures to forthcoming UK Sustainability Reporting Standards. The expectations remain guidance, not rules, but supervisors will test implementation six months after finalisation. The consultation closes on July 30, 2025.

UK Government launches consultation into voluntary carbon and nature markets (VCNMs)

On April 17, 2025, the Department for Energy Security and Net Zero published a consultation paper seeking views on the implementation of its principles to ensure integrity within VCNMs, launched at COP 29 in November 2024. VCNMs allow entities and/or individuals to acquire credits that represent avoided or removed greenhouse gas emissions or measurable environmental improvement. The acquiring entity/individual can then utilize the credits to offset unavoidable emissions and/or reach its environmental targets. The six principles announced at COP 29 include: (i) the use of credits in addition to ambitious actions within value chains; (ii) the use of high integrity credits; (iii) the disclosure of credits in ESG-related reporting; (iv) the role of credits in the transition plan; (v) the accuracy of green claims; and (vi) domestic and international co-operation. The consultation closes on July 10, 2025.

UK Advertising Standards Authority (ASA) publishes guidance on biodegradable and compostable products

On April 30, 2025, the ASA issued guidance on products that claim to be biodegradable and/or compostable to reflect relevant changes introduced by the Digital Markets, Competition and Consumers Act 2024 and included the following: (i) ensure claims are genuine; (ii) do not exaggerate the biodegradable content of the product; (iii) do not omit information material to a product’s ability to biodegrade or compost; and (iv) ensure absolute environmental claims apply to the product’s full lifecycle. In the event of an investigation, marketers should ensure that they hold sufficient evidence to substantiate claims about the extent to which their products are biodegradable and/or compostable.

Other highlights:

On April 24, 2025, His Majesty’s Revenue and Customs published the draft primary legislation for the carbon border adjustment mechanism for technical consultation.
On April 2, 2025, the Financial Conduct Authority shared feedback it received on its discussion paper on sustainability-related governance, incentives, and competence for regulated firms (DP23/1), confirming that it is not currently considering introducing new rules on the themes discussed in the discussion paper.
On April 11, 2025, the Lending Standards Board (LSB) announced its forthcoming Access to Financial Services for Ethnic Minority-led Businesses Code, committing participating firms to reduce barriers, enhance cultural understanding, apply evidence-based improvements, and share best practice, while the LSB monitors and reports progress.
On April 16, 2025, the International Association of Insurance Supervisors issued its final application paper on the supervision of climate-related risk, explaining how existing Insurance Core Principles should be applied to ensure insurers and supervisors adequately address the mounting consumer and commercial impacts of climate-driven events.

III. EUROPE

Discussions about Omnibus Simplifications in substance ongoing

On April 25, 2025, the rapporteur for the EU’s Omnibus Simplification Package in the European Parliament, Swedish MEP Jörgen Warborn, outlined his initial suggestions for amendments to the Corporate Sustainability Reporting Directive (CSRD) and Corporate Sustainability Due Diligence Directive (CSDDD) during discussions in the European Parliament. Among other things, Warborn proposes to further raise the employee threshold for CSRD reporting requirements uniformly above the currently proposed 1,000 employees and backed the Commission’s proposal to remove the CSDDD’s civil liability (we have previously reported on the Commission’s proposal here). The proposal has sparked strong political divisions in the European Parliament, with some factions pushing to eliminate or delay reporting and due diligence obligations, while others seek to preserve the core objectives of the regulations. The rapporteur is expected to present his final proposal in early June of 2025.

In parallel, the EU’s Sustainability Reporting Board (SRB) has approved a work plan to simplify the European Sustainability Reporting Standards (ESRS). Among the currently envisaged revisions are the removal of less relevant data points for general purpose sustainability reporting (such as detailed biodiversity transition plans and certain non-employee-related disclosures), the downgrading of currently mandatory data points to voluntary reporting and of voluntary data points to guidance, prioritizing quantitative over narrative disclosures, and further alignment with global standards like ISSB. According to the work plan, the process will be continued with a shortened public consultation period this summer and is set to be finalized by October 31, 2025.

Updates and proposed amendments on European Deforestation Regulation (EUDR) published

On April 15, 2025, the European Commission published updates regarding the EUDR, including proposed amendments to Annex I of the EUDR as well as updated guidance and FAQs. The proposed amendments to Annex I include clarifications on in-scope commodities, such as cattle, cocoa, coffee, oil palm, rubber, soya, and wood. According to the proposal, the following products shall be excluded: products made from bamboo, rattan and waste materials. The updated guidelines and FAQs clarify certain topics, including regarding re-imported products, local law requirements in Art. 2 (40), trading and packaging of pallets, and qualifications as trader or operator.

CSRD / Omnibus “Stop-the-clock” directive transposition update

The focus currently is on postponing entry into force of the CSRD reporting requirements by transposing the EU’s Stop-the-clock Directive in member states that already completed the transposition process. While France already published its national “Stop-the-clock” law in the Journal officiel on May 2, 2025, Lithuania has published a proposal for a respective bill to delay reporting by two years. Bulgaria passed a law to delay implementation by one year, which came into effect two days after the Omnibus Simplification Package was officially disclosed.

An overview of the current transposition status of CSRD into national laws and the “Stop-the-clock” process under the Omnibus Simplification Package can be found here.

Other highlights:

The European Securities and Market Authority published a consultation paper on its new Regulatory Technical Standards under the EU’S ESG Rating Regulation.

IV. NORTH AMERICA

Business Roundtable (BRT) and U.S. Congress address proxy process reforms

On April 23, 2025, BRT published a report recommending reforms to the proxy process. The report argues that the lack of proxy process regulation has “allowed a small but vocal group of activist investors to exploit the proxy system for political purposes,” and includes recommendations aimed at depoliticizing the proxy process and refocusing it “on supporting shareholder interests and long-term value creation.” The report includes recommendations to (i) reform the Rule 14a-8 shareholder proposal process and (ii) create accountability for proxy advisory firms.

With regard to the Rule 14a-8 shareholder proposal process, BRT recommends Congress enact legislation that would preclude the inclusion of environmental, social and political shareholder proposals in companies’ proxy statements. If legislation is not enacted, BRT recommends the Securities and Exchange Commission (SEC) amend Rule 14a-8 to exclude environmental, social and political shareholder proposals, (ii) raise submission and resubmission thresholds, (iii) prevent Rule 14a-8 workarounds, including the use of voluntary exempt solicitation filings and universal proxy rules, (iv) restrict co-filers and representatives from being directly or indirectly involved in more than one proposal per company, and (v) amend the SEC review process to include an appeals process for no-action letter decisions and changing the timeline for no-action request responses.

Regarding proxy advisory firms, BRT recommends that Congress and the SEC (i) confirm the SEC’s authority to regulate proxy advisory firms and deem the activities of proxy advisory firms “solicitations” subject to SEC oversight, (ii) prohibit robovoting, (iii) require an economic analysis for proxy advisor recommendations that are contrary to a majority-independent board’s decision, (iv) prohibit conflicts of interests, and (v) limit the ability of proxy advisory firms to impose subjective preferences, including related to executive compensation decisions and prior shareholder support levels.

On May 6, 2025, the Interfaith Center on Corporate Responsibility (ICCR) and the Shareholder Rights Group (SRG) sent a letter to BRT, copying the Chairman of the SEC. The letter offered ICCR’s and SRG’s view that BRT’s recommendations would “insulate corporate management and boards, exposing companies and investors to increased risk during a highly volatile economic moment” and requested a dialogue with BRT to discuss the proxy process.

On April 29, 2025, the House Subcommittee on Capital Markets held a hearing to “examine the role and influence of proxy advisory firms . . . in shaping corporate governance and shareholder voting outcomes.” The memorandum related to the hearing included draft legislation proposing, among other things, required proxy advisory firm registration, prohibitions on robovoting for certain votes, and a requirement that the SEC study certain issues related to the shareholder proposal and proxy process.

Canadian regulator halts mandatory climate reporting requirements

On April 23, 2025, the Canadian Securities Administrators (CSA) announced a pause of its work developing new mandatory climate-related disclosure requirements and diversity-related disclosure rule amendments. The CSA explained the pauses were driven by the desire to support Canadian markets as they adapt to recent U.S. and global developments and resulting uncertainty and competitiveness concerns. The CSA emphasized, though, that Canadian securities laws already require disclosure of any material climate-related risks under existing regulations and that companies are encouraged to voluntarily report under the Canadian Sustainability Standards Board standards that were issued in December 2024.

Eighth Circuit issues abeyance in SEC climate litigation

After the SEC withdrew from its defense of the climate disclosure rules, 18 states filed a motion to hold the case in abeyance until the SEC takes action to amend or rescind the rules, as discussed in our March 2025 alert. On April 24, 2025, the Eighth Circuit granted the states’ motion and directed the SEC to file a report within 90 days advising whether the SEC intends to review or reconsider the rules.

President Trump issues executive order focused on state laws and regulations addressing climate and ESG

On April 8, 2025, President Donald Trump issued an executive order, “Protecting American Energy from State Overreach,” directing the U.S. Attorney General (AG) to investigate and identify all state and local laws and regulations that burden the “identification, development, siting, production, or use of domestic energy resources” that may be unconstitutional or preempted by federal law and to take “all appropriate action” to stop the enforcement of such laws. Under the order, the AG is required to prioritize laws that address climate change, environmental justice, carbon or GHG emissions, carbon penalties or taxes, and ESG initiatives. Within 60 days of the order, the AG is required to submit a report to the President detailing the actions taken and recommending additional presidential or legislative actions as necessary. The executive order highlights laws in New York and Vermont seeking retroactive payments for GHG emissions and California’s cap and trade framework as examples of laws that may be beyond states’ constitutional or statutory authorities.

Class-action plaintiffs attack sustainability claims by paper-goods companies

Two class-action lawsuits were filed recently in federal court against Amazon and Proctor & Gamble, alleging “greenwashing” claims based on each company’s statements about their paper products such as toilet paper. See Ramos et al. v. Amazon.com, Inc. (W.D. Wash. Case No. 2:25-cv-00465); Melissa Lowry, et al. v. Proctor & Gamble Company (W.D. Wash. 2:25-cv-00108). The complaints allege that, notwithstanding these companies’ advertised partnerships with groups like Forest Stewardship Council, production of their products leads to deforestation, and thus violates the FTC’s Green Guides and various state consumer-protection laws.

Both cases remain in their early stages. But they represent a new front in the ongoing trend of false-advertising litigation based on sustainability advertising claims, in which class action plaintiffs have already targeted multiple companies based on sustainability claims relating to plastics, emissions reductions, and supply-chain initiatives.

Other highlights:

On April 21, 2025, the Chamber of Commerce sent a letter asking the Trump Administration to urge the EU to exempt U.S. companies from the Corporate Sustainability Due Diligence Directive, which the letter asserts is overly prescriptive and in conflict with U.S. federal and state law.
As discussed in our recent client alert, on April 21, 2025, Paul Atkins was sworn into office as the 34th Chairman of the SEC.
On April 11, 2025, the SEC approved the launch of the Green Impact Exchange (GIX), a sustainability-focused stock market in the United States.
On April 4, 2025, the U.S. Department of Justice (DOJ) announced that it had terminated a settlement between the DOJ, the U.S. Department of Health and Human Services, and the Alabama Department of Public Health regarding sanitation risks in an Alabama county arising from inadequate water infrastructure, citing the termination as “another step . . . to eradicate illegal DEI preferences and environmental justice across the government and in the private sector.”

In case you missed it…

The Gibson Dunn DEI Task Force has published its updates for April summarizing the latest key developments, media coverage, case updates, and legislation related to diversity, equity, and inclusion.

A collection of our analyses of the legal and industry impacts from the presidential transition is available here.

V. APAC

South Korea Financial Services Commission (FSC) delays ESG mandatory reporting

On April 23, 2025, the FSC announced after the fifth meeting of the ESG Finance Promotion Task Force that its original plan to begin disclosures in 2025 for large companies listed on the Korea Composite Stock Price Index will be postponed to post-2026, with possible further delays. The FSC explained that the delay to the ESG disclosure roadmap is in response to the evolving global regulatory landscape and increasing pressure for harmonization and highlighted recent moves by global regulators to ease ESG requirements. The Task Force also reviewed other key aspects of the reporting framework, including disclosures on consolidated financial statements, excluding non-material subsidiaries and a proposal to defer Scope 3 emissions reporting due to its complexity and costs involved in tracking the emissions.

Securities and Exchange Board of India (SEBI) issues new guidelines for ESG ratings

On April 22, 2025, the SEBI issued new guidelines that provided flexibility in ESG rating withdrawals, streamlined disclosure requirements, and offered relief to newer ESG ratings providers. Under these new guidelines, ESG ratings providers may withdraw a rating on a company if their business responsibility or sustainability reports are not available. Additionally, a ratings provider may also withdraw the rating if there are no subscribers for the rating. These new guidelines follow a statement made earlier this month by SEBI’s new chief, Tuhin Kanta Pandey, arguing that the ESG disclosures were too onerous.

China issues its first sovereign green bond

On April 2, 2025, China’s Ministry of Finance (MOF) issued a sovereign green bond on the London Stock Exchange, making this China’s first green bond and the first bond to be listed on an international market. The MOF originally announced its intention to enter the green bond market in January 2025. The bond has raised $824 million USD ($6 billion RMB). Proceeds from the bonds will be used to support projects and initiatives aimed at achieving environmental objectives. These include climate change mitigation, adapting to utilizing natural resources, and biodiversity conservation.

Other highlights:

The Taipei Exchange will launch a green securities certification system in 2026 to encourage enterprises to engage in green and sustainable economic activities.
The Philippine Department of Finance announced its intention to expand the role of the Inter-Agency Technical Working Group on Sustainable Finance.

The following Gibson Dunn lawyers prepared this update: Lauren Assaf-Holmes, Carla Baum, Susy Bullock, Mitasha Chandok, Martin Coombes, Mellissa Duru, Sam Fernandez*, Ferdinand Fromholzer, Saad Khan*, Michelle Kirschner, Julia Lapitskaya, Vanessa Ludwig, Babette Milz, Johannes Reul, Annie Saunders, and Meghan Sherley.

Gibson Dunn lawyers are available to assist in addressing any questions you may have regarding these developments. Please contact the Gibson Dunn lawyer with whom you usually work, the authors, or any leader or member of the firm’s ESG: Risk, Litigation, and Reporting practice group:

ESG: Risk, Litigation, and Reporting Leaders and Members:
Susy Bullock – London (+44 20 7071 4283, sbullock@gibsondunn.com)
Perlette M. Jura – Los Angeles (+1 213.229.7121, pjura@gibsondunn.com)
Ronald Kirk – Dallas (+1 214.698.3295, rkirk@gibsondunn.com)
Julia Lapitskaya – New York (+1 212.351.2354, jlapitskaya@gibsondunn.com)
Michael K. Murphy – Washington, D.C. (+1 202.955.8238, mmurphy@gibsondunn.com)
Robert Spano – London/Paris (+33 1 56 43 13 00, rspano@gibsondunn.com)

*Sam Fernandez and Saad Khan are trainee solicitors in London and not admitted to practice law.

Gibson Dunn is monitoring regulatory developments and executive orders closely. Our attorneys are available to assist clients as they navigate the challenges and opportunities posed by the current, evolving legal landscape.

Introduction

On May 12, 2025, the Department of Justice (DOJ) Criminal Division announced it was “turning a new page” in its approach to white collar and corporate enforcement and issued four foundational guidance documents: a memorandum outlining the new White-Collar Enforcement Plan (“Enforcement Plan”), an update to the Criminal Division Corporate Enforcement and Voluntary Self-Disclosure Policy (“Corporate Enforcement Policy”), an update to the Department of Justice Corporate Whistleblower Awards Pilot program, and an updated memorandum describing the process for implementing monitorships and selecting monitors (collectively, the “May 12, 2025 Guidance Documents”).

Although the Criminal Division is but one litigating component in the larger DOJ and its guidance does not bind prosecutors outside it, it is a bellwether for DOJ-wide initiatives, particularly in white collar enforcement, because of its size, role in administering various criminal statutes, and proximity to DOJ leadership. Below we survey the most significant developments outlined in the Criminal Division’s new guidance, beginning with the key takeaways and continuing with developments under each of the three principles of criminal enforcement—”focus, fairness, and efficiency”—declared by the umbrella Enforcement Plan memorandum.[1]

The May 12, 2025 Guidance Documents were released days after President Trump signed an Executive Order aimed at combatting “Overcriminalization in Federal Regulations.” Analysis of that Executive Order can be found here.

Key Takeaways

These policies have immediate implications for the risk profile of certain conduct and the possibility of resolution with the Criminal Division, and potentially other components of the DOJ. Some key takeaways are:

In an unusual but helpful move, the Criminal Division has now set out a comprehensive strategy for criminal enforcement of white collar cases, providing a roadmap of its priorities with an “America First” and business-friendly emphasis. The Enforcement Plan also explains that the Criminal Division will continue to combat a broad range of white collar crimes to advance the Trump Administration’s law enforcement priorities, some of which have traditionally not been emphasized.
Like other guidance documents published by government agencies during the Trump Administration, the Enforcement Plan makes clear that overly aggressive government action can “hinder[] innovation.” The Enforcement Plan explicitly instructs prosecutors to consider the impact of their investigations on businesses, rather than simply deterring violations of law. The Enforcement Plan recognizes that the vast majority of American companies act legitimately, and that “it is critical to American prosperity to promote policies that acknowledge law-abiding companies and companies that are willing to learn from their mistakes.”
The Enforcement Plan begins by emphasizing a focus on the harms to America posed by “dishonest actors [that] exploit government programs” and “[s]chemes that defraud . . . investors and consumers, especially the most vulnerable.”
The Enforcement Plan also indicates that national security offenses will continue to be a priority of the Criminal Division, supplementing the work of the National Security Division.
The Criminal Division will continue to prosecute offenses related to foreign corruption, with an emphasis on bribery and money laundering offenses that harm U.S. national security, impact American businesses, and enrich foreign officials.
The Criminal Division likewise will focus on trade enforcement, including customs fraud and tariff evasion, as well as related money laundering.
In an exercise of new authority, the Criminal Division will prioritize white collar enforcement of the Federal Food, Drug, and Cosmetic Act.
The Department of Justice will be particularly focused on offenses related to China, cartels, transnational criminal organizations, and immigration violations.
The emphasis on the need for expeditious prosecution means that corporations subject to Criminal Division scrutiny can push for efficiency in investigations and faster resolutions, to ensure that investigations do not linger.
Corporations considering whether to self-disclose will have a clearer understanding of the potential benefits of making a disclosure. Those benefits include declination and higher discounts to any penalties. Prosecutors retain some discretion to conclude there are aggravating factors present that will mean a declination is not assured.

I. “Focus”

Enforcement Priorities

The Enforcement Plan states that the Criminal Division is to be “laser-focused on the most urgent criminal threats to the country[.]” Consistent with previous policy announcements by the Trump Administration, the Enforcement Plan lists ten high-impact areas that the Criminal Division will prioritize investigating and prosecuting to combat those harms.[2] Similarly, the Whistleblower Awards Pilot Program, which was first announced in August 2024, has been expanded to cover eligible tips in new subject areas that mirror the Criminal Division’s enforcement priorities, including cartels and transnational criminal organizations, violations of the immigration laws, material support of terrorism, sanctions evasion, and fraud involving trade, tariffs, customs and procurement.

Healthcare, Procurement, Investor, and Consumer Fraud

To address “[r]ampant health care fraud and program and procurement fraud,” the Enforcement Plan states that the “Criminal Division will lead the fight in holding accountable those who exploit these programs and harm the public fisc for personal gain.” The focus on health care and procurement fraud aligns with recent Executive Orders of President Trump on these topics.

Foreign Bribery Enforcement

Notwithstanding President Trump’s February 10, 2025 Executive Order pausing enforcement of the Foreign Corrupt Practices Act,[3] the May 12, 2025 Guidance Documents make clear that the Criminal Division will continue to prosecute cases involving foreign bribery. The Enforcement Plan specifically asserts that in doing so the Criminal Division will take a targeted approach to protect American interests, prioritizing offenses that include “[b]ribery and associated money laundering” that affect U.S. national interests, undermine national security, harm U.S. businesses, and enrich corrupt foreign officials.

National Security Offenses

In a memorandum issued on her first day in office, Attorney General Pam Bondi suspended certain requirements for approval by the National Security Division.[4] The May 12, 2025 Guidance Documents prioritize criminal enforcement of national security offenses, including terrorism and sanctions evasion. These documents suggest these offenses will be charged through the Criminal Division or U.S. Attorney’s Offices more often, supplementing the work of the National Security Division.

Tariffs and Customs Enforcement

The May 12, 2025 Guidance Documents make clear that the Criminal Division will prioritize violations of tariff and customs laws. Investigations of such violations are listed as priorities in the Enforcement Plan, and the updated whistleblower program adds such violations as subject areas for whistleblower tips. This adds to other recent indications by the Trump Administration that tariffs enforcement will, unsurprisingly, be heavily emphasized, as Gibson Dunn previously covered here and here.

Bank Secrecy Act Enforcement

Under the principles of the May 12, 2025 Guidance Documents, the Criminal Division will continue to prosecute cases involving violations of the Bank Secrecy Act, with a particular focus on offenses that implicate U.S. sanctions. The Enforcement Plan decries “exploitation of our financial system” that can “enable underlying criminal conduct,” and warns that “[f]inancial institutions, shadow bankers, and other intermediaries aid U.S. adversaries by processing transactions that evade sanctions.” The updated whistleblower program maintains the Department’s focus on violations by financial institutions or their employees for schemes involving money laundering and violations of the Bank Secrecy Act.

Fraud Cases with Individual Victim Losses

In line with the Criminal Division’s focus on vindicating the rights of victims impacted by white collar and corporate crime, the Enforcement Plan also tasks the Criminal Division with seeking forfeiture to compensate victims. The Criminal Division is also tasked with “prioritize[ing] schemes involving senior-level personnel or other culpable actors, demonstrable loss, and efforts to obstruct justice.” The Enforcement Plan focuses on certain crimes that defraud victims, including Ponzi schemes, investment fraud, elder fraud, market manipulation, and “fraud that threatens the health and safety of consumers.”

Federal Food, Drug, and Cosmetic Act Enforcement

As part of a broader reorganization of the Department—and explained in this Gibson Dunn client alert—it recently was announced that the criminal authorities (and most prosecutors) of Civil Division’s Consumer Protection Branch would move to the Criminal Division to become a new consumer protection unit of the Fraud Section. Through that move, the Criminal Division has gained authority to lead criminal enforcement of the Federal Food, Drug, and Cosmetic Act, and the Enforcement Plan makes clear that it intends to exercise that authority and to pursue corporate violations of the Controlled Substances Act.

Focus on China

The Criminal Division will renew its focus on criminal conduct related to China. The Enforcement Plan makes multiple references to criminal conduct involving Chinese-connected companies and entities, including variable interest entities and sophisticated money laundering operations connected to China.

II. “Fairness”

Additional Paths to Avoid or Mitigate Corporate Criminal Enforcement

The Enforcement Plan creates additional opportunities for white collar defense attorneys to advocate for non-criminal resolutions for their corporate clients. The Enforcement Plan states that, in many cases, prosecution of individuals will suffice to “vindicate U.S. interests,” leaving civil or administrative remedies to address misconduct at the corporate level. The Enforcement Plan reiterates that prosecutors should consider certain factors identified in the Justice Manual when determining whether to charge corporations, including whether the company self-reported, the company’s willingness to cooperate with the government, and the company’s actions to remediate the misconduct.

The Enforcement Plan also directs the Fraud and Money Laundering and Asset Recovery Sections to re-review all existing agreements between the Criminal Division and companies and determine whether to terminate those agreements early. Factors that could lead to early termination include the duration of the post-resolution period, a change in a company’s risk profile, the state of the company’s compliance program, and whether the company self-reported the conduct. According to the Enforcement Plan, the Criminal Division has already terminated some agreements early as a result of the new policy.

For future resolutions, the Enforcement Plan suggests that the duration of resolutions will be shorter than before, directing that prosecutors “must impose a term that is appropriate and necessary in light of, among other things, the severity of the misconduct, the company’s degree of cooperation and remediation, and the effectiveness of the company’s compliance program at the time of resolution.” The Enforcement Plan states that these terms are usually not to exceed three years and should be regularly reviewed for the possibility of early termination.

Recognition of Compliance and Law-Abiding Companies

In his May 12 speech at the annual Anti-Money Laundering and Financial Crimes Conference held by the Securities Industry and Financial Markets Association introducing the new enforcement policies and priorities, Matthew Galeotti, the Head of the Criminal Division, stated that the Criminal Division recognizes “that law-abiding companies are key to a prosperous America [and] [e]conomic security is national security.” In his speech, Galeotti further stated: “[m]ost corporations and financial institutions want to play by the rules and provide value for their shareholders and their customers. And that is what we want them to remain focused on. Excessive enforcement and unfocused corporate investigations stymie innovation, limits prosperity, and reduces efficiency.” The Enforcement Plan similarly recognizes that “it is critical to American prosperity to promote policies that acknowledge law-abiding companies and companies that are willing to learn from their mistakes.”

These messages make clear the importance of corporate compliance and appropriate remediation. In line with this message, the Corporate Enforcement Policy has been revised “[t]o ensure fairness and individualized assessments,” with a focus on benefits for companies that self-disclose and cooperate. Under the new Corporate Enforcement Policy, the Criminal Division is to make a “case-by-case analysis about the appropriate disposition” and consider all forms of corporate criminal resolutions: non-prosecution agreements (NPAs), deferred prosecution agreements, and guilty pleas. In his May 12 remarks, Mr. Galeotti stated that under the new policy, “[s]elf-disclosure is key to receiving the most generous benefits the Criminal Division can offer.” The Corporate Enforcement Policy also preserves prior compliance components in the definition of appropriate remediation, again signaling the importance of compliance.

More Certain Paths to Specific Results

Mr. Galeotti also stated that the new Corporate Enforcement Policy was simplified to allow companies to better anticipate outcomes when self-reporting. Under the updated Corporate Enforcement Policy, the Criminal Division will publicly decline to prosecute a company for criminal conduct when:

The company voluntarily self-disclosed the misconduct to the Criminal Division. These disclosures qualify so long as “the company had no preexisting obligation to disclose the misconduct to the Department of Justice.” This seems to allow for self-disclosures that were undertaken out of obligation to agencies other than DOJ.
The company fully cooperates with the Criminal Division’s investigation.
The company timely and appropriately remediated the conduct.
There are no aggravating circumstances (which are “the nature and seriousness of the offense, egregiousness or pervasiveness of the misconduct within the company, severity of harm caused by the misconduct, or criminal adjudication or resolution within the last five years based on similar misconduct by the entity engaged in the current misconduct.”). This definition suggests that only criminal resolutions by the same corporation for “similar misconduct” will be considered an aggravating factor, rather than any prior misconduct or by an affiliated entity.[5] Where there are aggravating circumstances, prosecutors can still recommend declination after weighing the severity of the circumstances.

In instances of “near miss self-disclosures” or where there are aggravating circumstances, the guidance requires the Criminal Division provide an NPA (absent egregious or multiple aggravating factors) for a term of less than 3 years without a monitorship, and a 75% reduction off of the low end of the U.S. Sentencing Guidelines fine range.

For resolutions in other cases, there is a presumption that any sentencing reduction will be taken from the low end of the Guidelines.

In addition to the updated language of the policy, the Criminal Division has also provided a flowchart illustrating enforcement “paths” in line with the policies summarized above.

III. “Efficiency”

Streamlined Investigations

In his remarks, Mr. Galeotti stated that businesses have been deterred from utilizing benefits of self-reporting misconduct to governmental authorities by the possibility of “lengthy drawn-out investigations that are ultimately detrimental to companies[.]” He argued that this deterrence of self-reporting diverts Department resources away from “tackling the most significant threats facing our country.” The Enforcement Plan instructs the Criminal Division to take all reasonable steps to minimize the length and collateral impact of their investigation and to ensure that “bad actors” are quickly brought to justice. While framed as a novel insight, many prior Administrations have included similar language in guidance documents; any meaningful change will depend on Criminal Division supervisors driving more efficient investigations.

Limited Use of Monitors

In addition to taking reasonable steps to minimize length and impact of investigations, the Enforcement Plan instructs the Criminal Division to utilize independent compliance monitors only when necessary and that use of those monitors should be narrowly tailored.

The Criminal Division also released a memorandum entitled “Memorandum on Selection of Monitors in Criminal Division Matters,” which requires prosecutors to consider four factors when weighing the possibility of imposing a monitorship:

Risk of recurrence of criminal conduct that significantly impact U.S. interests.
Availability and efficacy of other independent government oversight.
Efficacy of the compliance program and culture of compliance at the time of the resolution.
Maturity of the company’s controls and its ability to independently test and update its compliance program.

Even if a monitor is appropriate, the memorandum requires that prosecutors tailor the monitorship to be cost efficient and effective. The company’s counsel must present three to five monitor candidates for consideration, which is an increase from previous guidance. After a monitor is approved, the Criminal Division must ensure the costs are proportionate to the severity of the underlying conduct, the company’s profits, and the company’s size and risk profile. There will be a cap on hourly rates, and the monitor will be required to submit a budget for the entire monitorship at the time is submits its first work plan to the Criminal Division and company for review. The monitor will also attend at least two additional meetings a year with the company and the government to ensure alignment.

Conclusion

The May 12, 2025 Guidance Documents, taken together, indicate that the Criminal Division will continue to aggressively prosecute violations of law while rewarding compliant companies with non-criminal enforcement alternatives to resolve any misconduct. This development underscores the continued importance for companies to maintain effective compliance programs that address risks relating to government procurement, corruption, money laundering, national security and tariff offenses, sanctions evasion, and other priorities, to mitigate the corresponding liability that may arise under the criminal statutes. Companies therefore will be well served by reviewing their compliance programs and calibrating their compliance-related risk assessments to mitigate against changing risk and enforcement realities.

[1] Guidance documents like these are often issued by the Deputy Attorney General and thus are also applicable to other DOJ components like U.S. Attorney’s Offices. It remains to be seen how the May 12, 2025 Guidance Documents will, if at all, also govern those other DOJ components.

[2] The ten high-impact areas are:

“1. Waste, fraud, and abuse, including health care fraud and federal program and procurement fraud that harm the public fisc;

2. Trade and customs fraud, including tariff evasion;

3. Fraud perpetrated through [variable interest entities], including, but not limited to, offering fraud, “ramp and dumps,” elder fraud, securities fraud, and other market manipulation schemes;

4. Fraud that victimizes U.S. investors, individuals, and markets including, but not limited to, Ponzi schemes, investment fraud, elder fraud, servicemember fraud, and fraud that threatens the health and safety of consumers;

5. Conduct that threatens the country’s national security, including threats to the U.S. financial system by gatekeepers, such as financial institutions and their insiders that commit sanctions violations or enable transactions by Cartels, TCOs, hostile nation-states, and/or foreign terrorist organizations;

6. Material support by corporations to foreign terrorist organizations, including recently designated Cartels and TCOs;

7. Complex money laundering, including Chinese Money Laundering Organizations, and other organizations involved in laundering funds used in the manufacturing of illegal drugs;

8. Violations of the Controlled Substances Act and the Federal Food, Drug, and Cosmetic Act (FDCA), including the unlawful manufacture and distribution of chemicals and equipment used to create counterfeit pills laced with fentanyl and unlawful distribution of opioids by medical professionals and companies;

9. Bribery and associated money laundering that impact U.S. national interests, undermine U.S. national security, harm the competitiveness of U.S. businesses, and enrich foreign corrupt officials; and

10. As provided by the Digital Assets DAG Memorandum: crimes (1) involving digital assets that victimize investors and consumers; (2) that use digital assets in furtherance of other criminal conduct; and (3) willful violations that facilitate significant criminal activity. Cases impacting victims, involving cartels, TCOs, or terrorist groups, or facilitating drug money laundering or sanctions evasion shall receive highest priority.”

[3] Gibson Dunn’s analysis of that Executive Order can be found at https://www.gibsondunn.com/president-trump-pauses-new-fcpa-enforcement-initiates-enforcement-review-and-directs-preparation-of-new-guidance/.

[4] Gibson Dunn’s analysis of this and other memoranda issued by Attorney General Bondi can be found at https://www.gibsondunn.com/new-memoranda-from-attorney-general-bondi-topics-to-watch-in-corporate-enforcement/.

[5] DOJ policy under the Biden Administration directed prosecutors considering non-prosecution to give the “greatest significance” to “recent U.S. criminal resolutions, and to prior misconduct involving the same personnel or management.” This policy de-emphasized conduct addressed by criminal resolution more than ten years prior, or civil / regulatory resolutions finalized more than five years prior. However, conduct that fell outside of this timeframe could still be considered if it was part of a pattern of behavior indicative of deficient corporate “compliance culture or institutional safeguards.” See Memorandum from Deputy Attorney General Lisa O. Monaco, Further Revisions to Corporate Criminal Enforcement Policies Following Discussions with Corporate Crime Advisory Group (Sept. 15, 2022). See also Deputy Attorney General Lisa O. Monaco Delivers Remarks on Corporate Criminal Enforcement (Sept. 15, 2022), https://www.justice.gov/archives/opa/speech/deputy-attorney-general-lisa-o-monaco-delivers-remarks-corporate-criminal-enforcement.

Chart 1

The following Gibson Dunn lawyers prepared this update: F. Joseph Warin, Stephanie Brooker, Kendall Day, Winston Chan, Gus Eyler, Nick Hanna, Matt Axelrod, Jonathan Phillips, Patrick Stokes, Amy Feagles, John Partridge, Oleh Vretsona, Sam Raymond, Kate Goldberg, and Ashley Wilson*.

Gibson Dunn’s lawyers are available to assist in addressing any questions you may have regarding these issues. Please contact the Gibson Dunn lawyer with whom you usually work, the authors, or any leader or member of Gibson Dunn’s White Collar Defense and Investigations practice group:

Washington, D.C.
F. Joseph Warin (+1 202.887.3609, fwarin@gibsondunn.com)
Stephanie Brooker (+1 202.887.3502, sbrooker@gibsondunn.com)
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Courtney M. Brown (+1 202.955.8685, cmbrown@gibsondunn.com)
David P. Burns (+1 202.887.3786, dburns@gibsondunn.com)
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Michael S. Diamant (+1 202.887.3604, mdiamant@gibsondunn.com)
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Karthik Ashwin Thiagarajan (+65 6507 3636, kthiagarajan@gibsondunn.com)

Ashley Wilson, a recent law graduate in New York, is not admitted to practice law.

Gibson Dunn’s Workplace DEI Task Force aims to help our clients navigate the evolving legal and policy landscape following recent Executive Branch actions and the Supreme Court’s decision in SFFA v. Harvard. Prior issues of our DEI Task Force Update can be found in our DEI Resource Center. Should you have questions about developments in this space or about your own DEI programs, please do not hesitate to reach out to any member of our DEI Task Force or the authors of this Update (listed below).

Key Developments:

As we reported in our January 22 Client Alert, on January 21, 2025, President Trump issued Executive Order 14173, which, among other things, directed the Attorney General, “in consultation with the heads of relevant agencies,” to submit to the White House a report “containing recommendations for enforcing Federal civil-rights laws and taking other appropriate measures to encourage the private sector to end illegal discrimination and preferences, including DEI.” The report must contain proposed “strategic enforcement plan[s]” identifying the “most egregious and discriminatory DEI practitioners in each sector of concern.” To facilitate this report, each agency is instructed to identify “up to nine” large companies or non-profits for “potential civil compliance investigations,” as well as “[l]itigation that would be potentially appropriate for Federal lawsuits, intervention, or statements of interest.” May 21, 2025 marks 120 days since the White House issued EO 14173, and so we expect the Attorney General to submit her report next week. It is unclear whether any aspect of that report will be made public at that time. Stay tuned for further updates from the Gibson Dunn DEI Task Force.

On May 12, it was reported that the Equal Employment Opportunity Commission (“EEOC”) has launched an investigation into Harvard University’s hiring practices under Title VII. According to documents leaked to the Washington Free Beacon, Acting EEOC Chair Andrea Lucas filed a charge against the university on April 25. The charge accuses Harvard of discriminating against “white, Asian, male, or straight employees, applicants, and training program participants” in hiring, promotion, compensation, and career development programs. The charge also alleges that Harvard violated Title VII in relation to thirteen different fellowships and training programs by prioritizing applicants of color. The charge states that it is “based on publicly available information regarding Harvard, including, but not limited to, documents and information published on Harvard and its affiliates’ public webpages (including archived pages); public statements by Harvard and its leadership; and news reporting.”

On May 12, civil rights membership organization Americans for Equal Opportunity (“AEO”) sent a letter to the EEOC alleging discrimination by Sponsors for Educational Opportunity (“SEO”) and 44 law firms. AEO sent the letter on behalf of three AEO members who applied to SEO’s Law Fellowship program, which places incoming law students into paid summer internships at participating law firms. Although eligibility for the SEO Fellowship is not limited by demographic criteria, the letter alleges that the AEO members were rejected from the Fellowship program because they do not come from SEO’s “preferred racial or ethnic backgrounds.” The letter also asserts that the 44 named firms “participate in the SEO Fellowship to satisfy their target quotas of Black, Hispanic, and Native American candidates in proportions that the Sponsor Firms apparently cannot achieve through traditional, merit-based hiring practices.” AEO thus “requests that the EEOC initiate an investigation regarding the recruiting and hiring practices of SEO and its Sponsor Firms.”

On May 8, U.S. District Judge Loren L. AliKhan heard arguments on Susman Godfrey LLP’s motion for summary judgment, and the federal government’s motion to dismiss, in a lawsuit challenging President Trump’s April 9th Executive Order titled “Addressing Risks from Susman Godfrey.” The EO asserts that Susman Godfrey engages in hiring discrimination and that the firm “spearheads efforts to weaponize the American legal system and degrade the quality of American elections.” The EO directs agencies to suspend active security clearances held by Susman Godfrey attorneys and limit their access to federal buildings. During oral argument, Judge AliKhan asserted that the government lacked evidence that Susman Godfrey engaged in race or gender discrimination, pointing to language on the firm’s website stating that it does not discriminate based on race, ethnicity, or any other statutorily protected characteristics. Judge AliKhan indicated that she intends to rule on the pending motions soon.

On May 8, U.S. District Judge William G. Young asked the U.S. Department of Justice to provide him the Trump Administration’s definition of the term “diversity, equity and inclusion.” Judge Young presides over a lawsuit brought by a coalition of 16 states against the U.S. Department of Health and Human Services and certain agencies, which challenges the Administration’s directive requiring that research grant applications and other funding undergo review to determine whether they align with the Administration’s policy goals, including DEI goals. In a hearing regarding whether the states have jurisdiction to sue, Judge Young indicated that it was not clear to him how the Administration defines the term “DEI,” stating “This is healthcare . . . This is research to advance healthcare for all our citizens, so I don’t know what [DEI] means in this circumstance.”

On May 7, President Trump nominated Brittany Bull Panuccio to be a Commissioner on the EEOC. Panuccio, a current Assistant U.S. Attorney in West Palm Beach, Florida, would serve alongside current Commissioner Kalpana Kotagal and Commissioner and Acting Chair Andrea Lucas. Panuccio’s appointment would restore the EEOC’s three-member quorum, allowing the Commission to once again vote on policy and regulatory matters, issue guidance, and authorize certain lawsuits. The Commission has not had a quorum since January 2025.

On May 6, Chairman of the U.S. Federal Trade Commission Andrew Ferguson stated that the agency will investigate whether companies are colluding on DEI metrics, which he asserted could be a “potential antitrust problem.” Ferguson made the statement while appearing on Donald Trump Jr.’s podcast, “Triggered.” He characterized DEI metrics as “[o]ne of the forms of collusion that affects American workers” about which he is most concerned. He noted, “That’s a potential antitrust problem that the Commission is going to look at very strongly and take very seriously.” Ferguson also stated on May 6 that the FTC would examine corporate ESG initiatives, stating “We’re looking at this right now. It’s really important to us.”

Media Coverage and Commentary:

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

Law360, “Potential For DEI-Related Suits Vexes Employers, Report Says” (May 7): Patrick Hoff of Law360 reports on a recent survey indicating that, while employers are increasingly concerned about DEI-related litigation risks, few are significantly changing their programs. The survey, which captured the views of nearly 350 C-suite executives from a range of industries, found that 45% of employers are concerned about DEI-related litigation over the next year—up from about 20% in the previous two years—and that over 80% anticipate that the Trump administration’s anti-DEI stance will impact their businesses in the first year of the administration. At the same time, 45% of employers polled said that they are not planning to roll back DEI programs in response to the administration’s Executive Orders and policies, and only 7% state that they plan a full overhaul of DEI policies.
Washington Post, “‘DEI’ Vanishing from Corporate Filings, Mirroring Business World’s Retreat” (April 30): Eric Lau and Taylor Telford of The Washington Post report that mentions of DEI in companies’ SEC filings have fallen as firms respond to mounting scrutiny and legal threats from conservative activists. In 2024, the average S&P 500 company referenced DEI just four times in their Form 10-K filings, the fewest average mentions of DEI since 2020, and down from a peak of 12.5 in 2022. Lau and Telford quote Andrew Jones, a principal researcher at The Conference Board, as saying that “[t]he number one way that companies have responded to DEI scrutiny and backlash is adjusting language.” Jones noted that while approaches vary, many firms are “being more quiet and discreet, and dropping politically charged terminology.” For example, “inclusion” and “belonging” are now favored over “DEI,” “diversity,” and “equity,” with companies increasingly referencing terms such as “inclusive workplaces” and “diverse perspectives.”
Reuters, “Trump’s First 100 Days Target Diversity Policies, Civil Rights Protections” (April 30): Bianca Flowers and Disha Raychaudhuri of Reuters report on President Trump’s DEI-related initiatives during his first 100 days in office. The authors highlight, among other things, the Trump administration’s revocation of a longstanding executive order mandating equal employment opportunity, its cancellation of government contracts tied to DEI, and its revocation of federal funding for various projects meant to help women and minorities.
CNBC, “Corporate Sponsors are Backing Away from LGBTQ+ Pride Organizations” (April 27): Russell Leung of CNBC reports that U.S. corporations are backing away from sponsoring LGBTQ+ pride organizations and events, due to economic uncertainty, political pressure, and changing corporate priorities around DEI. According to Leung, both Seattle Pride and NYC Pride face $350,000 funding deficits, with San Francisco Pride and Minnesota’s Twin Cities Pride reporting $200,000 shortfalls. Other cities’ pride events face similarly tight budgets. Leung also reports that some LGBTQ+ groups are reevaluating their sponsorship relationships in light of their sponsors’ DEI policies. For example, Twin Cities Pride declined a $50,000 sponsorship offer from Target, citing Target’s recent changes to its supplier diversity commitments. Similarly, Cincinnati Pride rejected funding from previous partners after reviewing their nondiscrimination policies.
Simple Flying, “FAA To Update Airport Grant Requirements: Removing Environmental Protection & DEI Requirements” (April 25): Rytis Beresnevičius, writing for Simply Flying, reports that the Federal Aviation Administration (“FAA”) has issued notice that it may update its Airport Improvement Program (“AIP”) grant requirements to incorporate recent legislative provisions in the FAA Reauthorization Act of 2024 and certain DEI-related Executive Orders. Should the notice become final, airports “must agree to comply with certain assurances” to receive AIP grant funding for planning, development, and noise mitigation. Those assurances include rolling back DEI policies in line with recent Executive Orders and ceasing compliance with now-rescinded Executive Orders, such as those imposing affirmative action obligations on government contractors.
Wall Street Journal, “Paramount in Talks with FCC Over Diversity Policy Concessions for Merger” (April 24): Jessica Toonkel, Josh Dawsey, and Drew FitzGerald of the Wall Street Journal report that the Federal Communications Commission (“FCC”) may require changes to Paramount Global’s DEI policies as a precondition for approving Paramount’s merger with Skydance Media. The authors report that FCC Chairman Brendan Carr has “has urged telecom and media companies to limit their diversity, equity and inclusion policies as a precondition for the agency to consider mergers and acquisitions.”

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:

American Alliance for Equal Rights v. American Airlines, No. 25-125 (N.D. Tex. 2025): On February 11, 2025, the American Alliance for Equal Rights (“AAER”) sued American Airlines and Supplier.io, alleging that American Airlines’s suppler diversity program violates Section 1981. AAER alleges that eligibility for the supplier diversity program unlawfully depends on race, requiring that businesses “be at least 51% owned, operated and controlled by” minorities, women, veterans, service-disabled veterans, disabled individuals, or members of the LGBTQ community. AAER claims that it has members who are ready and able to apply to the program, but do not meet the diversity eligibility requirements.
- Latest update: On May 16, 2025, the parties filed a stipulation of dismissal after having reached the following agreement: (1) for the later of five years or so long as prohibited by applicable law, American Airlines agrees it not require businesses to be owned or operated by individuals of any particular race or ethnicity in connection with its supplier program or when awarding supplier contracts; (2) for four years after the entry of the stipulation, American Airlines agrees that it will add the following disclaimer to any supplier relationship website it maintains: “Consistent with federal law, American Airlines does not consider race or ethnicity in the award of contracts or in the selection of vendors or suppliers”; (3) Supplier.io agrees it will not require businesses to be owned or operated by individuals of any particular race or ethnicity to register or do business with Supplier.io unless otherwise required by applicable law; and (4) Supplier.io agrees it will add to its website a statement that makes it clear that its portal and platform are open to all registrants, regardless of size or demographic information and must remove statements that only “diverse” suppliers may register for its services.
American Alliance for Equal Rights v. Southwest Airlines Co., No. 24-cv-01209 (N.D. Tex. 2024): On May 20, 2024, AAER filed a complaint against Southwest Airlines, alleging that the company’s ¡Lánzate! Travel Award Program, which awards free flights to students who “identify direct or parental ties to a specific country” of Hispanic origin, unlawfully discriminates based on race. AAER seeks a declaratory judgment that the program violates Section 1981 and Title VI, a temporary restraining order barring Southwest from closing the next application period (set to open in March 2025), and a permanent injunction barring enforcement of the program’s ethnic eligibility criteria. On March 3, 2025, AAER moved for summary judgment. On April 9, Southwest, which no longer operates the challenged program, filed a Motion for Entry of Judgment of $0.01 in nominal damages for AAER.
- Latest update: On May 14, 2025, the court issued an order stating its intent to enter final judgment for AAER because Southwest has “unconditionally surrendered to the entry of judgment for complete relief” in AAER’s favor. The court stated it would not reach a decision on the merits of the case, as doing so would require the parties to continue to litigate, “potentially at great cost,” when Southwest has already agreed to judgment in AAER’s favor. The parties have 14 days to file an opposition.
Chicago Women in Trades v. President Donald J. Trump, et al., No. 1:25-cv-02005 (N.D. Ill. 2025): On February 26, 2025, Chicago Women in Trades (“CWIT”), a non-profit organization, sued President Trump, challenging EOs 14151 and 14173. CWIT claims that these EOs violate principles of separation of powers, the First and Fifth Amendments, and the Spending Clause of the U.S. Constitution. On April 14, 2025, the court preliminary enjoined enforcement of key provisions of the EOs, including a provision terminating CWIT’s Women in Apprenticeship and Nontraditional Occupations Act grant, which served as one of five federal sources of funding for the organization. On April 18, 2025, CWIT moved to modify the preliminary injunction to prevent termination of its four other sources of federal funding: (1) a Tradeswomen Building Infrastructure Initiative grant; (2) an Apprenticeship Building America grant; (3) a HUB Apprenticeship USA grant; and (4) an Intermediary Industry Contract. In its motion, CWIT asserted that the court erred by “declining to preliminarily enjoin termination of those grants” because “the [c]ourt’s logic enjoining termination of the [Women in Apprenticeship and Nontraditional Occupations Act] grant should also preclude termination of CWIT’s other grants.”
- Latest update: On May 7, 2025, the court denied the motion to modify the preliminary injunction, finding “CWIT has not shown a manifest error of law warranting modification of the preliminary injunction to encompass any of CWIT’s other sources of federal funding.” In its opinion, the court noted differences in how Congress funded the four other grants at issue and highlighted the different language used in the legislation creating these funding sources, which do not mandate the funding be used for gender equity-related purposes like the Women in Apprenticeship and Nontraditional Occupations Act grant.
Do No Harm v. Society of Military Orthopaedic Surgeons, No. 1:24-cv-03457 (D.D.C. 2024): On December 11, 2024, Do No Harm filed a complaint against the Society of Military Orthopaedic Surgeons, the U.S. Navy, and the Department of Defense challenging a jointly run scholarship program that allegedly provides funding to female students and students of racial backgrounds that are “underrepresented in orthopaedics.” According to Do No Harm, the program excludes white, male applicants and therefore violates Section 1981 and the equal protection component of the Fifth Amendment. On March 18, 2025, the parties filed a joint motion to stay the case and to permit the parties to file a joint status report by April 18, 2025. The parties reported that “they are discussing ways to resolve [the] case without further burdening the [c]ourt.” The parties stated that during the requested stay they “will meet and confer in good faith to explore possible amicable resolution of [the] case.” On March 26, 2025, in a minute order reflected on the case docket, the court granted in part and denied in part the parties’ joint motion to stay the case. The court granted the motion to stay “to the extent that it seeks to vacate all pending deadlines in [the] case” and denied the motion “in all other respects.” The court ordered that the parties shall appear before the court for a status conference on April 18, 2025.
- Latest update: On April 30, 2025, the parties filed a joint stipulation of dismissal. The Society of Military Orthopaedic Surgeons agreed to cancel the program, beginning with the fiscal year 2025 cohort, and removed reference to the program online. The Society also agreed that if the program were later reinstated, it would be equally open to all students. On May 1, 2025, the court dismissed the case with prejudice.
Landscape Consultants of Texas, Inc. et al. v. City of Houston, Texas et al., No. 4:23-cv-03516 (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, 2024, contending that the plaintiffs lack standing and that the programs satisfy the requirements of the Equal Protection Clause. On February 11, 2025, the court denied all motions for summary judgment in a single page order. On March 11, 2025, the court entered an order delaying setting a briefing schedule until after Houston votes on a new ordinance related to the program. On March 31, 2025, Houston notified the court that the City Council tabled consideration of the ordinance, which would adopt a relevant disparity study, for up to 30 days. On April 9, 2025, the plaintiffs responded that they are “prepared to move forward with trial” and that the delay deprived them of “their day in court.” The plaintiffs also contended that, even if Houston adopted the new ordinance, their constitutional and statutory claims would be unaffected.
- Latest update: On May 5, 2025, Houston submitted a notice to the court stating that the City Council discussed the ordinance at its April 30, 2025, meeting and unanimously voted to refer the ordinance back to the administration to permit business owners and stakeholders to comment. On May 8, Houston submitted a “final notice” to the court, stating that the City Council voted to, among other things, “amend[] various provisions of Chapter 15 of the Code of Ordinances, Houston Texas, relating to Minority, Women, and Small Business participation in City contracting; add[] Article XII establishing a Veteran-Owned Business Enterprise Program; [and] adopt[] City-Wide Goals for the City’s Minority, Women, and Small Business Enterprise Program.”
Landscape Consultants of Texas, Inc. v. Harris County, Texas et al., No. 4:25-cv-00479 (S.D. Tex.): On February 5, 2025, Landscape Consultants of Texas, Inc. sued Harris County, Texas and the Harris County Commissioners Court (“HCCC”), challenging Harris County’s Minority and Woman-Owned Business Enterprise (“MWBE”) Program. The plaintiff, a non-MWBE landscaping company, claims it “has been at a significant disadvantage when bidding on landscaping contracts” with the County, because a Harris County ordinance requires that the government grant a certain percentage of contracts to MWBEs. The plaintiff alleges that the MWBE Program is racially discriminatory in violation of Section 1981 and the Fourteenth Amendment because it treats companies bidding for public contracts differently based on the race of the company’s owners. On April 14, 2025, the HCCC moved to dismiss the plaintiff’s claims against it, contending that the court “lacks a separate legal existence” from Harris County and cannot “sue or be sued.”
- Latest update: On May 5, 2025, the plaintiff voluntarily dismissed its claims against the HCCC without prejudice.
National Association of Diversity Officers in Higher Educ., et al., v. Donald J. Trump, et al., No. 1:25-cv-00333-ABA (D. Md. 2025): On February 3, 2025, the National Association of Diversity Officers in Higher Education, the American Association of University Professors, the Restaurant Opportunities Centers United and the Mayor and City Council of Baltimore, Maryland brought suit against the Trump Administration challenging EOs 14151 and 14173. The plaintiffs contend that the executive orders exceed presidential authority, violate the separation of powers and the First Amendment, and are unconstitutionally vague. On February 13, the plaintiffs moved for a temporary restraining order and a preliminary injunction to prevent the Administration from enforcing the executive orders. On February 21, the Court granted in part the preliminary injunction. On March 14, the Fourth Circuit Court of Appeals stayed the injunction. On March 21, the plaintiffs filed a motion in the district court to vacate the injunction without prejudice, asserting that they “intend to seek additional relief based on developments that have occurred since the motion for preliminary injunction was filed on February 13, 2025.” The defendants opposed the motion on the ground that the district court lost jurisdiction when the defendants appealed the preliminary injunction order to the Fourth Circuit. The district court heard argument on the motion on April 10. On May 1, 2025, the district court denied the plaintiffs’ motion to vacate the preliminary injunction. Judge Abelson determined he had jurisdiction to rule on the motion under Federal Rule of Civil Procedure 59, which permits a party to move to amend a judgment. He then found that the plaintiffs failed to meet their burden to show that vacatur is appropriate. Specifically, he found that the plaintiffs failed to either demonstrate an intervening change in law, or to invoke an “error of law” or “manifest injustice.” Judge Abelson concluded that the “appropriate course” was to deny the motion and “allow the parties to brief the issues” on appeal.
- Latest update: On May 9, 2025, the plaintiffs filed a brief in the Fourth Circuit, asking the appellate court to either affirm the district court’s preliminary injunction order or, in the alternative, to vacate the preliminary injunction and remand for further proceedings. The plaintiffs contended that the district court did not abuse its discretion in granting a preliminary injunction, because it correctly determined that the EOs at issue violated the First and Fifth Amendments as they were impermissibly vague and would chill speech. The plaintiffs also argued that the district court correctly determined that they have standing to challenge the EOs. The plaintiffs argued in the alternative that the appellate court should vacate the preliminary injunction and remand the matter for further proceedings, at which time they would file an amended complaint with additional information that could potentially aid the court in its decision.

2. Employment discrimination and related claims:

Gerber v. Ohio Northern University, et al., No. 2023-cv-1107 (Ohio. Ct. Common Pleas Hardin Cnty. 2023): On June 30, 2023, a law professor sued his former employer, Ohio Northern University, for terminating his employment after an internal investigation determined that he bullied and harassed other faculty members. On January 23, 2024, the plaintiff, now represented by America First Legal, filed an amended complaint. The plaintiff claims that his firing was in retaliation for his vocal and public opposition to the university’s stated DEI principles and race-conscious hiring, which he believed were illegal. The plaintiff alleged that the investigation and his termination breached his employment contract, violated Ohio civil rights statutes, and constituted various torts, including defamation, false light, conversion, infliction of emotional distress, and wrongful termination in violation of public policy. On March 21, 2025, the parties entered a notice of agreed settlement. As part of the settlement, the parties agreed to reinstate the plaintiff to his professorship, whereby he will immediately tender a notice of retirement. The Ohio Northern University acknowledged that the plaintiff “provided outstanding teaching, scholarship, and service.” In exchange for these concessions, amongst others, the plaintiff agreed to release all claims against all defendants and will not pursue litigation in the future.
- Latest update: On May 5, 2025, the defendants moved to enforce the settlement order and settlement terms. Because the motion contained “confidential health information,” it was filed under seal. Information about the substance of the settlement agreement is not publicly available. In a combined filing, also under seal, on May 9, 2025, the plaintiff filed his response to the defendants’ motion to enforce settlement and his own motion to enforce settlement on May 9, 2025.
Dill v. International Business Machines, Corp., No. 1:24-cv-00852 (W.D. Mich. 2024): On August 20, 2024, America First Legal filed a discrimination suit against IBM on behalf of a former IBM employee, alleging violations of Title VII and Section 1981. The plaintiff claims that IBM placed him on a performance improvement plan as a “pretext to force him out of [IBM] due to [its] stated quotas related to sex and race.” The complaint cites to a leaked video in which IBM’s Chief Executive Officer and Board Chairman, Arvind Krishna, allegedly states that all executives must increase representation of underrepresented minorities on their teams by 1% each year to receive a “plus” on their bonuses. On March 26, 2025, the court denied a motion to dismiss, concluding that the plaintiff alleged sufficient facts to support a discrimination claim. On April 9, 2025, IBM answered the complaint, denying that the plaintiff consistently received high scores on the internal employee performance metric. IBM also denied having “executive compensation metrics that include a diversity modifier.” IBM raised 17 affirmative defenses, including (1) failure to state a claim, (2) failure to show the irreparable harm required for injunctive relief, (3) failure to show the plaintiff was treated less well or materially different from other similarly situated employees, and (4) failure to mitigate damages.
- Latest update: On April 30, 2025, IBM filed an amended answer to the complaint, denying the allegations of discrimination and raising 17 affirmative defenses including estoppel, unclean hands, waiver, and failure to mitigate damages.

3. Actions against Educational Institutions:

Do No Harm et al v. David Geffen School of Medicine at UCLA et al, No. 2:25-cv-04131 (C.D. Cal. May 08, 2025): On May 8, 2025, Do No Harm, Students for Fair Admissions, and a named individual plaintiff brought a class action lawsuit against the Geffen School of Medicine at UCLA and various school officials, claiming the medical school unlawfully considers race and ethnicity in its admissions process in violation of the Equal Protection Clause, Title IV, Section 1981, and the California Unruh Civil Rights Act. The plaintiffs seek declaratory and injunctive relief, an order that the school admit the named plaintiff, disgorgement of federal funds received by the school while allegedly out of compliance with federal antidiscrimination law, and compensatory, punitive, statutory, and nominal damages. The plaintiffs seek to certify the following class: “All individuals who applied to Geffen within the statute of limitations, do not identify as black, paid an application-related fee, and were denied admissions.” They also seek to certify a subclass, defined as “All individuals who are able and ready to apply or reapply to Geffen if the Court order relief that fully stops the school from considering race in admissions and undoes the effect of the school’s prior discrimination, including by enjoining the school’s limitations on transfers and multiple applications.”

Sullivan v. Howard University, No. 1:24-cv-01924 (D.D.C. 2024): On July 1, 2024, a male administrator at Howard University who was transferred to another department filed suit against the university, bringing claims of sex discrimination and retaliation in violation of Section 1981, and sex discrimination, retaliation, and a hostile work environment in violation of the D.C. Human Rights Act (DCHRA). On September 16, 2024, Howard University filed a partial motion to dismiss, arguing for the dismissal of both claims brought under Section 1981 because it does not protect against sex-based discrimination, and the hostile work environment claim because the alleged conduct was not severe, pervasive, or even linked to the plaintiff’s sex. The motion did not address the sex discrimination and retaliation claims brought under the DCHRA. On April 18, 2025, the court granted the university’s motion to dismiss the Section 1981 claims, but denied the motion as to the hostile work environment claim.
- Latest update: On May 2, 2025, Howard University filed an answer denying the remaining allegations in the complaint.

4. Board of Director or Stockholder Actions:

Ardalan v. Wells Fargo, 3:22-cv-03811 (N.D. Cal. 2022): On June 28, 2022, a putative class of Wells Fargo stockholders brought a class action against the bank related to an internal policy requiring that half of the candidates interviewed for positions that paid more than $100,000 per year be from an underrepresented group. The plaintiffs alleged that the bank conducted sham job interviews to create the appearance of compliance with this policy and that this was part of a fraudulent scheme to suggest to shareholders and the market that Wells Fargo was dedicated to DEI principles. On June 4, 2024, the plaintiffs moved to certify a class of all people and entities who had purchased Wells Fargo stock during the period when the bank allegedly engaged in sham job interviews. The plaintiffs also sought to remove the stay on discovery in order to prove that there are issues of law and fact common to the putative class. On June 25, 2024, the defendants opposed class certification, arguing that plaintiffs had not proved that they affirmatively met the requirements due to the stay. On July 7, the court granted the parties’ motion to continue certain deadlines and set a telephonic case management conference for August 1, 2024.On August 23, 2024, Wells Fargo answered the amended complaint, admitting that the bank had “Diverse Slate Guidelines” to promote diversity but denying the allegations of unlawful conduct. On January 17, 2025, the plaintiffs moved to certify a class of Wells Fargo shareholders. On February 14, 2025, the defendants filed an opposition, arguing that the plaintiffs failed to demonstrate a methodology for measuring damages on a classwide basis and that the plaintiffs’ claims are subject to unique arguments and defenses.
- Latest update: On April 25, 2025, the court granted the plaintiffs’ motion for class certification. The court concluded that class claims and defenses would predominate over individual claims and defenses and that Wells Fargo’s damages arguments did not prevent class certification. The court ordered the parties to provide a joint status report regarding the outcome of mediation by June 10, 2025.

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, Anna Ziv, Jenna Voronov, Emma Eisendrath, Kristen Durkan, Simon Moskovitz, Teddy Okechukwu, Beshoy Shokralla, Heather Skrabak, Maryam Asenuga, Angelle Henderson, Kameron Mitchell, Lauren Meyer, Chelsea Clayton, Maya Jeyendran, Albert Le, Allonna Nordhavn, Felicia Reyes, Godard Solomon, Laura Wang, and Ashley Wilson.

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)

On May 9, 2025, President Trump signed an Executive Order aimed at combatting “overcriminalization in federal regulations.” Reviving an Executive Order that was issued in the last days of the first Trump administration and quickly revoked by President Biden, the new Executive Order seeks to prevent “abuse and weaponization” of criminal regulatory offenses against “unwitting individuals” who lack the “privileges [of] large corporations, which can afford to hire expensive legal teams to navigate complex regulatory schemes and fence out new market entrants.” To advance that goal, the Executive Order is meant to “ease the regulatory burden on everyday Americans and ensure no American is transformed into a criminal for violating a regulation they have no reason to know exists.”

This new Executive Order is likely to lead to fewer U.S. Department of Justice (DOJ) criminal investigations and enforcement actions related to whether an individual or corporation acted in violation of a regulation, especially for individuals accused of strict-liability offenses. But the Executive Order, in combination with the reorganization of certain DOJ components, also may result in more aggressive investigations and severe punishments in those criminal regulatory actions that do proceed. As discussed in this alert, companies should closely follow the agency announcements directed by the Executive Order to assess criminal regulatory enforcement risks; engage with agencies to advocate for clearer and reduced enforcement approaches; and address allegations that could give rise to continuing risk under the Executive Order. Further analysis of the broader enforcement landscape, including consideration of DOJ’s recently announced enforcement priorities, can be found in Gibson Dunn’s forthcoming alert.

Policy: The Executive Order states that “it is the policy of the United States” that “[c]riminal enforcement of criminal regulatory offenses is disfavored,” except as to “the enforcement of the immigration laws or regulations” or “laws or regulations related to national security or defense.”

“Prosecution of criminal regulatory offenses,” the Executive Order explains, “is most appropriate for persons who know or can be presumed to know what is prohibited or required by the regulation and willingly choose not to comply, thereby causing or risking substantial public harm.” Thus, “[p]rosecutions of criminal regulatory offenses should focus on matters where a putative defendant is alleged to have known his conduct was unlawful.”

The Executive Order “disfavor[s]” criminal enforcement of “strict liability offenses” for violations of regulations—a scenario that “allows the executive branch to write the law, in addition to executing it”—and states that “agencies should consider civil rather than criminal enforcement” in such instances, “if appropriate.”

The Executive Order also provides that agencies promulgating regulations “should explicitly describe the conduct subject to criminal enforcement, the authorizing statutes, and the mens rea standard applicable to those offenses.”

Directives: Federal agencies are required under the Executive Order to take the following actions:

Report on Criminal Regulatory Offenses—Each agency must identify in a public report all criminal regulatory offenses enforceable by the agency or DOJ, with the applicable mens rea standards and potential criminal penalties for each offense. The Executive Order “strongly discourages” criminal enforcement of any offense not identified in these reports.
Promote Regulatory Transparency—In promulgating new rules, agencies must identify any potential criminal implications for a violation of the rule and “explicitly state a mens rea”
Establish a Default Mens Rea for Criminal Regulatory Offenses—Each agency, in consultation with the Attorney General, must “examine the agency’s statutory authorities and determine whether there is authority to adopt a background mens rea standard for criminal regulatory offenses that applies unless a specific regulation states an alternative mens rea.”
Publish Guidance on Criminal Referrals—By June 23, 2025, agencies are required to publish guidance outlining the factors considered when referring regulatory violations to the DOJ for criminal enforcement. The Executive Order notes that agencies should consider factors such as the harm caused; the defendant’s gain; and whether the defendant had specialized knowledge, licensure, or general awareness of the unlawfulness of his or her conduct.

Historical Context: As noted, the new Executive Order mirrors President Trump’s January 2021 order titled “Protecting Americans from Overcriminalization through Regulatory Reform” (EO 13980),[1] which was intended to shield Americans from “unwarranted criminal punishment for unintentional violations of regulations.” That prior order required agencies to make explicit the mens rea element of criminal offenses and to focus enforcement on individuals who “know what is prohibited or required by the regulation and choose not to comply.” It also similarly stated that strict liability offenses were “disfavored” and that administrative or civil remedies should be pursued instead, “when appropriate.”

The new Executive Order also reflects ongoing legislative debate. Dating back to 2015, various Republican Senators and Representatives have proposed legislation seeking to establish a default mens rea standard for criminal offenses that lack an expressly required state of mind. Most recently, Representative Andy Biggs (R-AZ-5) introduced the Mens Rea Reform Act of 2025, H.R. 59, which, like its predecessors, would “establish [ ] a default mens rea standard . . . for federal criminal offenses—statutory and regulatory—that lack an explicit standard.” The bill is currently pending in the House Judiciary Committee.

Potential Enforcement Implications: It is uncertain what effect the new Executive Order will ultimately have on enforcement actions, especially those involving corporations, but we expect that it may result in fewer but more severe regulatory prosecutions.

The specific terms of the Executive Order afford plenty of leeway for corporate enforcement actions. By its terms, the Executive Order is focused on avoiding the prosecution of “unwitting individuals” for violations of regulations “they have no reason to know exist,” and contrasts such individuals with “large corporations” that “can be presumed to know what is prohibited or required by [a] regulation.” The Executive Order is also seemingly aimed at reducing the prosecution of conduct that allegedly violates a regulation interpreting or implementing a statute (where the “executive branch . . . write[s] the law, in addition to executing it”), as opposed to conduct that allegedly violates the express terms of a statute. That may be a meaningful distinction in the enforcement of statutes like the Federal Food, Drug, and Cosmetic Act that specify particularized violations and remedies, including strict-liability misdemeanor offenses, and are applied more frequently to corporations than individuals. Indeed, as described in Gibson Dunn’s forthcoming alert, DOJ’s Criminal Division announced, just days after the issuance of the Executive Order, that it “will prioritize investigating and prosecuting. . . . [v]iolations of the Federal Food, Drug, and Cosmetic Act,” among other areas.[2] The Executive Order’s explicit carveouts for conduct affecting immigration, national security, and defense also exempt a potentially broad range of corporate conduct from its mandates, especially under the administration’s expansive interpretation of those terms to date. And it may not prove challenging for prosecutors to assert that an investigation involving a possible regulatory offense is seeking to identify potentially knowing or intentional misconduct, or that the conduct under investigation “caus[ed] or risk[ed] substantial public harm.”

At the same time, the Executive Order’s clear policy statement is that “[c]riminal enforcement of criminal regulatory offenses is disfavored,” and DOJ leadership will presumably assess proposed investigations and enforcement actions with that policy in mind. Such assessments likely will lead to fewer DOJ actions involving alleged regulatory offenses, against both individuals and corporations. The policy also may be achieved, in part, by DOJ leadership’s significant streamlining of DOJ enforcement components that specialized in the enforcement of crimes related to regulated products or services, as well as the reduction (or elimination) of associated regulatory agencies. As a result, we expect that certain regulatory enforcement actions will be less frequent, especially those of the sort pursued by the Biden administration and relating to alleged violations of technical environmental, tax, and agency-reporting regulations.

Although the Executive Order will likely lead to less criminal enforcement of regulatory offenses, it may also increase the severity of allegations and punishments in those matters that do proceed. For example, DOJ has historically charged defendants with stand-alone, strict-liability misdemeanor offenses only in conjunction with a negotiated plea bargain; the offenses are almost never charged in a case that will be litigated. That has particularly been true of Federal Food, Drug, and Cosmetic Act misdemeanors charged under the “Responsible Corporate Officer Doctrine” (also known as the “Park Doctrine”), which allows prosecution of individuals without intent, knowledge, or direct participation in the alleged misconduct if they were “responsible corporate officers” who could have prevented it.[3] Park charges are almost exclusively brought in connection with negotiated resolutions, in which an executive accepts responsibility without admitting knowledge of or participation in misconduct in exchange for not being charged with more serious crimes. The predecessor Executive Order that President Trump issued in his first term (EO 13980) acknowledged this reality and included an exception for strict-liability misdemeanor prosecutions concluded via plea agreement. The new Executive Order includes no such exception. As a result, defendants against whom investigations proceed may now have fewer and more severe settlement options, likely encountering demands to plead guilty to a knowing violation or face trial. Yet either option risks significant costs and ramifications, including with respect to a defendant’s ability to contract with the federal government or receive federal funds.

This potential trend toward fewer but more severe regulatory prosecutions may also be accelerated by President Trump’s restructuring of the prosecutors based in DOJ’s Washington, DC, headquarters to consolidate criminal enforcement work in the Criminal Division. That consolidation may lead to more aggressive actions in those prosecutions that advance.

For instance, DOJ leadership has announced that the Civil Division’s Consumer Protection Branch (CPB) will be divided, with its civil work remaining in the Civil Division and its criminal work (and most of its personnel) moving to a consumer protection unit of the Criminal Division’s Fraud Section. For more than fifty years, CPB attorneys used both civil and criminal tools to enforce laws administered by the U.S. Food and Drug Administration, Federal Trade Commission, Drug Enforcement Administration, Consumer Product Safety Commission, and National Highway Traffic Safety Administration. CPB also oversaw all prosecutions by U.S. Attorney’s Offices under consumer protection laws like the Federal Food, Drug, and Cosmetic Act. CPB’s flexibility in remedies and familiarity with complex statutes allowed it to pursue investigations and reach resolutions involving complicated dynamics, often using civil or misdemeanor remedies to secure relief for consumers—collecting more than $20 billion in penalties and restitution since 2017—while allowing defendants to preserve important business functions. Both by their new placement in the Criminal Division and because of the new Executive Order, prosecutors investigating consumer protection matters may have less flexibility moving forward. In addition, criminal resolutions involving such offenses will now track the Criminal Division’s resolution templates and compliance requirements, which are more robust and have less consideration for the role of regulatory agencies than those used in most matters by CPB.

Industry Opportunities: This shifting enforcement landscape presents both opportunities and obstacles for companies. Companies should consider the following actions in the short and long term:

Monitor Agency Reports: Companies should pay close attention to all agency reports listing which criminal regulatory offenses are enforced by that agency, along with the offense’s mens rea standard. Considering the president’s directive that criminal enforcement of offenses not listed in these reports is “strongly discouraged,” the reports may be important guides for companies seeking to identify areas of enforcement risk.
Review and Update Compliance Programs: Given the Executive Order’s implication that “large corporations” with “expensive legal teams to navigate complex regulatory schemes” likely “can be presumed to know what is prohibited or required by . . . regulation,” it is important for companies to maintain effective internal audit and compliance programs to help demonstrate that any regulatory noncompliance was not “willingly” pursued.

Advocate for Civil or Administrative Enforcement: Companies under investigation for regulatory offenses should evaluate the applicability of the Executive Order and, if appropriate, advocate for civil or administrative enforcement instead of criminal action. The Executive Order also provides an opportunity for industry to engage with agencies to advocate for reforms on the use of criminal enforcement in the regulatory context.
Investigate Allegations of Fraud: Following the Executive Order and the restructuring of DOJ components, it is perhaps more likely that regulatory violations may be pursued under fraud theories and statutes. Companies should diligently investigate and address internal and external allegations of wrongdoing, particularly those that could form the basis of a claim of fraud against the government.

[1] https://trumpwhitehouse.archives.gov/presidential-actions/executive-order-protecting-americans-overcriminalization-regulatory-reform/.

[2] Memorandum from Matthew R. Galeotti, Head of the Criminal Division, U.S. Department of Justice to All Criminal Division Personnel re Focus, Fairness, and Efficiency in the Fight Against White-Collar Crime (May 12, 2025).

[3] 421 U.S. 658, 672 (1975).

The following Gibson Dunn lawyers prepared this update: F. Joseph Warin, Stephanie Brooker, Winston Chan, Gus Eyler, Courtney Brown, Matt Axelrod, Katlin McKelvie, Rachel Baron, Aquila Maliyekkal, and Alice Wang.

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From the Derivatives Practice Group: This week, two CFTC Commissioners announced their departure.

Commissioner Christy Goldsmith Romero Makes Statement on Departure from CFTC. On May 16, Commissioner Christy Goldsmith Romero announced that she intends to step down from the Commission and retire from federal service. Her final day at the Commission will be May 31. [NEW]
Commissioner Summer K. Mersinger Makes Statement on Departure from CFTC. On May 14, Commissioner Mersinger announced that she intends to step down from her position as Commissioner at the CFTC at the end of the month, to pursue new opportunities. [NEW]
CFTC Warns Public of Imposter Scam Targeting Fraud Victims. On May 14, the CFTC warned the public about a growing imposter scam involving individuals falsely claiming to represent the agency. According to the CFTC, scammers are contacting members of the public and claiming to represent the CFTC Office of Inspector General and promise to help financial fraud victims recover lost funds from foreign bank accounts. The CFTC Office of Inspector General stated that it will never contact individuals with offers to recover money lost to investment scams. [NEW]
Acting Chairman Pham Makes Statement on Court Sanctions Against CFTC. On May 13, CFTC Acting Chairman Caroline D. Pham made a statement regarding the Federal District Court report and recommendations for sanctions against the CFTC for misconduct in CFTC v. Traders Global Group Inc, highlighting proactive efforts to overhaul the CFTC’s Division of Enforcement and reform culture and conduct, develop staff, and leverage expertise and reduce siloing. [NEW]
CFTC Staff on Leave Pending Investigation. On May 5, pursuant to the President’s executive orders on lawful governance and accountability, the CFTC placed certain staff on administrative leave for potential violations of laws, government ethics requirements and professional rules of conduct. The CFTC stated it is committed to holding employees to the highest standards, as expected by American taxpayers. Investigations are currently ongoing into these matters and the CFTC has committed to provide updates as appropriate. [NEW]
SEC Publishes New Market Data, Analysis, and Visualizations. On April 28, the SEC’s Division of Economic and Risk Analysis has published new data and analysis on the key market areas of public issuers, exempt offerings, Commercial Mortgage-Backed Securities, Asset-Backed Securities, money market funds, and security-based swap dealers in an effort to increase transparency and understanding of our capital markets amongst the public.

New Developments Outside the U.S.

ESMA Delivers Technical Advice on Market Abuse and SME Growth Markets as Part of the Listing Act. On May 7, ESMA published its advice to the European Commission to support the Listing Act’s goals to simplify listing requirements, enhance access to public capital markets for EU companies, and improve market integrity. In relation to Market Abuse Regulation (“MAR”), the advice covers: protracted processes, identifying key moments for public disclosure; delayed public disclosure, listing situations where delays are not allowed; and Cross-Market Order Book Mechanism, indicating the methodology for the identification of trading venues with significant cross-border activity.
ESMA Consults on Rules for ESG Rating Providers. On May 2, ESMA published a Consultation Paper on draft Regulatory Technical Standards (“RTS”) under the Environmental, Social, and Governance (“ESG”) Rating Regulation. The draft RTS cover the following aspects that apply to ESG rating providers: the information that should be provided in the applications for authorization and recognition; the measures and safeguards that should be put in place to mitigate risks of conflicts of interest within ESG rating providers who carry out activities other than the provision of ESG ratings; the information that they should disclose to the public, rated items and issuers of rated items, as well as users of ESG ratings.
ESMA Publishes the Annual Transparency Calculations for Non-equity Instruments and Bond Liquidity Data. On April 30, ESMA, the EU’s financial markets regulator and supervisor, published the results of the annual transparency calculations for non-equity instruments and new quarterly liquidity assessment of bonds under MiFID II and MiFIR.
ESMA Report Shows Increased Data Use Across EU and First Effects of Reporting Burden Reduction Efforts. On April 30, ESMA published the fifth edition of its Report on the Quality and Use of Data. The report reveals how the regulatory data collected has been used by authorities in the EU and provides insight into actions taken to ensure data quality. The document presents concrete cases on data use ranging from market monitoring to supervision, enforcement and policy making. The report also highlights ESMA’s Data Platform and ongoing improvements to data quality frameworks as key advancements in tools and technology for data quality.
ESMA Issues Supervisory Guidelines to Prevent Market Abuse under MiCA. On April 29, ESMA published guidelines on supervisory practices to prevent and detect market abuse under the Market in Crypto Assets Regulation (“MiCA”). Based on ESMA’s experience under MAR, the guidelines intended for National Competent Authorities include general principles for effective supervision and specific practices for detecting and preventing market abuse in crypto assets. They consider the unique features of crypto trading, such as its cross-border nature and the intensive use of social media.

New Industry-Led Developments

IOSCO Concludes its 50th Annual Meeting. On May 15, IOSCO concluded its 50th Annual Meeting, which was hosted by the Qatar Financial Markets Authority (“QFMA”) in Doha. IOSCO welcomed near 500 participants over the course of three days, followed by the QFMA public conference. The IOSCO Annual Meeting brings all 130 member jurisdictions together to discuss the most relevant issues and risks with regard to global financial markets, and how to assist regulators in implementing standards through capacity building. [NEW]
ISDA Publishes Paper Exploring Use of Generative AI to Extract and Digitize CSA Clauses. On May 15, ISDA published a whitepaper that shows generative artificial intelligence can be used to accurately and reliably extract, interpret and digitize key legal clauses from ISDA’s credit support annexes, showing how this technology could increase efficiency, cut costs and reduce risks in derivatives processes that have traditionally been highly manual and resource intensive. [NEW]
ISDA Margin Survey Shows Leading Derivatives Firms Collected $1.5 Trillion of Margin at Year-end 2024. On May 14, ISDA published its latest annual margin survey, which shows that initial margin (“IM”) and variation margin collected by leading derivatives market participants for their non-cleared derivatives exposures increased by 6.4% to $1.5 trillion at the end of 2024. The 32 responding firms included all 20 phase-one entities (the largest derivatives dealers subject to regulatory IM requirements in the first implementation phase), five of the six phase-two firms and seven of the eight phase-three entities. [NEW]
ISDA Extends Digital Regulatory Reporting to Support Revised Canadian Reporting Rules. On May 13, ISDA extended its Digital Regulatory Reporting solution to cover new reporting rules in Canada and has made it compatible with a trade reporting messaging format used for North America reporting to maximize the benefit of adoption by those firms subject to the rules. The revisions are being implemented by the Canadian Securities Administrators and are scheduled for implementation on July 25, 2025. [NEW]
ISDA Publishes Governance Committee Proposal for CDS Determinations Committees. On May 8, ISDA published a proposal for a new governance committee for the CDS Determinations Committees (“DCs”), the first in a series of amendments to improve the structure of the DCs and maintain their integrity in changing economic and market conditions. The governance committee would be responsible for taking market feedback and adopting rule changes affecting the structure and operations of the DCs to ensure their long-term viability and meet market expectations for efficiency and transparency in credit event determinations.
ISDA Presents Proposed Charter for the Credit Derivatives Governance Committee. On May 8, ISDA presented the proposed Charter for the Credit Derivatives Governance Committee and accompanying DC Rule changes to implement. Pursuant to the announcement made in 2024, an ISDA working group formed from ISDA’s Credit Steering Committee has worked on producing the Governance Committee solution. ISDA views the Governance Committee as the first step in implementing the other recommended changes from the Linklaters’ report as part of an independent review on the composition, functioning, governance and membership of the DCs.
ISDA Responds to FASB Proposal on KPIs for Business Entities. On April 30, ISDA submitted a response to the Financial Accounting Standards Board’s (“FASB”) proposal on financial key performance indicators (“KPIs”) for business entities. In the response, ISDA addressed the implications of KPI standardization, its potential impact on financial reporting and risk management, and the broader cost-benefit considerations for preparers and investors. Based on proprietary analysis, ISDA does not view financial KPI standardization or the proposed disclosures as urgent priorities for the FASB at this time.
CPMI-IOSCO Assesses that EU has Implemented Principles for Financial Market Infrastructures for Two FMI Types. On April 28, CPMI-IOSCO released a report that assessed the completeness and consistency of the legal, regulatory and oversight framework in place as of October 30, 2019. The report finds that the implementation of the Principles for Financial Market Infrastructures is complete and consistent for all Principles for payment systems. The legal, regulatory and oversight frameworks in the EU for central securities depositories and securities settlement systems are complete and consistent with the Principles in most aspects. However, the assessment identified some areas for improvement, particularly in aspects where implementation was broadly, partly, or not consistent, including risk and governance principles.

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

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)

On May 14, 2025, the Governor of Texas signed SB 29 into law which introduced significant amendments to the Texas Business Organizations Code affecting Texas corporations, limited partnerships and limited liability companies.

Overview

On May 14, 2025, the Governor of Texas signed into law significant amendments to the Texas Business Organizations Code (TBOC). The new laws introduce consequential changes affecting governance, governing authority liability, shareholder rights, and internal management of corporations, limited liability companies, limited partnerships, and other entities organized under the TBOC. We have summarized the most significant changes reflected in the amendments below. These changes became effective on May 14, 2025.

Director, Officer, and Managerial Duties: New Presumptions and Protections

A central feature of the amendments is the codification of the business judgement rule. Specifically, the amendments codify the presumption that directors, officers, and other managerial officials of corporations, limited liability companies, and limited partnerships acted in compliance with their duties. The presumptions apply to entities that are publicly traded or that affirmatively opt in.

For corporations, the actions of directors and officers are presumed to be taken in good faith, on an informed basis, in the best interests of the corporation, and in obedience to the law and the corporation’s governing documents. To prevail in a cause of action claiming a breach of duty, the claimant must rebut one or more of these presumptions and prove (i) the act or omission was a breach of the person’s duties as a director or officer and (ii) the breach involved fraud, intentional misconduct, ultra vires acts, or knowing violations of law. These protections are in addition to any existing statutory or common law defenses.

For limited liability companies and limited partnerships, these amendments also clarify that governing documents may expand, restrict, or eliminate fiduciary duties and related liabilities, including the duties of loyalty, care and good faith.

Limitation on Derivative Actions

Publicly traded corporations or corporations that (i) have 500 or more shareholders and (ii) have made an affirmative election to opt in to the statutory presumptions that directors and officers acted in compliance with their duties, may institute a minimum ownership threshold for shareholders to bring derivative actions. The amendment allows such corporations to set a minimum ownership threshold of up to 3% of the outstanding shares of the corporation to initiate such proceedings.

Attorney Fee Awards

The amendments provide limitations on awards of attorney fees in derivative proceedings through limiting what is considered a substantial benefit to an entity. The amendments provide that substantial benefits to a corporation, limited partnership or limited liability company do not include additional or amended disclosures made to shareholders, limited partners, or members respectively.

Independence of Committees Reviewing Related Party Transactions

Boards of publicly traded corporations[1] may petition the Texas Business Court (or any other district court with proper jurisdiction, if the corporation’s principal place of business is not located in an operating division of the Texas Business Court) to make a determination on the independence of the committee of directors formed to review and approve transactions involving controlling shareholders, directors, or officers. After expedited proceedings to determine appropriate legal counsel to represent the corporation and its shareholders (other than any relevant controlling shareholder), the court will hold an evidentiary hearing and render a binding determination regarding the independence of the directors on the committee. The finding is “dispositive” absent facts not presented to the court.

Jury Trial Waivers and Exclusive Forum Selection

The amendments expressly permit entities to include, in their governing documents, waivers of the right to a jury trial for any internal entity claims. Under Texas law, internal entity claims include claims of any nature such as derivative claims that are based on (i) rights, powers, and duties of its governing authority, governing persons, officers, owners, and members; and (ii) matters relating to its membership or ownership interests. This includes, for example, claims of breach of fiduciary duties by directors of corporations. Such waivers are enforceable even if not individually signed by members, owners, officers or governing persons. A person is considered to have knowingly waived the right to a jury trial if the person voted for or ratified the document containing the waiver or acquired stock in the entity at, or continued to hold stock in a particular entity after, a time in which the waiver was included in the governing documents. Also, in their governing documents, entities may choose an exclusive Texas forum and venue for internal entity claims.

Inspection Rights

The amendments clarify and, in some respects, limit the ability of shareholders, members and partners to inspect records. Notably, emails, text messages, and social media communications are excluded from entity records, unless those records effectuate an action by the corporation, limited liability company or limited partnership. Furthermore, for publicly traded corporations or corporations that affirmatively elect to opt in to the statutory presumptions that directors and officers acted in compliance with their duties, inspection demands by a requesting holder with ongoing or expected litigation involving the corporation or derivative proceedings may be denied. However, these changes do not impair the right to obtain discovery of records from the corporation in an active or pending lawsuit.

Conclusion

Texas is a notable forum for corporate activity and innovation. These amendments provide enhanced protections for directors and officers of Texas entities and should reduce litigation risks, particularly for publicly traded Texas entities. The changes also impose new limitations on shareholders, especially regarding inspection and derivative actions. Additional proposed amendments to the TBOC are currently proceeding through the legislative system. Gibson Dunn will publish a later update summarizing these amendments as they become law.

Texas corporations should update their training for boards of directors and review their organizational documents, internal procedures, and compliance practices to carefully assess the impact of these changes. Gibson Dunn’s Texas lawyers are available to assist with any questions you may have regarding these developments.

[1] This section of the code also applies to corporations that opt in to the statutory presumptions that directors and officers acted in compliance with their duties.

The following Gibson Dunn lawyers prepared this update: Gerry Spedale, Jason Ferrari, and Hillary Holmes.

Gerry Spedale (+1 346.718.6888, gspedale@gibsondunn.com)

Hillary H. Holmes (+1 346.718.6602, hholmes@gibsondunn.com)

Jason Ferrari (+1 346.718.6736, jferrari@gibsondunn.com)

The Civil Transactions Law codifies the rules governing liquidated damages clauses under Saudi law. This client alert outlines key considerations for contracting parties when adopting such clauses, and how courts may approach them in practice.

How Liquidated Damages Clauses are Recognized in Saudi Arabia

The Saudi legal framework recognizes liquidated damages as pre-agreed estimates of losses incurred by one party due to the other party’s breach of contract, including non-performance or delay in fulfilling contractual obligations.

Historical Context

Even prior to the Civil Transactions Law, Saudi courts recognized liquidated damages clauses based on Sharia principles. Such clauses have been upheld as valid and enforceable, except in cases where:

the breaching party had a legitimate excuse for non-performance or delay; or
the agreed amount was deemed excessively high, amounting to financial coercion, in which cases courts have assessed excessiveness based on prevailing customs and practices.[1]

How Liquidated Damages Operate Today

Validity:Parties can agree on liquidated damages, either in the original contract or a later agreement.[2]

Simplified Burden of Proof:Liquidated damages clauses render the occurrence of damages presumed. To enforce such a clause, the aggrieved party is not required to prove damage or causation – merely that a breach has occurred.[3]

Avoiding Liquidated Damages:A party may avoid liability under a liquidated damages clause by proving either:
- that the other party did not suffer any damage;[4] or
- that the damage was not caused by the party’s breach, but rather by the other party’s acts, omissions, or a force majeure event.
Reducing Liquidated Damages:The breaching party may be successful in reducing the sum of liquidated damages by proving either:
- that the pre-agreed amount is grossly exaggerated, thereby allowing the court to rule in accordance with the general principles of liability under Saudi law;[5] or
- that the breaching party has partially performed their obligations, thereby allowing the court to assess the extent of unperformed obligations and apply the liquidated damages clause accordingly.[6]
Court Discretion:Courts cannot freely adjust liquidated damages clauses. Their discretion is limited to:
- reducing the amount in cases of gross exaggeration or partial performance. A mere discrepancy between the damages incurred and the agreed sum is insufficient to warrant reduction[7]; or
- increasing the sum if the non-breaching party proves that deceit or gross negligence by the debtor caused the damage to exceed the agreed sum.[8]
Prohibition on Payment Obligations:In line with Saudi Arabia’s strict prohibition of interest payments[9], it is impermissible as a matter of public policy for liquidated damages to apply to payment obligations.[10]

How Saudi Arabia Compares to Neighboring Jurisdictions:Saudi Arabia’s approach towards liquidated damages clauses shares similarities with the approaches of UAE and Egypt, but there are some differences. For example:

Element	Saudi Arabi	UAE	Egypt
Default position on prior notice of imposition	No prior notice required.[11]	Prior notice required.[12]	Prior notice required.[13]
Court discretion to adjust liquidated damages	Relatively limited.[14]	Relatively broad.[15]	Relatively limited.[16]

Points to Consider When Drafting a Liquidated Damages Clause

Be specific. Clearly define what triggers the liquidated damages (delays, quality issues, etc.).
Consider industry benchmarks. Base estimates on market standards or historical data to avoid claims of exaggeration.
Expressly address partial performance. Specify how damages will be calculated if some of the triggering obligations are met.
Follow notice requirements. While Saudi law does not by default require notice to enforce liquidated damages, your specific contract might.
Understand burden of proof requirements. Know who bears the burden of proof in different scenarios to claim or defend tactically.
Consider all available remedies and seek them tactically. Parties may be precluded from enforcing liquidated damages clauses in conjunction with other contractual remedies.

[1] Resolution No. 25 dated 31/08/1394H by the Council of Senior Scholars: “The Council unanimously decides that the penalty clause stipulated in contracts is valid and legally binding, and must be upheld unless there is a legitimate excuse for the breach of the obligation that justifies it under Sharia. In such a case, the excuse nullifies the obligation until it ceases. If the penalty clause is, by customary standards, excessive to the extent that it serves as a financial threat and deviates significantly from the principles of Sharia, then fairness and equity must prevail, based on the actual loss of benefit or incurred harm.” Cases in which Saudi courts upheld the Council of Senior Scholar’s Resolution No. 25 include the General Court’s Decision No. 1 of 1439H: “The liquidated damages clause included in contracts is a valid and enforceable condition which must be upheld, unless there is a legitimate excuse for breaching the obligation that is recognized under Shari’a, in which case the excuse suspends the obligation until it ceases. If the amount of liquidated damages is excessive by customary standards, to the point that it constitutes financial coercion and departs from the principles of Shari’a, then recourse must be had to justice and fairness, based on the actual harm incurred or the benefit lost. The determination of such matters in case of dispute is to be made by the competent court with the assistance of experts and professionals.”

[2] Civil Transactions Law, Article 178: “The contracting parties may specify in advance the amount of compensation whether in the contract or in a subsequent agreement, unless the subject of the obligation is a cash amount. The right to compensation shall not require notification.”

[3] For example: Board of Grievance’s decision in Case No. 20 of 1430H (predating the enactment of the Civil Transactions Law): “…and the administrative authority is not required to prove that it has suffered harm, given that [the liquidated damages] constitute an agreed-upon compensation for presumed harm, including harm resulting merely from delay.” Commercial Court in Riyadh’s decision in Case No. 4530906759 of 1445H: “The Law expressly provides that liquidated damages are not due to the creditor if the debtor proves that the creditor has suffered no harm. This is specifically stated in paragraph (1) of Article (179) of the same Law mentioned above,” presuming that liquidated damages are initially owed to the creditor upon breach, and it is the debtor’s burden to rebut this presumption by proving the absence of harm. This position is consistent with the literature of leading scholars in the region. For example, A. Sanhouri, ‘Al Waseet on the Explanation of the Civil Code’, Part Two, p. 817, concerning a similarly formulated legal provision in Egypt’s Civil Code: “[…] the presence of a Liquidated Damages Clause renders the occurrence of damage presumed, and the creditor would not be required to prove it. Therefore, if the debtor alleges that the creditor has not incurred damage, it is he who would bear the burden of proof, and not the creditor.”

[4] Civil Transactions Law, Article 179: “Compensation that is contractually agreed upon by the parties shall not be payable if the debtor proves that the creditor has sustained no harm.”

[5] Civil Transactions Law, Article 179(2): “The court may, upon a petition by the debtor, reduce the compensation if the debtor establishes that the agreed-upon compensation was excessive or that the original obligation was partially performed.” A. Almarjah, ‘Explanation of the Saudi Civil Transactions law,’ 1445H, Part One, p. 297: “Judicial intervention is limited to removing exaggeration in the liquidated damages clause, not to assessing its proportionality to the actual harm. Accordingly, if the agreed liquidated damages exceed the actual harm, but the excess is not deemed gross, the judge may not reduce the amount.”

[6] Civil Transactions Law, Article 179(2): “The court may, upon a petition by the debtor, reduce the compensation if the debtor establishes that the agreed-upon compensation was excessive or that the original obligation was partially performed.”

[7] A. Sultan, ‘A Brief on the General Theory of Obligation’, 1983, Section 2, p. 78, concerning a similarly formulated legal provision in Egypt’s Civil Code: “…if there is excess in the quantification, but it is not exaggerated, it is impermissible to reduce it, as the fundamental principle is that the Judge orders in accordance with what has been agreed-upon by the parties, and absent one of the conditions of the exception, it is obligatory to resort to the fundamental principle.” A similar opinion has been given by a Saudi scholar; A. Almarjah, ‘Explanation of the Saudi Civil Transactions law,’ 1445H, Part One, p. 297: “Judicial intervention is limited to removing exaggeration in the liquidated damages clause, not to assessing its proportionality to the actual harm. Accordingly, if the agreed liquidated damages exceed the actual harm, but the excess is not deemed gross, the judge may not reduce the amount.”

[8] Civil Transactions Law, Article 179(3): “The court may, upon a petition by the creditor, increase the amount of compensation to the extent necessary to cover the harm if the creditor establishes that an act of fraud or gross negligence by the debtor is what caused the harm to exceed the agreed-upon compensation.”

[9] Commercial Court in Jeddah, Case No. 4531041638 of 1445H: “…it is impermissible to agree on compensation where the subject of the obligation is a monetary amount. Given that this Article pertains to public order (public policy), the parties may not contract out of or override its provisions…”

[10] See, Resolution No. (109) (12/3) of the International Islamic Fiqh Academy: “It is permissible to stipulate a penalty clause in all financial contracts, except in contracts where the primary obligation is a debt, as this would constitute explicit riba (usury),” upheld by the Commercial Court in Jeddah in Case No. 433665897 of 1443H.

[11] Civil Transactions Law, Article 178: “The contracting parties may specify in advance the amount of compensation […] The right to compensation shall not require notification.”

[12] UAE’s Civil Transactions Law, Article 387: “Compensation is not due without the debtor being notified, unless otherwise provided by law or agreed upon in the contract.”

[13] Egypt’s Civil Code, Article 218: “Unless otherwise specified, compensation is not due without the debtor being notified.”

[14] Civil Transactions Law, Article 179(2): “The court may, upon a petition by the debtor, reduce the compensation if the debtor establishes that the agreed-upon compensation was excessive or that the original obligation was partially performed.” Id, Article 179(3): “The court may, upon a petition by the creditor, increase the amount of compensation to the extent necessary to cover the harm if the creditor establishes that an act of fraud or gross negligence by the debtor is what caused the harm to exceed the agreed-upon compensation.”

[15] There are some inconsistent court decisions noted across and within each of the jurisdictions. UAE’s Civil Transactions Law, Article 390(2): “The judge may, in all cases, at the request of one of the parties, amend such an agreement, in order to make the amount assessed equal to the damage. Any agreement to the contrary is void.”

[16] Egypt’s Civil Code, Article 224: “(1) Damages fixed by agreement are not due, if the debtor establishes that the creditor has not suffered any loss. (2) The judge may reduce the amount of these damages, if the debtor establishes that the amount fixed was grossly exaggerated or that the principal obligation has been partially performed. (3) Any agreement contrary to the provisions of the two preceding paragraphs is void.”

The following Gibson Dunn lawyers prepared this update: Mahmoud Abdel Baky, Rashed Khalifah, and Hamzeh Zu’bi*.

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 member of the firm’s International Arbitration, Judgment and Arbitral Award Enforcement, or practice groups, or the following authors in Riyadh:

Mahmoud Abdel-Baky (+966 55 056 6323, mabdel-baky@gibsondunn.com)

Rashed Z. Khalifah (+966 55 236 0511, rkhalifah@gibsondunn.com)

*Hamzeh Zu’bi is a trainee associate in Riyadh and not admitted to practice law.

Please join us for a presentation that focuses on the latest developments in two key markets: the UK and the Middle East. As regulatory landscapes and investor expectations evolve, companies seeking to go public in these markets should ensure that they are alive to the opportunities and challenges.

The session provides valuable insights for companies and shareholders preparing for IPOs, highlighting key IPO readiness steps that companies should be considering, and offering a strategic understanding of how to navigate regulatory complexities and market expectations.

MCLE CREDIT INFORMATION:

This program has been approved for credit in accordance with the requirements of the New York State Continuing Legal Education Board for a maximum of 1.0 credit hour, of which 1.0 credit hour may be applied toward the areas of professional practice requirement. This course is approved for transitional/non-transitional credit.

Attorneys seeking New York credit must obtain an Affirmation Form prior to watching the archived version of this webcast. Please contact CLE@gibsondunn.com to request the MCLE form.

Gibson, Dunn & Crutcher LLP certifies that this activity has been approved for MCLE credit by the State Bar of California in the amount of 1.0 hour in the General Category.

California attorneys may claim “self-study” credit for viewing the archived version of this webcast. No certificate of attendance is required for California “self-study” credit.

PANELISTS:

Jade Chu is a partner in the Dubai office of Gibson, Dunn & Crutcher, where he is a member of the Mergers & Acquisitions practice group.

He has significant experience advising corporates, government-related entities, sponsors and financial institutions on a wide range of corporate transactions (including cross-border public and private M&A, JVs and equity capital markets) and general corporate advisory matters.

Marwan Elaraby is the partner in charge of the Dubai office where he is a member of the Mergers & Acquisitions and Capital Markets Practice Groups.

Marwan advises clients on M&A and private equity transactions, as well as governments on strategic and regulatory matters. He also advises both issuers and underwriters on equity and debt securities offerings.

Chris Haynes is a corporate partner in the London office of Gibson Dunn.

Chris has extensive experience in equity capital markets transactions and mergers and acquisitions including advising corporates, investment banks and shareholders on initial public offerings (including multi-track processes), rights issues and other equity offerings as well as on public takeovers, private company M&A and joint ventures. He also advises on corporate and securities law and regulation.

Ibrahim Soumrany is a partner in the Dubai and Riyadh offices of Gibson, Dunn and Crutcher and is a member of the firm’s Capital Markets practice group.

Ibrahim’s capital markets experience includes advising public and private issuers and investment banks on a broad range of capital markets transactions including equity offerings (IPOs and secondary offerings) and debt offerings (conventional and Islamic). Ibrahim has extensive experience advising on transactions across a number of jurisdictions in the Middle East, the US and Europe. Ibrahim also regularly advises on public M&As as well as companies and their boards on listing requirements, securities and corporate governance matters and reporting obligations.

On May 12, 2025, the United States and China announced that each country would reduce tariff rates on the goods of the other country by 115%, marking a significant breakthrough in the rapidly escalated trade war.

On May 12, 2025, the White House released a Joint Statement with the People’s Republic of China, accompanied by a Fact Sheet, announcing a significant step back from the high tariff rates each country had imposed on the goods of the other since the beginning of April. On the same day, President Trump issued an Executive Order titled “Modifying Reciprocal Tariff Rates to Reflect Discussions with the People’s Republic of China” (“May 12 Order”), directing relevant U.S. agencies to implement reduced tariffs on goods from China. This alert provides an overview of the impactful commitments made in the Joint Statement by the United States and China, where both governments recognized “the importance of the critical bilateral economic and trade relationship between both countries and the global economy” and committed to take certain actions by May 14, 2025, to substantially reduce the previously imposed tariffs.

The Joint Statement marks a significant breakthrough, signaling that both the United States and China have pulled back from the brink of a more serious trade war and a potential collapse in bilateral economic relations. As noted by Treasury Secretary Scott Bessent, the United States does “not want a generalized decoupling from China.” While the Joint Statement involves mutual concessions, it remains expressly a temporary measure rather than a comprehensive or lasting resolution. While much remains to be negotiated, the Joint Statement represents a hopeful step forward.

I. U.S. Reduces Tariffs on Chinese Goods Imposed under IEEPA to 30% for the
Initial Period of 90 Days

The May 12 Fact Sheet notes that the United States and China will each lower tariffs by 115% while retaining an additional 10% tariff. Consistent with this statement, effective May 14, 2025, Chinese goods, including those originating in Hong Kong and Macau, will be subject to a total of 30% tariffs imposed under the International Emergency Economic Powers Act (IEEPA) for an “initial period of 90 days.” These emergency tariffs will be applied in addition to any other applicable tariffs, including tariffs imposed under Section 232, Section 301, or “most favored nation” duties. Specific breakdowns are provided below.

10% So-Called “Reciprocal” Tariffs

Pursuant to Section 2 of the May 12 Order, effective with respect to goods entered for consumption, or withdrawn from warehouse for consumption, on or after 12:01 a.m. eastern daylight time on May 14, 2025, all articles imported into the United States from China, including Hong Kong and Macau, will be subject to an additional ad valorem tariff of 10% under the so-called “reciprocal” tariffs imposed by Executive Order 14257 of April 2, 2025. The prior April 2 executive order had imposed broad-reaching so-called “reciprocal” tariffs on all U.S. trading partners except for Mexico and Canada. The original country-specific rate for goods from China announced in that order was 34%. Under the May 12 Order, 24 percentage points are “suspended” for 90 days and replaced by the 10% duty. The May 12 Order removes the retaliatory tariff rates announced in subsequent executive orders of early April, notably the increased tariffs imposed by Executive Order 14259 (increasing the rate to 84%) and Executive Order 14266 (increasing the rate to 125%).

As a consequence of the May 12 Order, if a new deal is not reached during the initial period of 90 days, it appears that the United States may raise the “reciprocal” duty rate on Chinese goods to the originally announced 34%.

20% IEEPA-Fentanyl Tariffs and Other Tariffs that Continue to Apply

The May 12 Fact Sheet clarifies that the United States will retain all duties imposed on China prior to April 2, 2025, including: (i) Most Favored Nation tariffs; (ii) tariffs imposed under Section 301; (iii) industry-sector tariffs imposed under Section 232; and (iv) tariffs imposed pursuant to IEEPA related to the fentanyl-related national emergency announced and expanded in Executive Order 14195.

By way of background, on February 1, 2025, President Trump issued an executive orderimposing an additional 10% ad valorem rate of duty to all articles that are products of China or of Hong Kong, citing a national emergency with respect to illegal drugs entering the United States and China’s alleged failure to arrest, seize or otherwise intercept chemical precursor suppliers and money launderers connected to the illegal drug trade. President Trump subsequently increased such duties on China to 20%, effective March 4, 2025, citing China’s continued failure to adequately respond to the emergency. Thus, the total IEEPA-related tariffs imposed on goods from China is now 30%.

In addition, the Section 301 tariffs, imposed during the first Trump Administration in response to certain technology transfer practices in China, generally range from 7.5% to 25%, with certain products subject to higher duties up to 100%. Consequently, the effective average rate of duty for goods from China is approximately 40%-55%.

De Minimis Tariffs Adjustments

Section 4 of the May 12 Order decreases the tariff rate applicable to low-value imports from China (i.e., goods previously eligible for duty-free treatment under the de minimis exclusion) from 120% to 54%.

By way of background, the de minimis statutory exemption allows many shipments valued at $800 or less to enter the United States duty-free. Section 2(c)(i) of Executive Order 14256 of April 2, 2025 (Further Amendment to Duties Addressing the Synthetic Opioid Supply Chain in the People’s Republic of China as Applied to Low-Value Imports) eliminated the de minimis exception for China imports, effective May 2, 2025. Subsequently, Executive Order 14259 and Executive Order 14266 increased the duty rate on such goods.

The May 12 Order decreases the ad valorem rate of duty for low-value shipments from China and Hong Kong from 120% to 54% (this is still higher than the originally proposed low-value shipment rate of 30%). However, the May 12 Order retains the alternative “specific duty” option for low-value shipments delivered to the United States from China or Hong Kong via the international postal network at $100 per postal item, though this rate is no longer subject to the automatic increase originally scheduled to go into effect on June 1, 2025.

While the de minimis exclusion has been removed for goods from China and Hong Kong, it is still presently in place for imports that originate in other jurisdictions. However, President Trump has previously directed the Secretary of Commerce to develop mechanisms to collect IEEPA-based duties on low-value shipments from other jurisdictions.

II. Chinese Actions and Consultation Mechanism

China Lowers Tariffs on U.S. Goods to 10%

Pursuant to the Joint Statement, China issued an Announcement of the Customs Tariff Commission of the State Council No. 7 of 2025 on May 13, 2025, local time, that suspends the prior 34% tariff on goods from the United States originally announced on April 4, 2025, for a matching 90 days, while retaining a parallel 10% tariff during the period of the pause.

China to Remove Non-Tariff Barriers

In the Joint Statement and accompanying Fact Sheet, China committed to “adopt all necessary administrative measures to suspend or remove the non-tariff countermeasures taken against the United States since April 2, 2025.”

By way of background, China announced a range of non-tariff retaliatory measures on April 4, 2025, including the following:

China’s Ministry of Commerce added 11 U.S. companies to its list of so-called “unreliable entities,” which bars them from engaging in all import and export activities in China and making new investments in China.
Beijing added 16 U.S. entities to its export control list, which prohibits exports of dual-use items to the listed firms. Nearly all of the firms so targeted operate in the defense and aerospace industries.
The Ministry of Commerce announced the launch of an anti-dumping probe into imports of certain medical computed tomography tubes from the United States and India.
Beijing launched an anti-monopoly investigation into the PRC subsidiary of a major U.S. chemical company.
Beijing announced export controls on seven types of rare earth minerals to the United States, which are vital to end uses ranging from electric cars to defense. Notably, the United States imports its rare earth materials predominantly from China, which produces approximately 90% of the world’s supply.

Parties to Establish a Consultation Mechanism

The Joint Statement also promises that the U.S. and China “will establish a mechanism to continue discussions about economic and trade relations,” and that such discussions may be conducted alternately in China and the United States, or a third country upon agreement of the parties.

Conclusion

These developments involving the critical bilateral trading relationship between the United States and China, a relationship valued at an estimated $582 billion worth of annual goods trade, underscores the ongoing fluidity in global trade policy. We will continue to closely monitor developments related to tariffs and the progress of this and other anticipated trade deals. Gibson Dunn lawyers are prepared to help clients navigate this evolving landscape.

The following Gibson Dunn lawyers prepared this update: Hui Fang, Adam M. Smith, Donald Harrison, and Samantha Sewall.

Gibson Dunn’s lawyers are available to assist in addressing any questions you may have regarding these issues. For additional information about how we may assist you, please contact the Gibson Dunn lawyer with whom you usually work, the authors, or the following leaders and members of the firm’s International Trade Advisory & Enforcement practice group:

United States:
Ronald Kirk – Co-Chair, Dallas (+1 214.698.3295, rkirk@gibsondunn.com)
Adam M. Smith – Co-Chair, Washington, D.C. (+1 202.887.3547, asmith@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)
Matthew S. Axelrod – Washington, D.C. (+1 202.955.8517, maxelrod@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)
Amanda H. Neely – Washington, D.C. (+1 202.777.9566, aneely@gibsondunn.com)
Samantha Sewall – Washington, D.C. (+1 202.887.3509, ssewall@gibsondunn.com)
Michelle A. Weinbaum – Washington, D.C. (+1 202.955.8274, mweinbaum@gibsondunn.com)
Roxana Akbari – Orange County (+1 949.451.3850, rakbari@gibsondunn.com)
Karsten Ball – Washington, D.C. (+1 202.777.9341, kball@gibsondunn.com)
Hugh N. Danilack – Washington, D.C. (+1 202.777.9536, hdanilack@gibsondunn.com)
Hui Fang – Washington, D.C. (+1 202.777.9577, hfang@gibsondunn.com)
Mason Gauch – Houston (+1 346.718.6723, mgauch@gibsondunn.com)
Chris R. Mullen – Washington, D.C. (+1 202.955.8250, cmullen@gibsondunn.com)
Sarah L. Pongrace – New York (+1 212.351.3972, spongrace@gibsondunn.com)
Anna Searcey – Washington, D.C. (+1 202.887.3655, asearcey@gibsondunn.com)
Audi K. Syarief – Washington, D.C. (+1 202.955.8266, asyarief@gibsondunn.com)
Scott R. Toussaint – Washington, D.C. (+1 202.887.3588, stoussaint@gibsondunn.com)
Lindsay Bernsen Wardlaw – Washington, D.C. (+1 202.777.9475, lwardlaw@gibsondunn.com)
Shuo (Josh) Zhang – Washington, D.C. (+1 202.955.8270, szhang@gibsondunn.com)

Pohl v. Cheatham, No. 23-0045 – Decided May 9, 2025

On May 9, the Texas Supreme Court held that Texas’s civil barratry statute doesn’t apply to soliciting legal-services contracts outside Texas.

“We reaffirm our longstanding presumption that a civil statute does not have extraterritorial effect unless the Legislature makes clear that such effect is intended.”

Justice Huddle, writing for the Court

Background:

Two Texas lawyers entered into legal-services contracts with clients in Louisiana and Arkansas to represent those clients in personal-injury cases filed in courts outside Texas. After those cases settled, the clients sued the Texas lawyers under Texas’s civil barratry statute, seeking to void their legal-services contracts. The clients alleged that the lawyers directed and financed out-of-state case runners to solicit clients, and that the lawyers coordinated and funded these efforts from their Texas offices.

The Texas lawyers moved for summary judgment, arguing that Texas’s civil barratry statute doesn’t apply because the alleged solicitation occurred outside Texas. The trial court granted summary judgment, but the court of appeals reversed. It held that applying Texas’s civil barratry statute wouldn’t be impermissibly extraterritorial because some of the lawyers’ acts, such as financing the out-of-state runners, occurred in Texas.

Issue:

Does Texas’s civil barratry statute apply to acts of solicitation that occurred outside Texas?

Court’s Holding:

No. Nothing in the civil barratry statute’s text overcomes the strong presumption against extraterritoriality. Applying the statute to the clients’ claims in this case would be impermissible because the statute’s focus is on the acts that procured the legal-services contracts—all of which occurred outside Texas.

What It Means:

The Court reaffirmed the strong presumption against extraterritoriality: “[T]he Legislature generally legislates with Texas concerns in mind, and Texas legislation therefore is meant to apply only within Texas’s borders.” Op. 15. The decision makes clear that defendants can challenge a plaintiff’s statutory claim on the ground that it seeks to give the statute an impermissible extraterritorial effect.
The Court rejected the position that a civil statute should be applied extraterritorially “merely because some or any conduct related to the violation occurs in Texas,” explaining that “the presumption would be meaningless if any domestic conduct could defeat it.” Op. 21–22. Instead, the Court stressed that courts must “home in on the core conduct the Legislature sought to address—the object of the statute’s solicitude—and determine where that conduct occurred.” Op. 22.
Relying heavily on the U.S. Supreme Court’s extraterritoriality precedents, the Court adopted a two-step framework for analyzing the extraterritoriality of Texas statutes. First, Texas courts consider whether the statutory text expresses a clear intent to overcome the “strong presumption against extraterritorial application of a Texas statute.” Op. 17–18. If not, courts must then assess whether applying the statute to the plaintiff’s claim would be an impermissible extraterritorial application. To do so, courts must “identify the ‘focus’ of the Legislature’s concern underlying the provision at issue” and “ask whether the conduct relevant to that focus occurred within or outside Texas.” Op. 21.

The Court’s opinion is available here.

Gibson Dunn’s lawyers are available to assist in addressing any questions you may have regarding developments at the Texas Supreme Court. Please feel free to contact the following practice group leaders:

Appellate and Constitutional Law Practice

Thomas H. Dupree Jr. +1 202.955.8547 tdupree@gibsondunn.com	Allyson N. Ho +1 214.698.3233 aho@gibsondunn.com	Julian W. Poon +1 213.229.7758 jpoon@gibsondunn.com
Brad G. Hubbard +1 214.698.3326 bhubbard@gibsondunn.com

Related Practice: Texas General Litigation

Trey Cox +1 214.698.3256 tcox@gibsondunn.com	Collin Cox +1 346.718.6604 ccox@gibsondunn.com	Gregg Costa +1 346.718.6649 gcosta@gibsondunn.com
Mike Raiff +1 214.698.3350 mraiff@gibsondunn.com	Russ Falconer +1 214.698.3170 rfalconer@gibsondunn.com

This alert was prepared by Texas of counsels Ben Wilson and Kathryn Cherry and Texas associates Elizabeth Kiernan, Stephen Hammer, and Andrew Mitchell.

A new CFIUS “fast-track” pilot program—designed to streamline the investment process for foreign investors from allied and partner countries—aims to enhance efficiencies in the CFIUS review process while maintaining robust national security protections.

On May 8, 2025, the U.S. Department of the Treasury, in its capacity as Chair of the Committee on Foreign Investment in the United States (CFIUS), announced plans to establish a “fast-track” pilot program to expedite its review of investments from allied and partner countries. This program will include a first of its kind “Known Investor” portal, where CFIUS can collect information from foreign investors pre-filing with the aim of accelerating the review process. Treasury will launch this initiative as a pilot program with plans to refine it over time, though further details have not been provided at this time.

This development closely tracks President Trump’s America First Investment Policy (the “Policy”) issued on February 21, 2025, which outlined a dual policy goal: making the United States “the world’s greatest destination for investment dollars,” while also enhancing the “ability to protect the United States from new and evolving threats that can accompany foreign investment.” The Policy announced that the U.S. would create a “fast-track” process to facilitate greater investment from “specified allies and partner sources” based on “objective standards,” though a formal list of qualifying jurisdictions was not released. At the same time, the announcement underscored that CFIUS would maintain rigorous scrutiny on non-passive investments by the People’s Republic of China.

Looking forward, the “Known Investor” program could be particularly valuable for European and Middle Eastern investors, particularly for transactions with minimal national security risks. At this stage, it remains unclear whether the implementation will follow a notice and comment procedure via the Federal Register or whether guidance will be issued directly through the CFIUS website. The exact timeline for implementation also remains unclear.

Our team at Gibson Dunn is closely monitoring this new development and is actively advising clients on preparing for the new program.

The following Gibson Dunn lawyers prepared this update: Roxana Akbari, Sarah Burns, Stephenie Gosnell Handler, and Chris Mullen.

Gibson Dunn’s lawyers are available to assist in addressing any questions you may have regarding these issues. For additional information about how we may assist you, please contact the Gibson Dunn lawyer with whom you usually work, the authors, or the following leaders and members of the firm’s International Trade Advisory & Enforcement or Sanctions & Export Enforcement practice groups:

United States:
Ronald Kirk – Co-Chair, Dallas (+1 214.698.3295, rkirk@gibsondunn.com)
Adam M. Smith – Co-Chair, Washington, D.C. (+1 202.887.3547, asmith@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)
Matthew S. Axelrod – Washington, D.C. (+1 202.955.8517, maxelrod@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)
Amanda H. Neely – Washington, D.C. (+1 202.777.9566, aneely@gibsondunn.com)
Samantha Sewall – Washington, D.C. (+1 202.887.3509, ssewall@gibsondunn.com)
Michelle A. Weinbaum – Washington, D.C. (+1 202.955.8274, mweinbaum@gibsondunn.com)
Roxana Akbari – Orange County (+1 949.451.3850, rakbari@gibsondunn.com)
Karsten Ball – Washington, D.C. (+1 202.777.9341, kball@gibsondunn.com)
Hugh N. Danilack – Washington, D.C. (+1 202.777.9536, hdanilack@gibsondunn.com)
Mason Gauch – Houston (+1 346.718.6723, mgauch@gibsondunn.com)
Chris R. Mullen – Washington, D.C. (+1 202.955.8250, cmullen@gibsondunn.com)
Sarah L. Pongrace – New York (+1 212.351.3972, spongrace@gibsondunn.com)
Anna Searcey – Washington, D.C. (+1 202.887.3655, asearcey@gibsondunn.com)
Audi K. Syarief – Washington, D.C. (+1 202.955.8266, asyarief@gibsondunn.com)
Scott R. Toussaint – Washington, D.C. (+1 202.887.3588, stoussaint@gibsondunn.com)
Lindsay Bernsen Wardlaw – Washington, D.C. (+1 202.777.9475, lwardlaw@gibsondunn.com)
Shuo (Josh) Zhang – Washington, D.C. (+1 202.955.8270, szhang@gibsondunn.com)

Europe

04/28/2025

CJEU | Fact Sheet | Case Law on Personal Data Protection

The Court of Justice of the European Union (“CJEU”) has updated its “case law fact sheet” on personal data protection which compiles its key rulings in the field.

For further information: CJEU Website

04/23/2025

European Data Protection Board | 2024 Annual Report

The European Data Protection Board (“EDPB”) has published its annual report for 2024.

The report provides an overview of the EDPB work in 2024 and highlights key achievements such as the adoption of the 2024-2027 strategy and an increase in the consistency opinions under Article 64(2) GDPR (e.g., on “Consent or Pay” models, the use of personal data to train AI models). The report also emphasizes the EDPB’s contribution to cross-regulatory cooperation for new pieces of legislation such as the Digital Services Act (DSA) and the AI Act.

For further information: EDPB Website

04/14/2025

European Data Protection Board | Guidelines | Personal data and blockchain

The European Data Protection Board (“EDPB”) has published Guidelines 02/2025 on processing of personal data through blockchain technologies, open to public consultation until 9 June 2025.

The guidelines describe the blockchain technologies and provide a framework for organizations considering their use. They outline key GDPR considerations for processing activities (e.g., data retention periods, data subjects’ rights), and clarify the responsibilities of different actors involved in a blockchain related processing.

For more information: EDPB Website

04/11/2025

European Commission | Public Consultation | EU Cybersecurity Act

The European Commission has opened a public consultation on the evaluation and revision of the 2019 EU Cybersecurity Act.

The EU Commission is seeking stakeholders’ feedback on key areas for the contemplated revision, including the mandate of the European Agency for Cybersecurity (ENISA), the European Cybersecurity Framework, challenges related to ICT supply chain security, and the simplification of cybersecurity measures. The public consultation is open until 20 June 2025.

For more information: European Commission Website

04/10/2025

European Commission | Guidelines | Generative AI in Research

The European Commission has updated its Living Guidelines on the responsible use of generative AI in research.

The guidelines provide recommendations for researchers and organizations to ensure they promote and support responsible use of generative AI in their research activities. They are regularly updated to reflect the technological developments in the field.

For more information: European Commission Website, Guidelines

04/10/2025

European Data Protection Board | Report | Large Language Models

The European Data Protection Board (“EDPB”) has published a report on AI Privacy Risks and Mitigations Large Language Models (“LLMs”).

The report provides a risk management methodology to help developers and users of LLMs identify, assess and mitigate privacy risks in the development and use of LLM systems. As such, it complements the Data Protection Impact Assessment process (Art. 35 GDPR) and supports requirements regarding data protection by design and by default (Art. 25 GDPR) and security of personal data (Art. 32 GDPR).

For more information: EDPB Website

04/02/2025

European Commission | Report | B2B Data Sharing & EU Data Act

The European Commission’s Expert Group has issued its final report on B2B data sharing and cloud computing contracts under the EU Data Act.

The report contains model contractual terms (MCTs) covering different data sharing scenarios (e.g., data holder to user, user to data recipient), as well as standard contractual clauses (SCCs) for cloud computing contracts.

For more information: European Commission Website

03/27/2025

European Commission | DORA Directive | Infringement Procedures

The European Commission has launched infringement procedures against 13 Member States (including France, Spain, and Belgium) for failing to fully transpose the Digital Operational Resilience Act (“DORA”) Directive within the given deadline (17 January 2025).

The Member States have two months to complete their transposition and notify the adopted measures to the Commission.

For more information: European Commission Website

France

04/29/2025

French Supervisory Authority | Annual Report | Enforcement

The French Supervisory Authority (“CNIL”) has released its 2024 annual report, recording 17,772 complaints, 87 sanctions, and over €55 million in fines.

The CNIL has stepped up enforcement efforts with 331 corrective actions and observed an increase in the use of simplified procedures. It has also strengthened its response to growing cybersecurity threats and expanded its oversight on AI and digital innovation.

For more information: CNIL Website [FR]

04/24/2025

French Supervisory Authority | Public Consultation | Multi-terminal Consent

The French Supervisory Authority (“CNIL”) has launched a public consultation for its draft recommendation on multi-terminal consent across various devices.

The draft recommendation concerns stakeholders which intend to collect multi-terminal consent when users are authenticated on an account. They offer concrete recommendations on how to validly collect multi-terminal consent. The public consultation will end on 5 June 2025.

For more information: CNIL Website [FR]

04/23/2025

French Supervisory Authority | Publication | Data Breach

The French Supervisory Authority (“CNIL”) has published a fictional data breach use case to help professionals better understand and prevent risks related to unauthorized access to data handled by processors.

The use case outlines a typical data breach based on a real-life incident that was reported to the CNIL.

For more information: CNIL Website [FR]

04/14/2025

French Supervisory Authority | 2025-2028 European and International Strategy

The French Supervisory Authority (“CNIL”) has released its European and international strategy for 2025-2028.

The strategy focuses on three priorities: improving European cooperation, promoting high international data protection standards while supporting innovation, and reinforcing CNIL’s global influence.

For more information: CNIL Website [FR]

04/09/2025

French Supervisory Authority | Public Consultation | Session Recording and Replay Tools

The French Supervisory Authority (“CNIL”) has launched a public consultation on browsing session recording and replay tools.

These tools, which capture detailed user interactions, raise significant privacy concerns due to their potential to collect sensitive personal data without users’ awareness. The goal of the consultation is to develop practical recommendations to help tool providers and website editors ensure GDPR compliance and better protect user privacy.

For more information: CNIL Website [FR]

04/08/2025

French Supervisory Authority | Guidelines | Mobile Applications

The French Supervisory Authority (“CNIL”) has published an updated version of its recommendations on mobile applications recommendations.

The CNIL has published an updated version of its recommendations on mobile applications, originally adopted in July 2024 and released in September 2024. The revised version includes corrections and clarifications in response to stakeholder feedback, and an annotated version is available to highlight the updates.

For more information: CNIL Website [FR]

04/01/2025

French Supervisory Authority | Guidelines | Multi-Factor Authentication (MFA)

The French Supervisory Authority (“CNIL”) has published a recommendation on the implementation of multi-factor authentication (“MFA”) to help online services implement privacy-compliant cybersecurity solutions.

The guidance aims to support controllers and solution providers in aligning MFA practices with the GDPR—covering legal bases, data minimization, retention periods, and the appropriate use of authentication factors such as biometrics, SMS codes, and employee devices.

For more information: CNIL Website [FR]

04/01/2025

ANSSI | Cybersecurity | Information System Security Accreditation

The French National Cybersecurity Agency (“ANSSI”) has published updated guidance on the security accreditation of information systems.

This publication details the steps and documentation required to accredit an information system, including risk assessment, security objectives, and verification processes. It aims to ensure a structured and high-assurance approach to system security within both public and private organizations. The guidance forms part of ANSSI’s broader efforts to promote cybersecurity resilience and regulatory compliance in France.

For more information: ANSSI Website [FR]

Germany

04/29/2025

Hamburg Supervisory Authority | Data Act | Guidance

The Hamburg Supervisory Authority (“HmbBfDI”) has published guidance on the new European Data Act, which will apply from 12 September 2025.

The HmbBfDI’s guidance provides an overview of the new obligations for companies under the Data Act, in particular in relation to data sharing obligations applicable to manufacturers of connected devices. The guidance also identified the key steps companies should take to prepare for the application of the Data Act (e.g., data mapping, updating contracts, marking trade secrets). Since the Data Act applies without prejudice to the GDPR, the guidance analyses the interactions between obligations related to personal data under the GDPR and those related to personal data under the Data Act. Finally, the HmbBfDI has highlighted the responsibilities of supervisory authorities.

For further information: HmbBfDI Website [DE]

04/24/2025

Hamburg Supervisory Authority | Compliance Review | Third Party Services

The Hamburg Supervisory Authority (“HmbBfDI”) has reviewed 1.000 websites for data protection compliance regarding the use of third-party cookies and services and identified deficiencies in 185 of them.

The HmbBfDI found that although most of the websites reviewed met the data protection requirements, deficiencies were found for approximately 185 websites. Most violations result from the fact that certain tracking technologies are activated immediately when the page is first accessed, with the result that users are tracked before consent is obtained.

For more information: HmbBfDI Website [DE]

04/24/2025

Hamburg Supervisory Authority | Q&A | Tracking

The Hamburg Supervisory Authority (“HmbBfDI”) has published FAQs on tracking via third-party services on websites.

The HmbBfDI emphasises that tracking is only permitted with the explicit consent of the respective data subject. The authority included guidance on the design of consent banners, emphasising the need to implement a “reject all” option on the same level as an “accept all” button. The guidance highlights the importance of complying with the requirements of the ePrivacy Directive (transposed into national law) in relation to tracking, alongside the provisions of the GDPR.

For more information: HmbBfDI Website [DE]

04/10/2025

Federal Commissioner for Data Protection and Freedom of Information | Annual Report

The German Federal Commissioner for Data Protection and Freedom of Information (BfDI) has published its annual report.

The Federal Commissioner for Data Protection and Freedom of Information is responsible for monitoring data protection at federal public bodies and at companies that provide telecommunications and postal services. The report shows that most proceedings are related to information and transparency obligations.

For more information: BfDI Website [DE]

04/09/2025

New German Government | Coalition Agreement | Future of Data Protection

The new German Government consisting of the CDU/CSU (Christian Democratic Union of Germany/Christian Social Union of Germany) and SPD (Social Democratic Party of Germany) have published their coalition agreement.

The new German government intends to liberalize data protection law at both national and EU level and work towards “data utilization”, “data sharing” and a “data economy”. It is planned to bundle the data protection authorities of the individual federal states into a nationwide authority. At EU level, the coalition intends to exclude low-risk data processing activities as well as small and medium-sized enterprises from the scope of the GDPR.

For more information: SPD Website [DE]

02/20/2025

Federal Labour Court | Judgement | Right to Compensation

The Federal Labour Court (BAG) ruled in a recently published decision that a delay in providing information under Art. 15 GDPR does not by itself justify a claim for compensation.

According to the BAG, a delayed provision of information under Article 15 GDPR by a former employer does not by itself constitute non-material damage within the meaning of Article 82(1) GDPR. The BAG held that a mere delay, absent specific and substantiated fears of data misuse or an actual loss of control over personal data, does not give rise to a claim for damages. Subjective emotional responses such as worry, annoyance, or nervousness are not sufficient unless they are objectively substantiated by a real risk of data misuse.

For more information: Official Court Website [DE]

Greece

04/08/2025

Greek Supervisory Authority | Guidance | AI and GDPR

The Greek Supervisory Authority (“HDPA”) offers training sessions on AI and GDPR.

The HDPA published educational materials and provides training programs developed by external experts from the European Data Protection Board (“EDPB”). It notably offers a Data Protection Officers and Privacy Professionals Program, as well as a program for ICT Professionals. The material covers various topics such as core concepts of AI, Data Protection and Large Language Models, and Transparency.

For more information: HDPA Website [GR]

Netherlands

04/16/2025

Dutch Supervisory Authority | Survey | Algorithmic Data Processing

The Dutch Supervisory Authority (“AP”) has published survey results showing that many companies feel unprepared to manage algorithms processing personal data. Businesses often lack clarity on whether and how such algorithms are used.

The AP plans to provide guidance and practical tools, as well as and collect best practices to improve responsible algorithm procurement and use. More specifically, the AP is currently developing a checklist for businesses to adequately deal with the rights of people who are subject to algorithmic decision-making.

For more information: AP Press release [NL]

United Kingdom

04/29/2025

CPPA & Information Commissioner’s Office | International Cooperation | Privacy Enforcement

The California Privacy Protection Agency (“CPPA”) and the Information Commissioner’s Office (“ICO”) signed a declaration of cooperation to strengthen international collaboration on data protection.

The agreement will enable joint research, best practice sharing, and coordinated enforcement efforts. It marks the CPPA’s third international partnership, following agreements with Korea’s PIPC and France’s CNIL, and reflects its broader commitment to global privacy cooperation.

For more information: CPPA Press release

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

Gibson Dunn lawyers are available to assist in addressing any questions you may have about these developments. Please contact the Gibson Dunn lawyer with whom you usually work, the authors, or any leader or member of the firm’s Privacy, Cybersecurity & Data Innovation practice group:

Privacy, Cybersecurity, and Data Innovation:

United States:
Abbey A. Barrera – San Francisco (+1 415.393.8262, abarrera@gibsondunn.com)
Ashlie Beringer – Palo Alto (+1 650.849.5327, aberinger@gibsondunn.com)
Ryan T. Bergsieker – Denver (+1 303.298.5774, rbergsieker@gibsondunn.com)
Keith Enright – Palo Alto (+1 650.849.5386, kenright@gibsondunn.com)
Gustav W. Eyler – Washington, D.C. (+1 202.955.8610, geyler@gibsondunn.com)
Cassandra L. Gaedt-Sheckter – Palo Alto (+1 650.849.5203, cgaedt-sheckter@gibsondunn.com)
Svetlana S. Gans – Washington, D.C. (+1 202.955.8657, sgans@gibsondunn.com)
Lauren R. Goldman – New York (+1 212.351.2375, lgoldman@gibsondunn.com)
Stephenie Gosnell Handler – Washington, D.C. (+1 202.955.8510, shandler@gibsondunn.com)
Natalie J. Hausknecht – Denver (+1 303.298.5783, nhausknecht@gibsondunn.com)
Jane C. Horvath – Washington, D.C. (+1 202.955.8505, jhorvath@gibsondunn.com)
Martie Kutscher Clark – Palo Alto (+1 650.849.5348, mkutscherclark@gibsondunn.com)
Kristin A. Linsley – San Francisco (+1 415.393.8395, klinsley@gibsondunn.com)
Timothy W. Loose – Los Angeles (+1 213.229.7746, tloose@gibsondunn.com)
Vivek Mohan – Palo Alto (+1 650.849.5345, vmohan@gibsondunn.com)
Rosemarie T. Ring – San Francisco (+1 415.393.8247, rring@gibsondunn.com)
Ashley Rogers – Dallas (+1 214.698.3316, arogers@gibsondunn.com)
Sophie C. Rohnke – Dallas (+1 214.698.3344, srohnke@gibsondunn.com)
Eric D. Vandevelde – Los Angeles (+1 213.229.7186, evandevelde@gibsondunn.com)
Benjamin B. Wagner – Palo Alto (+1 650.849.5395, bwagner@gibsondunn.com)
Frances A. Waldmann – Los Angeles (+1 213.229.7914,fwaldmann@gibsondunn.com)
Debra Wong Yang – Los Angeles (+1 213.229.7472, dwongyang@gibsondunn.com)

Europe:
Ahmed Baladi – Paris (+33 1 56 43 13 00, abaladi@gibsondunn.com)
Patrick Doris – London (+44 20 7071 4276, pdoris@gibsondunn.com)
Kai Gesing – Munich (+49 89 189 33-180, kgesing@gibsondunn.com)
Joel Harrison – London (+44 20 7071 4289, jharrison@gibsondunn.com)
Lore Leitner – London (+44 20 7071 4987, lleitner@gibsondunn.com)
Vera Lukic – Paris (+33 1 56 43 13 00, vlukic@gibsondunn.com)
Lars Petersen – Frankfurt/Riyadh (+49 69 247 411 525, lpetersen@gibsondunn.com)
Christian Riis-Madsen – Brussels (+32 2 554 72 05, criis@gibsondunn.com)
Robert Spano – London/Paris (+44 20 7071 4000, rspano@gibsondunn.com)

Asia:
Connell O’Neill – Hong Kong (+852 2214 3812, coneill@gibsondunn.com)
Jai S. Pathak – Singapore (+65 6507 3683, jpathak@gibsondunn.com)

From the Derivatives Practice Group: This week, the CFTC placed certain staff on administrative leave pending ongoing investigations.

New Developments

CFTC Staff on Leave Pending Investigation. On May 5, pursuant to the President’s executive orders on lawful governance and accountability, the CFTC placed certain staff on administrative leave for potential violations of laws, government ethics requirements and professional rules of conduct. The CFTC stated it is committed to holding employees to the highest standards, as expected by American taxpayers. Investigations are currently ongoing into these matters and the CFTC has committed to provide updates as appropriate. [NEW]
SEC Publishes New Market Data, Analysis, and Visualizations. On April 28, the SEC’s Division of Economic and Risk Analysis (“DERA”) has published new data and analysis on the key market areas of public issuers, exempt offerings, Commercial Mortgage-Backed Securities (“CMBS”), Asset-Backed Securities (“ABS”), money market funds, and security-based swap dealers (“SBSD”) in an effort to increase transparency and understanding of our capital markets amongst the public.
Paul S. Atkins Sworn in as SEC Chairman. On April 21, Paul S. Atkins was sworn into office as the 34th Chairman of the SEC. Chairman Atkins was nominated by President Donald J. Trump on January 20, 2025, and confirmed by the U.S. Senate on April 9, 2025. Prior to returning to the SEC, Chairman Atkins was most recently chief executive of Patomak Global Partners, a company he founded in 2009. Chairman Atkins helped lead efforts to develop best practices for the digital asset sector. He served as an independent director and non-executive chairman of the board of BATS Global Markets, Inc. from 2012 to 2015.
CFTC Staff Seek Public Comment Regarding Perpetual Contracts in Derivatives Markets. On April 21, the CFTC issued a Request for Comment to better inform them on the potential uses, benefits, and risks of perpetual contracts in the derivatives markets the CFTC regulates (“Perpetual Derivatives”). This request seeks comment on the characteristics of perpetual derivatives, including those characteristics which may differ across products. as well as the implications of their use in trading, clearing and risk management. The request also seeks comment on the risks of perpetual derivatives, including risks related to the areas of market integrity, customer protection, or retail trading.
CFTC Staff Seek Public Comment on 24/7 Trading. On April 21, the CFTC issued a Request for Comment to better inform them on the potential uses, benefits, and risks of trading on a 24/7 basis in the derivatives markets the CFTC regulates. This request seeks comment on the implications of extending the trading of CFTC-regulated derivatives markets to an effectively 24/7 basis, including the potential effects on trading, clearing and risk management which differ from trading during current market hours. The request also seeks comment on the risks of 24/7 trading, and the associated clearing systems, including risks related to the areas of market integrity, customer protection, or retail trading.

New Developments Outside the U.S.

- ESMA Delivers Technical Advice on Market Abuse and SME Growth Markets as Part of the Listing Act. On May 7, ESMA published its advice to the European Commission to support the Listing Act’s goals to simplify listing requirements, enhance access to public capital markets for EU companies, and improve market integrity. In relation to Market Abuse Regulation (“MAR”), the advice covers: protracted processes, identifying key moments for public disclosure; delayed public disclosure, listing situations where delays are not allowed; and Cross-Market Order Book Mechanism, indicating the methodology for the identification of trading venues with significant cross-border activity. [NEW]
- ESMA Consults on Rules for ESG Rating Providers. On May 2, ESMA published a Consultation Paper on draft Regulatory Technical Standards (“RTS”) under the ESG Rating Regulation. The draft RTS cover the following aspects that apply to ESG rating providers: the information that should be provided in the applications for authorization and recognition; the measures and safeguards that should be put in place to mitigate risks of conflicts of interest within ESG rating providers who carry out activities other than the provision of ESG ratings; the information that they should disclose to the public, rated items and issuers of rated items, as well as users of ESG ratings. [NEW]
- ESMA Publishes the Annual Transparency Calculations for Non-equity Instruments and Bond Liquidity Data. On April 30, the European Securities and Markets Authority (“ESMA”), the EU’s financial markets regulator and supervisor, published the results of the annual transparency calculations for non-equity instruments and new quarterly liquidity assessment of bonds under MiFID II and MiFIR.
- ESMA Report Shows Increased Data Use Across EU and First Effects of Reporting Burden Reduction Efforts. On April 30, ESMA published the fifth edition of its Report on the Quality and Use of Data. The report reveals how the regulatory data collected has been used by authorities in the EU and provides insight into actions taken to ensure data quality. The document presents concrete cases on data use ranging from market monitoring to supervision, enforcement and policy making. The report also highlights ESMA’s Data Platform and ongoing improvements to data quality frameworks as key advancements in tools and technology for data quality.
- ESMA Issues Supervisory Guidelines to Prevent Market Abuse under MiCA. On April 29, ESMA published guidelines on supervisory practices to prevent and detect market abuse under the Market in Crypto Assets Regulation (“MiCA”). Based on ESMA’s experience under Market Abuse Regulation (“MAR”), the guidelines intended for National Competent Authorities (“NCAs”) include general principles for effective supervision and specific practices for detecting and preventing market abuse in crypto assets. They consider the unique features of crypto trading, such as its cross-border nature and the intensive use of social media.
- ESMA Assesses the Risks Posed by the Use of Leverage in the Fund Sector. On April 24, ESMA published its annual risk assessment of leveraged alternative investment funds (“AIFs”) and its first analysis on risks in UCITS using the absolute Value-at-Risk (“VaR”) approach. Both articles represent ESMA’s work to identify highly leveraged funds in the EU investment sector and assess their potential systemic relevance.

New Industry-Led Developments

ISDA Presents Proposed Charter for the Credit Derivatives Governance Committee. On May 8, ISDA presented the proposed Charter for the Credit Derivatives Governance Committee and accompanying DC Rule changes to implement. Pursuant to the announcement made in 2024, an ISDA working group formed from ISDA’s Credit Steering Committee has worked on producing the Governance Committee solution. ISDA views the Governance Committee as the first step in implementing the other recommended changes from the Linklaters’ report as part of an independent review on the composition, functioning, governance and membership of the DCs. [NEW]
ISDA Publishes Governance Committee Proposal for CDS Determinations Committees. On May 8, ISDA published a proposal for a new governance committee for the CDS Determinations Committees (“DCs”), the first in a series of amendments to improve the structure of the DCs and maintain their integrity in changing economic and market conditions. The governance committee would be responsible for taking market feedback and adopting rule changes affecting the structure and operations of the DCs to ensure their long-term viability and meet market expectations for efficiency and transparency in credit event determinations. [NEW]
ISDA Responds to FASB Proposal on KPIs for Business Entities. On April 30, ISDA submitted a response to the Financial Accounting Standards Board’s (“FASB”) proposal on financial key performance indicators (“KPIs”) for business entities. In the response, ISDA addressed the implications of KPI standardization, its potential impact on financial reporting and risk management, and the broader cost-benefit considerations for preparers and investors. Based on proprietary analysis, ISDA does not view financial KPI standardization or the proposed disclosures as urgent priorities for the FASB at this time.
CPMI-IOSCO Assesses that EU has Implemented Principles for Financial Market Infrastructures for Two FMI Types. On April 28, CPMI-IOSCO released a report that assessed the completeness and consistency of the legal, regulatory and oversight framework in place as of October 30, 2019. The report finds that the implementation of the Principles for Financial Market Infrastructures is complete and consistent for all Principles for payment systems. The legal, regulatory and oversight frameworks in the EU for central securities depositories and securities settlement systems are complete and consistent with the Principles in most aspects. However, the assessment identified some areas for improvement, particularly in aspects where implementation was broadly, partly, or not consistent, including risk and governance principles.
ISDA/IIF Responds to EC’s Consultation on the Market Risk Prudential Framework. On April 22, ISDA and the Institute of International Finance (“IIF”) submitted a joint response to the EC’s consultation on the application of the market risk prudential framework. The associations believe the capital framework should be risk-appropriate and as consistent as possible across jurisdictions to ensure a level playing field without competitive distortions due to divergent rules.
ISDA and FIA Respond to Consultation on Commodity Derivatives Markets. On April 22, ISDA and FIA submitted a joint response to the EC’s consultation on the functioning of commodity derivatives markets and certain aspects relating to spot energy markets. In addition to questions on position management, reporting and limits and the ancillary activities exemption, the consultation also addressed data and reporting and certain concepts raised in the Draghi report, such as a market correction mechanism to cap pricing of natural gas and an obligation to trade certain commodity derivatives in the EU only.

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

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)