EU Legislation Roundup: June 2026

Staying informed on EU-level law helps you manage risk, maintain compliance and remain competitive in a fast-moving regulatory environment.

This edition, brought to you from our EU Knowledge Hub, highlights:

1. New circularity rules for the automotive sector
2. Digital Omnibus adopted
3. Tax simplification package
4. Transparency rules for sustainable financial products
5. Digital declaration for posted workers
6. Deal on air passenger rights
7. Stronger market stability reserve for emission trading system
8. Strengthened carbon border adjustment mechanism
9. Final AI transparency Code of Practice
10. Technological Sovereignty Package

EU: Council adopts circular automotive sector rules

On June 29, 2026, the Council adopted the regulation on circularity requirements for vehicle design and management of end-of-life vehicles (ELVs). New vehicles must contain at least 15% recycled plastic within six years, rising to 25% within ten years. At least 20% of that recycled plastic must come from ELVs. Extended producer responsibility (EPR) makes producers financially responsible for the full vehicle lifecycle, including free take-back and treatment. A cross-border mechanism ensures EPR obligations follow vehicles across member states. It fully applies to cars and light commercial vans; heavy-duty vehicles and motorcycles face more limited requirements.

The regulation applies two years after entry into force, likely from mid-to-late 2028. However, EPR obligations apply after three years, while the export ban of non-roadworthy used vehicles applies after five years.  Future targets for recycled steel, aluminium, magnesium, and critical raw materials will be set after a feasibility study.

Why this matters: Manufacturers must secure reliable sources of recycled plastic, particularly from ELV streams. This may require partnerships with recyclers to guarantee supply. The EPR obligations mean producers bear costs for take-back and treatment. Businesses selling vehicles across multiple member states should assess exposure under the cross-border mechanism.

EU: Council adopts Digital Omnibus

On June 29, 2026, the Council adopted a regulation simplifying the AI Act. It introduces targeted changes affecting high‑risk systems, transparency rules, and SMEs. SMEs will benefit from simplified quality management rules previously reserved for microenterprises.  They also benefit from simplified technical documentation, reduced fees, and capped penalties.

The Omnibus delays the application of high‑risk AI rules until 2 December 2027 for stand-alone systems and 2 August 2028 for systems embedded in regulated products. Certain regulatory exemptions are extended to SMEs and small mid‑cap companies. A new ban is introduced on AI systems generating non‑consensual intimate content. The grace period for transparency obligations on AI‑generated content is shortened to three months. Where strictly necessary, limited processing of sensitive personal data is permitted for bias testing.

Why this matters: The regulation provides additional time to prepare for high‑risk AI obligations but transparency requirements under Article 50 still apply from 2 August 2026. A new ban on AI-generated intimate content takes effect from 2 December 2026. Providers and deployers should update their compliance roadmaps to reflect the new deadlines. Businesses may need to reassess eligibility for simplified obligations and ensure exempted systems meet registration requirements where applicable. Earlier transparency planning for AI‑generated content and close monitoring of sector‑specific guidance may help reduce implementation risks.

EU: Commission proposes tax simplification package to cut compliance burdens

On June 24, 2026, the Commission adopted a tax simplification package designed to reduce compliance burdens for businesses across the EU. The package is composed of two legislative proposals: the taxation Omnibus and the Recast of the Directive on Administrative Cooperation (DAC).

The Taxation Omnibus proposes an exemption from withholding tax on cross-border payments of dividends, interest, and royalties between EU companies. It also proposes removing overlapping provisions between Controlled Foreign Company (CFC) rules and the global minimum tax.

The DAC recast proposes removing reporting obligations for large multinationals groups subject to the 15% minimum tax rate. It raises the reporting threshold for online sales of goods on digital platforms from €2,000 to €3,000 per year. It also removes the 30-transaction activity threshold. These changes eliminate reporting obligations on over 10 million private sellers, particularly those selling second-hand goods.

Why this matters:

Taxation Omnibus: The withholding tax exemption would remove lengthy approval and refund procedures for intra-EU payments. Groups subject to Pillar 2 would no longer need to apply CFC rules in parallel. Both changes should prompt a review of existing cross-border tax compliance processes.

DAC Recast: Platforms should update reporting systems to reflect the new €3,000 threshold and removed activity trigger. Pillar 2 groups should assess whether they can discontinue DAC6 reporting on cross-border arrangements.

EU: Council agrees position on simpler sustainability disclosure rules for financial products

On June 24, 2026, the Council agreed its negotiating position on an updated Sustainable Finance Disclosure Regulation (SFDR). The revised rules aim to ease administrative burdens and improve investor understanding of ESG-related financial products.

The Council position retains the three product categories (sustainable, transition, and ESG basics) introduced by the Commission proposal. These replace existing SFDR concepts linked to greenwashing risks. Mandatory use of at least three adverse impact indicators applies to sustainable and transition products. Alternative investment funds offered exclusively to professional investors may be exempted from categorisation.

Why this matters: The Council mandate sets the basis for negotiations once the Parliament adopts its position. The updated SFDR framework will reshape how financial market participants classify and disclose sustainability information. It is expected to apply by mid-to late 2029, following negotiations and formal adoption. Businesses should prepare mapping each product to one of the three categories, meeting a 70% investment alignment threshold. They should begin reviewing product ranges, documentation, and marketing materials against the new criteria. Products with fossil fuel exposure in the transition category will face particular scrutiny.

EU: Council and Parliament agree on digital declaration system for posted workers

On June 23, 2026, the Council and the Parliament reached a provisional deal on a regulation to digitalise the declaration of posted workers. The regulation aims to simplify cross-border worker posting. The European Labour Authority estimates roughly 3.6 million postings involving around 2.6 million workers across the EU. About 1.2 million of those work in two or more member states.

The regulation requires the Commission to create a multilingual public interface for companies to declare worker postings. Member states may voluntarily opt in, but once they do, they must use the interface exclusively without requiring additional declarations. A standard online form will set common information requirements, and member states using it cannot request more data. The deal also introduces a functionality allowing service providers to upload relevant posting documents through the platform. 

Why this matters: Currently, businesses must navigate different national declaration systems in each member state where they post workers. The new regulation replaces these fragmented processes with a single standardised electronic form. Businesses that post workers to other member states should monitor which countries opt in to the new digital interface. They should also prepare to transition from national declaration systems to the standardised electronic form once adopted.

EU: Council and Parliament strike a deal on stronger air passenger rights

On June 15, 2026, the Council and Parliament reached a provisional agreement updating EU rules on air passenger rights and airline liability. It is most relevant to airlines, travel operators, airports, and consumers traveling within or to and from the EU.

Compensation rights for delays over three hours and late cancellations are reinforced, with clearer extraordinary circumstances rules. New rights include a no-show ban, hand-baggage fare transparency, and stronger protections for vulnerable passengers. Airlines must notify passengers of compensation entitlements within 96 hours and respond to claims within 30 days. Passengers must be offered rerouting within three hours or may self-arrange and claim up to 400% reimbursement.

Why this matters: The new rules are expected to apply by late 2027 or early 2028, following negotiations and formal adoption. Airlines should begin assessing the likely compliance implications. The new obligations are likely to require upgrades to claims-handling systems. The no-show ban also unwinds a longstanding contractual practice, so airlines may need to revisit fare terms. They should also review terms and conditions, booking interfaces, and disruption protocols ahead of implementation.

EU: Council agrees position on strengthening the carbon border adjustment mechanism

On June 12, 2026, the Council agreed its negotiating position on strengthening the carbon border adjustment mechanism (CBAM). The updated framework would extend CBAM's scope to new downstream products and close circumvention loopholes. CBAM has been fully operational since January 1, 2026, covering iron, steel, cement, fertilizers, aluminium, electricity, and hydrogen.

The Council's position extends CBAM to approximately 180 steel- and aluminium-intensive downstream products and mandates an annual Commission review of further additions. New anti-circumvention measures bring pre-consumer metal scrap into scope and empower the Commission to act against deceptive reporting. The Council also defined more precisely a mechanism for temporarily exempting goods from CBAM during serious and unforeseen circumstances.

Why this matters: Importers of manufactured goods containing iron, steel, or aluminium should assess whether their products fall within CBAM's expanded scope.  Businesses relying on pre-consumer metal scrap face new compliance obligations once the rules are finalized.  Importers should also review emissions reporting practices now, given the strengthened anti-circumvention powers. Implementation is expected to begin on January 1, 2028.

EU: Council and Parliament agree on strengthened market stability reserve for ETS2

On June 11, 2026, the Council and Parliament reached a provisional agreement on a targeted amendment to the market stability reserve (MSR) for the emissions trading system (ETS2). ETS2 covers buildings, road transport, and additional sectors, and it is set to become fully operational by 2028.

The agreement extends the MSR lifetime beyond 2030 to maintain long-term price stability. It doubles the number of allowances released when carbon costs exceed €45 per tonne, increasing from 20 million to 40 million allowances. It also introduces a more gradual release mechanism when allowances in circulation fall below 260 million.

Why this matters: Fuel distributors still need systems to monitor emissions, acquire allowances, and manage carbon costs before ETS2 is fully operational in 2028. For fuel suppliers, the MSR changes may reduce exposure to abrupt short-term price spikes. A larger volume of allowances would be released if carbon costs exceed €45 per tonne. However, the mechanism does not create a price cap or remove allowance-price volatility. Businesses should still model ETS2 costs above the €45 trigger.

EU: Commission publishes final AI transparency Code of Practice

On June 10, 2026, the Commission published the Code of Practice on transparency obligations under the AI Act. It gives providers and deployers practical guidance on marking, detecting, and labelling AI-generated or manipulated content. This includes deepfakes, chatbot interactions, and certain public-interest text produced without human editorial control. Providers should also use machine-readable markers, where appropriate, to support detection. The Article 50 transparency obligations apply from August 2, 2026.

Why this matters: The Code is voluntary, but the underlying transparency duties are mandatory from August 2, 2026. Businesses should now identify where they create, alter, or publish AI-generated content. They should also update product design, content workflows, and user notices before the obligations start. Following the Code may help businesses show compliance and reduce uncertainty in supervisory discussions.

EU: Technological Sovereignty Package launched

On June 3, 2026, the Commission presented the Technological Sovereignty Package to reduce dependence on non-EU technology providers. The package introduces the first EU-wide sovereignty assurance framework for cloud services, with direct implications for public-sector procurement. It is most relevant to cloud providers, semiconductor manufacturers, energy operators, and public-sector entities.

The package has four pillars. The Cloud and AI Development Act (CADA) introduces a tiered sovereignty framework with four assurance levels for cloud services used by public sector bodies. The Chips Act 2.0 aims to strengthen EU semiconductor design, production, and packaging capacity. It also includes an Open Source Strategy and a Strategic Roadmap for Digitalisation and AI in Energy.

Why this matters: The CADA framework will require public bodies to classify data by sensitivity. Cloud providers serving public-sector clients should assess which assurance level applies. At Levels 3 and 4, providers must demonstrate EU ownership, control, and supply-chain independence, which may effectively exclude non-EU providers without structurally separated EU operations. Semiconductor supply chains will need to align with new resilience requirements under the Chips Act 2.0. Businesses reliant on non-EU chip sources should start mapping exposure. Implementation is expected to begin early 2028.

Co-authored by Uendi Barreti and Paola Paccani (Knowledge)

Further reading

Implementation of the EU Pay Transparency Directive

EU Pay Transparency Directive: Job evaluation and classification guidelines

EU Tightens Control Over Critical Raw Materials

EU adopts renewed foreign investment framework

Implementation of the EU Pay Transparency Directive - New developments in France June 2026