Bocconi Knowledge
Internal Market and Sustainability: The Role of Private Law
Quo vadis, EU (Law)? 3rd edition: The Green Transition 3/4
The third panel delved into the complex dynamics between the internal market and sustainability, with a keen focus on the role of private law.
In the pursuit of achieving a comprehensive green transition, legal frameworks must play a pivotal role in promoting sustainability and ensuring a balance between economic prosperity and environmental well-being. To explore this topic, the Bocconi Faculty of Law hosted a panel, chaired by Prof. Mikko Kaunisvaara(University of Lapland), and invited Prof. Lillà Montagnani (Bocconi University), Prof. Rosa Ballardini(University of Lapland), Prof. Béatrice Shütte (University of Lapland) and Prof. Janne Kaisto(University of Lapland) to provide a comprehensive understanding on different aspects of private law.
Closing the Loops of Circular Economy - Opening the Infrastructure of the Digital Circular Economy – Prof. Lillà Montagnani
During her speech, Professor Montagnani presented the complex topic of the digital circular economy, trying to address its main issues while providing some possible solutions.
Firstly, the differences between the linear and circular economy models were explained, the former focusing solely on profitability, while the latter embodies the concept of sustainable development.
The traditional economic system currently used is framed in a linear way: natural resources are extracted, converted into products, used and then disposed of; this is a symptom of the unsustainable race towards development that has characterized human evolution, hence the need to create sustainable economies.
Circular economy, on the other hand, aims to prolong the lifespan of products within the internal market. The main idea is to avoid the use and disposal of products, and instead, reintroduce them into the production and distribution chains by repairing them to the maximum extent possible. The ultimate aim is to create products that are designed to last and optimized for reuse. This scheme can be summed up in the “R” activities (reusing, repairing, refurbishing, remanufacturing, recycling).
However, in some cases, Intellectual Property Rights (IPRs) represent an obstacle to the achievement of a sustainable circular economy by preventing products from re-entering the internal market. Infact, IPRs are perfectly coherent with a linear economy: they enable right holders to produce and control the disposition of their products, until the very last chain of disposal. Yet, the perspective need to change to fit the digital circular economy. All this frame must be looked in relation to technology, which plays a crucial role in the production, consumption, and distribution of goods. The shift towards a green economy must happen alongside a digital transition, then one should focus more on digital circular economy.
The 3 main legal issues standing on the way of the digital circular economy are: legal restrictions on information, technologies, and data resulting from third parties’ rights (IPRs); as well as de factorestrictions, such as digital locks and contractual limitations to circular activities.
The green transition and the objective of establishing the multifaced challenges proposed by the digital circular economy provide the chance for reshaping IPRs. Possible way to do so has three layers: the layer of the “R” activities; the infrastructural layer (to achieve the Digital CE) and finally the innovation system (that relates to the incentive for market operators to innovate, in terms of both adopting new business models and generating innovation).
The infrastructure layer emerged as a focal point: the layer includes common data spaces, data sharing obligations, portability and interoperability for data and circular data sharing platforms. Yet, the challenges of implementation and enforcement loom large. The inquiries surrounding data licensing standardization and horizontal interoperability beckon for nuanced solutions to ensure the effective opening of data and technology within the circular economy.
In conclusion, there are some developments happening regarding a digital circular economy, however it is not at the ideal level yet. There is a need for an ecosystem that will enable the opening up of data and technology, and advocated for a coherent legal framework that considers access to technology as a fundamental aspect of the circular economy, aiming to close up these loops from the beginning.
Right to Repair and the Circular Economy: Views from IPR Perspectives- Prof. Rosa Ballardini
Professor Ballardini conducted an insightful analysis on the Right to Repair (RtR), i.e. the legal right for owners of devices and equipment to freely modify and repair their products, which raises complicated issues of private law, particularly with regard to IPRs.
Ballardini analyzed the matter from a global perspective while addressing that when talking about RtR there are many different interests and stakeholders involved.
The prevailing reason people advocate for RtR in the USA focuses on consumer rights and competition, while in Europe and Australia the primer concern is environmental issues: the right to repair is pushed in order to achieve a more sustainable economy.
In essence, the concept of right to repair and reparing a product is highly beneficial for many reasons: it extends product life reducing waste and minimizing material usage for environmental reasons. Moreover, modern products have shown a high level of fragility compared to the older ones, that could be repaired (consumer’s rights reason).
However, the question that arises is whether repairing the item is a viable option at present. Nowadays cost-wise repairing is not worthwhile. Moreover, there are other factors that hamper or impede RtR, such as the need for specialized skills or tools, the difficulties in obtaining replacement parts or instructions, the fact that many products are not designed to be repaired, and that many customers prefer to buy new item instead of repairing the old ones. This highlights the necessity for a change of mindset and behaviours.
Furthermore, many legal limitations arise from areas of law. Although patent law does not explicitly prohibits repairs, it is not clear whether and to what extent purchasing a patented item then modifying it or repairing it is allowed.
According to case law, if the repair is carried out during the normal working life span of the product, it is considered legitimate, otherwise it is seen as an infringement of IPRs. Typically, the interpretation of normal working life span implies a noticeably short period of time. Consequentially, in many instances, the conclusion will be that the repair was illegitimate, because the normal working life had expired, presenting a significant obstacle to the repairing culture.
Therefore, there is a need of finding a balance between the RtR, and IPRs. Currently, this is pending more towards the right of the owner –often considered as an elite type of right –and less towards access to technology, open data, and opportunity to repair.
A view on the topic is to shift from a normal working life span to a sustainable working life span, which would extend the time to do repairs.
In conclusion, transitioning towards a repairing-enabled culture requires integrated holistic approaches of law, policy, technology, and business, and it appears necessary in order to move towards a more sustainable economy.
Liability for Damage Caused by Al and its Implications for Sustainability: The Proposed AI Liability Directive and Beyond - Prof. Béatrice Schütte
Professor Béatrice Schütte discussed the liability for damages caused by Artificial Intelligence and its implications for sustainability. She focused on the proposed AI Liability Directive by the EU Commission in September 2022, aimed at harmonizing existing provisions in liability for damages caused by AI. As the Professor pointed out, the legal issue is significant and unfortunately the Directive’s substance is actually irrelevant, therefore there is no harmonization on this complex topic yet.
The core provisions of the AILD are articles 3 and 4: the former is concerned on the disclosure of evidence – which gives potential claimers the possibility to request the court to order that providers disclose the evidence in their hands – and the rebuttable presumption of non-compliance; the latter is concerned on the rebuttable presumption of causation in case of fault. However, the proposed directive as such does not contain any provision on sustainability, and similarly in the past sustainability aspects have been neglected in AI regulation.
Nonetheless the Explanatory memorandum makes two references to sustainability, namely the indirect links to the European Green Deal and the contribution to achieving the SDG’s.
As far as it concerns the indirect link to the European Green Deal, this European Parliament study refers to the beneficial use cases of AI digital technologies and how they can maximise the impact of policies. In particular, digital technologies, including AI, are a critical enabler for attaining the sustainability goals of the Green Deal in many different sectors including healthcare, transport, environment and farming. But still, the framework is unclear because the Communication on the Green Deal does not refer to liability.
As regards environmental impacts, the explanatory Memorandum states that the Directive can contribute to achieving the SDG’s, meaning that the uptake of AI can create a benefit for the environment;. For instance, AI systems applied in process optimization have the potential to minimize waste (e.g. by reducing the amount of fertilizers and pesticides needed, decreasing the water consumption at equal output, etc.).
The Directive would positively impact SDGs 4 (Quality Education) 5 (Gender Equality), 10 (Reduced Inequality), 16 (Peace, Justice and Strong Institutions) through effective legislation focusing on transparency, accountability and fundamental rights. This approach guides AI’s potential to benefit individuals and society. When read together with the AI Act, based on EU values and fundamental rights and aims to give people and other users the confidence to embrace AI-based solutions. This initivative further encourages businesses to develop them, with the ultimate aim of increasing human well-being.
Finally, a summary of the issue outlined the gap that is left by the AILD because of the missing mention of sustainability on its substantial part, and only a brief and unclear reference in the Explanatory Memorandum: this leads us to necessarily read the directive together with other frameworks. Academics have suggested to require sustainability impact assessment before an AI system can be placed on the market. [1]
In conclusion, in this confused framework, what is clear it that liability rules can contribute to fostering sustainability, but the path still needs enforcements.
Carbon Market and Private Law - Prof. Kaisto
Professor Kaisto explored the wide theme of Carbon Markets from a traditional private law perspective.
The Carbon Market has greatly evolved in the last decades, largely because of the Kyoto Protocol, and its key role in reducing global greenhouse gas emissions has been recognized by Article 6 of the Paris Agreement, which allows parties to use international trading of emission allowances, establishes a framework for accounting rules and creates a new market mechanism.
Carbon credits are artificial legal instruments that resemble emission allowances as tradable objects and must be issued by a crediting mechanism.
Following a systematization, there are: i) international crediting mechanisms established under international treaties; ii) domestic crediting mechanisms established by regional, national or subnational governments; iii) independent crediting mechanisms managed by independent nongovernmental entities. [2]
The purpose of the presentation was threefold: to examine private law-related questions that may arise in the carbon market, to explore how these questions are answered, and to consider whether the manner of addressing these questions affects the effectiveness of the carbon market in promoting environmental sustainability.
- Since the carbon market is based on trading, the legal problems typical to any trading system, such as theft of allowances and unfulfilled promises, emerge within this context. Furthermore, Kaisto's introduction of carbon credit-specific legal problems, such as the liabilities of different parties involved in carbon credit projects, expands the discourse beyond the generic to the specific challenges posed by environmental trading instruments.
- While some private law matters are briefly touched upon in the EU ETS directive, private law-related problems have often been set aside when Carbon Markets have been addressed in international treaties or national legislation. Therefore, general private law rules, provided by national legal systems, play a fundamental role in filling the gaps.
- To achieve sustainability, it is not possible to say a priori that some private law solutions would be certainly better than others, since the complexity of the issue demands a case-by-case study. Moreover, private law protects many other interests, which must be balanced with environmental sustainability.
In conclusion, an easy recommendation arises: private law issues should receive due attention when carbon markets are addressed in international treaties and legislation since a more complete understanding is essential for fostering both legal certainty and environmental sustainability.
To sum up, the ideas that emerged from the conferences exposed various points of reflection on the challenges that private law and the Internal Market must face both in old and new areas, thus leaving an open question for the future. The issues are very complex, but surely the solutions are to be found in the light of the fundamental rights of citizens and the increasingly urgent need to create a more sustainable world.
