Technology companies in the United States operating within the EU region now face new regulatory challenges as the European Union introduces enhanced cybersecurity legislation aimed at protecting critical infrastructure from cyberattacks. At the center of this development is the Network and Information Security Directive, commonly referred to as NIS2, which represents an expansion and evolution of its predecessor, NIS1, enacted in 2016.
NIS2 Overview
With the increasing reliance on digital systems in the EU economy, NIS2 extends its regulatory reach to a wider array of technology service providers, including those headquartered outside the EU but offering services within it. This broadened scope means that US firms, such as cloud computing services, data centers, content delivery networks, managed services, and social media platforms, will be expected to comply with the new regulations. Key obligations under NIS2 encompass implementing ten specific cybersecurity measures, ensuring management oversight and training in cybersecurity, and reporting significant operational disruptions to regulators and potentially to customers within a stringent 24-hour timeframe.
Compliance and Penalties
Failure to comply with NIS2 can result in substantial penalties, including fines up to €10 million or 2% of global turnover, and could also lead to personal liability for management teams. While the initial enforcement date was set for October 17, 2024, delays in the implementation by various EU member states suggest that these laws will likely come into effect between late 2024 and early 2025. These anticipated delays provide a narrow window for US firms to prepare for compliance.
Broader EU Cyber Security Regulations
In addition to NIS2, US businesses must be aware of other EU cybersecurity regulations that have extraterritorial implications. The General Data Protection Regulation (GDPR), already well-known among organizations handling personal data, mandates the proper safeguarding of such data. Another significant regulation, the Digital Operational Resilience Act (DORA), set to take effect in January 2025, requires EU financial institutions to maintain robust IT system resilience, extending these requirements to their suppliers and impacting US firms in the financial sector. Furthermore, the proposed Cyber Resilience Act will impose security certification mandates on US software and hardware companies.
Navigating New Regulations
To effectively navigate these complex regulatory landscapes, US companies can seek guidance from legal experts. Law firms like Womble Bond Dickinson offer detailed advice on NIS2 compliance and insights into related EU cybersecurity laws. This collection of legislation signifies the EU’s strong commitment to protecting its critical infrastructure and digital economy from an array of emerging cyber threats.
Conclusion
Technology companies operating in the United States that do business in the European Union are now encountering heightened regulatory hurdles due to new EU cybersecurity laws. These new regulations are designed to enhance the protection of critical infrastructure against cyber threats. Central to these developments is the Network and Information Security Directive, widely referred to as NIS2. This directive is a significant advancement of its predecessor, NIS1, which was introduced in 2016. The new legislation aims to address the evolving landscape of cyber threats and mandates stricter security measures for organizations within the EU. This includes not just technology firms, but also sectors that are considered part of the EU’s critical infrastructure, such as energy, transportation, and healthcare. NIS2 emphasizes the importance of risk management and incident reporting, requiring companies to promptly notify authorities about significant cyber incidents. As a result, American tech companies must now align their operations with these stringent requirements to ensure compliance and avoid potential penalties.
